FUTURE ENERGY NEEDS OF THE WORLD WITH NUCLEAR ENERGY
by Hari Sud
The fossil fuel reserves are exhausting fast. No new energy sources are on the horizon; hence the world has to look at nuclear energy, as a possible source to meet future power needs. This, the much maligned power source has been receiving failing grades from the environmentalists, because of its bad safety record. The Three Mile Island Power Plant near melt down in 1979 and the Chernobyl melt down in 1989 and hundreds of minor accidents which result in radioactive leaks all over the world do not speak very well of the nuclear industry. For all its faults, the nuclear energy industry has survived and has kept on producing 21% of power in US, 80% in France, 25% in UK and 30% in Germany. Lately its safety record has improved. Better training & maintenance, better design of the hardware, R & D have all played key roles in this improvement.
The Long-term prospect of $60 a barrel oil has infused a fresh life in the nuclear power industry. In the not too distant future, not only oil will be in short supply, its supply will be hotly contested by all the powers of the world. That means alternate sources of energy have to be developed. All other sources of energy, namely solar or wind power are insufficient to even supply 2% of the energy needs of the world. Coal has a potential to provide energy to countries like China, and USA for another one hundred years. Countries not blessed with huge coal deposits are at a great disadvantage. Also, the greenhouse gases which the coal fired plants produce are an unwelcome development for anyone in the world. Hydrogen, the other much touted energy source for automobile industry requires huge amounts of electric power to split water into Hydrogen. Only then it can be further used to power the motor vehicles. Hence, the world needs a reliable source of power which is safe and which will not exhaust quickly.
There is a glimmer of hope in Natural Gas as an energy source. It could meet some of the world’s energy needs, when the crude oil supplies peak out and production starts to dwindle. It has one disadvantage. Unlike crude oil, which is easily transportable from its source by ship or by pipeline, Natural Gas has to be piped to the user, sometimes over a hostile territory ( Pakistan or Afghanistan ) or very expensively transported in refrigerated containers. In addition, Natural Gas has far fewer uses other than generating electricity or providing thermal energy to industry or heating homes and businesses compared to the Crude Oil. The latter is a building block of today’s petrochemical industry, oils & lubricants, synthetic fibers and various chemicals (Natural Gas can also be stripped out of ethylene, the building block of petrochemicals, but its quantity is very small). Hence we are back to square one i.e. a cheap source of unlimited power has to be developed and made freely available to everybody.
What is the Status of Nuclear energy today?
Technology to build nuclear power plants was mastered in sixties and seventies. Nuclear power plants built or licensed to build in that era, but completed later, are operating today and produce electricity at comparable cost to coal, natural gas or hydroelectric power. Non nuclear power plants are everywhere in the world. They are either locally engineered or purchased from some of the advanced nations in the West. The same is not true about the nuclear power plants. Its supply, operation and technology is controlled by five nations, by a complex set of international treaties (Nuclear Proliferation Treaty – NPT), supply monopoly (Nuclear Supplier’s Group – NSG) and monitoring agency (International Atomic Energy Agency – IAEA) and a host of very complicated local laws enacted by the Nuclear Supplier’s Group (mainly US). US, Russia, France, UK and China are the monopolists in this area. The first four also design and build nuclear power plants for themselves and for export. China although fairly advanced in nuclear weapons technology is unable to build large sized nuclear power plants for itself, hence look at the first four to supply nuclear power plants. India, although well advanced in nuclear R & D, has no capability to build extensive power plants. Today in the era of energy shortages, it has become important to revisit the whole issue of nuclear power generation, R & D and sharing of the knowledge.
What is NPT and why is it a Hindrance to Acquiring Civilian use Nuclear Plants?
Nuclear Proliferation Treaty (NPT) was enacted in 1970 by the first four but mainly US to prevent the spread of nuclear weapons. The fifth member of the nuclear exclusive group i.e. China got inclusion in this group as a bonus for exploding its nuclear weapon prior to the January 1, 1967 cut off date. US is completely consumed by a thought that a rogue state or a terrorist group will lob a nuclear weapon in its middle, hence has worked hard to prevent spread of nuclear knowledge. This, it has achieved by intimidation and enacting a whole set of laws (some of them contradictory) to prevent the five recognized nuclear states from exporting nuclear technology. One such law was enacted in 1978 and it’s appropriately named as Nuclear Proliferation Act. Its declared intent is to prevent any smaller state from acquiring nuclear weapons. Still this law did not prevent Pakistan, Israel, India, Brazil, South, North Korea and Iran from acquiring the nuclear weapons know how.
Some of forgoing countries deny having military related nuclear program. South Africa in the nineties dismantled its nuclear program. Israel never acknowledged having one and Iran and North Korea will complete this task in a short while. India openly built its nuclear bombs and chose to delay exploding until 1998, although a small nuclear explosion was set-off in 1974,said to be for peaceful purposes. Pakistan denied having a military nuclear program but stole all the technology to match India.
In short, the NPT did not have the impact it was supposed to have. Nuclear know now is freely available for anyone who has the money. Pakistani nuclear scientists are available to supply know how to any country that wished to build a nuclear bomb. Internationally, no country has dared to use or even threaten to use these weapons, since US bombing of Japan in 1945. This is true, because the consequences to itself is total annihilation. Alternatively, these weapons offer prestige and confidence, hence are considered, good to have. That is why Iran and North Korea are working to acquire them.
Hence the question arises i.e. if you are unable to prevent nations from building nuclear weapons, then should you be throttling the spread of civilian uses of the nuclear energy? The latter has become a staple conversation in US political circles. Politicians within the US Administration and Congress work hard to deny responsible states (India) from meeting their energy needs, yet do nothing when nuclear secrets are stolen from right under their noses (Pakistan) to build nuclear weapons and spread them to others.
Where is the Hindrance?
Technically NPT does not prevent any country with money to purchase civilian nuclear power plants from the big four. As a matter of fact it guarantees it, provided it has signed the NPT treaty. India in its past wisdom did not sign it. So did Israel and Pakistan. India’s argument against the treaty is mainly centered on the January 1, 1967 cut off date. It considers it as arbitrary. This date offered China a great military and diplomatic advantage. India is comparable in size and stature to China and cannot be denied its due place in the world affairs. Pakistan is a spoiler state for both China and US. The latter uses Pakistan to deny India everything to punish it for supporting the Soviets during the Cold War. Hence hindrance to utilizing full potential of nuclear energy by states which are experiencing energy shortages are not the dangers of its misuse but politicking in Washington. Cold war is over, energy shortage is looming and the supply of nuclear power plants has to be freed from its old self-serving doctrine. Time has come to undertake changes. These changes include:
*
Rewriting the NPT, which in its current state discriminates nuclear and non-nuclear states as of January 1967.
*
Repealing contradictory laws enacted in 1978 in US, which gives too much influence to officials who wish to stay the course.
*
Developing a methodology to deal with the spent fuel cycle. It is important not to leave the spent fuel in the hands of any nation. It should be picked up by the donor nation and accounted for by the user.
*
IAEA without teeth is a toothless tiger good for propaganda only. It has done very little good in its 40 years of existence. It has to be re-organized made non political and given responsibility to run the full fuel cycle at all the nuclear power generation facilities. Such an organization will go a long way to prevent tempering with the nuclear material. Today IAEA is a hindrance. But it can become a real useful international entity preventing any nuclear theft.
* Stiffen laws everywhere, which can be used to prevent nuclear material and technology theft. Pakistan would not have a nuclear bomb today, had the West chased the main perpetrator of this crime, strongly.
Nuclear Energy Economics in Today’s World
Coal and nuclear power have a comparable cost structure. Cost of Power generated using oil and natural gas is high. Raw material cost is the key reason for the higher cost. Combine this with looming shortage of oil and high cost for emission control; the power cost will be still higher. If a nation has abundant supply of coal, which China & US have, they can easily convert oil fired units into coal-fired units. Unfortunately coal is less desirable due to its impact on the environment; hence the choice in near future will fall upon nuclear energy or Natural Gas. Switch to Natural Gas is possible, if one could solve all the international vagaries of jurisdiction, transportation and control over this resource. Natural Gas is relatively a cleaner fuel, if its prices could be kept stable and uninterrupted supply guaranteed, then we have an energy source for next 100 years. But none of the foregoing is likely to happen in an orderly manner. Hence too much reliance on Natural Gas or Coal is impractical. Moreover other uses of oil make it necessary that we conserve it as much as possible. That leaves development of nuclear energy as an alternative to Coal, Natural Gas and Oil as a sure bet.
Civilian Nuclear Energy V/s Military Nuclear Energy
A test case is underway currently where a non-signatory of the NPT – India, is to be conferred an almost nuclear power status. A complicated process is underway to change US laws after the Bush-Manmohan agreement of July 18th, 2005. At the heart of this change is India’s desire to import 4 to 6 large sized nuclear power plants in lieu of not importing natural gas from Iran. The latter is in the cross hair of the US propaganda campaign for trying to build a nuclear bomb. India will not get the original five status but, if it successfully separates the military component of its nuclear program then US will change a few of its laws to make it easy for India to buy nuclear power reactors from the US or any other NSG group members. All the civilian use nuclear power plants will be subject to IAEA inspection.
India is in a win-win situation. This is not sitting well with the US elected officials and the nuclear lobby in the US State Department. US Congress is being asked to vote on India specific changes to the US laws. For the past 50 years they have been fed with anti Indian propaganda and now they are being asked to change their views. Still, India has support for its position. First and foremost, President Bush advised by his able Secretary of State Condi Rice wishes to change US position with respect to India. Second, even hawks like El Baradei, the IAEA Chief has come out in support of the Bush – Manmohan agreement. Third, all-important members of the NSG group (excluding China) have come out in support of the above agreement. They have all sensed possible business deals. Indian parliamentary opposition lead by the leftists is of no value. They are just acting as spoilers for anything US. They are still in Cold War mode.
God willing, if the song and dance currently in progress in Washington goes in India’s favor and no more conditions are attached, these nuclear power plants will go along way to relieve the power shortage in the country. India will be able to participate in the nuclear fusion R & D currently in progress with the building of experimental fusion reactor in Switzerland. Nuclear fusion is touted as the source of unlimited source of energy. It is the future, probably, twenty years from now.
Other countries like Pakistan are waiting in the wings to ask for a similar deal. So far US has said “no”. But if Pakistan completely shuts down its nuclear Wal-Mart and hands over, keys to its nuclear bombs to the US, they may get their wish.
Conclusion
NPT is irrelevant if it stands in the way of energy self sufficiency via nuclear energy. In addition a host US laws are also standing in the way of civilian nuclear export. If military component could be separated out, just as India plans to do, then spread of civilian nuclear energy should be a benefit to the mankind. The world needs energy and the fossil fuel is no longer a viable option, hence all laws, rules and regulations need to be modified. The world has to watch the final outcome of Bush-Manmohan agreement. It is the forerunner of shape of things to come.
Sunday, August 19, 2007
POVERTY AND SLUMS IN INDIA – IMPACT OF CHANGING ECONOMIC LANDSCAPE
POVERTY AND SLUMS IN INDIA – IMPACT OF CHANGING ECONOMIC LANDSCAPE
by Hari Sud
Western media headlines as usual are as follows – twenty five percent of Indians live on less than a dollar a day and seventy percent live on less than two dollars a day. The forgoing was the headline of May 9, 2005 in a major international newspaper. Others headlines are not any less mischievous. These are all meaningless analysis. It does not reflect that same amount of money has differing values in different places. A more acceptable and bit accurate description of incomes in countries is Purchase Power Parity (PPP), which is, pricing identical products and services as needed by the local population in different countries, thus establishing a new and a more equitable exchange rate. The foregoing is applicable mostly to tradable goods. The PPP will put India’s GDP at $3.7 Trillion. This will raise daily monies of twenty five percent of Indians at the lowest rung of the society to seven dollars. The latter is still low but is much higher than the Western media would like to project. The forgoing is not the point; the point is that poverty is a major shame in India’s otherwise decent, scientifically advanced, peace loving and at times turbulent image. Poverty creates slums and slums breed hopelessness and crime. Hence it needs to be tackled as an integral part of economic development.
The key question that arises - will the current hype in economical development in India alter the landscape for the very poor?
The answer is that, not much will change in next 20 to 25 years. The real impact will be felt later than twenty-five years. That is when 8% growth trajectory will take the PPP daily income of the very poor in India from seven dollars to forty dollars. By then, a $20 Trillion GDP economy (PPP basis) and $600 billion in exports (year 2001 basis) will add one hundred and fifty million jobs, of which forty to fifty million will go to the very poor segment of the society. This general prosperity will not only put food on the table but will add to better living, better housings etc. In the intervening period of 25 years, rising income levels will definitely add to the exodus from the slums to planned living areas. The forgoing also requires massive governmental effort to house people properly.
Let us examine this issue of poverty and slums in Indian cities and its relationship to the betterment of economic conditions of the masses, a bit further?
What Causes Slums in the Cities in the First Place?
It is vicious cycle of population growth, opportunities in the cities (leading to migration to the cities), poverty with low incomes, tendency to be closer to work hence occupying any land in the vicinity etc. The key reason out of all is the slow economic progress. After independence in 1947, commercial and industrial activity needed cheap labor in the cities. Plentiful was available in the rural area. They were encouraged to come to cities and work. People, who migrated to the cities and found work, brought their cousins and rest of the families to the cities. Unable to find housing and afford it, they decided to build their shelter closer to work. First, one shelter was built, then two and then two thousand and then ten thousand and on and on. Conniving governments provided electricity and drinking water. Politicians looked at the slums as vote bank. They organized these unauthorized dwellers into a political force; hence slums took a bit of a permanent shape. More slums developed as more population moved to the cities. By mid sixties Mumbai, Kolkata, Delhi, and all other large cities were dotted with slums.
