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WHY CHINA A BIGGER SUSPECT THAN IMF-WB

Bangladesh has made it clear that it won’t take any further loan from Beijing while Nepal has also taken same stand

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The recent economic upheaval followed by the political disruption in Sri Lanka, has once again made China’s Belt and Road Initiative (BRI) the focus of debate whether it is beneficial or insensitive to the participating countries besides being a success or a failure.

Chinese President Xi Jinping launched the BRI with much fanfare and high promises and grandiose plans for the participating countries in 2013. It was considered to be a centrepiece of the Chinese foreign and trade policy.

As claimed by China, the BRI, earlier known as One Belt One Road (OBOR), is basically a global infrastructure development strategy to invest in nearly 150 countries and international organisations, around the globe.

The BRI formed a central component of Xi’s “Major Country Diplomacy” strategy, which calls for China to assume a greater leadership role for global affairs in accordance with its rising power and status. As of August, 149 countries were listed as having signed up to the BRI.

Xi originally announced the strategy as the “Silk Road Economic Belt” during an official visit to Kazakhstan in September 2013, referring to the proposed overland routes for road and rail transportation through landlocked Central Asia along the famed historical trade routes of the Western Regions; in addition to the “21st Century Maritime Silk Road”, referring to the Indo-Pacific sea routes through Southeast Asia to South Asia, the Middle East and Africa.

In fact, the BRI was also considered a grandiose plan to challenge the American hegemony over the global trade and diplomacy.

However, the recent events in Sri Lanka, with similar echoes being heard from Bangladesh, Nepal and Pakistan has led some China watchers to conclude that this is an indicator of the hit that the Chinese economy has taken during the Covid pandemic and the BRI appears to be under revaluation with recipient countries wary of the debt trap and its economic feasibility.

Let’s take a closer look at the original intent of the BRI, its expansion and its long and short-term impacts on the aid recipient countries and whether it has been a success or a failure and how the US could have countered it in a much better manner.

In his report in 2020, Rafiq Dossani, Director, RAND Centre for Asia Pacific Policy, opined that China’s strongest motive behind the BRI was its long-term economic security. The maritime routes of the BRI would have helped the relatively underdeveloped, landlocked areas of China such as Yunnan and Xinjiang provinces by linking them with ports in the more rapidly growing areas of Asia.

At the same time, the emerging land routes of the BRI were marked as an alternative to the South China Sea, through which most of China’s trade currently passes and which is becoming a zone of contestation between the US and China.

Dossani further explaining the reasons for the initial welcome of BRI opined that traditionally, many countries prefer to work with the World Bank and other multilateral lenders, which provide borrowers with good practices, while making significant funding available on a meritocratic rather than political basis.

But, he says further that from a developing country’s viewpoint, accessing the world’s spare capital has been difficult because of the risk entailed in many such investments. The Asian Development Bank estimates that Asian countries face an infrastructure investment gap of $459 billion a year.

This logic also explains the sentiments, which in the initial stages of the launch of the BRI seemed to be the main attractive reason for the BRI projects and Chinese funding. But nine years after its launch BRI seems to have lost its sheen, due to the economic meltdown in several countries, which borrowed heavily from China under the garb of infrastructure development, progress and prosperity.

Bangladesh Finance Minister A.H.M. Mustafa Kamal has publicly blamed economically unviable Chinese BRI projects for exacerbating economic crisis in Sri Lanka. He says that developing countries must think twice about taking more loans through BRI as global inflation and slowing growth add to the strains on indebted emerging markets.

In fact, Bangladesh has made it clear that it will not accept any further loans but only grants from Beijing. Nepal has also taken the same stand. Pakistan with some $53 billion being spent by Beijing under the aegis of BRI also faces the same fate.

China has also invested some $44 billion in Indonesia, $41 billion in Singapore, $39 billion in Russia, $33 billion in Saudi Arabia and $30 billion in Malaysia.

The cry against Chinese BRI is not limited only to Indian sub-continent alone as its reverberations can be heard in the stalled $4.7 billion railway project in Kenya, also. Five years since its launch, the project ends abruptly in an empty field, 200 miles from its destination in Uganda.

