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Notes by vineetpunnoose on www.kiwipaper.com
Content
Fighting for policy space 1
Business as usual 2
Lawless in Libya 4
Closer to democracy 6
Signs of peace 8
Justice as Governor? 9
Earth Overshoot Day 11
Passing the buck 12
The fight for equity 13
Tenuous truce 17
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Fighting for policy space
Sat, Oct 11, 2014
Frontline, economics,
One sees this as both a necessary and a virtuous outcome of global integration, which
forces governments to do what is "ultimately best" for them and for others, notwithstanding
possible short-term pain. The second view not only contests the notion of one-size-fits-all
policy direction but sees it as a significant loss of sovereignty and flexibility and an
unfortunate reduction in the ability of governments to identify and pursue the most
appropriate mix of economic and social policies to achieve equitable and sustainable
development in their own national contexts, even as they remain part of an interdependent
global economy.
The Bretton Woods architecture that was developed in the 1940s, therefore, explicitly
sought to support the policy goals of raising incomes, full employment and social
security in the developed economies; some also struggled to place development issues
on this multilateral agenda, specifically by expanding the policy space for state-led
industrialisation and ensuring more financial support for this.
The report notes that today's developed countries and the more successful emerging
economies did not depend solely on "market forces" for their structural transformation;
rather, they adopted various country-specific forms of government intervention to
mitigate the destructive tendencies of market operations and to guide private agents
into more socially desired forms of investment and economic activity.
But the era of globalisation has brought with it a combination of more intense multilateral
commitments by governments and less power to deal with other cross-border flows,
particularly of finance and investment.
Consider just some of the constraints faced by developing countries today that prevent
them from using strategies that were important tools for structural transformation in
the past. Subsidies were a preferred instrument to incentivise certain types of investment
and production but are now circumscribed by the WTO's Agreement on Subsidies and
Countervailing Measures (SCM). Performance requirements on foreign investors for
exports, domestic content and technology transfer that were important to create linkages
between foreign investors and local manufacturers are limited by the Agreement on
Trade-Related Investment Measures (TRIMs). The Agreement on Trade-Related Aspects
of Intellectual Property Rights (TRIPS) prevents countries from encouraging reverse
engineering and imitation which were critical in all previous cases of successful
industrialisation.
Surprisingly, WTO restrictions are often less onerous than those demanded by regional
trade agreements (RTAs) and economic partnership agreements, which have become
ever more comprehensive in recent times. Similarly, bilateral investment treaties and
investment chapters in RTAs play at best an ambiguous role in attracting more FDI.
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But the lack of transparency and the perceived pro-investor bias of the tribunals associated
with some of these agreements have made many countries wary of their implications.
So why are developing countries still seeking to sign agreements that severely constrain
national policy autonomy? The desire for greater market access into developed markets
and the fear of exclusion when other developing countries are signing them are potent
reasons, along with the hope of becoming more attractive destinations for foreign
investment.
Fiscal space has clearly been hit by globalisation, which has affected the ability of
governments to mobilise domestic revenues. Trade tax collections have come down
because of trade liberalisation, while greater capital mobility has generated tax competition
between countries, leading to reduced direct taxation.
At the same time, there has been more blatant use of tax havens by multinational firms
and wealthy individuals. Further, trade mispricing, including through transfer pricing
(involving cross-border transactions by various constituents of multinational companies),
has become the evasion mechanism of choice for many companies. In addition to this,
"thin capitalisation" allows a company to mix and match intra-group debts and interest
payments across its subsidiaries to minimise tax payments and generate higher overall
profits.
The report notes that the major providers of financial secrecy are to be found in some
of the world's biggest and wealthiest countries, or in specific areas within these countries.
In fact, offshore financial centres and the secrecy jurisdictions that they host are not
just small outlaws (like the frequently mentioned island states) but are fully integrated
into the global financial system and responsible for handling substantial shares of global
trade and capital movements, including FDI.
Further, because these initiatives are mostly led by the developed economies (which
are also the main homes of transnational corporations and some secrecy jurisdictions),
the debate has not fully taken into account the needs and views of developing and
transition economies.
Business as usual
Sat, Oct 11, 2014
japan, Frontline, international,
PRIME MINISTER Narendra Modi's recent five-day visit to Japan was heralded as
path-breaking, signalling the beginning of a really close relationship between India and
Japan that would redraw the power configuration of Asia. The visit was seen to mark
the beginning, as one hopeful commentator remarked, of an Asia that was not China-centred.
The major focus was on infrastructural projects. Japan pledged $500 million towards
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a public-private infrastructure financing project to India Infrastructure Finance Company
Limited (IIFCL). Japan also agreed to double its current investment to $35 billion over
the next five years. The infrastructural development will start with building smart cities
in six States along the Delhi Mumbai Industrial Corridor. This is not really new as it
has been on the cards. If it is implemented, there are huge opportunities for both Indian
and Japanese businesses.
A memorandum of understanding was signed between the Ministry of New and
Renewable Energy and the Japan Bank of Industrial Cooperation (JBIC). But there was
no deal on cooperation to develop civil nuclear energy; rather, the two countries agreed
to develop clean coal-fired power plants.