Very poor people live in slums. They are not the only one dwelling there. Fairly well to do people also reside there. They are either offspring of the slum dwellers that found education and an occupation. They have prospered but are unable to find affordable housing, hence have continued to stay in the shantytowns. Others are avoiding paying rent and property taxes. The latter is more often the case. It is not unusual that in the dirtiest of slums, where misery prevails that TV sets, refrigerators and radios are also blaring music. This is quite a contrast from the image which one gets in the media or from the opportunist politicians.
India’s capital of Delhi has a million and a half out of fourteen million living in slums. Mumbai is worst with greater percentage living in slums. Other big urban centers have done no better. Newly built cities like Chandigarh and surrounding towns where shantytowns could have been avoided altogether have now slums. The forgoing is India’s shame despite huge progress.
How will the growing Economy impact Poverty and the Slum dwellers?
As stated above, 8% growth rate of Indian economy will push per capita GDP to $2,000 level in about twenty to twenty-five years (PPP per capita GDP will be much higher). The forgoing presupposes that the population does not explode in the near future but continue a healthy 1.5 to 2% growth. That is where the magic equilibrium of prosperity and desire to live a better life begins. These two together could end poverty and slums. With availability of affordable housing and jobs, slum dwelling is the last thought on people’s mind.
On the other hand if the above does not happen then slums dwellers will triple in 25 years and so will the poverty. Delhi will have four and a half million-slum dwellers. Kolkata and Mumbai will have even bigger numbers. India’s shame will have no end. To avoid that, India’s economy has to remain at a high state of growth. Jobs created by the economic growth, hence higher incomes are key criteria for poverty reduction and slum elimination. The foregoing together with the current urban renewal in progress in the urban areas today will give cities in India a new look. Higher incomes will create a demand for in-expensive housing, which will have to be met with innovative use of land and building techniques. Government provided housing would be a great failure as it has been elsewhere in the world. Instead sufficient cash has to be placed in the people’s hands together with in-expensive land that people’s housing program become efficient and affordable. In addition slum living has to be made unattractive with land taxes and denial of social services. Slum colonies, which opt out of current hopelessness, should get a better deal in housing which replaces the slums. This followed with rapidly growing rural economy will kill migration. That will also reduce pressure on housing.
No single policy has ever brought an end to poverty and slums. It is a concerted effort and better policies, which will end it. No country in the world has ever been able to end poverty and slums completely. That includes the richest nation of the world – USA. The point is that if economy progresses and special effort is made to uplift the poor, poverty and slums will be overtaken by better economic conditions of the people.
How did US Tackle its Slums?
US had its share of poverty and slums in around the immigrant dominated cities. New York and Boston had great amount of poverty and slums at the turn of the twentieth century. These slums worsened further with the arrival of newly liberated African-American population from Deep South. The era pictures give a glimpse of everyday life and it is not pretty. People without jobs and with no prospects crowded cities in the North. A new word, Ghetto was coined, which described these places. Immigrant from different background or race crowded together and gave rise to Ghettos. At that time US did not have control over its economy and Civil War debt and additional monies borrowed to rehabilitate agriculture and commerce after the Civil War was unpaid. As twentieth century progressed a concerted effort was made to clean up the Ghettos and push people inland with free grant of land and promise of prosperity. Industrial Revolution, which was slow in reaching America from Europe, finally arrived. And it made the difference. It provided the much-needed jobs to the immigrants and colored. Also, free land in the West gave rise to food self-sufficiency and paying off of all Civil War and post Civil War debts. First World War gave US economy a boost and America joined the select group of countries of Europe in prosperity. Poverty by the end of the Second World War was a thing of the past. In just fifty years, i.e. by 1950, US were nation of 160 million souls, all prosperous and all well employed (forget the habitual lazy). That does not mean that all the Ghettos disappeared. They continued to exist. They exist today, but on a much lower scale. These are not eyesores.
One critical factor which eliminated slums and poverty in US was quadrupling of the US economy from 1900 to 1940. A free wheeling economy created industrial giants and a super rich class. Need for war material during the WWII resulted in creation of huge industrial infrastructure and innovation. Post war reconstruction in Europe added greater impetus to the economy. General well being of the people living in the poorer section of the cities dramatically improved. US raced ahead of Europe and are still ahead, 60 years after the WWII. In most cities, ghettos disappeared or shrunk. Urban renewal and building boom in last sixty years has completely changed the landscape of the country.
There is a parallel here. Poverty and slums in India are at the same level as they were in beginning of the twentieth century in America. Economic growth over fifty years eliminated them. It is possible in India too if the economy sustains the 8% growth trajectory.
Slums and the Great Briton
Great Briton was a great big slum before they became a colonial power in the nineteenth century. For eight hundred years prior, until 1800s, Great Briton was an agrarian society, where the lord lived happily in his Manor and Castles and the masses lived in a great squalor. Slums were everywhere. London had the biggest slums. Colonization brought prosperity and prosperity brought in a huge effort to improve the lot of the people and clean up of the cities. That is when the unemployed and slum dwellers were pushed to newly developing industrial hubs of Sheffield, Birmingham, Liverpool and Manchester. Compared to that Delhi, Kolkata were heavens. First slums in Kolkata appeared in 1850-70 as a result of systematic destruction of textile industry in Bengal and destruction of trading infrastructure in and around Kolkata. Slums elsewhere followed.
It took all the Victorian age from 1825 to 1900 to vanish poverty and slums in England. Their GDP multiplied 8 times over this period. British factories produced goods and services which were sold at profit in the in the colonies. Work for everybody in England was the cornerstone of building well-serviced cities.
The point is that reduction of poverty and slums follow closely with economic development. Faster the economic development, sooner will the poverty vanish and with it, the slums.
How did China handle its Poverty and Slums?
Chinese had a unique way of making slums disappear from its urban centers. Permit system to live in a city or in a particular neighborhood was introduced just after the Communist took control in 1949. That means that a migration of rural population to the urban areas in search of jobs was arrested. In addition the war ravaged eastern provinces where rural population had moved to the cities and into the slums, were emptied out. Nobody questioned Mao Tse Tung’s wisdom; hence he had a free hand. People were permitted to return to their homes in the cities only after proof of their residency had been established. Outsiders were sent back to their own homes and land in the rural area. Future residency in the cities was permitted on a permit basis only. Hence the major problem of unplanned urban squatting was prevented. Even today the foregoing policy continues. The FDI built cities of Guangdong province carry on with the permit system established in 1949. In order to move there, a person has to have a job and place to reside. The latter could be a factory provided bunk bed. This prevents urban squatters. The above is no comparison to how poverty was vanished in UK, US and elsewhere. Major economic progress in last 20 years has re-invigorated the cities with investment and reconstruction. Whether the same is true in the China’s rural areas is a debatable issue. China likes to pretend that poverty has been removed. Published reports state otherwise. (http://www.economist.com/World/asia/displayStory.cfm?story_id=5636460)
Urban Renewal In India
Urban renewal is in progress in India in a big way for the last 50 years. The British starved cities in India of the funds for two hundred years. They only built regal palaces for themselves in Delhi, Shimla and Kolkota. No new funds were made available to the people to renew and rebuild, hence Moghul Delhi presented a decaying and a rundown look, when they finally left India in 1947. The problem got compounded with migration of people from rural areas. Expanding industry and commerce needed them hence migration was encouraged. Thus urban slums and squatting began in a big way. Today, some estimates place 10 to 15% of Delhi population as slum dwellers. Slums in Kolkata predate Delhi slums. So do the Mumbai slums. They all began the same way – people’s livelihood was destroyed or they were invited to work in factories without adequate housing. The problem grew acute with huge population growth after 1950. From 1950 to today, cities lacked funds to renew themselves and help build additional housing. People lacked adequate jobs hence are caught in the poverty cycle.
Only recently a huge building and construction boom has started in all cities in India. Whereas governments are concentrating on building infrastructure and industrial base, private construction is building work places, shopping districts and housing for the middle class. The poor and slum dwellers are not there in any building equation. Cheap housing projects are lowest in the category. Hence slum dwelling has become a way of life.
How Long the Poor have to wait?
If the experience elsewhere is a guide then poverty, slums and urban squat will be a diminishing phenomenon, if the rapid economic progress keeps its pace. Today we would have smaller of the slums, had economic policies of the present were in place 50 years back. Only now, all signs point to a rapidly rising GDP together with rising per capita GDP. With rise in income level, tendency to head to the slums has lessened. Die-hard slum dwellers who wish to pay no taxes and spend nothing on housing will most certainly continue to stay there. Others will prefer to move out. This is a normal phenomenon. It happened in US and elsewhere. It will happen in India too. An economic equilibrium has not been reached in the society yet, where enough money in people’s pocket will persuade them to vacate the slums. This won’t we reached for another 20 to 25 years. By about middle of this period with increased availability of housing and higher incomes, the growth in slum dwelling will be arrested. Decline will begin only when much higher incomes are reached (as stated above), provided India does not make the mistake of regularizing the slums/bustees with land tenure on tenable land and other amenities. That is a sure fire method to keep the slums going. People will always wait for free grant of land ownership even if these grants never materialize. Even the possibility of this ever happening in a distant future will keep the slum dwellers in the slums.
Conclusion
Poverty, slums and urban squat are not going to go away in next 20 to 25 years. Reversal of this phenomenon will begin after sufficient economic progress had been made. Eight percent GDP growths is a good sign. With quadrupled GDP in 25 years, there is a good chance that the new and upcoming generation may stay away from slum dwelling. It may take another 25 years before the slums are vacated.
by Hari Sud
Western media headlines as usual are as follows – twenty five percent of Indians live on less than a dollar a day and seventy percent live on less than two dollars a day. The forgoing was the headline of May 9, 2005 in a major international newspaper. Others headlines are not any less mischievous. These are all meaningless analysis. It does not reflect that same amount of money has differing values in different places. A more acceptable and bit accurate description of incomes in countries is Purchase Power Parity (PPP), which is, pricing identical products and services as needed by the local population in different countries, thus establishing a new and a more equitable exchange rate. The foregoing is applicable mostly to tradable goods. The PPP will put India’s GDP at $3.7 Trillion. This will raise daily monies of twenty five percent of Indians at the lowest rung of the society to seven dollars. The latter is still low but is much higher than the Western media would like to project. The forgoing is not the point; the point is that poverty is a major shame in India’s otherwise decent, scientifically advanced, peace loving and at times turbulent image. Poverty creates slums and slums breed hopelessness and crime. Hence it needs to be tackled as an integral part of economic development.
The key question that arises - will the current hype in economical development in India alter the landscape for the very poor?
The answer is that, not much will change in next 20 to 25 years. The real impact will be felt later than twenty-five years. That is when 8% growth trajectory will take the PPP daily income of the very poor in India from seven dollars to forty dollars. By then, a $20 Trillion GDP economy (PPP basis) and $600 billion in exports (year 2001 basis) will add one hundred and fifty million jobs, of which forty to fifty million will go to the very poor segment of the society. This general prosperity will not only put food on the table but will add to better living, better housings etc. In the intervening period of 25 years, rising income levels will definitely add to the exodus from the slums to planned living areas. The forgoing also requires massive governmental effort to house people properly.
Let us examine this issue of poverty and slums in Indian cities and its relationship to the betterment of economic conditions of the masses, a bit further?
What Causes Slums in the Cities in the First Place?
It is vicious cycle of population growth, opportunities in the cities (leading to migration to the cities), poverty with low incomes, tendency to be closer to work hence occupying any land in the vicinity etc. The key reason out of all is the slow economic progress. After independence in 1947, commercial and industrial activity needed cheap labor in the cities. Plentiful was available in the rural area. They were encouraged to come to cities and work. People, who migrated to the cities and found work, brought their cousins and rest of the families to the cities. Unable to find housing and afford it, they decided to build their shelter closer to work. First, one shelter was built, then two and then two thousand and then ten thousand and on and on. Conniving governments provided electricity and drinking water. Politicians looked at the slums as vote bank. They organized these unauthorized dwellers into a political force; hence slums took a bit of a permanent shape. More slums developed as more population moved to the cities. By mid sixties Mumbai, Kolkata, Delhi, and all other large cities were dotted with slums.
Very poor people live in slums. They are not the only one dwelling there. Fairly well to do people also reside there. They are either offspring of the slum dwellers that found education and an occupation. They have prospered but are unable to find affordable housing, hence have continued to stay in the shantytowns. Others are avoiding paying rent and property taxes. The latter is more often the case. It is not unusual that in the dirtiest of slums, where misery prevails that TV sets, refrigerators and radios are also blaring music. This is quite a contrast from the image which one gets in the media or from the opportunist politicians.
India’s capital of Delhi has a million and a half out of fourteen million living in slums. Mumbai is worst with greater percentage living in slums. Other big urban centers have done no better. Newly built cities like Chandigarh and surrounding towns where shantytowns could have been avoided altogether have now slums. The forgoing is India’s shame despite huge progress.
How will the growing Economy impact Poverty and the Slum dwellers?