As conflicts between the US and China appear to mount, some experts have questioned the intentions of China’s BRI. It has been viewed as a debt trap for impoverished states and a means for China to expand its territorial control, but is it a reality? Is the US missing an opportunity to participate-in or initiate parallel activities?

BRI has been repeatedly labelled a debt trap and a power grab, and perhaps this seemed like a possible scenario. However, this concept has been denied by Deborah Brautigam, director of the China Africa Research Initiative at Johns Hopkins University. She has claimed to have found no evidence that Chinese banks over-lend or invest in loss-making projects to obtain a foothold in those countries, in one of her studies on Chinese lending to Africa.

Brautigam has also claimed that China is not engaging in debt-trap diplomacy. She has noted that in some countries the IMF has been labelled as being vulnerable. Also, Chinese loans were not responsible for pushing indebted countries above IMF debt sustainability limits, she adds.

On the other hand, it should be noted that not just impoverished nations, but East Asian and Europe countries have also been smitten by the BRI. Over 18 European Union member countries have joined the BRI and most of them have not been quite happy about it.

In fact, rather than decrying China, the US should engage in infrastructure lending to poor countries, and/or make it easier for multilateral banks to lend for such projects, reducing bureaucratic requirements. It should also initiate similar activities in under-developed or developing countries.

To better its image, China should improve transparency around BRI deals. The World Bank and other bodies have also called for increased transparency. This would go a long way in improving US and other countries’ understanding of Chinese intentions about the BRI. • IANS

(The author is a political commentator based in New Delhi.)

An aerial view of the Lower Sesan II hydroelectric power station at Sesan district of Stung Treng province in Cambodia. With a length of 6,500 metres, the 400-MW dam is the largest and the seventh one built by China in Cambodia.

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Post 370, investment climate brightens in J&K

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Post 370, investment climate brightens in J&K

After witnessing decades of violence, the Union Territory of Jammu and Kashmir has witnessed tremendous changes in economic activities after the abrogation of Article 370.

After Article 370 was repealed, Jammu and Kashmir became subject to 890 central laws, while 250 unfair state legislation were eliminated. Additional 130 state legislation have undergone changes. The elimination of certain hurdles has led to a conducive business atmosphere. Due to the country’s strong leadership and increased stability in the region, foreign businesses are considering investment opportunities here.

The Lulu Group, Apollo, EMAAR, and Jindal are among the few commercial organizations that have investments in Jammu and Kashmir. The UT has inked five more Memorandum of Understandings (MoUs) with Al Maya Group, MATU Investments LLC, GL Employment Brokerage LLC, Century Financial, and Noon E-commerce, respectively. Magna Waves Pvt. Ltd. and Emaar Group, and Lulu International have also signed a single Letter of Intent.

In 2021, the Union Territory attracted investments of USD 2.5 billion, showcasing the region’s vast opportunities and business potential.

Even Indian Prime Minister Narendra Modi met with delegates from the United Arab Emirates seeking business opportunities in Jammu and Kashmir, noting that private investment bids in the Union Territory have topped Rs 38,000 crore.

The government is fully aware that investments play a crucial role in economic development because they lead to the accumulation of public wealth as well as advancements in science and technology. As a result, a framework for increasing the region’s manufacturing viability and economic growth is established.

The Jammu and Kashmir government established a five-person committee on June 23 to communicate with the Minister of External Affairs regarding the G20 meetings. India is starting to get ready for the big event.

In order to promote fresh investment and bring industrial development to the block level, the J&K administration introduced a new industrial development scheme with an outlay of Rs 28,400 crore in January of last year. The new regulation, valid until 2037, also made it possible for more prominent investors to invest in J-K.

Before the repealing of Article 370, there were not many investments in Jammu and Kashmir.

The Indian government is aware that investments play a key role in the economic development of any region. Hence, it is no letting stone unturned to establish a framework for increasing the region’s manufacturing viability and economic growth.

Infrastructure development in the Union Territory got a big push after the abrogation of Article 370.

After the abrogation of Article 370, the execution of new roads, tunnels and other basic Infrastructure has gained momentum to ensure the overall development of J&K.

Noting that roads are now being built at twice the speed as before, the Lt Governor of the Union Territory Manoj Sinha had said there has been a radical change in its progress under Pradhan Mantri Gram Sadak Yojana.