Given the problems of global warming, nuclear energy offers the prospect of clean
energy, a choice that the Abe government has not rejected despite the massive
contamination caused by the Fukushima disaster.
An agreement was reached by which Japan, as part of the infrastructural development
plan, would provide technical, financial and operational support to build a Shinkansen
(literally new trunk lines) or a bullet train system for India, starting with a line connecting
Ahmedabad and Mumbai for which joint feasibility studies are being conducted.
While infrastructural development and connectivity is important and high-speed train
services are necessary, it is highly debatable whether the Japanese Shinkansen system
is a solution or is even workable at this stage. The Shinkansen has become the marker
of development. China has introduced it and so, as we turn our cities into Shanghai,
must we.
The Shinkansen system requires expertise at various levels both to produce and operate
sophisticated technologies and, even more importantly, well-trained manpower, which
India lacks. The Indian railway system has many shortcomings and needs to be improved,
but it provides cheap transport to many. The cheapest Shinkansen ticket for a
1,300-kilometre, nearly five-hour trip between Beijing and Shanghai in the fastest train,
is over Rs.5,000, twice that for a first class ticket. These high-speed trains have their
drawbacks: noise pollution, the need for dedicated corridors, high costs and the gradual
phasing out of cheaper trains. The heavy costs incurred in building such a system to
gain half an hour are hard to justify when improving air travel would seem to provide
a cheaper and faster way to travel.
The second major area where agreements have been reached is defence. A Joint Working
Group will coordinate the development of the US-2 amphibian aircraft and explore
other areas for cooperation in the Indian aircraft industry. Japan, it is hoped, will transfer
aircraft technology to India. This again is a project that was in the pipeline. ShinMaywa
Industries, which manufactures these planes, has been in talks with the Indian government.
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Japan has begun to break the long-established taboo against exporting defence-related
equipment. As part of the Abe government's strategy to allow Japan to act as a "normal"
country, that is, enter into alliances, send troops abroad, etc., the government has been
trying to increase defence exports. Defence equipment produced in Japan has very high
per unit cost because it only supplies its own limited needs. Defence export has become
a new area for a struggling economy and an important arrow in Abe's quiver of economic
policies.
Japan's entry as an exporter of weapons has benefits for the Japanese economy, but
these exports to India and other countries in the region are based on the idea that China
is a growing military threat and can only be countered by strengthening defence.
Smart cities promise the use of technology to provide a more rational, efficient and
environment-friendly way to manage large urban conglomerations. But as critics have
begun to note, the way these ideas are transforming cities is much the way car travel
did in an earlier time. The urban landscape was transformed by the construction of
highways and roads. Equally, though not so obviously, technology will have a strong
impact that needs to be publicly debated. Increasingly, private companies build and
operate the public services. The huge amount of data that are gathered can be used to
reduce energy consumption or track crime, but it can also be used for unregulated
surveillance. For instance, sensors can gather data about how you travel through
automated licence recognition.
Urban designers have warned that the smart city model fits well with authoritarian
ideas. The problems faced in our cities, of poverty, social inequality, inadequate public
educational facilities and environmental pollution, cannot be solved from a single
command centre but need the active engagement of the citizenry.
India has also agreed to the export of rare earths, which Japan has imported from China,
a country that has some 85 per cent of the world's rare earths. But in 2010, China
restricted exports. The extraction of rare earths is done using chemicals that seriously
damage the area and harm the people, and in China, because of lax environmental
regulations, this has adversely affected the health of people and the environment.
Lawless in Libya
Sat, Oct 11, 2014
Frontline, international, Libya,
After the fall of the Muammar Qaddafi government in 2011, the al-Qa'qa and al-Sawai'q
militias from the mountain city of Zintan had taken control of this airport. The coastal
town of Misrata had fashioned itself as the heart of the 2011 uprising.
The recent war in Tripoli demonstrated Libya's fragility. Western embassies fled the
city, with the United States chancellery turned over into a playground for fighters ( The
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Libyan parliament also abandoned the capital for the provincial town of Tobruk, near
the Egyptian border.
The political and military chaos in Libya did not begin in July, when Salah Badi moved
his fighters towards Tripoli. Libya has been in this state since 2011, when the NATO
attacks precipitated the collapse of the state and the new rulers of the country failed to
create any central authority for the country.
The fractured political landscape, awash with guns, meant that violence would be
inevitable. All political disputes quickly took the form of gunfire. The parliament, since
its first sitting, has been secondary to the gunmen. Several times over the past few years,
angry militias have stormed into parliament--even kidnapping the former Prime Minister
Ali Zeitan (who has now gone into exile in Germany). Fear of assassination was so
great that the lawmakers hired a cruise ship for their residence during the parliamentary
session.
Not only did the Western embassies close shop, but also since mid-July, the United
Nation's Support Mission in Libya has vacated its Tripoli office. U.N. agencies have
been hard-pressed to do any kind of humanitarian work, including the basic accumulation
of data on the social costs of this crisis. The United Nations High Commissioner for
Refugees (UNHCR) says that at least 1,600 people have died trying to cross the
Mediterranean since June. Displaced Libyans, such as the people of Tawergha, find
themselves on the move again--this time from the neighbourhoods around the international
airport in Tripoli. There are no refugee camps run by the UNHCR for them. All of
Libya has become a battlefield.
