Surat textile strike against GST

Surat is perhaps India’s largest textile manufacturing as well as trading center. It is in the state of Gujarat which is BJP as well as PM Narendra Modi’s stronghold. In fact Modi as Gujarat CM resisted GST because it is one of India’s “producing” states and GST, being a consumption based tax, is favorable to “consuming” states like Bihar or UP which have very little manufacturing but huge populations.

As we have highlighted in our earlier article, GST, in addition to bringing large parts of underground economy into the open, also facilitates better Income tax compliance. Once dealings are recorded, tax evasion, not just of GST but even other taxes like Income Tax, becomes that more difficult.

And everyone knows that while the salaried class and even large sections of organized business sectors pay taxes and have less means of evasion, the small and medium sized traders that dominate the textile sector carry out their entire business in “black”. This means not just no sales tax or very little, but no Income tax.

It is to protect this illegal and damaging modus operandi that Surat based textile traders went on strike soon after GST was implemented. Markets were shut down for weeks and blatant threats issued to BJP that they will “pay” in votes should they not be allowed to continue with their tax cheating ways.

This article in Indian Express explain the motives quite clearly.  “Traders readily concede most of their business was “unaccounted” in order for them to avoid income-tax”. Here is another article that narrates how a nosy Excise inspector was thrown into the boiler!

In fact this strike has been one of those rare highly publicized cases of post GST disruption and troubles. In fact, anti-Modi rags like Wire were reduced to playing up this strike, for want of “better” news. This article, full of hyperbole about the negative impact of the strike in terms of livelihood etc., surprisingly completely omits the tax evasion aspect of the strike, which is in fact its main trigger!

Of course, one can readily imagine how Wire would have played it if Congress or CPM was in power. The strikers would be labelled Sangh parivar fascists who are looting the poor and deserve still jail terms!

Arun Jaitley and Narendra Modi should take up this gauntlet thrown by Surat traders head on. The workers affected by this senseless strike should be helped to tide over this difficulty as well as educated on the real reasons behind this strike. While their daily purchases are taxed, it would be cruelty if their masters don’t pay any tax on their much fatter earnings. Our socialist warriors and their propaganda mouth pieces that shed copious false tears for the “sub-altern” instead of highlighting the real story, choose to fish for anti-Modi sound bites instead!

The strike also highlights how entrenched corruption, cheating, tax evasion is in India to the extent where they become “rights” for which open agitations can be launched.

Genuine and reasonable demands, such as extra time for filing returns, simpler paperwork, protection from corrupt officials etc., can be and should be provided, of course. That is no excuse to demand complete exemption from tax laws of the country.  As the FE article cited says quite clearly “If the government stands firm, this protest will fizzle out ultimately. But if it budges, it will encourage similar elements in other industries as well,”

Jaitley sahib it is your call!

 

 

 

China policy and strategic challenge

The ongoing standoff between India and China over the strategic “tri-junction” near Sikkim has resulted in a flurry of articles in online as well as traditional media. Most of the press in China itself (at least the English language versions which have been quoted extensively in Indian media) has been jingoistic, threatening and ominous. This is matched by equally solemn and grave messages from official Chinese circles only watered down as little as usual courtesies of diplomacy demands. There has not been even one article or Op-ed that says “Why don’t we figure out what the Indians really want and see if we can accommodate if that is reasonable?”

On the contrary India media has its share of leftists that advocate caution and even recommend acceptance of Chinese “demands” and overall suzerainty.

At the outset we have to be clear on what this crisis is NOT about – the so-called tri-junction in Doklam where, depending on who you believe, India has occupied some Chinese territory in a 1962 style blunder of aggression or the other way around. As if logical “proof” and convincing arguments matter in such cases, several analysts have gone about dissecting historical documents, treatises and correspondences to prove one or the other point of view right.

You may choose to believe in such fantasies if you choose to believe that China supports LeT / JeM terrorists because “it is not convinced over evidence” or vetoes support at NSG because “it is worried over selective exemptions”. China (or for that matter any superpower) treats treaties, conventions and past assurances as valid only as far as they serve its own interests. Even the agreement with Britain over Hong Kong as has been trashed as irrelevant, although it’s text or content, semantics etc. are no way in dispute.

Talking of flights of fantasies you have to read this article by Prem Shankar Jha for Wire. It seems we have misunderstood the Chinese who are building roads because Chinese companies are running low on order books! I suppose our comrades in media will say China is firing bullets because they have surplus steel.

John Garver seems to have his pulse on the real source of trouble in this excellent article from South China Morning Post. The simple fact is, China is pissed off because India has not accepted it as the regional “dada” or “Don” and wants to run its own fiefdom. The Narendra Modi government has gone further down this blasphemous track by engaging Japan, Vietnam, USA etc in ways China sees as a clear threat to its rise as unquestioned Asian superpower, a necessary step for global domination. So it wants to turn the screws. As simple as that.

