Category: Huffington Post (UK)

[This article was first published here on The Huffington Post]

More than 20 years after a vote in its Senate asked the United States to vacate large-scale military bases in the country and leave, the Philippines announced on 27 January that it was looking for more joint military exercises with the US, as well as having a greater number of US troops rotating through the country.

While the Philippines’ Foreign Secretary Albert del Rosario did not mention any specific reason for the Philippines’ drive for a greater US military presence, but he highlighted “territorial disputes” in his interaction with reporters at the announcement.

The most urgent territorial dispute for the Philippines is clearly with China over contesting claims to parts of the South China Sea – home to about one-tenth of the fishing catch landed globally, shipping routes that generate nearly half the tonnage of intercontinental trade in commercial goods, and a treasure chest of fossil fuels.

The Philippines and Vietnam, which also claims parts of the South China Sea, complained repeatedly last year of what they said were increasingly aggressive acts by China in the decades-long dispute.

The alleged aggressive acts, which included a Chinese naval ship reportedly firing warning shots at Filipino fishermen, fuelled fears among some nations in the region about China, especially in the light of the Asian giant’s growing military and political strength.

China claims sovereignty over most of the South China Sea, including the disputed Paracel and Spratly Islands, which many nations including the Philippines claim as their own. In September 2011, the Filipino President Benigno Aquino raised the tensions between the two nations a notch higher by announcing the renaming of a part of the South China Sea as the West Philippine Sea in an effort to reinforce its claim to the Spratlys.

But that barely got acknwoledged by China. In January, the western command of the Philippine armed forces confiscated a Chinese fishing boat that had GPS, radios, and even air compressors for deep sea diving – clearly not the equipment that you would find in a normal fishing boat.

The Philippines claimed that the boat, which tried to ram a smaller Philippine patrol boat before the patrol party shot at and disabled the engine, was actually meant for surveillance.

In similar instances late last year, Chinese boats left construction materials near islands the Philippines claims. The Philippines quickly cleared them, because when this happened in 1995 on Mischief Reef, a reef in the Spratly Islands, the Chinese erected a structure almost overnight, and now have a permanent presence there. Mischief Reef is just 130 nautical miles from the Philippines, but more than 600 from China.

According to the International Law of the Sea, a country’s Exclusive Economic Zone extends 200 miles from its shores. But China maintains it has a historical claim to islands even farther away, because it found them and named them first.

But encroachment on the Philippines territories, as the southeast Asian nation describes it, is not the only threatening act that China engages in. When ExxonMobil announced in October 2011 that it had found what looked like a sizable natural gas field near the Vietnamese city of Danang, China warned that foreign companies shouldn’t proceed in waters that China claims.

In other words, from the Philippines’ perspective, things were getting out of its control recently and it had to seek out external help.

The US, on the other hand, is increasingly looking to contain China through a a shifting defence strategy with a greater military focus on Asia, beginning with the deployment of up to 2,500 Marines to northern Australia in November 2011. With many important ASEAN members – business partners of the US – being embroiled in a dispute with China in the South China Sea, responding favourably, and quickly, to the Philippine’s SOS was akin to seizing an opportunity.

The symbiotic nature of the new arrangement was not lost upon analysts.

Rene de Castro, a lecturer in international studies at De la Salle University, said to AFP, “Philippines is playing the balance of power game because it has no means to deal with an emergent and very assertive China.”

“The Philippines is now playing the US card to get more leverage against China,” Rommel Banlaoi, head of the Philippine Institute for Peace, Violence and Terrorism Research, added.

That is certainly how China’s communist party controlled The Global Times newspaper saw the new announcement.

The paper suggested that while the US$30 billion in trade the Philippines has with China could have doubled in a couple of years, the Asian giant could now in fact punish the southeast Asian nation with sanctions for turning to the US.

Sounding ominous, it also suggested that the “little countries” in the region should stop challenging China’s interests, or they’ll “hear the roar of cannon fire.”

China’s view is that the US should stay out of the South China Sea. In November 2011, Chinese Foreign Ministry spokesman Liu Weimin said, disputes in the South China Sea should be resolved through consultation between involved sovereign states. He added that any “interference from outside forces would only complicate matters.”

It is a feeling that is shared by some within the Philippines too.

Dozens of activists of the left-leaning New Patriotic Alliance (NPA) marched outside the US embassy in Manila on January 28 to protest the expanding military cooperation between the two allies.