Operation Dignity General Khalifa Haftar, who had been a senior military officer in
Qaddafi's army before he defected to the U.S. in 1987, returned to Libya in the middle
of the uprising of 2011. He had tried to take control of the ground war then but failed.
The militias were too powerful, and the political leadership--beholden to NATO--could
not deliver the fighters to his command.
The UAE, Saudi Arabia, along with its Egyptian client, and the U.S. have been backing
General Haftar in his attempt to beat back the Muslim Brotherhood's advance. This
has been the Saudi game in North Africa since they backed General Abdel Fattah El-Sisi
against President Mohammed Morsi last year. On Libya's eastern border, Egyptian
troops sit idly. They are there to seal the border although there is every indication that
if the crisis escalates they will intervene. On Libya's western and southwestern border,
Algeria and Tunisia are equally concerned. France's Operation Serval in January 2013
into northern Mali sent jehadi fighters into the borderlands of Tunisia, Algeria and
Libya. Taking refuge in Jabal Ash-Sha'nabi, these fighters have seriously troubled the
three countries.
The NATO war destroyed Libyan institutions, and produced in a flash a failed state.
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The repercussions have been severe for the Libyan people. There is no silver lining
here. The West has washed its hands of the disaster that it contributed to create--and
has refused at all costs to allow a U.N. investigation into the war itself. Regional actors
have no political path for stability. They have turned to their armies. The only outcome
of an Algerian-Egyptian-Tunisian intervention is a divided Libya with an Algerian-Tunisian
sphere of influence in the west and with an Egyptian sphere in the east. This is a bad
outcome. It will result in greater war and suffering.
Closer to democracy
Sat, Oct 11, 2014
Fiji, Frontline, international,
FIJI will elect a democratic government on September 17, eight years after its last
elected government was overthrown in a bloodless military coup in 2006. The long-awaited
election is taking place under a new Constitution, with a new scheme of voting under
a proportional representation system for the 50-member National Assembly. It will be
held on the basis of "one person, one vote, one value", according to the Fijian Elections
Office (FEO).
Frank Bainimarama, the military commander, seized power in 2006 following differences
with the elected Prime Minister, Laisenia Qarase, and abrogated the Constitution. The
military regime initiated the process of drafting a new Constitution by forming a
committee of experts and initiating a long exercise of public consultations. It rejected
the draft Constitution and promulgated a slightly changed version in September 2013.
The 2013 Constitution did away with Fiji's race-based electoral system which was part
of the Constitution adopted in 1970 when Fiji gained independence from British rule.
The county's multiracial population comprises indigenous Fijians (56 per cent), people
with Indian ancestry (37 per cent; they are descendents of Indian workers brought to
Fiji over a century ago), people of European descent, and other Pacific islanders.
Under the new Constitution, there will be no race-based seats or geographically delineated
constituencies. People will vote on a single ballot listing the names of all candidates.
The new Constitution gives equal rights to indigenous Fijians and Indians and terms
all Fiji nationals as Fijians instead of identifying them by race.
Fiji's move towards the September elections gained an impetus after Bainimarama
stepped down as the commander of the Fiji Armed Forces in March this year, while
remaining the head of the interim government. He set up a political party called Fiji
First and announced his intention to contest the elections. He has been campaigning
vigorously since then, showcasing his various achievements, and even travelling to
Australia and New Zealand to address the Fijian diaspora, with mixed results.
Civil society organisations and student activists have not been allowed to set up election
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observer groups, and human rights groups have not been allowed to campaign in the
elections. However, the government has invited election observers from a select group
of countries. It has signed an agreement for a Multinational Observer Group which will
be co-led by Australia, India, Papua New Guinea and Indonesia and will include 10
other countries: Israel, South Africa, Brazil, Russia, Turkey, Japan, South Korea, Iran,
the United Kingdom and New Zealand.
Despite the fears expressed by some sections, there is great interest in Fiji in the elections,
which can be gauged by the success of the voter enrolment programme. Over 580,000
persons registered as voters: this constitutes almost 90 per cent of all those eligible to
vote.
The most significant aspect of the election is that votes will be cast in favour of
individuals, without any party affiliations. The election to the 50-member House will
be on a single-constituency, open-list proportional representation system depending on
the total votes received by a party. There is a 5 per cent threshold for each party to be
part of the proportional representational list.
There will be a single ballot paper for all the 50 seats in the National Assembly. It will
be a large sheet of paper with 249 randomly mixed numbers printed on a grid without
any names or party symbols to identify them. A board outside the polling station will
list the names of the candidates and the numbers assigned to them. Voters will need to
consult the board and memorise the number assigned to their candidates, as they will
not be allowed to take any aide-memoires inside the polling booths. Those who cannot
read will be assisted by polling officers to ascertain the number of the candidate they
wish to vote for.
Seven approved political parties are contesting the election.
Two former Prime Ministers, Mahendra Chaudhry, Fiji's first Premier of Indian origin
who was deposed in 2000, and Laisenia Qarase, who replaced him and was ousted in
the 2006 coup, have been barred from contesting the election as a result of convictions
in two cases.