Now the situation can be analysed as:

  1. The alleged misdemeanors on India’s part simply a matter of misunderstanding or deliberate? Unlikely it is high school playground type misunderstanding or it would have been cleared off long ago.
  2. If deliberate, were they a reaction to similar Chinese perfidies which may or may not be deliberate? Again we are constrained to assume that this question has been posed to PRC and replies unsatisfactory or unconvincing.
  3. In other words, we are left with the assumption that Indian actions that offend China are the result of deliberate policy caused by factor over which China has done little or wants to do little to assuage Indian anxieties for its own good reasons.
  4. Which leads us to the natural next question – has India, like any good chess player, thought through the possible reactions from China, including the Doklam type standoffs and worse? Or has it simply muddled along and poked China perhaps under estimating the ferocity of China’s reaction? Our leftist media has lobbed precisely this charge at the Modi administration.
  5. Even if the “muddled along” assumption is true, one can safely assume that having seen the ferocity of the bite-back, India would pull back, once given some “face” and try some other trick to get back into the game after a cool off period. Particularly if the messages coming from Tokyo and Washington through private diplomatic channels is “You are on your own, son!”. One has to credit that much intelligence, patriotism and common sense to Narendra Modi and his Government.
  6. What if India predicted this sort of rabid reaction from across the Himalayas, and its strategy had always factored it in? What if help has been offered by powers that be? We will never know until it is too late. It means that India will not buckle so easily even if China escalates along other vulnerable sectors. What the result of such a confrontation would be is not for us to predict. Too many variables are at play, including timing, location, preparedness, security of supply lines, Tibet situation, international outcry, etc etc.
  7. It is of course, entirely possible that India has miscalculated its strengths and may get a bloody nose, as in 1962 or perhaps worse. But will this help China in any way? Chances are low. Capturing or holding territory in the North East (best case scenario for China) could make things worse. It would have only earned another century or more of unrelenting hostility. India would officially bid goodbye to ambivalent “strategic independence” and sign up lock stock and barrel with Uncle Sam’s camp.  Trump unlike diamonds, is not forever.
  8. We are assuming here that the scenario doesn’t descend into all out nuclear war in which case, oddly enough, things are easier to predict – India will probably cease to exist as a nation state, even as China suffers unacceptable damage. Precisely the sort of predictions that are offered regarding India Pakistan conflict descending into nuclear exchange.

What next?

The sensible course for China would be to stay focused on its primary mission – challenge USA as the global supercop & WBC champion. If it thinks India is a speed bump in that path better to sit down and discuss what is it that it can do to remove that irritant. If it means watering down the “sweeter than honey” relation with Pakistani terrorists, it should have the maturity to say “So be it”. This is because India is not trying to replace China as Asia’s No. 1, it is simply asking for a place in the sun for its own ambitions which need not threaten China’s.

And the sensible thing for India to do, even if it has thought through the scenarios and feels it can play this tough game, is to do exactly the same – sit with China and find out how much “kowtowing” is expected of it and can safely be done without sacrificing core interests and if that will keep China happy.

The logic of this argument is quite simple: We are no superpower and not going to be there anytime soon. Regardless of who we sign up with, some amount of strategic kowtowing is going to be necessary. After all, the only other game in town, Uncle Sam, is not offering any free passes. Why not sign up with our nearest neighbour? They are Asian, shared culture and can probably help tame Pakistan and let us focus on growth, something USA has not managed to do. If China does well and manages to trump US in the great game, we can heave a sigh of relief that we are in its good books and if it comes worse off, we can always resume the mini-great game. Sounds enticing?

But we are not too enthusiastic about signing up for pax-Beijing as an also-ran and probably a deputy sheriff for South Asia (Pakistan excepted). Others that have gone down the slavery route – Srilanka’s Rajapakse, Philippines’ Duterte among others, have very little to show for it.

It should also think carefully about the timing of any limited or unlimited conflict with China and the state of its own readiness in economic, military and other ways. The present standoff doesn’t appear to be initiated by India.

Of course, as Nitin Pai puts it if China has made up its mind to “teach India a lesson” and India has determined it can meet that challenge head on and give the Chinese some Hindi lessons of its own, nothing much can be done by us ordinary folks other than pray that the damage is not too high and that we emerge victorious.

 

 

 

GST a game changer for sure

Let us come straight to the point! Why do we say this?

Many countries implemented GST. It is not as if their economies were magically transformed. But then each one does so for their own reasons and have their own unique circumstances.

For Singapore (to take one example), it was the desire to reduce Income taxes and yet retain revenue buoyancy. This was a key USP when it competes with the likes of Hong Kong where taxes are lower. Prior to that, Singapore had no taxes on sale at all, barring sin goods.

For India, the key benefit is reducing tax evasion and bringing almost all economic activity into the tax net. Perhaps no other country implemented GST with an economy like ours where most activity is outside of the tax net.

This is why it is going to be a game changer. Nothing else (imperfect rates, complexity, too many forms, returns blah blah blah) matters. Just this one factor alone will more than justify these compromises and sub optimal choices and bargains to get the thing going.

Right now most small traders don’t pay any tax. Nor do they issue any receipt. This means their entire income is “black”.  This evasion cascades up and down the supply chain – the trucker who delivers the items, the landlord who collects rent, the wholesaler who sells to the trader and so on, all get paid in “black” and in turn pay others in black. You get the drift..

In other words, for each tax evader enjoying himself, another “idiot” pays the price. In fact many have to pick up the tab. This is the exact feeling of many in salaried class who are forced to pay tax on their actual income while the trader or contractor next door pays zilch and openly flaunts his wealth.

If this changes (yes, it will not change overnight) that’s a HUGE gain for India. We may not need 28% or even 18% rates for most items.