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Raise retirement age of SC, HC judges: BCI

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Raise retirement age of SC, HC judges: BCI

The Bar Council of India (BCI) in a joint meeting that was held last week has unanimously reached a conclusion that there should be an immediate amendment to the Constitution and the retirement age of Judges of Supreme Court and High Courts.

“There should be an immediate amendment in the Constitution and the retirement age of Judges of High Court should be enhanced from 62 to 65 years and the age of superannuation of the Judges of Supreme Court should be enhanced to 67 years,” stated BCI in a press statement. The copy of the resolution was decided to be communicated to the Prime Minister of India and Union Minister for Law and Justice for immediate action on the resolution, stated press statement by BCI.

Moreover, the joint meeting has also resolved to propose to the Parliament to consider to amend the various Statutes so that even the experienced advocates could be appointed as the Chairpersons of various commissions and other Forums.

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PM to hold bilateral talks with world leaders: MEA

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PM to hold bilateral talks with world leaders: MEA

Prime Minister Narendra Modi is looking forward to exchanging views on topical, regional and international issues at the 22nd Summit of the Council of Heads of the Shanghai Cooperation Organization Member States (SCO-CoHS) to be held in Samarkand.

“At the SCO Summit, I look forward to exchanging views on topical, regional and international issues, the expansion of SCO and on further deepening of multifaceted and mutually beneficial cooperation within the Organization,” read Prime Minister’s Office departure statement ahead of his visit to Uzbekistan. PM Modi will attend the summit on Friday. He is expected to have bilateral meetings with Russian President Vladimir Putin, Iranian President, Ebrahim Raisi and Uzbekistan President Shavkat Mirziyoyev on the sidelines of the SCO summit in Samarkand.

“I will be visiting Samarkand at the invitation of President of Uzbekistan, Shavkat Mirziyoyev to attend the Meeting of the Council of Heads of State of the Shanghai Cooperation Organization (SCO),” added the statement.

Under the Uzbek Chairship, a number of decisions for mutual cooperation are likely to be adopted in areas of trade, economy, culture and tourism.

“I also look forward to meeting President Mirziyoyev in Samarkand. I fondly recall his visit to India in 2018. He also graced the Vibrant Gujarat Summit as its Guest of Honour in 2019”.

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CENTRE INKS PEACE DEAL WITH 8 MILITANT OUTFITS

A new age of peace and harmony in state will undoubtedly begin with the signing of the pact, said Assam CM

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CENTRE INKS PEACE DEAL WITH 8 MILITANT OUTFITS

The Centre and Assam government on Thursday signed a tripartite peace accord with eight tribal militant outfits of Assam. The accord was signed in the presence of Union Home Minister Amit Shah.

The eight rebel groups include Birsa Commando Force (BCF), Adivasi People’s Army (APA), All Adivasi National Liberation Army (AANLA), Adivasi Cobra Military of Assam (ACMA) and Santhali Tiger Force (STF) and the remaining three outfits are splinter groups of BCF, AANLA and ACMA. The accord was signed 10 years after the peace process started. Birsa Commando Force (BCF), Adivasi People’s Army (APA), All Adivasi National Liberation Army (AANLA), Adivasi Cobra Military of Assam (ACMA) and Santhali Tiger Force (STF) have been in a ceasefire with the government since 2012 and since then the cadres of the militant outfits are staying in designated camps.

“I am sure signing of the agreement will usher in a new era of peace and harmony in Assam,” Assam Chief Minister Himanta Biswa Sarma had said.

On January 27 this year, a total of 246 insurgents of two militant groups of the state laid down their arms and returned to the mainstream.

In an arms-laying ceremonial function held at Srimanta Sankardev Kalakshetra in Guwahati, 169 insurgents of the United Gorkha People’s Organisation (UGPO) and 77 insurgents of the Tiwa Liberation Army (TLA) laid down their arms before Assam Chief Minister Himanta Biswa Sarma, Assam DGP Bhaskar Jyoti Mahanta, Chief Executive Member of BTR Pramod Boro, CEM TAC Jibon Chandra Konwar.

Earlier, the Assam CM had held a meeting with rebel Adivasi groups regarding the final settlement which is currently under a ceasefire.