Four of the seven political parties are headed by women: the People's Democratic
Party, the Fiji First Party, the National Federation Party and the Fiji Labour Party. Out
of the 249 approved candidates, 44 are women; this is a sharp increase compared with
the last election in 2006, when there were only 30 women in a total 338 candidates.
Fiji's Army chief, Brigadier General Mosese Tikoitoga, has said that the military will
accept the outcome of the election, adding that it does not favour any individual or
political party. Advising those who had not read the Constitution to familiarise themselves
with it, he said: "We will take our role in the Constitution seriously and we will continue
to uphold that role for the sake of upholding stability and maintaining law and order in
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our nation."
Interim Prime Minister Bainimarama has declared that he will accept the outcome of
the election. With Fiji's history of coups, there is apprehension whether the election
can throw up a stable government. But the people clearly desire an end to the authoritarian
regime and want an elected government.
Signs of peace
Sat, Oct 11, 2014
Ukraine, Frontline, international, Russia,
THE CEASEFIRE agreement signed by representatives of the Ukrainian government
and the eastern rebel forces in Minsk, the capital of Belarus, on September 5, is viewed
by the governments in Moscow and Kiev as a definitive step forward in ending the
five-month-old civil war in the east European country.
The 14-point peace plan includes pledges to return areas under rebel control to the
government and exchange prisoners. Militias on both sides will be disbanded and a
10-kilometre buffer zone will be established along Ukraine's border with Russia.
the agreement states that power will be decentralised and the status of Russian as an
official language will be guaranteed.
The step taken by Poroshenko to bring about a negotiated end to the conflict is already
being undermined by the forces that triggered the crisis in the first place by engineering
the illegal ouster of the elected government early this year. long-standing demand of
eastern Ukrainians for the "decentralisation of power" and the creation of a "special
autonomous zone" in the east. rewriting the Constitution to guarantee the "neutral
military political status" of Ukraine and to turn the country into a federation. The new
government, which mainly represents the Ukrainian-speaking parts of the country, is
also speeding up moves to integrate with the West, economically as well as militarily.
The North Atlantic Treaty Organisation (NATO) has been itching to officially move
into Ukraine since the country became independent and install its missile defence
systems along Ukraine's border with Russia.
The continued expansion of NATO along the Russian border is a red rag for the Kremlin.
member-states would jointly contribute EU15 million in direct military aid to Ukraine.
NATO also approved a "comprehensive and tailored package of measures" to assist
the Ukrainian military in the improvement of logistics, command and control,
communications and other services.
The latest decision is in contravention of the 1997 Founding Act of the NATO-Russian
council under which NATO had agreed that it would not base its troops permanently
in eastern European countries that had become its members.
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The Western media have been saying that Poroshenko has blindly accepted a ceasefire
plan drafted in the Kremlin, glossing over the fact that he had submitted a similar plan
soon after he was elected to power in June. It was the rebel leadership that rejected the
proposal at that time.
Politicians in the pro-Western part of the country, who now hold the reins of power,
want to appeal to anti-Russian nationalistic sentiments. Sections within the security
and political establishments are working overtime to upset the truce.
The longevity and permanence of the ceasefire will, of course, depend on the negotiations
that will take place between the warring sides.
Despite the positive developments, the West has announced plans to slap more punitive
sanctions on Russia, which will include a ban on arms exports and additional sanctions
on the banking and energy sectors. The U.S. and the E.U. had imposed stiff sanctions
on Russia in late July after the crash of the Malaysian passenger airliner MH17 over
eastern Ukraine. The sanctions on the energy sector could hurt Russia the most, affecting
production as well as revenues. Half of Russia's budget is dependent on oil revenues.
Russia, however, is not taking things lying down. It responded to an earlier round of
Western sanctions by banning the import of poultry, vegetable and dairy products from
E.U. countries. This has had a negative impact on the farming and dairy sectors of many
E.U. countries. Countries such as Finland have already been hit hard by Russia's
countermeasures. Germany, the economic engine of Europe, is heavily dependent on
Russian energy supplies. Slovakia, an E.U. member, has argued against the logic of
imposing sanctions against Russia at a time when many European economies are
struggling to emerge from recession.
Justice as Governor?
Sat, Oct 11, 2014
Frontline, polity, judiciary, supreme court,
It is the first time that a former CJI has been appointed the Governor of a State by the
President on the recommendation of the Central government. It has led to legitimate
apprehensions that a post which has so far been considered inappropriate for a retired
CJI by both the executive and the judiciary might become a handy tool for the executive
to woo those members of the judiciary who are close to retirement.
That the judiciary has to be free from the executive's pulls and pressures in order to
deal with the cases before it with absolute fairness and objectivity is sacrosanct. This
principle is vindicated at a time when governments--both Central and State--are the
largest litigants in the courts.
The Bill and the accompanying Constitution 121st Amendment Bill 2014, which has
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to be ratified by half of the State Legislative Assemblies before it secures the President's
assent, were challenged as unconstitutional in the Supreme Court by several petitioners,
including the eminent jurist Fali S. Nariman. But the court found the challenge premature
and refused to hear the matter before the Bill became an Act of Parliament.