It will also make the traders and other businesses confident and bold because they don’t have to pay bribes through their nose on daily basis and live in fear of raids and harassment. Check my books – they are clean! They can invest, expand, hire more staff and kick start the economic engine held down by bad loans and UPA’s loot. It also levels the playing field so formal retailing can expand and bring benefits (better paid staff, better quality control, cash free payments, the list is endless).  Salaried class can look forward to lesser direct taxes.

In fact even on Day 1  many have proudly posted their GST paid receipts on Twitter – showing tax collected and paid by vendors who never did so earlier! Here’s a sample

In fact the doomsday prophets are having a tough time because even dhabhas, shop keepers and supposedly illiterate vendors are issuing GST invoices, right from midnight on 1st July! A few that are used to old ways are going on strike in their usual ways, but this is one tsunami that is not going to roll back for them.

We are on to something HUGE. The benefits are clearly under-estimated.  Don’t get us wrong. Modi and his government may mishandle the implementation and may even pay a price in 2019. We frankly don’t care. That is besides the point. But it will settle down one day and improve with time.

Looking at Indian economy as a whole this will be the day that will be celebrated by our children and their children as the day India changed.

You heard it here first!

Comments are welcome.

 

 

 

Modi in US – Beware of terror trap

As Modi visits US to meet President Trump domestic media has been highlighting well known issues like the H1-B visa, Possible conflicts between “Make American Great Again” & “Make in India”, Paris accord etc. Expectations are lowered given the mercurial temperament of Trump and his past comments and policy decisions and the need for Modi to build a new relationship all over again.

Not much attention is being paid to one key agenda item – terror.

Terror may become a low hanging fruit, a good filler, convenient topic to discuss and forget other contentious issues, given the current global situation. Lofty press releases can be issued without much real work or progress and everyone feels good. So the temptation would be to spend too much time focusing on “terror”

That is where the danger lies! Why?

Because our terror problems are vastly different from USA’s.

  1. Even if you don’t agree with left loonies & their self flagellation anyone that has been following news over last 10,20 years should by now know this: West has paid for and purchased this current set of problems. Iraq, Libya, Iran, Syria, Afghanistan, the list is endless.
  2. Regime changes enforced with brutal violence, often bombing from high up in the air with guaranteed civilian casualties, overthrow of secular, liberal dictatorships, endorsement of rabid fanatics of Muslim Brotherhood type, arming and funding dangerous jihadis with 7th century world views have all contributed to the terror problem that European cities and communities are facing today. If mainland America is somewhat more immune it is because of the Atlantic and Pacific oceans – an accident of geography.
  3. We cannot also close our eyes to the grim reality of USA funding jihadi terrorist generals of Pakistan with cash and arms worth “billions and billions and billions”, to borrow Donald Trump’s language, much of it used to spread terror against India and ironically against America itself!
  4. Despite decades of being cuckolded, American policymakers refuse to wake up as proven by recent articles in media seeking surrender to Pakistani “interests” in Afghanistan. One never knows, Trump may prove to be no different given past track record of American Presidents from Reagan to Obama.
  5. We can be proud that India has more than 100 million Muslims and despite this we don’t really have a serious genuine Islamic terror problem other than those created by Pakistan and its jihadi generals. This is the real truth.
  6. Like almost every other Indian of all colors, sizes and shapes, yes, Muslims have grievances but barring a microscopic minority they have not used terror to get them solved. (We have some concerns and suggestions to Modi government on this front but that is topic for another day).

Given this background, spending too much time on terror (which almost exclusively has come to mean Islamist terror) in discussions with US President will do more harm than good. Because it will be about THEIR problem not OURS. It will simply serve to further American interests which keep shifting like flavours of Ben & Jerry even if there is no regime change in America itself.  Simple example – is Qatar a terrorist state or an American base? Can it be both? Why are they sold armaments worth hundreds of billions?

The Americans will happy to sing song, hear us sing in perfect sync with their tunes on their terror problems but do zilch, zero to solve our problem which is Pakistan. That is one problem we have to solve ourselves.

Instead what we will get is lectures on human rights, democracy and what not. This, incidentally applies to Western Europe too.

Any discussion with Trump on terror should be private, low key, proportionate to its weight in the overall agenda and not talked about much in press conferences or public information releases. And the focus should be on OUR terror problem whose proximate cause is American funding of Wahhabi fanaticism in Pakistan.

West has enough money and muscle to solve their terror problem which, in case you missed it earlier, was caused by their own misadventures in Middle East and Africa.

Modi beware!

 

The hit job on IT job losses

Of late we have been flooded with grim news predicting gloom and doom for India’s IT industry. Robots, automation, Donald Trump you name it, a variety of forces working together to devastate the bottom lines, destroy growth and render thousands jobless. Or so we were told. As usual our clever journalists can always find “anonymous” sources or perhaps even the odd genuine geek given the pink slip. In an industry that employs hundreds of thousands (TCS alone has almost 400k), coming across a few should not be that difficult.

But the key questions are:

  1. Are the job losses much more severe this year as compared to earlier years?
  2. Are they really due to the reasons mentioned in these scary reports?
  3. Is the paranoia warranted? Or is there a deeper agenda behind it?