“We are very opposed to the plans to re-align and deploy more US troops in the Philippines […] And we feel that the Philippines might be caught in the rising tension between the two countries if we allow the U.S. to base their troops in this region,” spokesperson for the NPA, Renato Reyes told television reporters at the site of the protest.

In sync with Reyes contention, a January 26 research note published by the Eurasia Group political risk consultancy warned that efforts to hedge against the rise of China by the Philippines and Vietnam, which is also moving closer to the United States, could kindle tensions in 2012.

“While a direct confrontation remains unlikely, tensions over territorial disputes increase the risk of a miscalculation by Hanoi or Manila and of an overreaction by Beijing,” said the note, published on Thursday.

For the moment, the Aquino government is not getting deterred by such sentiments, and looks clearly in favour of fighting fire with fire. The future, however, is yet to be written.

[This article was first published here on The Huffington Post]

South Asia is often described as the most dangerous place on earth and the most promising emerging market – both in the same breath. The year 2011 illustrated in ample measure the implausible irony.

The biggest international story of the year, according to The Associated Press’ annual poll of US editors and news directors, was the killing of Osama Bin Laden in his hideout in Pakistan on 2 May.

Coming close on the heels of a serious diplomatic row between the US and Pakistan over the issue of Raymond Davis, an alleged CIA operative, killing three men in the busy streets of Pakistan’s second biggest city Lahore in late January, Pakistan brought frequent – and hugely unwelcome – spotlight to the South Asian region during the year.

The year of turmoil, which was preceded by the country losing hosting rights of many sporting events including South Asia’s biggest sporting event, the ICC Cricket World Cup, ended with one of the most public spats in recent history between the democratically elected government and the omnipotent Pakistan military.

In a spat that could spell serious trouble for the fragile democracy of the nation, President Asif Ali Zardari is alleged to have sought US assistance to quell a possible military coup in the aftermath of Osama’s killing. Called the ‘Memogate Scandal’, for the unsigned memo – allegedly crafted by former ambassador to the US Hussain Haqqani – that was used to convey the Pakistani request to the US administration, the matter has taken the scalp of Haqqani and dragged both Zardari and chiefs of military and Pakistan’s secret service agency Inter Services Intelligence (ISI) to nation’s supreme court.

Conflicts like these have in the past acted as the precursor to military rule in the country, which the nuclear-armed nation has been under for more than half the period of its independence from British rule in 1947. Though the chief justice of the Supreme Court, Iftikhar Mohammad Chaudhry, decisively denied on 22 December the possibility of any extra-constitutional measure against the democratic system, a cursory glance at the nation’s volatile history informs that the military usually manages to have its way.

Unfortunately, Pakistan was not the only South Asian nation where dead bodies talked the most during the year. Bangladesh, Sri Lanka and Nepal grappled with the aftermath of armed conflicts of recent history, even as India played host to a fleeting visit by terror in 2011.

A tribunal, headed by Nizamul Haque Nasim and known as ‘International Crimes Tribunal’, was formed in March 2010 in Bangladesh to hold trial of those accused of their involvement in ‘crimes against humanity’, including genocide, murder and rape during the nine-month ‘Liberation War’ – the period between declaration of Bangladesh’s independence from Pakistan in March 1971 and attaining freedom with India’s military help against Pakistan in December 1971. Many unofficial accounts put the figure of dead people at three million and those of women raped at 200,000. Hundreds of thousands of other, the then, East Pakistanis ended up as refugees in India.

Following up on the formation of the tribunal, the nation took its first step towards addressing that dark chapter of its young history when the police arrested three top Jamaat-e-Islami leaders in June 2010, two of which were cabinet ministers in the 2001-06 Bangladesh National Party (BNP) administration of the present opposition leader and then prime minister of Bangladesh, Begum Khalida Zia.

Khaleda Zia, in a statement to press, said that the tribunal is “nothing but a servile, rubber-stamp organisation” out to victimise the government’s political opponents.

The tribunal began its first trial in October this year when it charged Delwar Hossain Sayedee, a top authority of Jamaat-e-Islami and allegedly one of the leaders of a pro-Pakistan mercenary group, with involvement in the killing of more than 50 people, torching villages and forcibly converting Hindus to Islam.

Sayedee, who denies the charges, could be given the death penalty if found guilty.

International observers have cautiously welcomed the trials. With neutral researchers noting that about 1800 people collaborated with the Pakistani army in committing the ‘war crimes’, many more arrests in the case are expected.