The NJAC will consist of six members, namely, the CJI, the two senior-most judges
of the Supreme Court, the Union Law Minister, and two eminent members to be chosen
by a committee comprising the Prime Minister, the CJI and the Leader of the Opposition
(where there is no designated Leader of the Opposition, the leader of the largest opposition
party), with one of the two eminent members being from the Scheduled Castes/Scheduled
Tribes/Other Backward Classes/Minorities/Women. Despite these safeguards, the Bill's
provision that any two members of the NJAC could exercise a veto over the commission's
recommendations is looked at with suspicion by those who fear that the primacy of the
judiciary in the appointment process may be compromised so as to threaten the
independence of the judiciary.
Justice Sathasivam's acceptance of the post of Governor exposes the doublespeak of
those who are critical of the NJAC on the grounds that it compromises the independence
of the judiciary. Those who defend the collegium system appear to have no compunction
in accepting post-retirement jobs offered by the executive.
Indeed, it is perfectly legitimate for former CJIs to be considered for the post of the
Chairperson of the National Human Rights Commission (NHRC), which is a statutory
body, with a provision in the Act creating it reserving the post to former CJIs. Former
judges are also eligible for a number of other posts, such as chairmanships of various
tribunals and commissions of inquiry.
In contrast, the appointment of a Governor of a State is completely in the hands of the
Central government, which has always considered it a patronage to be distributed among
its senior party members in recognition of their services to the party.
If the intention of the Modi government is to appoint eminent persons to non-political
posts such as Governors, it is not reflected in the choice of the other Governors it has
appointed, all of whom have been associated with the Bharatiya Janata Party (BJP)
over the years.
Therefore, the insinuation that Justice Sathasivam has been singled out and rewarded
with the post of Governor, when there were other former CJIs who could have been
considered for the post has to be looked at carefully.
But this does not detract from the fact that Justice Sathasivam's acceptance of the
Governor's post sets a wrong precedent. True, there is no express legal bar on a former
judge accepting such a post. However, the issue must not be reduced to technicalities
but be judged on the basis of people's perceptions of the credibility of a judge.
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But there is a fundamental difference between these precedents and Justice Sathasivam's
appointment. Justice Fathima Beevi was just a judge of the Supreme Court, and even
her appointment was criticised for lack of propriety. As Chairman of the Law Commission
Justice A.P. Shah said in an interview to a daily: "The post of the CJI is too revered an
office to be exposed to doubts and aspersions on account of such an appointment."
Appointing retired judges to a government position within a year of their retirement
creates incentives for sitting judges to curry favour with the government with a view
to getting a post-retirement job, Justice Shah said. The Law Commission, in its 232nd
report, has said that sitting judges "seek consideration for such appointments either on
the eve of their retirement or after their retirement". Contesting an elected office after
retirement is different from accepting an offer of appointment from the executive, soon
after retirement from the Bench.
Earth Overshoot Day
Sat, Oct 11, 2014
Earth Overshoot Day, environment, Frontline,
AUGUST 19 was Earth Overshoot Day: an estimate of the moment in a 12-month
period when humans have consumed more natural resources than the biosphere can
replace and created more waste than it can absorb. This means that humanity is already
living off next year's supplies, which in turn means that next year's supplies will end
even sooner than this year's. No wonder Earth Overshoot Day is also called Ecological
Debt Day.
Earth Overshoot Day does not follow the standard practice of having a fixed commemorative
day and is more of a countdown. It was first commemorated on December 19, 1987,
when humanity was 11 days in debt. Since then, the ecological debt has been accelerating.
In 2000, Earth Overshoot Day occurred in October. In 2014, it has advanced by two
months.
Conceived in 1990 by Mathis Wackernagel and William Rees at the University of
British Columbia, the Ecological Footprint is now in wide use by groups as diverse as
scientists, businesses, governments, agencies and institutions. The website explains the
Footprint as representing "two sides of a balance sheet. On the asset side, biocapacity
represents the planet's biologically productive land areas, including our forests, pastures,
cropland and fisheries. These areas, especially if left unharvested, can also absorb much
of the waste we generate, especially our carbon emissions. Biocapacity can then be
compared with humanity's demand on nature: our Ecological Footprint. The Ecological
Footprint represents the productive area required to provide the renewable resources
humanity is using and to absorb its waste. The productive area currently occupied by
human infrastructure is also included in this calculation, since built-up land is not
available for resource regeneration." In simple terms, the Footprint "addresses whether
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the planet is large enough to keep up [with] the demands of humanity".
The obvious conclusion is that the planet certainly does not have the capacity to keep
on satisfying the current rate of human demand. Using the Footprint to explain the
extent of humanity's "overshoot", the GFN draws the attention of governments, investors
and opinion leaders and demonstrates to "the advantages of making ecological limits
central to decision-making".
It is no secret that the planet has a finite quantity of resources that are being used up
faster than they are being replaced. Fifty years ago, most areas of the globe had more
resources than were consumed. But now, 86 per cent of the people in the world live in
countries with a huge ecological footprint, where the demands literally strip the country
of its resources at a rate faster than they can be replenished.