Based on statements, articles and interviews by knowledgeable people in the industry (not our corrupt know-all “journalists” many of whom do their research inside envelopes) we can gleam the following facts:

  1. Technology changes all the time and workforce skills have to evolve, adapt and change. This is nothing new in the IT industry or for that matter any industry these days. After all, our industry has survived various other doomsday prophecies – end of Y2K boom, dotcom bust, 2008 crisis and so on.
  2. Of course, some unfortunately need more time or may may have missed the bus this time around.
  3. This requires action by every stakeholder – the academia (syllabus revisions, industry interactions etc), the industry (re-training, proactive counseling, partially paid sabbaticals for re-boot of skills etc.), Government (fiscal incentives, create learning infrastructure, particularly in smaller towns where skill gap and thus job losses can be higher)  and most importantly the individual (constantly learn, adapt and never feel secure)
  4. Net net the industry is hiring, not firing.  TCS has added more than 20,000 this year, not reduced. Same goes for many other tech firms. NASSCOM says Indian IT hired about 117k jobs in 2016-17. Cognizant also plans to continue to hire and its “firings” are nothing abnormal this year (Link 8).
  5. There is no denying that focus on low end, repetitive tasks and wage arbitrage is bad. Industry’s profits should come from innovation and intellectual property not cheap programmers and flogged workers. On this front there is a genuine case for gripe.
  6. As Mihir Sharma points out (Link 7), changes proposed by Trump administrators may not necessarily be bad for Indian IT professionals. After all, US companies are much better employers! This may force Indian IT firms to change their behavior too.
  7. A country our size cannot depend on the visa policies of another country to ensure its prosperity. Reforms to H1B visa in the US which is long overdue or other advanced Western countries are eminently sensible from their perspective and should be seen as an opportunity, not crisis.

Modi Government – be more proactive

Just as he did with Indian Bank chiefs, perhaps Narendra Modi should initiate a round table discussion with the IT industry heads. Agenda should be pointed, focused and simple:

  1. What specific short and medium term steps can the government take to help? Here focus should be on clearly identified, do-able tasks, not pie in the sky wish lists. What is NOT needed is funding schemes that go nowhere and take years to produce results. India cannot afford that.
  2. Why are we not producing Google’s and thousands of small startups in big data, analytics, cloud etc etc. that US produces week after week, year after year, ironically many of which have Indian talent at the very top? Target here should be identify specific red tapes, speed bumps and cut them down.
  3. Instead of hiring “unemployable” graduates and spending money training them (often at site to the chagrin of the customers) what can Government, industry and Education ministry do to quickly re-tool our colleges? It is not as if nothing is being done but surely results are disappointing so it is worth a re-look.

Somewhere a beginning has to be made to usher in a new future for our IT Industry and keep its powder dry for endless battles in the tech arena. Whining, scare mongering and senseless headlines to score web hits is not the answer.

Links

(may disappear or change over time, valid at the time of posting)

  1. http://www.thehindubusinessline.com/info-tech/chatter-over-layoffs-in-it-industry-highly-exaggerated-tcs-president/article9718629.ece
  2. http://profit.ndtv.com/news/tech-media-telecom/article-why-6-lakh-it-professionals-are-at-risk-of-losing-jobs-1693403
  3. http://profit.ndtv.com/news/tech-media-telecom/article-infosys-defers-pay-hikes-says-no-planned-layoffs-read-letter-to-staff-1692632
  4. http://economictimes.indiatimes.com/tech/ites/indian-it-in-the-sweet-spot-industry-to-double-its-jobs-by-2025/articleshow/58885691.cms
  5. As TCS Chief (now Tata Group honcho) Chandrasekaran points out, global IT spending is growing and that too more in services. This puts India in a “sweet spot”.
  6. http://www.hindustantimes.com/business-news/indian-it-industry-still-hiring-reports-of-layoffs-wrong-nasscom/story-ZlQ8RATcuKshdnc19X9m5L.html
  7. http://www.rediff.com/business/column/column-indian-it-is-dead/20170417.htm
  8. http://www.business-standard.com/article/companies/local-hiring-to-go-on-cognizant-president-tells-techies-fearing-layoffs-117052501075_1.html

 

 

Cattle trade notification controversy

Once again Modi Government finds itself amidst a media storm caused by the so-called “beef ban circular”. No amount of protestations that it is a animal welfare move and not against beef consumption is going to convince our liberal brigades who rush from beef eating contests to TV studio debates without a pause for thought.

Naturally as with all other such controversies, overseas (that is, Western) media will lap it all up & project India (and Hindus) as intolerant and backward. Never mind that horse meat and other such delicacies are banned in several of their states.

Now we are hearing that center has “open mind” on the issue and it is not a prestige issue for the BJP. That begs a question- what was done prior to this notification?

Amending the notification or even cancelling it now will not bring any relief because not only is the damage done, any rollback will be seen as “victory” to the barbarians of Sonia Gandhi’s Congress Party that brutally slaughtered a calf in full public view, including several young children in Kerala.

In most matters, be it Corporate, Legal, Academic or cultural our bureaucrats have developed this “shoot first and ask questions later” culture. Ministers and political parties invariably fall victim to this syndrome.

But then, it does seem (as per this article) the notification was posted in draft form in public domain but then no one took notice.  Interestingly, the original source quoted by the article not only makes no mention of the “beef ban” aspect, it also includes a quote from a NGO representative praising it! We are not clear if the original draft is exactly same as the one notified or if it was amended later without full debate.