In another case involving war in the SAARC region, to the south-west of Bangladesh, the Lessons Learnt and Reconciliation Commission (LLRC) of Sri Lanka submitted its final report to the government on November 20. Established by President Mahinda Rajapaksa in May 2010 to look into alleged war crimes committed during the final days of the 26-year-old civil war in Sri Lanka that ended with the defeat of the rebel Liberation Tigers of Tamil Eelam (LTTE) at the hands of the Sri Lankan army in May 2009, the LLRC – expectedly – exonerated the Sri Lankan government of any wrong doings between 21 February 2002 to 19 May 2009.

The commission is not recognised by most of the international rights groups because of its failure to satisfy the fairness and transparency criteria. But the Sri Lankan government, which has steadfastly resisted vociferous global support for external accountability mechanisms such as the UN Secretary General’s Panel of Expert, said that the LLRC report is impartial and objective, and would be presented verbatim at the next session of the United Nations Human Rights Council (UNHRC) in March 2012.

Up north in the Himalayas, the erstwhile monarchy and the presently constitution-less fledgling democracy of Nepal struggled, for another year, to draft a new constitution and pave the way for a stable democracy.

On 28 November, members of parliament extended the Nepalese parliament’s term for a fourth and final time to allow the drafting of a new constitution that adheres to a peace accord brokered between political parties and the Maoist rebels, after the civil war ended in 2006.

Formed in 2008 after Nepal relinquished its monarchy, the current 601-member parliament, or Constituent Assembly (CA), was given an initial two-year mandate to write a new constitution for the young republic.

But three years since, the CA has not been able to produce even a first, consolidated draft. The previous three extensions of the assembly – first for a year and then two of three months each – failed to resolve differences between the various political parties on issues like federalism, presidential or prime ministerial formats and election procedures.

But the nation made some progress in what it called the ‘regrouping process’, entailing the re-integration of the cadre of Nepal’s People’s Liberation Army (PLA) in the mainstream Nepalese society. PLA was the military wing of the Unified Communist Party of Nepal-Maoist (UCPN-M) when the party was at civil conflict with the Nepalese monarchy.

19,500 PLA combatants who were living in a total of seven cantonments in different parts of the country after the commencement of the peace process in 2006 began appearing before a committee on November 18 to register their choice of either joining the Nepal army or taking a voluntary retirement.

The process is seen is one of the only successes of Nepalese democracy since the abolition of constitutional monarchy in 2006.

India, the SAARC nation that has the biggest stake in the Nepalese peace process, meanwhile continued to answer its own geo-political needs – supporting the Maoists in Nepal, while going after the group in India and gunning down one of its biggest leaders, Kishenji.

Indian analysts, however, point out that there is no contradiction in the approach, as while the Nepali Maoist are now firmly in the Himalayan nation’s mainstream polity, the Indian rebels are still caught in the time warp of trying to overthrow the government to establish their own ideological republic – through the barrel of a gun.

The South Asian giant, however, faced none of the security-related anxiety of the other SAARC nations mentioned in this year-end wrap; barring a jolting bomb blast outside a court premises in New Delhi. But it was kept on the tenterhooks by another kind of challenge – that of popular anger.

[This article was first published here on The Huffington Post]

India’s government battled pressure from a united opposition on its November 25 decision to open up the country’s retail sector, worth an estimated $450 billion, to international brands like Tesco and Wal-Mart.

The cabinet in New Delhi took the decision to allow 51% foreign investment in multi-brand retail stores and up to 100% in single brand retailers in cities with a population of more than one million. The decision stipulates that foreign firms, which at the moment are able to partner with Indian businesses as minority stakeholders to operate wholesale operations, would have to make a minimum investment of $100 million, half of which would have to go in transport, storage and other associated infrastructure in rural to semi-urban areas.

Explaining the rationale behind the government decision, D Subbarao, the Governor of Reserve Bank of India (RBI), India’s Central Bank, said the government’s move to open up the retail sector is aimed a boosting growth and control inflation. India is presently suffering from double-digit inflation and a slowing down of economy that is further hurt by the Indian currency hitting a historical low against the dollar in November.

Talking at a seminar in Chandigarh, a city north of New Delhi, Subbarao said “It’s commendable as the government has taken the initiative. Let’s hope that it will improve the logistics chain and supply chain management in agriculture.”

“Raising agricultural production and productivity is vital towards containing price pressures, raising rural incomes and making growth more inclusive,” he added.