Amit Shah had in January 2020 also presided over the signing of a historic agreement between the Government of India, the Government of Assam and Bodo representatives in New Delhi to end the over 50-year-old Bodo crisis that has cost the region over 4,000 lives.

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AS XI STEPS OUT OF CHINA, POPULIST POLICIES LOOM

Modi is no political novice; he has his cards close to his chest and would not be cowered by dragon. If communism has steeled Xi, democracy has bolstered Modi

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AS XI STEPS OUT OF CHINA, POPULIST POLICIES LOOM

Chinese President Xi Jinping has stepped out of the country for the first time since the outbreak of the Covid-19 pandemic that originated in his country in early 2020 and forced global lockdowns, clobbered large economies and caused death of thousands across the world, not to forget the millions who fell sick and escaped death but paid with lifetime of infirmities.

But, we won’t discuss the pandemic here even though any discussion in the world today is incomplete without mentioning the affliction that has acquired a universal character.

Xi, wearing a face mask, landed in Nur-Sultan, the capital of Kazakhstan, to a red carpet welcome by his Kazakh counterpart Kassym-Jomart Tokayev on Tuesday. The Central Asian republic is celebrating 30 years of the establishment of diplomatic relations with China.

Central Asian countries are of strategic interest to China not only because they can help the second largest economy deepen its economic footprint in the region but because they also provide a diplomatic perch to ride on as Beijing faces increasing isolation from the West.

Later in the evening, Xi flew to Samarkand in Uzbekistan where he will attend the Shanghai Cooperation Organisation (SCO) Summit from Thursday to Friday. Beyond the security implications of the meeting of the strategic group of eight countries, the spotlight on Samarkand this fall is on bilateral talks.

Though Xi is thousands of kilometres from home, his heart would be in Beijing as the Chinese leader who would be virtually crowned for the third term to lead the nation of 1.5 billion is just two months away from the grand event – the upcoming Congress of the Communist Party of China (CPC).

Xi carries loads of baggage on his shoulders. The baggage is made of political pledges and expectations, declarations of social and cultural resuscitation of the nation and the promise of reuniting Taiwan with mainland China.

Xi is in Samarkand not only as the President of his country but as a reservoir of hope for the millions of Chinese of his generation who want to live by the ideals of communist leader Mao Zedong and believe in the revival of an ethos that the China of today may have strayed away from amid lapping waves of globalisation and the unnerving war cry of capitalism over communism.

AS XI STEPS OUT OF CHINA, POPULIST POLICIES LOOM

The presence of Prime Minister Narendra Modi and Russian President Vladimir Putin at the summit adds to the precariousness of Xi’s situation. While northern neighbour Russia is seen as a renegade by the West for attacking Ukraine and bringing the region to a military ferment, India has to speak its mind to Beijing that was behind the Galwan standoff which brought two nuclear powers quite close to a full-blown war.

A Xi-Putin summit will see the Chinese President trying to leverage the opportunity to buy more support from Moscow for its stance on Taiwan. President-for-life he may be, but nothing prevents Xi from catalysing more support from a country that again stands isolated among most nations of a community comprising mainstream international politics.

Ahead of the 20th CPC National Congress on October 16, Xi has to show his constituents (Chinese people) that he is capable of standing tall in the Great Hall of the People.

In Modi, Xi will find an adversary who straddles the eastern and western hemispheres with equal ease. In the summit with Modi, Xi will try his best to turn the tables on India over the spy ship Beijing sent to Sri Lanka or have the upper hand on border disputes with New Delhi. After all, the delegates at the 20th Congress need to see their leader unfazed.

But Modi is no political novice. He surely has his cards close to his chest and would not be cowered by the flaming dragon. If communism has steeled Xi, democracy has strengthened Modi.

“We should join hands to combat terrorism, separatism, extremism, drug trafficking and transnational organised crimes, and ensure the security of oil and gas pipelines and other large cooperation projects and their personnel. We should resolutely oppose interference by external forces and work together for lasting peace and long-term stability of our region,” Xi said in a signed article published on Tuesday in the Kazakhstanskaya Pravda.

If words were horses, all politicians would ride them. Let’s see which way the dragon sits and the elephant trumpets.

• IANS

China emerged as the world’s second-largest economy by registering exceptional growth in the last four decades but at the cost of widespread corruption, environmental degradation, food safety issues and income disparities.