But then our babus and their bosses in the government should be smart enough (by now at least) to the inherent controversy potential of this notification? Should they not have given it much wider publicity or done something to float trial balloons? After all we have TV channels ready to trade favors with the party in power to help in such matters?! In fact even a rumor can be planted & floated that beef consumption is likely to be banned triggering a lot of pseudo liberal outrage before “clarification” about the draft issued, saving everyone a lot of face! Babus, learn to be smart!

Simply publishing in a website may be OK for some cases but there is no harm in sending email notifications to trade associations and their members such as Leather exporters etc. Does it cost a lot? After all the importance of this to their business is no secret.

This is also where proactive communication by senior ministers could have helped. If Dr. Harsh Vardhan had given some media interviews about the draft, invited comments (and brickbats) BEFORE it was made final, may be we could have avoided this?

One hopes the BJP government has learned valuable lessons in PR from this episode.

 

XI reasons not to lose sleep over CPEC/OBOR

Thanks to our famous DD newsreader, by now the whole world knows how to pronounce Chinese President Xi Jinping’s name! So here’s our top 11 reasons not to lose sleep over CPEC, OBOR, BARF, BRF, SRI or whatever its most recent name is.

  1. There’s a lot of marketing hype that would put a dotcom bubble company to shame! Words like “game changer”, “new dawn” are used with such regularity, they have almost become pedestrian. Riding on the bandwagon, projects that have nothing to do with belts or roads or China are getting tagged with the label hoping there will be some lucrative contracts or deals (mostly for Chinese companies, of course) or lemons would magically transform into hot potatoes. One example is the Singapore-KL High speed rail project. This not only predates the OBOR initiative, it is mostly bilateral and nothing to with China.
  2. US/Europe sending delegations doesn’t mean a thing. Greece, Germany and other European nations, apart from Australia, reportedly refused to sign the official declarations because there were no assurances of “transparency” in deals – code word for “let me have my share of the meat”. EU that has nothing to lose in territory & is strategically in deep trouble anyway, simply wants its companies allowed to grab some of the contracts. It is not an endorsement of the OBOR or any specific projects. Obviously China’s ideas are something else.
  3. A lot of the connection is already there and hasn’t change any game for anyone. They get a fresh coat of “OBOR” paint for propaganda purposes. For example the much ballyhooed London-China direct train service. This too predates the OBOR by years. Here is a nice article in SCMP that debunks much of the hype about its “game changing” potential. A container ship can carry nearly 300 train loads! To replace that (that is, just one ship) trains have to run every 90m in both directions, something the infrastructure can hardly handle! On top of that it is twice as expensive if not more! Interestingly, this also means China doesn’t really need Gwadar to import or export from EU as it makes zero sense sending goods partly by train or truck & then ship them again when the train goes all the way!
  4. Just look at the rogues gallery of leaders that signed up! Clearly no globally respected, truly democratic & sensible leader has bet his reputation on CPEC/OBOR/BRF. Duterte of Philippines whose foul mouth and anti-US sentiments are well known, Najib Razak of Malaysia reeling from corruption allegations following the IMDB scandal, Hun Sen the long ruling dictator of Cambodia, Jihadi terrorist Pakistani generals and their puppets in the civilian government, Mahinda Rajapakse regime facing human rights questions in Lanka & ignored by the West, Thug-ocracy of Chavez/Maduro in Venezuela…the list goes on. Most of them, if not all, have practically no options worth considering and this pushes them into the laps of Xi Jinping who can pretty much dictate any terms he wants to! Sadly the people in these countries will pay, not the leaders or their cronies.
  5. Projects not bankable! Many of the projects have not taken off all this while because they were not bankable in the first place! That is, no one wants to invest or lend to them. This is precisely what motivates smaller nations and those with dubious records to rush to China. After all, Tata or Birla don’t go to the pawn broker for money. This also means, once they are constructed the chances are they will become white elephants that someone finally has to pay for. That is more likely than not the hapless tax payers of these countries who had zero say on them to start with. Sri Lanka’s Hambantota is a good example. There are more, including a refinery in Kyrgyzstan. Here a refinery was built without tying up oil supplies!
  6. China is simply looking for insurance policies not live alternatives. After all, if Malacca straits are not blockaded by war it makes zero sense shipping from Gwadar via Xinjiang across thousands of miles to China’s industrial heartland which lies in the East! By the way Xinjiang already has good connectivity to Central Asia through numerous initiatives of the past and doesn’t need Gwadar for transit. Nor have they changed any “game” for the nations involved. Myanmar’s new pipeline to Yunnan at least makes some geographical sense, even that has viability concerns!
  7. The doors will not close just because we don’t sign up on Day 1. These veiled threats have been issued both by China’s official media and by its friends in India. Sign NOW or you’ll be a loser forever! But then that is not how world of commerce and diplomacy works. China will be (and is most certainly not) a complete idiot to punish India or burn bridges with a nation against which it is running a huge trade surplus (About $4b a month, that is a lot more than CPEC which is a 10+ year project). India can wait, haggle, raise the price and finally settle for something that makes sense to its own interests as it is not a banana republic run by a tinpot dictator or loose mouthed loonie without any other sensible options on the table.
  8. China is already supplying to India, giving loans, investing! And in billions! CPEC or BRF notwithstanding! This is apart from the trade figures we cited above. But then these projects are going through proper bidding, on commercially sensible terms, and in mutual interest, not grabbed by diktats at crazy predatory prices. Alibaba, Dalian Wanda, Didi Taxi, Haier, Huawei and so many others are investing where it makes sense to them. And they will continue to do so. We don’t need government to government deals certainly not for power, roads etc. May be railways – yes given their long gestation, but here again our needs are vastly different from, say, Philippines or Indonesia who have very little internal expertise, technology, project management skills or funds.
  9. China is not the only game in town. We can and should team up with the Europeans, Japan and many others for select projects where there’s commercial and strategic synergy, bidding is transparent and transactions commercially viable and most importantly, beneficial to the host nation. China has already lost a lot of credibility in a wide range of markets thanks to the greed, corruption, insensitivity and bad quality of its businesses. We don’t have to rush to import more of the same.
  10. China’s credit squeeze is hurting many of the promised investments. This will eventually hurt many so-called OBOR/BRF projects that have nothing to do with the core strategic aims of China and are renamed simply to ride on the marketing hype. The Bandar Malaysia project (see our separate article on that topic) is one. So it is not a smooth pathway to investment nirvana for the receiving nation.
  11. We are big enough to do it ourselves. Need we say more on this? Ironically many of our champion non-aligned, anti-colonial, anti-imperialist, anti-globalisation anti-big business left “progressive intellectuals” have become de-facto marketing agents of China pushing OBOR/BRF with all the naive enthusiasm as a housewife that signed up for latest pyramid marketing miracle drug or slimming plan to hit the town!. Shame on them. https://twitter.com/mkvenu1/status/863330735377141760