The opening up of India’s retail market has been welcomed by global brands like Carrefour, which has long been advocating the move. In a press communiqué, Carrefour officials said that the company could help modernize infrastructure in the country where a third of produce goes waste every year due to poor road and storage – especially refrigeration – infrastructure.
Similarly, a spokesman for Tesco told The Independent, a UK daily, “Allowing foreign direct investment in retail would be good news for Indian consumers and businesses and we await further details on any conditions.”

The excitement amid global retailers about the cabinet decision can be understood by the fact that A T Kearney, a US-based global management-consulting firm, in its Global Retail Development Index (GRDI) report 2011, ranked India as the fourth most attractive nation for retail investment among 30 emerging markets.

Also, the Business Monitor International (BMI) India Retail Report for the fourth-quarter of 2011 forecasts that the total retail sales will grow from $ 411.28 billion in 2011 to $ 804.06 billion by 2015. While Booz and Co (India) Pvt. Ltd., a global management and strategy consulting firm, said in its annual report that Indian retail market entails only 6 per cent of itself as organised retail segment as of 2010 – thereby offering huge potential to be explored by domestic and international players.

Rajan Bharti Mittal, director of Bharti Enterprises, which has 13 exclusive joint ventures with US retail giant Wal-Mart acknowledged the above assessment by dubbing the cabinet decision as a “major landmark in India’s economic reforms process”.

But not everyone agrees with him in India on the issue.

Expressing her surprise on the sudden decision by the government on an issue that has been under active deliberation amongst all political parties since many years, Sushma Swaraj, leader of the opposition in Lok Sabha, the lower house, tweeted: “Parliament is in session and the Government announced a decision of such far reaching consequences outside the Parliament.”

Her surprise is rooted in the fact that the deliberations on foreign investment in retail dates back to 1993, when the then finance minister had introduced a law that permitted foreign investment in retail. Since then, the policy has seen many ups and downs, as per the nature of the political landscape of the nation – even as foreign multinationals lobbied hard to sell directly in a market that is seen as a replacement for the saturated markets of the west.

It is that active lobbying by global giants that instills further fear into the minds of local retailers. The biggest fear of the smaller retailers is that over a period of time, big retailers would start displacing the entire supply chains of the products, and make them redundant.

The fear of losing out on business and livelihoods due to the present cabinet decision has united small shopkeepers and trade unions against the decision across India – thereby putting pressure on influential state leaders and lawmakers both from opposition parties and from within the ruling coalition to safeguard their electoral constituency by opposing the cabinet decision.

The government tried to assuage the fears by saying that small and medium domestic retailers would not be affected, as the decision would impact only 53 cities of over one million population, out of the 8000 towns and cities of India. Making a statement in the parliament on November 25, commerce minister Anand Sharma said that the cabinet decision would in fact create 10 million jobs over three years.

But his assurance failed to bear fruit, as opposition parliamentarians in both the upper and lower house expressed noisy anger and tore up copies of his statement on their way to securing adjournment of proceedings.

The all-party meeting on November 29, chaired by Finance Minister Pranab Mukherjee to address the logjam in parliament, ended without a deal being reached, and parliament remained paralysed by noisy protests against the reforms.

Amid the noise, Prime Minister Manmohan Singh on November 30 rejected calls to reverse the cabinet decision, saying the entry of foreign supermarket giants would help modernise the $450 billion sector and fight stubbornly high inflation.

In his first public statement on the controversy, Singh said at a meeting of the ruling Congress party, “The decision on allowing FDI in retail was not taken in any hurry, but well considered,” adding that investment rules would protect small businesses.

For the moment, it is not cutting much ice with the opposition. “The government has introduced the policy of foreign investment in retail under intense lobbying of companies in the US and other western nations. We are totally against it,” Murli Manohar Joshi, a very senior leader of the principal opposition party Bharatiya Janata Party (BJP) told reporters.

[This article was first published here on The Huffington Post]

Inflation in Asia may have passed or reached its peak this cycle.

In its annual Financial Stability Review released on November 18, the Monetary Authority of Singapore said that while inflation rose for most Asian economies in the first half of the year, the worsening global economic outlook has helped contain inflationnary pressures in October.

“Inflation appears to have peaked in most Asian economies,” the report added.

While six months ago, South Korea was struggling to keep inflation in check, the Bank of Korea kept interest rates frozen for a fifth straight month in November — as Korean consumer inflation slowed to 3.9 percent in October from 5.3 percent in August.

Elsewhere in Indonesia, Southeast Asia’s largest economy, inflation unexpectedly slowed in October, adding to the central bank’s ability to cut interest rates further to boost economic growth.