Passing the buck
Sat, Oct 11, 2014
Frontline, economics, QE policy,
Reserve Bank of India Governor Raghuram Rajan has been railing against the monetary
authorities in the developed economies for some time now. Initially, his complaint was
that they unilaterally decide on infusing liquidity or withdrawing it through their
"quantitative easing" and "taper" policies, even though this move affects "emerging
markets" such as India.
To start with, all developed country policymakers who, like Rajan, see much virtue in
financial markets argue that financial institutions on the verge of insolvency had to be
bailed out, even though it was their errant behaviour that had led to their near-failure
and the financial crisis.
Further, despite initial talk of providing a stimulus to stall and reverse the real economy
decline that the financial crisis triggered, conservative opinion, again of the kind that
Rajan is known to favour, soon turned against the tendency to enlarge the fiscal deficit
on government budgets to finance the stimulus. With an emphasis on austerity in
economies performing both moderately well and poorly, monetary policy had to replace
fiscal policy as the principal means to address the crisis. This required more liquidity
infusion into the system, over and above what is needed to save the banks and return
them to profitability. What became clear over time was that a little bit of money did
not go far enough in addressing the crisis--the system had to be flooded with cash.
The result was the decision to pump large volumes of liquidity into the system through
versions of the quantitative easing (QE) policy. QE essentially involves purchase of
bonds, normally from banks but also from other agents. The consequences of such
purchases are threefold. First, it infuses liquidity into the system, allowing banks to
lend more because they have accumulated reserves and because they have transferred
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risk off their balance sheets by the sale of securities. Secondly, it raises the price of
assets because of the increased demand for securities in the "market". Thirdly, since
the corollary of a rise in asset prices is a fall in yield, the move results in a decline in
interest rates. The resulting cheapening of credit, it is expected, would spur demand
and combat the recession.
Starting with the Troubled Asset Relief Programme in 2008, and then through QE II,
which injected around $600 billion over eight months, and finally QE III, which involved
purchases of $85 billion a month for several months, the balance sheet of the Federal
Reserve or the assets it held through purchases ballooned from $800 billion in 2008 to
more than $4 trillion recently.
with households and businesses already heavily in debt, they were (and are) not willing
to borrow more even at lower interest rates, and banks were cautious about lending to
over-indebted clients. The expectation that increased liquidity in the system would
translate into increased consumer, housing and investment credit proved misplaced.
But the absence of inflation encouraged staying with the QE policy.
So where did the money go? Part of it remained in the books of the banks, which were
happy to have got rid of the excessive volumes of risky assets they held. But another
part was flowing into assets like equity, bonds and gold, both within the U.S. and abroad.
The result has been huge asset price inflation.
Stock markets globally are at record highs (witness the movements in the Sensex). As
financial analyst Michael Hieise puts it: "The collateral damage from ultra-loose
monetary policy is accumulating. Risks to financial stability are growing as investors
are piling into riskier assets in search of higher returns. Already, some assets such as
junk bonds are trading at what look like inflated prices."
While it is true that the U.S. Federal Reserve, encouraged by positive growth numbers,
has decided to taper out its bond purchase policy, that process is slow. And precisely
when that is occurring, the normally conservative European Central Bank under Mario
Draghi startled analysts in early September by reducing interest rates to record lows
and announcing a policy to buy private-sector bonds worth hundreds of billions of euros
as a measure to stall a deflationary crisis. For Draghi, this was unavoidable also because
the weak dollar that liquidity infusion by the U.S. results in forecloses any effort at
using the depreciation of the euro to revive export demand and growth.
The fight for equity
Sat, Oct 11, 2014
Copenhagen , BRICS, environment, Frontline, climate change,
IN December 2015, the world will know which way it is headed in terms of climate
change and what the fate of the earth will be, particularly humanity, in the years beyond
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2050. The year marks the deadline that was set in 2011 at the 17th climate summit in
Durban, under what is known as the Durban Platform, for the world community to
arrive at a binding international agreement on limiting carbon emissions so that the
average global surface temperature does not overshoot the "guard rail" of 2deg Celsius--or
even a more ambitious limit of 1.5deg C--above pre-industrial levels. The annual climate
summits are called the Conference of the Parties (COP) to the United Nations Framework
Convention on Climate Change (UNFCCC), which was negotiated in 1992 at the Earth
Summit in Rio de Janeiro. The convention's stated objective (Article 2) is "stabilisation
of greenhouse gas (GHG) concentrations in the atmosphere at a level that would stop
dangerous anthropogenic interference with the climate system".
Equity is an important principle, indeed the cornerstone, of the UNFCCC, which is
articulated (Article 3.1) as: "The parties should protect the climate system for the benefit
of present and future generations of humankind, on the basis of equity and in accordance
with their common but differentiated responsibilities (CBDR) and respective capabilities"
(emphasis added).
Every country has an additional common climate obligation towards emission reductions
individually, but these responsibilities would be differentiated according to their historical
actions, respective current capacities and capabilities.
According to the latest (Fifth) Assessment Report (AR5) of the Intergovernmental Panel
on Climate Change (IPCC), the increase in temperature between 1880 and 2012 is
already 0.85deg C
At COP-15 in Copenhagen in 2009, the participating countries, after failing to conclude
a legally binding treaty in accordance with the UNFCCC principles, pledged to work
towards an agreement that would prevent global warming from exceeding 2deg C. The
crucial COP-21, expected to herald the making or breaking of a climate resilient world,
will be held in Paris. At COP-20, to be held in Lima in December 2014, it is widely
expected that the nature of the emergent universal agreement should become clear. A
draft text is expected to be tabled for discussions at the summit.