As stated above, 8% growth rate of Indian economy will push per capita GDP to $2,000 level in about twenty to twenty-five years (PPP per capita GDP will be much higher). The forgoing presupposes that the population does not explode in the near future but continue a healthy 1.5 to 2% growth. That is where the magic equilibrium of prosperity and desire to live a better life begins. These two together could end poverty and slums. With availability of affordable housing and jobs, slum dwelling is the last thought on people’s mind.
On the other hand if the above does not happen then slums dwellers will triple in 25 years and so will the poverty. Delhi will have four and a half million-slum dwellers. Kolkata and Mumbai will have even bigger numbers. India’s shame will have no end. To avoid that, India’s economy has to remain at a high state of growth. Jobs created by the economic growth, hence higher incomes are key criteria for poverty reduction and slum elimination. The foregoing together with the current urban renewal in progress in the urban areas today will give cities in India a new look. Higher incomes will create a demand for in-expensive housing, which will have to be met with innovative use of land and building techniques. Government provided housing would be a great failure as it has been elsewhere in the world. Instead sufficient cash has to be placed in the people’s hands together with in-expensive land that people’s housing program become efficient and affordable. In addition slum living has to be made unattractive with land taxes and denial of social services. Slum colonies, which opt out of current hopelessness, should get a better deal in housing which replaces the slums. This followed with rapidly growing rural economy will kill migration. That will also reduce pressure on housing.
No single policy has ever brought an end to poverty and slums. It is a concerted effort and better policies, which will end it. No country in the world has ever been able to end poverty and slums completely. That includes the richest nation of the world – USA. The point is that if economy progresses and special effort is made to uplift the poor, poverty and slums will be overtaken by better economic conditions of the people.
How did US Tackle its Slums?
US had its share of poverty and slums in around the immigrant dominated cities. New York and Boston had great amount of poverty and slums at the turn of the twentieth century. These slums worsened further with the arrival of newly liberated African-American population from Deep South. The era pictures give a glimpse of everyday life and it is not pretty. People without jobs and with no prospects crowded cities in the North. A new word, Ghetto was coined, which described these places. Immigrant from different background or race crowded together and gave rise to Ghettos. At that time US did not have control over its economy and Civil War debt and additional monies borrowed to rehabilitate agriculture and commerce after the Civil War was unpaid. As twentieth century progressed a concerted effort was made to clean up the Ghettos and push people inland with free grant of land and promise of prosperity. Industrial Revolution, which was slow in reaching America from Europe, finally arrived. And it made the difference. It provided the much-needed jobs to the immigrants and colored. Also, free land in the West gave rise to food self-sufficiency and paying off of all Civil War and post Civil War debts. First World War gave US economy a boost and America joined the select group of countries of Europe in prosperity. Poverty by the end of the Second World War was a thing of the past. In just fifty years, i.e. by 1950, US were nation of 160 million souls, all prosperous and all well employed (forget the habitual lazy). That does not mean that all the Ghettos disappeared. They continued to exist. They exist today, but on a much lower scale. These are not eyesores.
One critical factor which eliminated slums and poverty in US was quadrupling of the US economy from 1900 to 1940. A free wheeling economy created industrial giants and a super rich class. Need for war material during the WWII resulted in creation of huge industrial infrastructure and innovation. Post war reconstruction in Europe added greater impetus to the economy. General well being of the people living in the poorer section of the cities dramatically improved. US raced ahead of Europe and are still ahead, 60 years after the WWII. In most cities, ghettos disappeared or shrunk. Urban renewal and building boom in last sixty years has completely changed the landscape of the country.
There is a parallel here. Poverty and slums in India are at the same level as they were in beginning of the twentieth century in America. Economic growth over fifty years eliminated them. It is possible in India too if the economy sustains the 8% growth trajectory.
Slums and the Great Briton
Great Briton was a great big slum before they became a colonial power in the nineteenth century. For eight hundred years prior, until 1800s, Great Briton was an agrarian society, where the lord lived happily in his Manor and Castles and the masses lived in a great squalor. Slums were everywhere. London had the biggest slums. Colonization brought prosperity and prosperity brought in a huge effort to improve the lot of the people and clean up of the cities. That is when the unemployed and slum dwellers were pushed to newly developing industrial hubs of Sheffield, Birmingham, Liverpool and Manchester. Compared to that Delhi, Kolkata were heavens. First slums in Kolkata appeared in 1850-70 as a result of systematic destruction of textile industry in Bengal and destruction of trading infrastructure in and around Kolkata. Slums elsewhere followed.
It took all the Victorian age from 1825 to 1900 to vanish poverty and slums in England. Their GDP multiplied 8 times over this period. British factories produced goods and services which were sold at profit in the in the colonies. Work for everybody in England was the cornerstone of building well-serviced cities.
The point is that reduction of poverty and slums follow closely with economic development. Faster the economic development, sooner will the poverty vanish and with it, the slums.
How did China handle its Poverty and Slums?
Chinese had a unique way of making slums disappear from its urban centers. Permit system to live in a city or in a particular neighborhood was introduced just after the Communist took control in 1949. That means that a migration of rural population to the urban areas in search of jobs was arrested. In addition the war ravaged eastern provinces where rural population had moved to the cities and into the slums, were emptied out. Nobody questioned Mao Tse Tung’s wisdom; hence he had a free hand. People were permitted to return to their homes in the cities only after proof of their residency had been established. Outsiders were sent back to their own homes and land in the rural area. Future residency in the cities was permitted on a permit basis only. Hence the major problem of unplanned urban squatting was prevented. Even today the foregoing policy continues. The FDI built cities of Guangdong province carry on with the permit system established in 1949. In order to move there, a person has to have a job and place to reside. The latter could be a factory provided bunk bed. This prevents urban squatters. The above is no comparison to how poverty was vanished in UK, US and elsewhere. Major economic progress in last 20 years has re-invigorated the cities with investment and reconstruction. Whether the same is true in the China’s rural areas is a debatable issue. China likes to pretend that poverty has been removed. Published reports state otherwise. (http://www.economist.com/World/asia/displayStory.cfm?story_id=5636460)
Urban Renewal In India
Urban renewal is in progress in India in a big way for the last 50 years. The British starved cities in India of the funds for two hundred years. They only built regal palaces for themselves in Delhi, Shimla and Kolkota. No new funds were made available to the people to renew and rebuild, hence Moghul Delhi presented a decaying and a rundown look, when they finally left India in 1947. The problem got compounded with migration of people from rural areas. Expanding industry and commerce needed them hence migration was encouraged. Thus urban slums and squatting began in a big way. Today, some estimates place 10 to 15% of Delhi population as slum dwellers. Slums in Kolkata predate Delhi slums. So do the Mumbai slums. They all began the same way – people’s livelihood was destroyed or they were invited to work in factories without adequate housing. The problem grew acute with huge population growth after 1950. From 1950 to today, cities lacked funds to renew themselves and help build additional housing. People lacked adequate jobs hence are caught in the poverty cycle.
Only recently a huge building and construction boom has started in all cities in India. Whereas governments are concentrating on building infrastructure and industrial base, private construction is building work places, shopping districts and housing for the middle class. The poor and slum dwellers are not there in any building equation. Cheap housing projects are lowest in the category. Hence slum dwelling has become a way of life.
How Long the Poor have to wait?
If the experience elsewhere is a guide then poverty, slums and urban squat will be a diminishing phenomenon, if the rapid economic progress keeps its pace. Today we would have smaller of the slums, had economic policies of the present were in place 50 years back. Only now, all signs point to a rapidly rising GDP together with rising per capita GDP. With rise in income level, tendency to head to the slums has lessened. Die-hard slum dwellers who wish to pay no taxes and spend nothing on housing will most certainly continue to stay there. Others will prefer to move out. This is a normal phenomenon. It happened in US and elsewhere. It will happen in India too. An economic equilibrium has not been reached in the society yet, where enough money in people’s pocket will persuade them to vacate the slums. This won’t we reached for another 20 to 25 years. By about middle of this period with increased availability of housing and higher incomes, the growth in slum dwelling will be arrested. Decline will begin only when much higher incomes are reached (as stated above), provided India does not make the mistake of regularizing the slums/bustees with land tenure on tenable land and other amenities. That is a sure fire method to keep the slums going. People will always wait for free grant of land ownership even if these grants never materialize. Even the possibility of this ever happening in a distant future will keep the slum dwellers in the slums.
Conclusion
Poverty, slums and urban squat are not going to go away in next 20 to 25 years. Reversal of this phenomenon will begin after sufficient economic progress had been made. Eight percent GDP growths is a good sign. With quadrupled GDP in 25 years, there is a good chance that the new and upcoming generation may stay away from slum dwelling. It may take another 25 years before the slums are vacated.
Regionalism: An Impediment to Globalisation
Regionalism: An Impediment to Globalisation
Aruni Mukherjee
It is not an exaggeration to declare that the Doha round of negotiations at the World Trade Organisation has comprehensively failed. Whether the inflexibility of the American position contributed primarily to this failure matters little, for whoever is to be blamed, the fact of the matter is that there is no deal on the table. The key issue lies elsewhere, and is noted by WTO Director General Pascal Lamy- “We have missed a very important opportunity to prove that multilateralism works.”
The failure of multilateral trade negotiations has been followed by announcements from a number of WTO member countries suggesting that they intend to pursue bilateral deals instead, while paying lip service to the long-term agenda of the global body. For instance, India- one of the chief perpetrators of the breakdown in talks- is already mulling free trade deals with the European Union and Japan. France- another culprit supreme- has already shown receptiveness to more openness in trade between the EU and India on a bilateral level.
Such instances are not one-offs. After the breakdown of each round of meetings, such deals are often announced between countries. Often the developed countries have used offers for bilateral deals as a carrot to break the unified agenda of the developing countries at the WTO.
There have been arguments put forward by scholars such as Kenichi Ohmae that regionalism frees up at least some of the world trade and is hence a facilitator to large-scale globalisation. However, it hardly seems a coincidence that most recent regionalist projects have been mulled precisely after the failure of a wider and much more ambitious global agenda. Examples include the US-Middle East Partnership Initiative and the EU-Mediterranean FTA. Moreover, there are certain characteristics of regionalist projects that make it a bulwark against globalisation, and not a catalyst for quickening it.
First, many of the preferential trading regimes across the world are highly selective in nature. The Association of South Asian States (ASEAN) has recently suspended free trade talks with India on grounds that the latter was being highly selective about removing import tariffs. Under the Common Agricultural Policy of the EU, certain subsidised items were excluded from the FTA it signed with South Africa. Under the North American Free Trade Area (NAFTA), Canada has opted out of freely trading in sugar, poultry and dairy products.
Second, whether regionalism has resulted in a globalisation of trade is highly doubtful. For instance, in 2004 the intra EU trade stood at $2.5 trillion vis-à-vis $180 billion for the EU-Africa trade. Taking a cue from the world systems theory of Immanuel Wallerstein, we can argue that the world is increasingly being divided into “cores and peripheries” as far as concentration of trade is concerned.
Third, we must always ask ourselves whether regionalism facilitates trade, or whether it encourages a fortress type mentality among the participants- to shut out wider competition through the agreement. From WTO figures, we can calculate that while the trade between the ANDEAN group of countries grew by 461% between 1990 and 2004, their trade with the rest of the world only grew by a mere 136% over the same period. Similarly, while intra-Mercosur trade grew by 318% over this period, its trade with the extra-Mercosur world grew by 188% only.
We could make the point without citing statistics. Take a look at the defensive nature of key sectors in countries within the EU and NAFTA (e.g., the French farm lobby) and the issue will be quite clear. Inter-regional disputes such as between the US and the EU over subsidies is another point to note here.
What can be agreed is that globalisation has managed to thwart pro-active protectionism. But regionalism has provided ample opportunities for self-interested, inward looking states (that liberals wish they could wish away) to introduce re-active protectionism. The hostile reaction of the EU to China’s allegedly “dumping tactics” is a recent example. What has taken place, therefore, is not ‘globalisation of trade’ but ‘globalisation of trade regionalisation’. The basic defensive character of these trading blocs remains. As Columbia University Professor Jagdish Bhagwati has argued, the regionalisation tendency is “a Trojan horse masquerading as a gift horse.”
So when India, China, Brazil or the US ink the next FTA with a country or a group of countries, look for the small print- look for areas where these countries are planning to exclude competitors from extra-regional countries.
Aruni Mukherjee
It is not an exaggeration to declare that the Doha round of negotiations at the World Trade Organisation has comprehensively failed. Whether the inflexibility of the American position contributed primarily to this failure matters little, for whoever is to be blamed, the fact of the matter is that there is no deal on the table. The key issue lies elsewhere, and is noted by WTO Director General Pascal Lamy- “We have missed a very important opportunity to prove that multilateralism works.”
The failure of multilateral trade negotiations has been followed by announcements from a number of WTO member countries suggesting that they intend to pursue bilateral deals instead, while paying lip service to the long-term agenda of the global body. For instance, India- one of the chief perpetrators of the breakdown in talks- is already mulling free trade deals with the European Union and Japan. France- another culprit supreme- has already shown receptiveness to more openness in trade between the EU and India on a bilateral level.
Such instances are not one-offs. After the breakdown of each round of meetings, such deals are often announced between countries. Often the developed countries have used offers for bilateral deals as a carrot to break the unified agenda of the developing countries at the WTO.
There have been arguments put forward by scholars such as Kenichi Ohmae that regionalism frees up at least some of the world trade and is hence a facilitator to large-scale globalisation. However, it hardly seems a coincidence that most recent regionalist projects have been mulled precisely after the failure of a wider and much more ambitious global agenda. Examples include the US-Middle East Partnership Initiative and the EU-Mediterranean FTA. Moreover, there are certain characteristics of regionalist projects that make it a bulwark against globalisation, and not a catalyst for quickening it.