So let us stop whining, worrying, biting our nails off and wallowing in defeatist rhetoric.

Comments are welcome!

 

 

 

Turkish delight from Erdogan on Kashmir

Just prior to his recent India visit, Turkish strongman Erdogan, fresh from his referendum “victory” threw a curve ball at India – he offered himself (and Turkey) as mediator to help address the Kashmir issue.

Reactions have been varied. Wire columnist  thought Erdogan was reiterating his Islamist credentials in doing so. Hindu too was somewhat circumspect and didn’t seem to really like Erdogan’s meddling.

Prime Minister meets Recep Tayyip Erdogan, President of Turkey at Hyderabad House during his State Visit to India (May 01, 2017)

Thankfully India’s reaction was mature and subdued. Instead of the usual theatrics whenever someone mentions the K word. That is a great start.

But what about the offer itself? Does it deserve rejection outright? Or worth analysing?

May not be a bad idea

Firstly, let us completely stay clear of Erdogan’s controversial and authoritarian track record and Islamist credentials. They are matters entirely irrelevant to this discussion.  Fact is he represents Turkey and will do so for another 10 years in all probability. Nothing else matters.

If anything that makes it easier for him to play a role.

Let us take a step back and see what options do we have to bring the Kashmir situation to a satisfactory conclusion?

  1. Wait it out. Let time be the medicine, increasing the gap between Pakistan and India in economic and strategic terms and wait for better sense to prevail so settlement can be on our terms or near about.
  2. Physical force. That is clearly out of question unless the provocation is strong enough to make it inevitable.
  3. Settle through talks in the short/medium term with the contours of the settlement along known lines – i.e., keep our part of Kashmir, give up on POK with some arrangement that saves everyone’s face.

Clearly the fourth option of simply giving up on Kashmir and settle on terms agreeable to present Pakistani dispensation is clearly not on the table. Unless again, it is forced by circumstances beyond our control.

Coming to the third option, it should be clear to us, given the nuclear situation, we simply don’t have the means to enforce anything on Pakistan.

Any agreement signed with the Pakistani civilian dispensation is not worth the paper it is printed on. Even if it were to be openly endorsed by the Pakistani military it is in all probability a “taqiya” which will be torn up at the earliest chance. Then we are back to square 1. Furthermore, Pakistani Army will simply take that as confirmation of its “success” and simply expand its shopping list. For all is military might and economic clout, $30b and three decades later Uncle Sam is still happily writing cheques and getting cuckolded. Do we stand better chance?

This is where a third party comes in provided it fulfills main criteria

  1. It has power to enforce any agreement. That power need not be economic or military, it can be religious.
  2. It is not totally biased against us, the best we can hope for, given that there is no such thing as “neutral” in global power politics.

Why Turkey?

Pakistan WILL NOT listen to USA because it has perfected the art of fooling them over multiple administrations and in any case that is a hard sell to the Abdul in the street. After all it is a kuffar power not exactly popular in the streets of Lahore.

Pakistan MAY listen to KSA for religious and monetary reasons but then KSA sheiks are beholden to the Pakistani generals to protect their own crumbling edifice. They make poor mediators.

Pakistan WILL listen to China but then China is just about the most biased and untrustworthy mediator one can find. Not even Modi can go the public and sell a plan brokered by China, except perhaps in Alimuddin Street and JNU.

Any other global power is completely worthless in this context. UK? France? You must be joking. Russia? May be 40 years back, not now.

That brings us to Turkey.