The nature of the legal agreement was left pretty much vague at the Durban summit.
The Durban decision was that it could be a protocol, another legal instrument or "an
agreed outcome with legal force". The phrase "an agreed outcome with legal force",
whose meaning is not quite clear, was incorporated after prolonged wrangling as a
compromise to India for which the use of the words "legally binding" in the earlier
formulation was anathema to its negotiating position. In the past 22 years of climate
negotiations, two approaches to address the impending climate crisis have emerged.
The first was the Kyoto Protocol of 2005, a top-down (prescriptive) solution whose
architecture reflected the CBDR. The Kyoto Protocol now stands virtually dismantled.
In accordance with the respective historical responsibilities, it required only the developed
or Annex 1 countries to take on assigned targets for emission reductions over their 1990
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levels based on the simple "polluter pays" principle. Their carbon emissions since
industrialisation began in the mid-19th century account for about 70 per cent of the
accumulated carbon in the atmosphere (stock), constituting the major cause for the
current global warming and climate change.
The First Commitment Period (FCP) of the Kyoto Protocol ended in December 2012.
After much acrimonious negotiations at Durban, the Second Commitment Period (SCP)
was agreed upon. This will expire in December 2020, when the new globally binding
post-2015 agreement will take effect. During the FCP, industrialised countries committed
to reducing GHG emissions by an average of 5 per cent below 1990 levels. During the
SCP, the commitment is to reduce emissions relative to 1990 levels by 18 per cent.
On the other hand, the non-Annex 1 countries, which account for about 80 per cent of
the world population, are not required to meet any assigned targets. This premise has
not been acceptable to some developed countries. The United States, for instance, opted
out of the Kyoto Protocol right from the start even though until recently it was the
biggest carbon emitter in the world. These countries want emerging economies such
as India and China, whose emissions are increasing as a result of the ongoing development
and economic growth, to take on binding commitments as well. Post-2012, Canada,
too, withdrew from the Kyoto process. Russia, Japan and New Zealand have not accepted
any reduction commitments for the SCP for the same reason. Effectively, therefore,
the SCP puts reduction targets only on 15 per cent of world emissions.
Thus, the Kyoto process today stands greatly undermined. The U.S. has all along
favoured a single framework ( Frontline , December 18, 2009) on the basis of a bottom-up
approach premised on unilateral emission reduction commitments by all countries which
would include India and China as well--commitments that are measurable, reportable
and verifiable (MRV)
quasi-formalisation of this process occurred at COP-16 in Cancun, Mexico, in 2010
when the Cancun agreements included a list of pledges by individual countries, with
nothing said about the "review" process that should go with it. "All countries must
accept binding commitments in some appropriate legal form," the then Indian Minister
of Environment and Forests, Jairam Ramesh, famously said at Cancun.
Arguing that India must be seen to be part of the solution and not part of the problem,
Ramesh overruled the negotiators and declared at Cancun that India would reduce its
emission intensity by 20-25 per cent of its gross domestic product (GDP) by 2020 from
the 2005 levels as the Indian pledge in the new globally binding bottom-up approach.
This target was the Nationally Appropriate Mitigation Action (NAMA) that it had
communicated to the UNFCCC in 2009 under the Bali Action Plan of COP-13 as a
voluntary measure and not as a binding target.
: "Towards 2015 COP at Paris, India has decided to strengthen its negotiating team, its
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negotiating efforts, taking other countries along with us... we have eight missions; we
may add one or two more.... The issue is that the world must recognise that India needs
to grow.... So we will seek a window up to say 2050. Then our scenario may plateau
and then come down...."
This is a throwback to the pre-Ramesh negotiating stance of India not being prepared
to undertake any binding emission cuts. Indeed, this was the burden of India's submission
to the UNFCCC on the work plan for the Durban Platform. It said: "The
responsibilities/obligations of developing countries in a post-2020 arrangement will
clearly need to be built on the principles of equity and CBDR. Irrespective of the legal
form of the final arrangements, the developing country targets under such arrangements
cannot be binding until the principle of differentiation based on equity is defined and
the conditions implicit in such definition of equity are met
One of the reasons for domestic policies not being predicated upon climate change
imperatives is a lack of detailed State or regional level impact assessments and
vulnerability maps on factors such as agricultural productivity, monsoon variability
and sea-level rise, to appropriately tailor the State-level policies and the State Action
Plans on Climate Change (SAPCCs).
The Indian approach to equity in climate negotiations has always been premised on the
basis of per capita emissions (PCE) per year, which is about 1.7 tonnes (ranked 127th)
as compared to China's 6.2 tonnes (ranked 55th) and the U.S.' 16.4 tonnes (ranked
eighth). In terms of gross emissions, they account respectively for 6.41 per cent (the
fourth biggest emitter), 26.43 per cent (the biggest emitter) and 17.33 per cent (the
second biggest). The scientific basis for this approach is that atmosphere is a global
commons. But global warming restricts the available carbon space (the amount of GHG
that can be emitted without breaching the 2deg C ceiling or the "carbon budget") for
humanity as a whole. Equity in a climate change agreement implies right of equitable
access to this carbon space and operationalisation of these rights (at a national level).