First, many of the preferential trading regimes across the world are highly selective in nature. The Association of South Asian States (ASEAN) has recently suspended free trade talks with India on grounds that the latter was being highly selective about removing import tariffs. Under the Common Agricultural Policy of the EU, certain subsidised items were excluded from the FTA it signed with South Africa. Under the North American Free Trade Area (NAFTA), Canada has opted out of freely trading in sugar, poultry and dairy products.
Second, whether regionalism has resulted in a globalisation of trade is highly doubtful. For instance, in 2004 the intra EU trade stood at $2.5 trillion vis-à-vis $180 billion for the EU-Africa trade. Taking a cue from the world systems theory of Immanuel Wallerstein, we can argue that the world is increasingly being divided into “cores and peripheries” as far as concentration of trade is concerned.
Third, we must always ask ourselves whether regionalism facilitates trade, or whether it encourages a fortress type mentality among the participants- to shut out wider competition through the agreement. From WTO figures, we can calculate that while the trade between the ANDEAN group of countries grew by 461% between 1990 and 2004, their trade with the rest of the world only grew by a mere 136% over the same period. Similarly, while intra-Mercosur trade grew by 318% over this period, its trade with the extra-Mercosur world grew by 188% only.
We could make the point without citing statistics. Take a look at the defensive nature of key sectors in countries within the EU and NAFTA (e.g., the French farm lobby) and the issue will be quite clear. Inter-regional disputes such as between the US and the EU over subsidies is another point to note here.
What can be agreed is that globalisation has managed to thwart pro-active protectionism. But regionalism has provided ample opportunities for self-interested, inward looking states (that liberals wish they could wish away) to introduce re-active protectionism. The hostile reaction of the EU to China’s allegedly “dumping tactics” is a recent example. What has taken place, therefore, is not ‘globalisation of trade’ but ‘globalisation of trade regionalisation’. The basic defensive character of these trading blocs remains. As Columbia University Professor Jagdish Bhagwati has argued, the regionalisation tendency is “a Trojan horse masquerading as a gift horse.”
So when India, China, Brazil or the US ink the next FTA with a country or a group of countries, look for the small print- look for areas where these countries are planning to exclude competitors from extra-regional countries.
Rebuild India’s Infrastructure & Finance it with FDI & Export Earnings
Rebuild India’s Infrastructure & Finance it with FDI & Export Earnings
by Hari Sud
Has India’s infrastructure crumbled that it no longer can cope up with growing economic needs? The business investors from abroad often pose this question.
No is the answer to the first part of the above question. India’s infrastructure is alive and well and is adequate to the previously slow growing economy. Yes is the answer to the second part of the above question where accelerated growth of the last five years has made the existing infrastructure completely inadequate. It is no secret that this infrastructure needs to be rebuilt to a level where western investor is comfortable when he invests his money in India. Various estimates have been published from $150 billion to $330 billion required over next 5 to 10 years to rebuild power plants, roads, railways, ports, airports, water works, health care, education, upgrade city services etc. This tall order is outside government’s capability to finance, let alone building it and successfully running it. Private finance and their co-operation are needed to push India into the twenty first century. Without it, outside investor will have less confidence in India and would probably look elsewhere to get a good return on his investment.
What Does India Spends on Infrastructure Today?
Current infrastructure expenditures estimates at about $21 billion a year in last two years is extremely low. Fiscal year 2006-07 is the first year in which greater emphasis has been placed on rebuilding the infrastructure. It is estimated that about $49 billion will be spent in the current fiscal year; increasing to about $80 Billion a year by 2008-09, only if funds needed, becomes available. The forgoing is a huge jump and should put skepticism at ease. About 60% of this expenditure will be on improving the existing services; balance in capital expenditures on new building program. Both of these expenditures will modernize and upgrade the present system. The capital sum of about $20 to $30 billion is totally inadequate, especially if the nation has to consistently achieve 10% growth rate. Capital sums requirements for a world-class system in India have been variously estimated at about $40 to $50 billion a year. This additional requirement has sent India’s political establishment scurrying for favors abroad. Investors are being wooed. Technical help to modernize the system is being sort. Only when some of the above is in place, the investors abroad will have confidence in ‘New India’ and then they will have no excuse to look for another place like China to invest.
China’s infrastructure was in worse shape in 1982 than that of India’s at that time. But they began building program soon there after. Whereas the foreign investors concentrated their funds on building factories, China used its own funds and export earnings to build the infrastructure. From 1982 to 2003, it is estimated that the capital spending of about $300 billion went into it. Today, it is estimated that China spends close to $150 billion on infrastructure including capital sum. Discounting a few double accounted items from the total, their expenditure is four time than that of India. Their capital-spending program has transformed cities like Shanghai Beijing and first-rate transportation system etc. These cities look like any western city. Chinese have an eye on positive publicity it will generate, hence concentrate their energies on where it will be most beneficial. Elsewhere in the hinterland, it is middle-ages transportation system.
Where Does India has to acquire Funds for this Building Program?
Three are only three ways to get money to build the infrastructure in India, namely:
1. Use the huge pile of foreign exchange reserves.
2. Use FDI as source of cash and foreign technical know how with their participation.
3. Borrow from open market and pay it off with export earnings.
Use the Foreign Cash Reserves
This method is the most talked about and least likely possible to get the needed cash. A foreign reserve at about $160 billion, (held in US and Europe) is needed, should a cash flow crisis strike again in early nineties negligible foreign reserves resulted in India, mortgaging its gold in lieu of loans to finance imports. It was the worst financial crisis in modern India. It cannot be allowed to repeat. Hence foreign reserves have to be left alone. In addition India’s has about $130 billion debt, which it owes to foreign lending institutions. To this if we add funds already committed and not yet paid, it roughly balances the cash reserves. Hence the cash reserves become a sort of security to the lenders. The lenders will never move against these reserves and seize them, except in case of war or complete refusal to pay back debt, which is unlikely.
The above is not an unusual situation. China has about $800 billion in reserves and about the same amount in FDI loans. Their cash reserves are held against the FDI invested in the country.
Still, foreign reserves in small amounts can be used to finance the infrastructure build. Funds of the order of $40 to$50 Billion a year has to be financed through other means.
FDI & Foreign Participation
This financing method is most likely to yield good results. There is a mountain of cash available in the world financial markets, some of which is awaiting Indian government signal to flood in. A few rules and policy changes have to be made before the floodgate is open. This money will also bring with it foreign participation, which is sorely needed for this very complex and highly technical sector. FDI has transformed China. It will do the same to India. The question is ‘what is the delay’. The first and foremost is to understand bureaucratically how to manage the FDI in the infrastructure sector and how to pay it back with export earnings. Second is how to avoid future Enron type fiascos. The latter had ten years of shameful delay and cost escalation in the construction of much needed power plant. Nuclear power plants, which require imported technology and Uranium will most certainly require FDI in big amounts. With the passage of Indo-US nuclear deal, funds needed to build 8 nuclear power plants will arrive without much hype. Modernization of transport sector, another area lagging far behind, is to be undertaken in earnest. It also requires foreign money and their technical expertise.
Borrow Money in Open Market
Yes, this is the most talked about way to finance infrastructure projects. It is not the best. About $300 billion borrowed will add to the debt burden of the nation. Even if it is to be paid with export earnings, success of all export projects is not guaranteed. Political interference will create new Enrons. These will drag down export earnings and make debt servicing a major problem.
Technical and management expertise will have to be obtained together with the import of equipment and machinery. The ideal would be far the governments to manage these projects and hope to run them smoothly, that will be first for the nation. Most of government run power plants & power distribution, steel mills, roads and railways have not lived up to the national expectations. Even if private sector partners with the government or participate independently in projects, political interference in one form or other will reduce project profitability. This will all result in reduced export earnings and inability to pay off debt. The latter will create a whole set of new problems, very much similar to financial crisis which Argentina; Mexico, Brazil had in the past 20 years and all the Asian Tiger nations went through in the late nineties. They all borrowed too much and invested in projects with none or very little return. IMF bailed them out every time but at a high cost to the people.
Hence there is no single perfect way to finance major infrastructure upgrade. A combination of all the above three is the best possible solution. The only nation, which has successfully implemented infrastructure upgrade is China. They are to be studied and copied.
Encourage the Private Sector to take up the Bulk of the Upgrade Projects
Overall investment plan for this sector is being drawn up by the government’s planning body. It includes participation of central & state governments together with the private sector. The latter is expected to fund and manage about 20% of the overall investment and projects. To achieve this, a few regulatory problems and lack of transparency have to be tackled. Power sector is one of the most critical components of infrastructure development. It drives all other sectors forward. 1990 is the watershed year in this area. Prior to that private participation in power sector was limited. Enron’s Dhabol Power Plant was one of the first major project, but failed to inspire confidence due to many reasons. This discouraged foreign interest in India’s power sector. Thanks to the political party in power today that this power plant will generate power for the power hungry state. In addition, foreign interest in India’s power sector has picked up. The GE has big plans for India.
Today, private interests generate about 11% of the total power. State and central interests generate the rest. Private sector participation is meager. If this sector has to reach an optimum capacity, then private sector has to come forward with an iron will and wrist of steel to overcome all problems. Indo-US nuclear deal will help. It will have foreign private participation in it. But the first nuclear power plant under this deal will not be operational until about 2012. Until then all possible avenues to add additional power capacity are to be explored. Natural gas from Iran may help, but current international climate make dealing with Iranians impossible. Here again first gas power plant with Iranian Gas, if the gas ever arrives, may not become operational until 2011. Under the circumstances, nuclear is better option.
Privatization of Delhi and Mumbai airports has already given a shot in the arm both for the transportation sector as well as to the privatization. Others projects will follow soon. An eight-lane highway is being built by the private sector to link Bangalore to Chennai. Success of this venture has already spurred interest in projects elsewhere.
Hence groundwork for private participation has already been laid. It is making a steady progress. Soon it will become one of the major players in this sector.
In short India has lately recognized that without proper infrastructure there is no possibility of making rapid strides on the economic front. Hence special emphasis has to be placed on it. All plans boil down to one simple issue i.e. who will pay for it and will the investment have an adequate return to justify more investment? That issue is to be sorted out first to everybody’s satisfaction. A variety of instruments exist to finance it. A combination of some of these instruments will have to be used to achieve the goal.
by Hari Sud
Has India’s infrastructure crumbled that it no longer can cope up with growing economic needs? The business investors from abroad often pose this question.
No is the answer to the first part of the above question. India’s infrastructure is alive and well and is adequate to the previously slow growing economy. Yes is the answer to the second part of the above question where accelerated growth of the last five years has made the existing infrastructure completely inadequate. It is no secret that this infrastructure needs to be rebuilt to a level where western investor is comfortable when he invests his money in India. Various estimates have been published from $150 billion to $330 billion required over next 5 to 10 years to rebuild power plants, roads, railways, ports, airports, water works, health care, education, upgrade city services etc. This tall order is outside government’s capability to finance, let alone building it and successfully running it. Private finance and their co-operation are needed to push India into the twenty first century. Without it, outside investor will have less confidence in India and would probably look elsewhere to get a good return on his investment.
What Does India Spends on Infrastructure Today?
Current infrastructure expenditures estimates at about $21 billion a year in last two years is extremely low. Fiscal year 2006-07 is the first year in which greater emphasis has been placed on rebuilding the infrastructure. It is estimated that about $49 billion will be spent in the current fiscal year; increasing to about $80 Billion a year by 2008-09, only if funds needed, becomes available. The forgoing is a huge jump and should put skepticism at ease. About 60% of this expenditure will be on improving the existing services; balance in capital expenditures on new building program. Both of these expenditures will modernize and upgrade the present system. The capital sum of about $20 to $30 billion is totally inadequate, especially if the nation has to consistently achieve 10% growth rate. Capital sums requirements for a world-class system in India have been variously estimated at about $40 to $50 billion a year. This additional requirement has sent India’s political establishment scurrying for favors abroad. Investors are being wooed. Technical help to modernize the system is being sort. Only when some of the above is in place, the investors abroad will have confidence in ‘New India’ and then they will have no excuse to look for another place like China to invest.
China’s infrastructure was in worse shape in 1982 than that of India’s at that time. But they began building program soon there after. Whereas the foreign investors concentrated their funds on building factories, China used its own funds and export earnings to build the infrastructure. From 1982 to 2003, it is estimated that the capital spending of about $300 billion went into it. Today, it is estimated that China spends close to $150 billion on infrastructure including capital sum. Discounting a few double accounted items from the total, their expenditure is four time than that of India. Their capital-spending program has transformed cities like Shanghai Beijing and first-rate transportation system etc. These cities look like any western city. Chinese have an eye on positive publicity it will generate, hence concentrate their energies on where it will be most beneficial. Elsewhere in the hinterland, it is middle-ages transportation system.
Where Does India has to acquire Funds for this Building Program?