Turkey is a Sunni power and under Erdogan it has shifted away from its European identity to its Islamic roots. Just as Pakistan tried to wash away its South Asian roots and claim Arab, Turkish or Persian heritage, depending on season.

Which means if Turkey underwrites any agreement, it is easier for the Pakistani regime to “sell” it to its Abduls.

Moreover, we simply don’t believe Erdogan is anti-India. He may be pro Pakistan for religious reasons but that is to be expected. After all the so-called secular, anti-Islamist Army led regimes of Turkey were pro Pakistani too. His flexible and somewhat reasonable stance on Israel is a pointer.

That goes for much of the so-called “Ummah” too. Contrary to arms selling super powers like USA and Europe who probably want the conflict prolonged as it comes with bonus of keeping India in check, the Sunni Muslim world has nothing to gain by this conflict and even less to gain if Pakistan were to somehow by some miracle succeed in snatching Kashmir away. After all, at best this can only be done to the valley, not Jammu or Ladakh. Which only makes them even smaller minority in India in addition to permanently antagonising India forever. It also weakens India’s huge Muslim community.

Which is also why other than routine boilerplate template noises at OIC which no one takes seriously, there has not been that much pressure on India to settle at Pakistan’s terms. This is only going to get better from India’s perspective as oil’s importance weakens along with that Middle East’s.

Interestingly, China which shares US/European vested interest in keeping India in check through such conflicts is slowly coming around to the idea that it is a strategy that will harm them more than it does India. The CPEC investments will go down the drain not to speak of export trade that hugely favors China. Again this will get better over time as India buys & integrates even more into the Chinese economy, political tensions notwithstanding.

Badly bruised in the Syrian affair, his reputation in tatters globally, with too many contenders for the mythical Caliph role within the Sunni Muslim Ummah, Erdogan may use Kashmir role to buttress his own credentials and to do so he knows he has to be reasonable with India’s position. A failure will only make him an even bigger laughing stock.

Pre-conditions

But then as we noted earlier, Pakistan has successfully fooled generations of US Presidents. It has nothing to fear from China. Russia too is embracing every loony or reckless state it can find, simply to cock a snook at Uncle Sam.

So we still cannot rule out the fact that Pakistan will use Turkey to draw up some settlement and then renege on its commitment. After all, Turkey hardly has any trade, economic or military levers on Pakistan to pull.

So that means there is a narrow set of circumstances and conditions that has to be met before India can publicly embrace this option:

  1. The broad contours of agreement are drawn up bilaterally using Track 2 or Track 3 channels.
  2. Our own Kashmiri “separatists” are on board.
  3. We know at least on paper the jihadi generals are on board.
  4. China is behind the idea.
  5. KSA has been sounded out.
  6. The Pakistani civilian regime simply wants Islamic rubber stamp on the deal to sell it to its beards. As ex-Ottoman state that once had moral authority over global Sunni Muslims, Turkey still has that goodwill. This is where Erdogan’s strong Islamist credentials help. Any deal will involve compromises and the beards may go ballistic with “Islam in danger” noise and that can be mitigated.
  7. We have clear well defined Plan B in place to deal with any betrayals, expansion of agendas and the like.

Clearly the first 5 items on the agenda will have to be done behind the scenes and bilaterally and only if successfully done can we openly get Turkey /Erdogan involved publicly. That is a big IF.

Because once we cross the rubicon of involving third parties formally, there is no going back.

For now it is best to counsel Erdogan to counsel Pakistan to start behaving and start talking behind the scenes.

 

 

 

 

 

 

 

 

 

 

Malaysia cancels Chinese project – Bandar Malaysia

Indian media covers CPEC a lot but happenings in other parts of the world that are equally important receive scant coverage. How many of us know that unlike CPEC which is mostly talk (and some coal fired power plants on one sided terms that no sensible nation would accept) China has already invested US$35b between 2010 and 2016 in Malaysia.

Malaysian Government decision to scrap the sale of Bandar Malaysia site to a consortium that included a Chinese government entity is one such event has has passed unnoticed by Indian media.

About Bandar Malaysia

The Sungai Besi airport, about 7km from KL city center is an old one – this is where Tunku Abdul Rahman landed from London, bringing news of Malaysia’s independence in 1956. It was used by Malaysia’s Air Force and for some VIP flights and is largely unused.  The site was sold in 2011 to the infamous 1MDB to become “Bandar Malaysia”, a city within city incorporating various developments and drive Kuala Lumpur area’s future growth. When 1MDB collapsed (a hugely entertaining story in of itself) the land was taken over by Ministry of Finance as part of “restructuring”, rather rescue.

The area of land involved is about 190Ha.

In late 2015, 60% ownership of the land parcel was sold again by MoF to IWH / CREC consortium for RM7.4b. IWH owned by ethnic Chinese tycoon Lim Kang Hoo who also runs the Danga Bay Waterfront city (4300acre) in Johor in the south, close to Singapore. CREC is PRC goverment owned China Railway Engg Corpn. CREC also threw in a sweetener, promising to build a RM8b Regional HQ in the site.

As with CPEC various grandiose plans were bandied about (one was a “digital” FTZ), along with talks of changing face of Malaysian growth, enormous local employment opportunities etc.