The per capita approach means that this available carbon space be apportioned equally
across all individuals of the world. This implies equity between nations as part of an
international agreement and equity within nations through domestic actions. The thrust
of the UNFCCC equity principle and the Indian approach to equity is that "historical
emissions" of industrialised nations have greatly shrunk the available sink capacity of
the atmosphere for future carbon emissions necessary for the growth of developing
countries. Thus, these historically accumulated stocks, and not flows, of carbon emissions
must form the basis for assigning equitable access to available carbon space. It is the
relative contribution of GHG emission stocks that would determine the used up carbon
space by various nations and how much of it remains for use by all nations in the future.
India used equity as a defensive mechanism in negotiations. While agreeing that equity
was being used as a negotiating tactic, Raghunandan favoured the per capita approach
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but with the caveat that it would be more effective internationally if India were to
address this issue domestically in its developmental policies, in terms of energy and
resources access, linked with environment and sustainability issues, which unfortunately
was not happening.
With available carbon space becoming highly constrained, from the perspective of
developing countries, equity should be non-negotiable and should form the basis of
any global agreement post-2015. However, the equity principle is yet to become central
to the negotiations despite there being several formulations of it. The problem is, as
Jayaraman pointed out, which among these different formulations, which appear similar
and comparable, should be picked.
The Indian negotiating team should, therefore, engage with as many countries as possible
to evolve a common strategy for advancing the idea of equity and arrive at a formulation
of equity that would be acceptable to as many countries as possible. It is becoming
increasingly clear that a "pledge-and-review" kind of agreement is likely to be the
outcome at Paris. The question then is: What kind of a structure should it have so that
equity could become an integral part of it?
Besides the BASIC group, India has also used the forum of Like-Minded Developing
Countries (LMDCs) to formulate a common stand on climate change. But, as Raghunandan
pointed out, India should try and win over countries of the Africa Group, the LDCs and
SISs as well to create a much larger common front to address questions such as "What
are the overarching terms that an agreement should have?",
Tenuous truce
Sat, Oct 11, 2014
Gaza, palestine, Frontline, international, Israel, Hamas,
There are no signs yet that Israel is serious about lifting the economic blockade on Gaza
or removing the travel restrictions that have turned Gaza into an open-air prison since
the withdrawal of Israeli troops from the territory in 2005.
The Prime Minister seems determined to continue with his expansionist policies. Soon
after the ceasefire agreement, the Israeli government announced the appropriation of
another 500 hectares of Palestinian land on the West Bank. Israel already occupies 61
per cent of the West Bank and controls most of its water resources. He recently emphasised
that there was no question of withdrawing the Israeli army from the West Bank. Defence
Minister Moshe Ya'alon has threatened to unleash another war on the hapless population
of Gaza.
The scale of destruction is much more this time than in the 2009 and 2012 attacks by
the Israeli forces. Billions of dollars was needed to repair the damage inflicted on Gaza's
infrastructure in those attacks. The Palestinian Authority (P.A.) has put the cost of
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reconstruction of Gaza now at $7.8 billion.
Human rights groups and international legal luminaries say that Israel should be held
responsible for committing war crimes in Gaza. During "Operation Cast Lead" in 2009,
despite documented evidence of war crimes, no Israeli leader or military officer was
held responsible. This time, the international community seems to be more serious
about making those responsible for the death of more than 500 children in Gaza
answerable for their crimes. Around 3,000 children were injured and more than 1,400
orphaned during the course of the Israeli assault.
by sending vast amounts of military aid to Israel, Congress and the Obama administration
have aided and abetted the commission of war crimes, genocide and crimes against
humanity by Israeli officials and commanders in Gaza.
The Obama administration rushed in additional arms to Israel when the civilian toll in
Gaza, following indiscriminate air and sea attacks, had crossed the 500 mark. Every
year, the U.S. provides around $3.1 billion in military aid to Israel. The U.S. has for
all practical purposes been aiding Israel's expansionist and apartheid polices.
At the launch of the new war, Netanyahu had promised to militarily defeat the armed
resistance groups and convert Gaza into a pacified and demilitarised zone. The Israeli
army even failed to decommission all the tunnels the resistance had built to militarily
combat the occupiers.
Hamas remains firmly in control of the Gaza Strip. A recent opinion poll taken among
Palestinians in the occupied territories revealed that the popularity of Hamas among
ordinary people had soared. The poll predicted that if elections were held in the occupied
territories, Hamas would emerge the winner once again. Before the last Israeli onslaught
started, Hamas had become politically isolated.
Hamas' political fortunes were on a downslide after the removal of its parent organisation,
the Muslim Brotherhood, from power by the Egyptian military last year. Since then,
the Egyptian authorities have further intensified the blockade on Gaza.
It was obvious that the new Egyptian government wanted the demilitarisation of Gaza
and the political sidelining of Hamas from the Gaza Strip. But the latest Israeli
misadventure has bolstered the standing of Hamas, not only among Palestinians and
the Arab street but also internationally.