Three are only three ways to get money to build the infrastructure in India, namely:
1. Use the huge pile of foreign exchange reserves.
2. Use FDI as source of cash and foreign technical know how with their participation.
3. Borrow from open market and pay it off with export earnings.
Use the Foreign Cash Reserves
This method is the most talked about and least likely possible to get the needed cash. A foreign reserve at about $160 billion, (held in US and Europe) is needed, should a cash flow crisis strike again in early nineties negligible foreign reserves resulted in India, mortgaging its gold in lieu of loans to finance imports. It was the worst financial crisis in modern India. It cannot be allowed to repeat. Hence foreign reserves have to be left alone. In addition India’s has about $130 billion debt, which it owes to foreign lending institutions. To this if we add funds already committed and not yet paid, it roughly balances the cash reserves. Hence the cash reserves become a sort of security to the lenders. The lenders will never move against these reserves and seize them, except in case of war or complete refusal to pay back debt, which is unlikely.
The above is not an unusual situation. China has about $800 billion in reserves and about the same amount in FDI loans. Their cash reserves are held against the FDI invested in the country.
Still, foreign reserves in small amounts can be used to finance the infrastructure build. Funds of the order of $40 to$50 Billion a year has to be financed through other means.
FDI & Foreign Participation
This financing method is most likely to yield good results. There is a mountain of cash available in the world financial markets, some of which is awaiting Indian government signal to flood in. A few rules and policy changes have to be made before the floodgate is open. This money will also bring with it foreign participation, which is sorely needed for this very complex and highly technical sector. FDI has transformed China. It will do the same to India. The question is ‘what is the delay’. The first and foremost is to understand bureaucratically how to manage the FDI in the infrastructure sector and how to pay it back with export earnings. Second is how to avoid future Enron type fiascos. The latter had ten years of shameful delay and cost escalation in the construction of much needed power plant. Nuclear power plants, which require imported technology and Uranium will most certainly require FDI in big amounts. With the passage of Indo-US nuclear deal, funds needed to build 8 nuclear power plants will arrive without much hype. Modernization of transport sector, another area lagging far behind, is to be undertaken in earnest. It also requires foreign money and their technical expertise.
Borrow Money in Open Market
Yes, this is the most talked about way to finance infrastructure projects. It is not the best. About $300 billion borrowed will add to the debt burden of the nation. Even if it is to be paid with export earnings, success of all export projects is not guaranteed. Political interference will create new Enrons. These will drag down export earnings and make debt servicing a major problem.
Technical and management expertise will have to be obtained together with the import of equipment and machinery. The ideal would be far the governments to manage these projects and hope to run them smoothly, that will be first for the nation. Most of government run power plants & power distribution, steel mills, roads and railways have not lived up to the national expectations. Even if private sector partners with the government or participate independently in projects, political interference in one form or other will reduce project profitability. This will all result in reduced export earnings and inability to pay off debt. The latter will create a whole set of new problems, very much similar to financial crisis which Argentina; Mexico, Brazil had in the past 20 years and all the Asian Tiger nations went through in the late nineties. They all borrowed too much and invested in projects with none or very little return. IMF bailed them out every time but at a high cost to the people.
Hence there is no single perfect way to finance major infrastructure upgrade. A combination of all the above three is the best possible solution. The only nation, which has successfully implemented infrastructure upgrade is China. They are to be studied and copied.
Encourage the Private Sector to take up the Bulk of the Upgrade Projects
Overall investment plan for this sector is being drawn up by the government’s planning body. It includes participation of central & state governments together with the private sector. The latter is expected to fund and manage about 20% of the overall investment and projects. To achieve this, a few regulatory problems and lack of transparency have to be tackled. Power sector is one of the most critical components of infrastructure development. It drives all other sectors forward. 1990 is the watershed year in this area. Prior to that private participation in power sector was limited. Enron’s Dhabol Power Plant was one of the first major project, but failed to inspire confidence due to many reasons. This discouraged foreign interest in India’s power sector. Thanks to the political party in power today that this power plant will generate power for the power hungry state. In addition, foreign interest in India’s power sector has picked up. The GE has big plans for India.
Today, private interests generate about 11% of the total power. State and central interests generate the rest. Private sector participation is meager. If this sector has to reach an optimum capacity, then private sector has to come forward with an iron will and wrist of steel to overcome all problems. Indo-US nuclear deal will help. It will have foreign private participation in it. But the first nuclear power plant under this deal will not be operational until about 2012. Until then all possible avenues to add additional power capacity are to be explored. Natural gas from Iran may help, but current international climate make dealing with Iranians impossible. Here again first gas power plant with Iranian Gas, if the gas ever arrives, may not become operational until 2011. Under the circumstances, nuclear is better option.
Privatization of Delhi and Mumbai airports has already given a shot in the arm both for the transportation sector as well as to the privatization. Others projects will follow soon. An eight-lane highway is being built by the private sector to link Bangalore to Chennai. Success of this venture has already spurred interest in projects elsewhere.
Hence groundwork for private participation has already been laid. It is making a steady progress. Soon it will become one of the major players in this sector.
In short India has lately recognized that without proper infrastructure there is no possibility of making rapid strides on the economic front. Hence special emphasis has to be placed on it. All plans boil down to one simple issue i.e. who will pay for it and will the investment have an adequate return to justify more investment? That issue is to be sorted out first to everybody’s satisfaction. A variety of instruments exist to finance it. A combination of some of these instruments will have to be used to achieve the goal.
India - Food Security & Its Future
India - Food Security & Its Future
By Hari Sud
The first green revolution in India began in 1960s. It resulted in doubling of food grain production from 120 million tons in 1960 to 210 million tons today. It was the combined effort of high yield seeds, extensive use of fertilizers, land reforms and irrigation schemes that resulted in this remarkable achievement. Food self-sufficiency was achieved by 1984. As the year 1995 dawned, India was a net food exporter. This remarkable feat also included increased acreage of cultivable land from 116 million hectare in 1960 to 170 million hectare in 1990. In 1995, 850 million souls had about 190 million tones of food grain to share. Although the forgoing could not be classified as excess, yet it was enough to feed everybody about 2,200 calories a day. A few unlucky one did not get the basic minimum food intake, but it was a far cry from the days of famine and ration of 1950, 1956, 1965-67 and 1975-77.
In the last ten years, India has added 150 million more mouths to feed but has increased food production by only 15 million tons. Hence there is beginning to be an imbalance in supply and demand. Government of India in last 12 months has initiated steps to import as much as 5 million tons of wheat from Australia and elsewhere. It is not for lack of trying that food grain production has not kept up pace, but the present food grain production infrastructure can only produce this much. For a bigger harvest in coming years, different initiatives have to be taken to jump-start the stagnant agriculture sector.
This initiative could be three fold:
a) Use technology together with newer cultivation techniques.
b) Water management with harvesting excess Monsoon rainwater in the North and transporting it to the parched West and South.
c) Ensuring a better return to the farmers.
Each of the above has been under Government of India’s scanner. The latter is concerned about possible social upheaval, should the masses go hungry. The forgoing is not only a serious challenge in India, it has also been recognized as a serious challenge in China. Both India and China while focusing heavily on industrialization have not given due attention to food grains production. Now it is becoming increasingly important for both to shift focus a bit from industrialization to agriculture. China is worse off because rapid industrialization has created a massive acid rain problem. Acid rain is having a detrimental impact on agriculture. Already their wheat production of 125 million tones in 1995 has declined to 100 million tones in 2005. While in India, acid rain is not an issue increasing population will be one.
How Technology Will Help?
1. Technology is going to play a major role to take the grain production from about 210 million tones today to 300 million tons by 2020 (i.e. 6% increase per year). That much food supply is needed to feed the population, which by then will hit 1.4 billion mark. Any political party compromising on that requirement will not survive the ballot box. Hence technology has to become essential part to deliver higher food grain supply needs. Technology will play its role in the following ways:
2. Agricultural input management
3. Better seeds and cultivation techniques
Mechanization of Agricultural Machinery and Handling
A farmer has to become a part agronomist and a part economist. He has to depend upon the information age to know the weather pattern in advance (prior to planting crop), inputs like fertilizers needed for a particular crop, pest control schedule to safeguard crop and maximize advantage from the local irrigation schemes. Once the crop is harvested, the storage and handling losses are to be minimized with careful planning and good local storage. A farmer has to become party to the distribution system to prevent mal-distribution and handling losses. Genetically Modified crops (GM) will play a vital role in future. It should be remembered that Dr. Norman Borlaug’s developed the dwarf variety wheat in Mexico, which was adopted in India and thus began the first green revolution. Without adopting newer varieties of seeds and scientifically planned inputs, it will be harder to boost food grain output. Also Indian agriculture is heavily dependent on labor. In other words it is not fully mechanized. Although, tractor has become common in India to plough the fields, yet further mechanization until harvesting is scanty. There is one very basic requirement, which is mother of all agriculture output, i.e. timely rains and irrigation. Monsoon rains of June-September play a vital role in a particular year’s crop success. Timely rain helps; delayed rain or no rain hurts badly.
Water Supply Situation In India
Geographically, India has two major river basins. In the north, it is the Ganga River Basin, which together with Jamuna and other smaller rivers drain the rainwater and melting snow from Himalayas into the Bay of Bengal. This drainage system is joined by mighty Brahmaputra, which hugs the northern Himalayan contour in Tibet, then bursts into Assam plains and finally joins river Ganga in Bangladesh. This northern basin is surplus in water (34%) and acts as major source of water for irrigation and also inflicts misery during the Monsoon floods. This forgoing is supplemented in the West by five rivers, which originate in the Himalayas and drain south through Punjab and Pakistan into the Arabian Sea. These rivers, two in India and rest in Pakistan have been dammed carefully and canal system provides irrigation to Punjab, Haryana and northern Rajasthan. These rivers and canal system is independent of the Ganga river basin, although they all originate in different parts of Himalayas.
Southern river basin of Godavari, Krishna and Cauvary (and also Mahanadi in Orissa) provides the water and irrigation needs of the peninsular India. This area is south of Vindyachal mountain ranges, which runs roughly east to west, and stands as a hump in the middle of India. It is a dry and parched plateau except during the rainy season it receives sufficient rain to sustain a few rivers. Two of these rivers (Narmada & Tapti), flow east to west horizontally, and discharge into the Arabian Sea. Three more rivers, Chambal, Betwa and Son also originate from Vindya Ranges and flow north and join the Ganga river system. The only reason that these forgoing three rivers flow north are that the high plateau of Vindaya Ranges prevents drainage south. The above-mentioned southern peninsular river system irrigates the rice fields of Andhra Pradesh, Tamil Nadu and Karanataka. Irrigation dams have been built on all the rivers and water and power potential had been harnessed. Although these four mighty rivers flow in the peninsular India, yet it is deficient in water (-20%). This deficiency prevents the southern India from utilizing its full agricultural potential. Hence, there is always a hope that some day, surplus water from the northern basin will be transferred south. It is easier said than done. Main problem is the Vindaya plateau. It runs 300 to 600 miles wide with an elevation of 300 to 1500 metes. Taking water over this hump is beyond present day engineering skill except at the expense of huge amount of electric power consumption. It will consume about 40% of all the power India generates today to undertake this step. Three times in last 50 years, this idea has been advanced and three times it has been rejected as unworkable.
The only idea, which seems to make sense, is to transfer the surplus northern water, westwards towards Rajasthan and Gujarat via Haryana. There is no major elevation disadvantage in going west and southwest. Minor mountain ranges can be circumvented. With the arrival of fresh water, parched lands of Rajasthan and Northern Gujarat will become fertile lands. A canal system about 1,600 miles long will eventually bring prosperity to these areas and add additional much needed food grain output to India. The forgoing scheme will also require interlinking Ganga, Jamuna and other Ganagetic plain rivers first. This could be further improved if surplus water of Brahmaputra is also added to this canal system. But Bangladesh stands in the way and is not amenable to any proposal.
Rainfall Pattern In Indian Subcontinent
Rivers in the north are perennial in nature, with a constant flow from the melting snow of the Himalayas. Their flow multiplies four times over during the rainy season from June till September. Annual average rainfall in Eastern India (Assam & Arunachal) is about 200 centimeters, with hilly areas receiving a much higher amount. All the rain, which falls in Arunachal, also flows back into Assam, hence adding to the tremendous surplus in water in River Brahmaputra. This becomes source of misery and destruction year after year. Northern Gangetic plains and the middle Himalayas receive about 100 to 250 centimeters of rain with Himalayan ranges receiving the higher amounts. All this water eventually flows back into the Gangetic basin and causes floods. By the time river Ganga & Brahmaputra join together in Bangladesh, they have too much water and all of it flows into Bay of Bengal but not before inflicting tremendous damage there.
Western Indian plains of Punjab, Haryana and Western UP receive anywhere from 100 to 150 centimeters of rain. This much rain is sufficient to grow good crop as well as keep floods in check. Occasionally the five rivers of Punjab overflow their banks, this happens when greater amount of rain falls in western Himalayan region. These floods have now been contained with floodwater being stored in mighty dams both in India and Pakistan. This later is used to sustain a very progressive agriculture. That does not mean that floods do not happen in Punjab and Pakistan. They do happen but happen less and less.
Western Rajasthan and northern Gujarat receives only 20 to 30 cm of rains. This much rain is insufficient to sustain agriculture, hence making a living there is a bit harder.
The southern peninsular region of Andhra Pradesh, Tamil Nadu and Karnataka receives about 50 cm of rainfall during the June-September season but gets additional 35 centimeter of rains during winter October-March time frame, giving it a reasonable total of about 85 centimeters of rain in a year. This much rain although not sufficient but sustains life there. Western Maharashtra, Madhya Pradesh and part of Orissa receives about 50 to 75 centimeters of rain during June-September time frame, but receive no rain during the winter period, hence these areas are perpetually deficient in water resources. West Coast of India receives a huge rainfall of about 100 to 250 centimeters in a year. This area has never been deficient in water. Sometimes it rains so much that cities on the West coast of India start floating in water like what happened in Mumbai this year.