Subsequent developments have made the site worth a lot more – the Singapore – KL High Speed Rail (HSR) project terminates in Bandar Malaysia. This plus the new MRT line under construction that will link Putrajaya (in the south) to Sungai Buloh via KL city is also likely to boost land values. In fact the original RM12b valuation, it is reported, will be well above RM20b now.

Malaysia wakes up?

As with most other deals of this sort in Malaysia, it is not clear how this particular consortium was chosen for the award. Supposedly at government levels without any bidding. But at that time it was justified since 1MDB collapse was hurting Malaysia badly and no one else was willing to come to its rescue other than the Chinese.

This is where the unknown unknowns come in. Because it was a rescue operation, it is not clear what was promised to the Chinese in return. Reports indicate the Singapore-KL High Speed Rail project is one such quid pro quo. That’s worth a lot – US$23 billions by some estimates. Now Japan is rumoured to be the front runner.

JV with Chinese characteristics

PRC has its own way of doing things in such “joint ventures”. It controls the entire supply chain and brings its own labour even for unskilled jobs. Supply of materials too is from Chinese entities. As Singapore’s Straits Times reported, even the canteen staff in Xiamen Uni campus in Malaysia are from China! While this may be perfectly acceptable to the mard-e-momeens of Pakistan thanks to its irrational anti-India hatred and army de-facto rule, Malaysia is a different case.

Although it was desperation (caused by the 1MDB collapse) that threw Najib into the arms of the Chinese, (a theme that should be familiar to Pakistanis re CPEC) he is smart enough and Malaysian politics unstable enough for things to change when circumstances change. Under the table promises are also harder to enforce.

There have been murmurs of dissent and complaints from local industrialists over lack of goodies from the gravy train to local tycoons, who, ironically are almost all ethnic Chinese. In fact there have even been reports that Chinese citizens will be allowed to settle in Malaysia in real estate projects such as Danga Bay, because there are not enough locals to fill those apartments! Such reports have been denied but allegations are not just by the fringe, and have been made by Mahatir Mohammad, Malaysia’s ex-PM.  Since ethnic issues are never too far below the surface in Malaysia, this can be troublesome for the ruling elite to explain.

What next?

Going by reports, it seems Najib cleverly grabbed the chance to get away from a bad deal using non payment as a convenient excuse. The Chinese quid pro quo demands (termed in one report as a “shopping list”) was just too much for Malaysia to pay. Now he can re-sell the same land to another consortium for even bigger amount (should one be willing) and start all over again!

However, it is not clear how PRC will react to this since it seems its capital control restrictions on overseas investments have a role to play. If it is so, it may bite the bullet, even if the bullet train project is not for it to take a bite on. In fact, China has been rolling back or pulling out of numerous Malaysian (and other international) projects because of its internal issues, capital flight, dubious viability and other concerns. The fact that it is still “investing” in CPEC goes to show the juiciness of those contracts, thanks to Pakistani surrender. After all who else can give 15-30% assured returns on equity, 7%+ interest rates on loans and ability to sell third rate products (anyway in surplus) at super premium prices without any competitive bidding?!

Or it may react with under the table pressure and squeeze Malaysia to give up something else in return for the 1MDB rescue act. The fact that such murky deals always involve murky pay offs may give it additional leverage given the political situation in Malaysia.

All this gives us enough indications on how CPEC itself will proceed. Given Pakistan’s utter helplessness and abject surrender thanks to its own visceral hatred for India, the scale of loot is likely to be worse. If the aam Abdul in Pakistan wakes up one day just like Najib did, there could be interesting repercussions!

 

 

 

 

 

 

 

 

 

Agenda for Yogi Adiyanath

Dear Yogiji

CONGRATS!! You have been chosen. As Tavleen Singh so rightly says it in her column winning is the easy part. She is also correct to say the depravity in UP is so bad, voters ask for very little.

With that in mind let us take the liberty of suggesting an action plan to you.

  1. Ignore the constant sniping from liberal media agents of corrupt dynasts. They are paid to do what they are doing. They get the airtime but people don’t listen to them.
  2. Be careful in what you say and tell your followers to do the same. You know secularism in India is such Azam Khan or Owaisi can say anything but you cannot.
  3. It doesn’t take a lot of money or time to do “development”. Grand schemes, metro railways, big dams and highways can wait. But take simple steps that common man can see for himself and enjoy benefits of. We give a few suggestions on this below:

The development agenda

  1. Ask BJP IT cell to help you create a database of each and every village or settlement in UP. Don’t bother about caste, religion, zone etc.
  2. For each village the database should show statistics on basic things like this picture shows. For cities, use mohallas or blocks, not villages.
  3. Make this publicly available so people can point out mistakes, errors. Suggestions.
  4. Assign local MLA + one minister to each of them. MLA is primarily responsible, minister oversees. Also assign one babu. For opposition wards, assign suitable candidates.
  5. If users click on each cell, it should take them to a page where status of what is being done to solve the issue is shown. For example if power lines are being constructed, the page should show status, which contractor, value etc. So people know who to complain against if they are doing bad job.
  6. Of course, this is basic information, you can add more details such as maps, plans etc also.
  7. Just sit back, monitor and sack anyone not doing his job. Whatever other things you do, such as mandir, cow slaughter, inaugurating big schemes can of course, go on, but don’t forget this main task!
  8. That’s it! You will prove 2019 is no different from 2014 or 2017, even better!

Suggestions welcome!