Prof Justin Yifu Lin, formerly senior vice-president and chief economist of the World Bank (2008-12), in an analysis explained the institutional price China paid for its economic success, reported Financial Post.

In 2018, China celebrated the 40th anniversary of its transition from a planned economy to a market economy. And it was an astounding success. In 1978, the country was closed and suspended to the world. It was a poor country, if not among the world’s poorest.

Its per capita was less than a third of even sub-Saharan African nations. Over 80 per cent of its people lived in rural areas, as many were living below the international poverty line and China had a closed economy where trade made less than 10 per cent of its GDP.

But in the last 40 years, the annual GDP growth rate was 9.4 per cent on average and trade grew at an average rate of 14.8 per cent. In no time, China was the world’s second-largest economy overtaking Japan. It was the largest exporter, beating Germany. It even surpassed the US to become the largest economy, measured by ‘purchasing power parity,’ and the largest trading economy.

But China paid a price for its unprecedented success. In addition to environmental degradation and food safety issues, which have attracted many public complaints and are the results of rapid industrialization and lack of appropriate regulations, the main issue during the transition is widespread corruption and the worsening of income disparities, said Prof Lin.

“Before 1978, China had a rather disciplined and clean bureaucratic system and an equalitarian society. According to the Corruption Perception Index published by Transparency International, China ranked No. 79 among all the 176 countries or territories in 2016,” added the professor.

The negatives are attributed by economics experts to China’s “dual-track transition strategy”. At one level, “the government provided transitory protection and subsidies to the nonviable state-owned enterprises (SOEs) in the old, capital-intensive sectors to maintain stability”.

At another, it “liberalized and facilitated the entry to the new, labour-intensive sectors which were consistent with China’s comparative advantages to achieve dynamic growth,” reported Financial Post. Prof Lin points out that one of the most essential “costs of investment and operation for the old capital-intensive sectors was the cost of capital”.

Before the transition in 1978, the “government used fiscal appropriation to pay for investments and cover working capital, so SOEs did not have to bear any cost for capital. After the transition, the fiscal appropriation was replaced by bank loans.”

The Chinese government set up four large state banks and a stock market to meet the capital needs of large enterprises and to “subsidize SOEs, the interest rates and capital costs were artificially repressed”.

The research shows, “When the transition started, almost all firms in China were state-owned. With the dual-track transition, private-owned firms grew and some of them become large enough to get access to bank loans or list in the equity market.”

“As interest rates and capital costs were artificially repressed, whoever could borrow from the banks or list in the stock market was therefore subsidized. These subsidies were paid for by the low returns to savings in the banks or in the stock market made by individual households. Those people providing the funds were poorer than the owners of the large firms they financed.”

“The subsidization of the operation of the rich’s firms by poorer people was one reason for increasing income disparities. Moreover, the access to bank loans and equity market generated rents, leading to bribery and corruption of the officials who control the access.”

The analysis argues that some natural monopoly industries, such as power and telecommunication, were operated by state-owned enterprises and the government “liberalized the entry to those industries gradually”, adding that “those monopoly rents were also sources of inequality and corruption,” reported Financial Post.

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EU to raise $140 bn with windfall swoop

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EU to raise $140 bn with windfall swoop

The European Union wants to raise $140 billion by tapping the windfall profits of some energy companies to help households and businesses pay eye-watering gas and electricity bills, media reports said.

On Wednesday, the European Commission proposed capping the profits of renewable and nuclear electricity producers, and taxing the windfall earnings of oil and gas companies, CNN reported.

Profits at power generators using wind, solar and nuclear energy have ballooned because their tariffs are linked to the wholesale price of natural gas, which soared to a record high in March after Russia invaded Ukraine, and now stands about 550 pert cent up on year-ago levels, the report said. Europe sanctioned Russian oil and coal exports after the invasion, prompting Moscow to slash supplies of gas in return.

EU Commission President Ursula von der Leyen said on Wednesday that the bloc would conduct a “deep and comprehensive reform” to decouple the cost of gas from the price of electricity.

“These companies are making revenues they never accounted for, they never even dreamt of,” she told EU lawmakers in a speech in Strasbourg, France.

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