Overall India receives average of 100 to 150 centimeters of rain in a year. This is a respectable amount. But the vagaries of the weather make it harder to forecast where and when the rain will come first. Farmers depend upon timely rain; otherwise the crops suffer a tremendous set back. The above amount of rainfall results in about 4,000 Billion Cubic Meters of water looking for an exit to the sea. Since 75% of this precipitation occurs in June-September time frame, hence much of this water is looking for an exit in a hurry, in this time frame. At times it overflow the banks and into the cities and villages in the surrounding areas. It has been an accepted theory that about half of this water (2,000 Billion cubic meters) soaks the soil, which has been parched during the summer months; remaining half becomes the river run off. 50% of the this run off is in Ganga-Brhmaputra basin, 20% in Punjab rivers, 10% in central India rivers and remaining 20% in the southern peninsular rivers. In short, there is too much water in the northern basin and much less in the southern peninsular region. As stated above, north has a 34% surplus of water and south has 20% deficiency.
Cost and Benefits of Taking Gangetic Basin Water To Rajasthan
It is a common knowledge that North-South link has to wait until future engineering achieves a breakthrough and makes it possible to pump huge amount of water over 300 meters height inexpensively or canal boring could be done over a distance of hundreds of miles through the central Indian plateau. There is something, which is possible today i.e. taking the surplus Gangetic basin water to Rajasthan. As much as 1,000 billion Cubic Meters of surplus water could be transferred to Rajasthan and Gujarat. It will bring additional 25 to 30 million hectare land under cultivation. This bonanza will produce additional 50 to 60 million tons of food grains annually. In addition, floods and misery known year after year in the Gangetic basin will be a thing of the past. If ever a deal is truck to dig a canal through Bangladesh to take excess water of Brahmaputra, then more land could be brought under cultivation and the benefits will multiply.
The above is feasible now. Costs may be as much as $40 billion over 15 years to build dams; storage facilities and digging up a main canal and multitude of smaller canals to distribute the available water, but the payback will be fast. An estimated $60 billion worth of crop will be available for consumption or export every year. Ancillary industry will most likely add an equivalent amount to the national GDP.
Ensuring Better Returns to the Farmers
India’s farmers are vary from very wealthy to very poor.. Farmers with large holdings are wealthy. They enjoy the benefits of government aid, mechanization and technology. Farmers with smallholding are worst off. The latter is the backbone in food grain production. It is they who need to be looked after most. There are only two ways farmers could be helped:
Subsidize agriculture on the same line as the Western countries do to make farming profitable.
Or
Price structure should be such that it ensures a fair return to the farmers
Help in form of subsidy has created more problems than it ever solves. Dependence on subsidies kills initiative. Hence this alternative has to be discouraged. West (Europe and US) who heavily subsidize their farmers is in fact have built a monster at their doorstep. Subsidies cannot be easily eliminated without a political suicide for the ruling government. Subsidies also make international commerce and trade difficult. Today, WTO talks in Geneva are stuck on the subsidy issue. If the agricultural subsidies in Europe and US are removed then for example, wheat prices in the international market, which currently are in the $140 per ton range, will increase to about $220 a ton. This will make international wheat price at level with Indian wheat prices and remove a major irritant in trade relationship between India and the West. Alternative to direct subsidies is easy long-term credit, better irrigation, higher availability of power, and easy access to other agricultural inputs including mechanized harvesting.
Also stable and guaranteed price is the best mean to ensure prosperity to the farmers. Currently state owned procurement system is highly inefficient. Losses of food grains in storage and transit amount to about 10%. This ultimately reflects in the price the state systems offer to the farmers. If these losses could be cut to bare minimum, the farmer will get 10% or so better price for his produce. Additional money in his pocket will allow him to pay off his credit easily and modernize his farming. Not only that it will give him a more stable life style. Other areas for improvement include further land reforms and easy access to technology to make him a smart farmer. Ultimately, higher output per acre with a combination of the forgoing will translate into more money in farmer's pocket.
Conclusions
In order to boost agricultural output from current 210 million tons to about 300 million tons, technology has to play a greater role. Hopefully immediate needs of the rising population will be met with the combination of technology and efficient management of water resources we already have. Next quantum leap in agriculture cannot be achieved without bringing additional areas under cultivation. There is no more agricultural farmland left to cultivate except in the arid west, southwest and in peninsular India. Both will require transport of surplus water from north to south or southwest. The former is proving to be difficult to achieve. But the latter is achievable. It will take about 15 years to implement this scheme and 5 years to plan. By 2025, India can add additional 50 to 60 million of food grains to a total of about 350 to 360 million tons a year. Hopefully by then the West would have eliminated its agricultural subsidies. At that time India could enter export market in a big way.
By Hari Sud
The first green revolution in India began in 1960s. It resulted in doubling of food grain production from 120 million tons in 1960 to 210 million tons today. It was the combined effort of high yield seeds, extensive use of fertilizers, land reforms and irrigation schemes that resulted in this remarkable achievement. Food self-sufficiency was achieved by 1984. As the year 1995 dawned, India was a net food exporter. This remarkable feat also included increased acreage of cultivable land from 116 million hectare in 1960 to 170 million hectare in 1990. In 1995, 850 million souls had about 190 million tones of food grain to share. Although the forgoing could not be classified as excess, yet it was enough to feed everybody about 2,200 calories a day. A few unlucky one did not get the basic minimum food intake, but it was a far cry from the days of famine and ration of 1950, 1956, 1965-67 and 1975-77.
In the last ten years, India has added 150 million more mouths to feed but has increased food production by only 15 million tons. Hence there is beginning to be an imbalance in supply and demand. Government of India in last 12 months has initiated steps to import as much as 5 million tons of wheat from Australia and elsewhere. It is not for lack of trying that food grain production has not kept up pace, but the present food grain production infrastructure can only produce this much. For a bigger harvest in coming years, different initiatives have to be taken to jump-start the stagnant agriculture sector.
This initiative could be three fold:
a) Use technology together with newer cultivation techniques.
b) Water management with harvesting excess Monsoon rainwater in the North and transporting it to the parched West and South.
c) Ensuring a better return to the farmers.
Each of the above has been under Government of India’s scanner. The latter is concerned about possible social upheaval, should the masses go hungry. The forgoing is not only a serious challenge in India, it has also been recognized as a serious challenge in China. Both India and China while focusing heavily on industrialization have not given due attention to food grains production. Now it is becoming increasingly important for both to shift focus a bit from industrialization to agriculture. China is worse off because rapid industrialization has created a massive acid rain problem. Acid rain is having a detrimental impact on agriculture. Already their wheat production of 125 million tones in 1995 has declined to 100 million tones in 2005. While in India, acid rain is not an issue increasing population will be one.
How Technology Will Help?
1. Technology is going to play a major role to take the grain production from about 210 million tones today to 300 million tons by 2020 (i.e. 6% increase per year). That much food supply is needed to feed the population, which by then will hit 1.4 billion mark. Any political party compromising on that requirement will not survive the ballot box. Hence technology has to become essential part to deliver higher food grain supply needs. Technology will play its role in the following ways:
2. Agricultural input management
3. Better seeds and cultivation techniques
Mechanization of Agricultural Machinery and Handling
A farmer has to become a part agronomist and a part economist. He has to depend upon the information age to know the weather pattern in advance (prior to planting crop), inputs like fertilizers needed for a particular crop, pest control schedule to safeguard crop and maximize advantage from the local irrigation schemes. Once the crop is harvested, the storage and handling losses are to be minimized with careful planning and good local storage. A farmer has to become party to the distribution system to prevent mal-distribution and handling losses. Genetically Modified crops (GM) will play a vital role in future. It should be remembered that Dr. Norman Borlaug’s developed the dwarf variety wheat in Mexico, which was adopted in India and thus began the first green revolution. Without adopting newer varieties of seeds and scientifically planned inputs, it will be harder to boost food grain output. Also Indian agriculture is heavily dependent on labor. In other words it is not fully mechanized. Although, tractor has become common in India to plough the fields, yet further mechanization until harvesting is scanty. There is one very basic requirement, which is mother of all agriculture output, i.e. timely rains and irrigation. Monsoon rains of June-September play a vital role in a particular year’s crop success. Timely rain helps; delayed rain or no rain hurts badly.
Water Supply Situation In India
Geographically, India has two major river basins. In the north, it is the Ganga River Basin, which together with Jamuna and other smaller rivers drain the rainwater and melting snow from Himalayas into the Bay of Bengal. This drainage system is joined by mighty Brahmaputra, which hugs the northern Himalayan contour in Tibet, then bursts into Assam plains and finally joins river Ganga in Bangladesh. This northern basin is surplus in water (34%) and acts as major source of water for irrigation and also inflicts misery during the Monsoon floods. This forgoing is supplemented in the West by five rivers, which originate in the Himalayas and drain south through Punjab and Pakistan into the Arabian Sea. These rivers, two in India and rest in Pakistan have been dammed carefully and canal system provides irrigation to Punjab, Haryana and northern Rajasthan. These rivers and canal system is independent of the Ganga river basin, although they all originate in different parts of Himalayas.
Southern river basin of Godavari, Krishna and Cauvary (and also Mahanadi in Orissa) provides the water and irrigation needs of the peninsular India. This area is south of Vindyachal mountain ranges, which runs roughly east to west, and stands as a hump in the middle of India. It is a dry and parched plateau except during the rainy season it receives sufficient rain to sustain a few rivers. Two of these rivers (Narmada & Tapti), flow east to west horizontally, and discharge into the Arabian Sea. Three more rivers, Chambal, Betwa and Son also originate from Vindya Ranges and flow north and join the Ganga river system. The only reason that these forgoing three rivers flow north are that the high plateau of Vindaya Ranges prevents drainage south. The above-mentioned southern peninsular river system irrigates the rice fields of Andhra Pradesh, Tamil Nadu and Karanataka. Irrigation dams have been built on all the rivers and water and power potential had been harnessed. Although these four mighty rivers flow in the peninsular India, yet it is deficient in water (-20%). This deficiency prevents the southern India from utilizing its full agricultural potential. Hence, there is always a hope that some day, surplus water from the northern basin will be transferred south. It is easier said than done. Main problem is the Vindaya plateau. It runs 300 to 600 miles wide with an elevation of 300 to 1500 metes. Taking water over this hump is beyond present day engineering skill except at the expense of huge amount of electric power consumption. It will consume about 40% of all the power India generates today to undertake this step. Three times in last 50 years, this idea has been advanced and three times it has been rejected as unworkable.
The only idea, which seems to make sense, is to transfer the surplus northern water, westwards towards Rajasthan and Gujarat via Haryana. There is no major elevation disadvantage in going west and southwest. Minor mountain ranges can be circumvented. With the arrival of fresh water, parched lands of Rajasthan and Northern Gujarat will become fertile lands. A canal system about 1,600 miles long will eventually bring prosperity to these areas and add additional much needed food grain output to India. The forgoing scheme will also require interlinking Ganga, Jamuna and other Ganagetic plain rivers first. This could be further improved if surplus water of Brahmaputra is also added to this canal system. But Bangladesh stands in the way and is not amenable to any proposal.
Rainfall Pattern In Indian Subcontinent
Rivers in the north are perennial in nature, with a constant flow from the melting snow of the Himalayas. Their flow multiplies four times over during the rainy season from June till September. Annual average rainfall in Eastern India (Assam & Arunachal) is about 200 centimeters, with hilly areas receiving a much higher amount. All the rain, which falls in Arunachal, also flows back into Assam, hence adding to the tremendous surplus in water in River Brahmaputra. This becomes source of misery and destruction year after year. Northern Gangetic plains and the middle Himalayas receive about 100 to 250 centimeters of rain with Himalayan ranges receiving the higher amounts. All this water eventually flows back into the Gangetic basin and causes floods. By the time river Ganga & Brahmaputra join together in Bangladesh, they have too much water and all of it flows into Bay of Bengal but not before inflicting tremendous damage there.
Western Indian plains of Punjab, Haryana and Western UP receive anywhere from 100 to 150 centimeters of rain. This much rain is sufficient to grow good crop as well as keep floods in check. Occasionally the five rivers of Punjab overflow their banks, this happens when greater amount of rain falls in western Himalayan region. These floods have now been contained with floodwater being stored in mighty dams both in India and Pakistan. This later is used to sustain a very progressive agriculture. That does not mean that floods do not happen in Punjab and Pakistan. They do happen but happen less and less.
Western Rajasthan and northern Gujarat receives only 20 to 30 cm of rains. This much rain is insufficient to sustain agriculture, hence making a living there is a bit harder.
The southern peninsular region of Andhra Pradesh, Tamil Nadu and Karnataka receives about 50 cm of rainfall during the June-September season but gets additional 35 centimeter of rains during winter October-March time frame, giving it a reasonable total of about 85 centimeters of rain in a year. This much rain although not sufficient but sustains life there. Western Maharashtra, Madhya Pradesh and part of Orissa receives about 50 to 75 centimeters of rain during June-September time frame, but receive no rain during the winter period, hence these areas are perpetually deficient in water resources. West Coast of India receives a huge rainfall of about 100 to 250 centimeters in a year. This area has never been deficient in water. Sometimes it rains so much that cities on the West coast of India start floating in water like what happened in Mumbai this year.