Vietnam, which is the worst affected nation in Asia on the issue of inflation, too saw inflation slow down for the second month in succession in Oct.

Though the current crisis in Europe does have a bearing on the new figures from Asia, experts say neither the rise in inflation in Asia in the early part of the year nor the subsequent cooling off in Oct. is dependent entirely on the events in the Eurozone.

An International Monetary Fund (IMF) Working Paper (‘Inflation Dynamics in Asia: Causes, Changes, and Spillovers from China’ by Carolina Osorio and D. Filiz Unsal) revealed that more than 60 percent of inflation fluctuations in Asia have a domestic origin.

The contribution of domestic factors is more pronounced for economies that have large domestic demand bases (China, India, and Indonesia) and for those that are more advanced (Japan and Korea).

On the other hand, the Working Paper said, domestic factors account for a lower share of inflation fluctuations in ASEAN economies such as Malaysia and Thailand, which are relatively more open and exposed to global inflationary shocks.

Irrespective of the size of the economy, however, the most fundamental domestic demand of any growing economy is that of food.

According to Rabobank Groep NV, food makes up more than 30 percent of inflation indexes on average in Asia, compared with about 15 percent in Europe and less than 10 percent in the US.

Within Asia, home to 60 percent of the world population, food’s weight in consumer-price indexes varies from about 45 percent in the Philippines and India, to more than 30 percent in China and about 10 percent in South Korea, Rabobank says.

In direct agreement with Rabobank’s finding, the lowering of inflation in China in Oct was in tandem with the event of food costs in the Asian giant, where poor families spend half of their earning to eat, rose by 11.9 per cet in October, down from September’s 13.4 percent.

The sensitivity of their economies to swings in meat and vegetable costs means emerging-market policy makers need to raise interest rates more to stem inflation when global agriculture prices soar.

It is particularly important from a political perspective too as no government can hope to rule a population that is not having enough to eat.

In its annual Asian Development Outlook report (2011), the Asian Development Bank (ADB) warned that inflation, especially if driven by food prices, could exacerbate inequality and lead to social tensions.

In Nepal, for instance, the report suggests that a 20 per cent food price inflation would cause the poverty ratio to rise by over four percentage points, increasing the poor population by more than one million, from the current figure of 6.7 million to 7.7 million.

A development of that nature would end up offering recruits for armed militias fighting against the nation on many fronts.

On the other hand, in China and India, sustained period of inflation presents the ruling establishments the risk of losing the support of the middle class, which may see the only reason of its support to the ruling establishments — prosperity — get washed away by inflation.

Apart from food, an array of factors affects economies in the region in a varied manner.

In Indonesia, government data show that gold jewelry was the biggest contributor to increase in consumer prices in August from the previous month.

Similarly, while gold and gold ornaments account for a mere 0.36 percent in India’s main index, a 52 percent jump in prices in the category was enough to push up the inflation rate in August.

Japan and other Asian economies such as Singapore, Vietnam and Hong Kong did not witness because the metal is either absent from inflation baskets in those countries or jewelry has a limited effect.

Overall, a look back at the 2008 financial crisis shows that many Asian countries are in a better position to respond to another downward spiral now should the need arise. Even though inflation is running too hot for comfort across the region, it is lower now than it was in 2008 for economies like Indonesia and the Philippines.

Changyong Rhee, ADB’s chief economist said, “Developing Asia, having shown resilience throughout the global recession, is now consolidating its recovery and rapid expansion in the region’s two giants — the People’s Republic of China and India — will continue to lift regional and global growth.”

The Asian Development Outlook report (2011) said Asia, barring Japan, would grow by 7.8% in 2011 and 7.7% in 2012, down from 9% in 2010 when the region rebounded strongly from the global financial crisis.

Ironically, Anoop Singh, Director, Asia and Pacific Department, International Monetary Fund (IMF) said in his official blog: “If emerging Asia continues to grow rapidly, this may also lead to higher commodity prices, as demand from the region has become an important driver of many of these prices.”

Clearly, there is neither a simple explanation for inflation in Asia, nor is there an easy fix for fighting it. But with Chinese manufacturing continuing to expand in October and Japan showing signs of coming out of the Tsunami shadow, the region can look forward to build upon the present cooling of inflation.

What should further encourage analysts is the fact that experts like Zhu Jianfang, a Beijing-based economist at Citic Securities, believe that food and global prices have peaked and the inflation figure in the region would only come down in future.