Overall India receives average of 100 to 150 centimeters of rain in a year. This is a respectable amount. But the vagaries of the weather make it harder to forecast where and when the rain will come first. Farmers depend upon timely rain; otherwise the crops suffer a tremendous set back. The above amount of rainfall results in about 4,000 Billion Cubic Meters of water looking for an exit to the sea. Since 75% of this precipitation occurs in June-September time frame, hence much of this water is looking for an exit in a hurry, in this time frame. At times it overflow the banks and into the cities and villages in the surrounding areas. It has been an accepted theory that about half of this water (2,000 Billion cubic meters) soaks the soil, which has been parched during the summer months; remaining half becomes the river run off. 50% of the this run off is in Ganga-Brhmaputra basin, 20% in Punjab rivers, 10% in central India rivers and remaining 20% in the southern peninsular rivers. In short, there is too much water in the northern basin and much less in the southern peninsular region. As stated above, north has a 34% surplus of water and south has 20% deficiency.
Cost and Benefits of Taking Gangetic Basin Water To Rajasthan
It is a common knowledge that North-South link has to wait until future engineering achieves a breakthrough and makes it possible to pump huge amount of water over 300 meters height inexpensively or canal boring could be done over a distance of hundreds of miles through the central Indian plateau. There is something, which is possible today i.e. taking the surplus Gangetic basin water to Rajasthan. As much as 1,000 billion Cubic Meters of surplus water could be transferred to Rajasthan and Gujarat. It will bring additional 25 to 30 million hectare land under cultivation. This bonanza will produce additional 50 to 60 million tons of food grains annually. In addition, floods and misery known year after year in the Gangetic basin will be a thing of the past. If ever a deal is truck to dig a canal through Bangladesh to take excess water of Brahmaputra, then more land could be brought under cultivation and the benefits will multiply.
The above is feasible now. Costs may be as much as $40 billion over 15 years to build dams; storage facilities and digging up a main canal and multitude of smaller canals to distribute the available water, but the payback will be fast. An estimated $60 billion worth of crop will be available for consumption or export every year. Ancillary industry will most likely add an equivalent amount to the national GDP.
Ensuring Better Returns to the Farmers
India’s farmers are vary from very wealthy to very poor.. Farmers with large holdings are wealthy. They enjoy the benefits of government aid, mechanization and technology. Farmers with smallholding are worst off. The latter is the backbone in food grain production. It is they who need to be looked after most. There are only two ways farmers could be helped:
Subsidize agriculture on the same line as the Western countries do to make farming profitable.
Or
Price structure should be such that it ensures a fair return to the farmers
Help in form of subsidy has created more problems than it ever solves. Dependence on subsidies kills initiative. Hence this alternative has to be discouraged. West (Europe and US) who heavily subsidize their farmers is in fact have built a monster at their doorstep. Subsidies cannot be easily eliminated without a political suicide for the ruling government. Subsidies also make international commerce and trade difficult. Today, WTO talks in Geneva are stuck on the subsidy issue. If the agricultural subsidies in Europe and US are removed then for example, wheat prices in the international market, which currently are in the $140 per ton range, will increase to about $220 a ton. This will make international wheat price at level with Indian wheat prices and remove a major irritant in trade relationship between India and the West. Alternative to direct subsidies is easy long-term credit, better irrigation, higher availability of power, and easy access to other agricultural inputs including mechanized harvesting.
Also stable and guaranteed price is the best mean to ensure prosperity to the farmers. Currently state owned procurement system is highly inefficient. Losses of food grains in storage and transit amount to about 10%. This ultimately reflects in the price the state systems offer to the farmers. If these losses could be cut to bare minimum, the farmer will get 10% or so better price for his produce. Additional money in his pocket will allow him to pay off his credit easily and modernize his farming. Not only that it will give him a more stable life style. Other areas for improvement include further land reforms and easy access to technology to make him a smart farmer. Ultimately, higher output per acre with a combination of the forgoing will translate into more money in farmer's pocket.
Conclusions
In order to boost agricultural output from current 210 million tons to about 300 million tons, technology has to play a greater role. Hopefully immediate needs of the rising population will be met with the combination of technology and efficient management of water resources we already have. Next quantum leap in agriculture cannot be achieved without bringing additional areas under cultivation. There is no more agricultural farmland left to cultivate except in the arid west, southwest and in peninsular India. Both will require transport of surplus water from north to south or southwest. The former is proving to be difficult to achieve. But the latter is achievable. It will take about 15 years to implement this scheme and 5 years to plan. By 2025, India can add additional 50 to 60 million of food grains to a total of about 350 to 360 million tons a year. Hopefully by then the West would have eliminated its agricultural subsidies. At that time India could enter export market in a big way.
India-China-Russia: alliance in the making?
India-China-Russia: alliance in the making?
By Rajiv Sikri
The long-awaited meeting of the Foreign Ministers of India, China and Russia in New Delhi on 14th February was, at one level, merely the latest in a series of trilateral meetings at this level held annually since 2002, generally on the margins of multilateral gatherings. It was, however, only the second stand-alone meeting, the first one having taken place in Vladivostok in June 2005. It was also the first meeting of the three Foreign Ministers after their leaders met in St. Petersburg in July 2006 on the margins of the G-8 summit. The fact that the latest meeting took place in one of the capitals, again a first, gave it comparatively much higher profile and visibility.
Russia has been the keenest proponent, and the driving force, of the concept of closer consultation and cooperation among India , China and Russia . The idea of trilateral cooperation was initiated by then Russian Prime Minister Primakov in 1998. It was Russia that hosted the first Foreign Ministers� meeting in New York , the first stand-alone meeting at Vladivostok and the leaders� summit at St. Petersburg . Last week, the Russian Foreign Minister made a special visit to Delhi for the trilateral meeting, which was dovetailed with the Chinese Foreign Minister�s bilateral visit to India .
Russia �s enthusiasm for trilateral cooperation is easy to understand. From being the co-equal of the United States (in its incarnation as the Soviet Union ), it was contemptuously, if mistakenly, relegated by the West to strategic irrelevance in the post- Cold War era. Yeltsin�s overtures to get Russia accepted by the West into its fold were spurned. Meanwhile, as NATO steadily crept eastwards, to the very borders of Russia, and the US succeeded in getting a foothold in Russia�s strategic neighbourhood, especially Ukraine and Georgia, Russia�s security fears were heightened. From a strategic perspective, Russia realizes that on its own it is not strong enough to challenge the West, specifically the US . China and India are the only countries that are large enough players and sufficiently independent-minded to be potential partners in this strategic balancing act. Russia may also have felt that a triangular relationship involving Russia could facilitate better understanding between India and China . This would minimize possible contradictions in Russia �s ties with two of its most important partners, and thereby ward off unpleasant choices for Russia .
The New Delhi meeting will compel the US to sit up and take notice. A few years ago, when the US straddled the world like a colossus, these three countries thought it prudent not to provoke the US , with whom the stakes of each of these countries were higher than with one another. Thus, the early trilateral meetings of Foreign Ministers were formal and devoid of substance, with deliberately low-key publicity. As the three countries� economic and military clout have risen, so has their self-confidence, and their willingness to challenge the US world view, even if this is accompanied by a reiteration of ostensibly reassuring and loud disclaimers that trilateral cooperation is �not directed against the interests of any other country.� Objectively, too, the US remains very important to each of the three countries, and the Foreign Ministers cannot be faulted for their caution. At the same time, President Putin�s extremely significant, blunt address at the Munich security conference earlier this month, China ASAT test, and India �s conscious efforts to reach out to Iran and Myanmar are signals to the US that all three countries intend to follow an independent foreign policy that serves their respective national interests.
The Joint Statement issued after the New Delhi meeting contains many interesting nuances in this direction. It is noteworthy that its overwhelming emphasis is on the convergence of views on broad strategic issues, rather than on specific areas of trilateral cooperation. In a thinly veiled critique of US global policies and behaviour, the Foreign Ministers, we are told, emphasized the �strong commitment� of the three countries to multilateral diplomacy, and exchanged views on �how international relations are being presently conducted.� Their discussions on developments in Iran , Iraq , Afghanistan , West Asia, and the Korean peninsula, brought out their common approach on these issues, and a global perspective clearly very different from the US world-view. The absence of any specific mention of regional issues in the Joint Statement may be only because the Ministers may have thought it prudent not to directly provoke the US by coming out with an agreed formal formulation on these issues. More areas of strategic convergence are likely to emerge if Russia and China agree to India �s proposal to host a trilateral seminar, with the participation of not only scholars but officials too, later this year on the �emerging geo-strategic trends.�
In calling for a �more even distribution of development resources and influence,� and the attainment of a �more stable and balanced� multi-polar world order through the instrumentality of the UN, the three countries have, for the first time, collectively signaled that they too, not just the West, must have a say in how the world is governed and how its limited resources are exploited. The disaster in Iraq and the looming confrontation with Iran explain their common concern that cooperation rather than confrontation, with an important role for the UN, should govern approaches to regional and global affairs.
Central Asia also came up for discussion. Although since the mid-20th century the foreign policies of Russia , China and India were broadly oriented in a direction away from Eurasia and towards Europe, East Asia and South Asia respectively rather than towards the continental landmass, today�s changed circumstances compel all three countries to look at developments in Eurasia much more seriously. As continental powers whose respective back doors, so to speak, open in the fragile, volatile and strategically important region of Central Asia, it is perfectly logical that India, China and Russia should be actively exploring avenues of cooperation to ensure that this region remains peaceful and stable. The broad strategic convergence of the policies of these three countries in this region is evident in their participation in the Central Asia-centric Shanghai Cooperation Organization, where Russia and China are members, and India an observer.
Given the institutional weaknesses of the Central Asian states, there are many potential dangers emanating from this region that could threaten the security and stability of all three countries. Separatist tendencies and terrorist activities exist precisely in those regions of India , China and Russia that are contiguous to Central Asia . Faced as all three countries are with terrorist and separatist activities ( Chechnya for Russia , Xinjiang for China , and Kashmir for India ), there was considerable meeting ground on this issue among the three Foreign Ministers. Against this background, they had little difficulty in agreeing that there can be no justification for any act of terrorism irrespective of motivations, as well as in rejecting selective approaches and double standards in countering terrorism. There was agreement in conceptual terms and in the intention to develop practical cooperation in multilateral and regional frameworks and through coordinated trilateral action. It remains to be seen what would be the concrete forms of such cooperation.
In addition, the US military presence in the region, which is likely to be a long-term one, poses an incipient threat to all three countries about which none of them can be sanguine. The formulation in the Joint Statement that Russia and China �would actively facilitate early realization of mutually beneficial contribution of India to the Shanghai Cooperation Organisation,� and a recent statement by the Russian Ambassador to India, provide indications that India may soon be invited to become a full member of the Central Asia-centric Shanghai Cooperation Organisation. Were that to happen, it could become a matter of serious strategic concern to the US that tends to regard the SCO as an anti-US alliance.
While many ideas for trilateral cooperation have been discussed among scholars in a number of trilateral academic meetings organized over the last few years, no visible progress on the ground has been made so far. The Ministers identified energy, transport infrastructure, health, and high technology as promising areas for joint cooperation and collaboration. Hopefully, the proposed expert-level meetings, and the Business Meet in India later this year, will come up with practical areas of trilateral economic cooperation.
Energy is an obvious area of mutually beneficial cooperation if the three countries are willing to think creatively and boldly. Energy-deficient, fast-growing and geographically proximate India and China could become long-term reliable markets for energy-surplus Russia , provided Russia takes a strategic decision that its enormous energy resources should be available to fuel the growth of India and China instead of being committed principally to Western markets. The considerable hydropower potential in Siberia and Tibet could be tapped for transmitting electricity via Xinjiang and Tibet to the large Indian market just across the mountains. Overland pipeline projects, if technically and economically feasible, could transport Russian and Caspian oil and gas to markets in India via China , as well as to global markets via India �s warm water ports. This could be cheaper and also obviate many of the risks associated with exclusive reliance on maritime energy supply routes. China is already exploring alternative routes via Pakistan for transporting Gulf oil to China . It may well find a sea-land route via India more reliable and secure, particularly if there is a reciprocal dependence � India�s on Russian and Central Asian gas transiting China on its way to India, and China�s on Gulf oil transiting India on its way to China. Joint India-China-Russia investments in energy projects in Russia and elsewhere, and swap deals are other possible areas of cooperation.
Another exciting and potentially very significant area of cooperation is high technology. If the three countries pool their assets and synergize their strengths, they could emerge as an alternative nucleus for development of futuristic technologies, and break the current technological dominance of the West. Information technology and biotechnology have already been identified as areas meriting special attention. There is some talk of developing civilian aircraft that could break the duopoly of Boeing and Airbus, and of cooperation in the field of pharmaceuticals that could pose a challenge to the cartel of American and European multinational pharmaceutical companies. Controlling between them about one and a half trillion dollars of foreign exchange, the three countries have also talked of cooperation in financial services.
The New Delhi meeting of the Foreign Ministers of India, China and Russia has put trilateral cooperation firmly on the rails. There will be regular Foreign Ministerial meetings, with the next to be hosted by China . Gone is the tentativeness and hesitation that characterized earlier meetings. The atmospherics of the latest meeting were good, its outcome substantive, and the mood of the participants upbeat and confident. The burgeoning trilateral consultations and cooperation constitute the most serious and credible endeavour to craft a multi-polar world. But there is no strategic alliance � at least not yet. What we are seeing is a demonstration of how in today�s complex global scenario there can be issue-based coalitions of states. It is the fructification of even one or two large projects of the kind indicated above that would hardwire the three countries into a long-term mutual interdependence and lead to a true strategic alliance. For this, conscious strategic decisions will be needed in all countries. Are the leaders of India , China and Russia ready for a radical conceptual breakthrough to take advantage of the new geo-political realities of the 21st century?
By Rajiv Sikri
The long-awaited meeting of the Foreign Ministers of India, China and Russia in New Delhi on 14th February was, at one level, merely the latest in a series of trilateral meetings at this level held annually since 2002, generally on the margins of multilateral gatherings. It was, however, only the second stand-alone meeting, the first one having taken place in Vladivostok in June 2005. It was also the first meeting of the three Foreign Ministers after their leaders met in St. Petersburg in July 2006 on the margins of the G-8 summit. The fact that the latest meeting took place in one of the capitals, again a first, gave it comparatively much higher profile and visibility.
Russia has been the keenest proponent, and the driving force, of the concept of closer consultation and cooperation among India , China and Russia . The idea of trilateral cooperation was initiated by then Russian Prime Minister Primakov in 1998. It was Russia that hosted the first Foreign Ministers� meeting in New York , the first stand-alone meeting at Vladivostok and the leaders� summit at St. Petersburg . Last week, the Russian Foreign Minister made a special visit to Delhi for the trilateral meeting, which was dovetailed with the Chinese Foreign Minister�s bilateral visit to India .
Russia �s enthusiasm for trilateral cooperation is easy to understand. From being the co-equal of the United States (in its incarnation as the Soviet Union ), it was contemptuously, if mistakenly, relegated by the West to strategic irrelevance in the post- Cold War era. Yeltsin�s overtures to get Russia accepted by the West into its fold were spurned. Meanwhile, as NATO steadily crept eastwards, to the very borders of Russia, and the US succeeded in getting a foothold in Russia�s strategic neighbourhood, especially Ukraine and Georgia, Russia�s security fears were heightened. From a strategic perspective, Russia realizes that on its own it is not strong enough to challenge the West, specifically the US . China and India are the only countries that are large enough players and sufficiently independent-minded to be potential partners in this strategic balancing act. Russia may also have felt that a triangular relationship involving Russia could facilitate better understanding between India and China . This would minimize possible contradictions in Russia �s ties with two of its most important partners, and thereby ward off unpleasant choices for Russia .
The New Delhi meeting will compel the US to sit up and take notice. A few years ago, when the US straddled the world like a colossus, these three countries thought it prudent not to provoke the US , with whom the stakes of each of these countries were higher than with one another. Thus, the early trilateral meetings of Foreign Ministers were formal and devoid of substance, with deliberately low-key publicity. As the three countries� economic and military clout have risen, so has their self-confidence, and their willingness to challenge the US world view, even if this is accompanied by a reiteration of ostensibly reassuring and loud disclaimers that trilateral cooperation is �not directed against the interests of any other country.� Objectively, too, the US remains very important to each of the three countries, and the Foreign Ministers cannot be faulted for their caution. At the same time, President Putin�s extremely significant, blunt address at the Munich security conference earlier this month, China ASAT test, and India �s conscious efforts to reach out to Iran and Myanmar are signals to the US that all three countries intend to follow an independent foreign policy that serves their respective national interests.
The Joint Statement issued after the New Delhi meeting contains many interesting nuances in this direction. It is noteworthy that its overwhelming emphasis is on the convergence of views on broad strategic issues, rather than on specific areas of trilateral cooperation. In a thinly veiled critique of US global policies and behaviour, the Foreign Ministers, we are told, emphasized the �strong commitment� of the three countries to multilateral diplomacy, and exchanged views on �how international relations are being presently conducted.� Their discussions on developments in Iran , Iraq , Afghanistan , West Asia, and the Korean peninsula, brought out their common approach on these issues, and a global perspective clearly very different from the US world-view. The absence of any specific mention of regional issues in the Joint Statement may be only because the Ministers may have thought it prudent not to directly provoke the US by coming out with an agreed formal formulation on these issues. More areas of strategic convergence are likely to emerge if Russia and China agree to India �s proposal to host a trilateral seminar, with the participation of not only scholars but officials too, later this year on the �emerging geo-strategic trends.�
In calling for a �more even distribution of development resources and influence,� and the attainment of a �more stable and balanced� multi-polar world order through the instrumentality of the UN, the three countries have, for the first time, collectively signaled that they too, not just the West, must have a say in how the world is governed and how its limited resources are exploited. The disaster in Iraq and the looming confrontation with Iran explain their common concern that cooperation rather than confrontation, with an important role for the UN, should govern approaches to regional and global affairs.
Central Asia also came up for discussion. Although since the mid-20th century the foreign policies of Russia , China and India were broadly oriented in a direction away from Eurasia and towards Europe, East Asia and South Asia respectively rather than towards the continental landmass, today�s changed circumstances compel all three countries to look at developments in Eurasia much more seriously. As continental powers whose respective back doors, so to speak, open in the fragile, volatile and strategically important region of Central Asia, it is perfectly logical that India, China and Russia should be actively exploring avenues of cooperation to ensure that this region remains peaceful and stable. The broad strategic convergence of the policies of these three countries in this region is evident in their participation in the Central Asia-centric Shanghai Cooperation Organization, where Russia and China are members, and India an observer.
Given the institutional weaknesses of the Central Asian states, there are many potential dangers emanating from this region that could threaten the security and stability of all three countries. Separatist tendencies and terrorist activities exist precisely in those regions of India , China and Russia that are contiguous to Central Asia . Faced as all three countries are with terrorist and separatist activities ( Chechnya for Russia , Xinjiang for China , and Kashmir for India ), there was considerable meeting ground on this issue among the three Foreign Ministers. Against this background, they had little difficulty in agreeing that there can be no justification for any act of terrorism irrespective of motivations, as well as in rejecting selective approaches and double standards in countering terrorism. There was agreement in conceptual terms and in the intention to develop practical cooperation in multilateral and regional frameworks and through coordinated trilateral action. It remains to be seen what would be the concrete forms of such cooperation.
In addition, the US military presence in the region, which is likely to be a long-term one, poses an incipient threat to all three countries about which none of them can be sanguine. The formulation in the Joint Statement that Russia and China �would actively facilitate early realization of mutually beneficial contribution of India to the Shanghai Cooperation Organisation,� and a recent statement by the Russian Ambassador to India, provide indications that India may soon be invited to become a full member of the Central Asia-centric Shanghai Cooperation Organisation. Were that to happen, it could become a matter of serious strategic concern to the US that tends to regard the SCO as an anti-US alliance.
While many ideas for trilateral cooperation have been discussed among scholars in a number of trilateral academic meetings organized over the last few years, no visible progress on the ground has been made so far. The Ministers identified energy, transport infrastructure, health, and high technology as promising areas for joint cooperation and collaboration. Hopefully, the proposed expert-level meetings, and the Business Meet in India later this year, will come up with practical areas of trilateral economic cooperation.
Energy is an obvious area of mutually beneficial cooperation if the three countries are willing to think creatively and boldly. Energy-deficient, fast-growing and geographically proximate India and China could become long-term reliable markets for energy-surplus Russia , provided Russia takes a strategic decision that its enormous energy resources should be available to fuel the growth of India and China instead of being committed principally to Western markets. The considerable hydropower potential in Siberia and Tibet could be tapped for transmitting electricity via Xinjiang and Tibet to the large Indian market just across the mountains. Overland pipeline projects, if technically and economically feasible, could transport Russian and Caspian oil and gas to markets in India via China , as well as to global markets via India �s warm water ports. This could be cheaper and also obviate many of the risks associated with exclusive reliance on maritime energy supply routes. China is already exploring alternative routes via Pakistan for transporting Gulf oil to China . It may well find a sea-land route via India more reliable and secure, particularly if there is a reciprocal dependence � India�s on Russian and Central Asian gas transiting China on its way to India, and China�s on Gulf oil transiting India on its way to China. Joint India-China-Russia investments in energy projects in Russia and elsewhere, and swap deals are other possible areas of cooperation.
Another exciting and potentially very significant area of cooperation is high technology. If the three countries pool their assets and synergize their strengths, they could emerge as an alternative nucleus for development of futuristic technologies, and break the current technological dominance of the West. Information technology and biotechnology have already been identified as areas meriting special attention. There is some talk of developing civilian aircraft that could break the duopoly of Boeing and Airbus, and of cooperation in the field of pharmaceuticals that could pose a challenge to the cartel of American and European multinational pharmaceutical companies. Controlling between them about one and a half trillion dollars of foreign exchange, the three countries have also talked of cooperation in financial services.
The New Delhi meeting of the Foreign Ministers of India, China and Russia has put trilateral cooperation firmly on the rails. There will be regular Foreign Ministerial meetings, with the next to be hosted by China . Gone is the tentativeness and hesitation that characterized earlier meetings. The atmospherics of the latest meeting were good, its outcome substantive, and the mood of the participants upbeat and confident. The burgeoning trilateral consultations and cooperation constitute the most serious and credible endeavour to craft a multi-polar world. But there is no strategic alliance � at least not yet. What we are seeing is a demonstration of how in today�s complex global scenario there can be issue-based coalitions of states. It is the fructification of even one or two large projects of the kind indicated above that would hardwire the three countries into a long-term mutual interdependence and lead to a true strategic alliance. For this, conscious strategic decisions will be needed in all countries. Are the leaders of India , China and Russia ready for a radical conceptual breakthrough to take advantage of the new geo-political realities of the 21st century?
SOUTH EAST ASIA: US Interests, Influence and Involvement
SOUTH EAST ASIA: US Interests, Influence and Involvement
By C. S. Kuppuswamy
Introduction
The main focus of the US policy on South East Asia during the cold war period was on security to maintain its influence gained during World War II. The purpose was containment of communism and to achieve this it supported even the authoritarian governments of South East Asia, as long as the US interests were served.
In the early 90s (after cold war ended) US shifted its focus from security to economic issues. The establishment of the Asia-Pacific Economic Cooperation Forum (APEC) in 1989 with the active participation of US was evidence of this shift in the US policy. In the late 90s the American policy was tilted more towards North East Asia (China, Japan and Korea). The lukewarm response to the 1997 financial crisis in SE Asia was perhaps the turning point of the waning US interests in SE Asia.
Since September 11, 2001, US focus has shifted on to terrorism, designating SE Asia as the second front on its global �war on terror�.
Presently China�s increasing economic clout and political influence over South East Asia has pushed US to the background and the role of the leading player is taken over by China.
ASEAN
Despite the fact that US has strong economic and trade relations with most of the ASEAN members, US economic engagement with ASEAN as a group is not appreciable. Cumulatively, US is ASEAN�s largest trading partner, with ASEAN�s total trade with US being $ 128 billion (in 2004). US remains the biggest investor in ASEAN ($136 billion) though China may soon relegate US to the second position.
US initiated an ASEAN Cooperation Plan (ACP) in 2002. This plan is focused mainly on trans-national issues such as narcotics, piracy, terrorism, disaster management, environment and HIV/AIDS, including support to ASEAN integration initiatives and strengthening of the ASEAN Secretariat. US also formed in 2002, the Enterprise for ASEAN Initiatives (EAI), for negotiating bilateral free trade agreements with ASEAN countries, who are WTO members.
A joint comprehensive framework called �ASEAN-US Enhanced Partnership� was chalked out on the side lines of the APEC Summit in Busan (South Korea) in November 2005. This partnership will include cooperation on political, security, economic and socio cultural issues. A joint plan of action to implement the partnership was also signed within eight months of the proposal.
US has at present envoys at various levels in each of the 10 ASEAN states. Richard Lugar, a Republican Senator introduced a bill (May 2006) calling for the appointment of an ambassador to ASEAN. In his opinion an ambassador to look after the region as a whole would prove crucial as ASEAN developed an integrated free trade area and addressed matters of common concern with the US.
Abdullah Ahmad Badawi, Prime Minister of Malaysia, in an address at the Asia Society Programme in New York, in 2005 said �The Dialogue between ASEAN and US has yet to reach its full potential. The US has to listen more to ASEAN�s concerns and aspirations. The US must also make efforts to appreciate the �ASEAN way� of conducting business which may at time appear slow and sluggish to the US�.
Indonesia
US State Department maintains that relations with Indonesia are guided by progress on human rights, democratic reform and accountability.
In the cold war era, Indonesia was more of a strategic asset to the US. Since Suharto came to power in 1965, his authoritarian regime had the full support of the US as long as the containment of communism was achieved. James Van Zorge wrote in The Jakarta Post (22 February 2006) that Suharto, who was initially unwilling to invade East Timor, had later relented under the advice of the US. Suharto took the blame for the invasion while US denied everything.
Tables turned after the cold war. Military aid to Indonesia was stopped by canceling the International Military Educational Training (IMET) Program in October 1992 and banning sale of small and light arms in 1994. The joint military exercises and commercial arms sale were cancelled in 1999. In 2001 all military assistance was suspended under the Leahy amendment.
President Susilo Bambang Yudhyono visited US in May 2005 and had met George Bush. Immediately after this visit the Bush administration had partially relaxed the restrictions on military aid by permitting sale of non-lethal defence equipment. Subsequently the US resumed full military relations with Indonesia on the premise that the military has reformed and that US support for the military is part of the strategy of its global �war on terror�. Indonesia, being the world�s most populous Muslim nation and where more extremists have made some in roads, has a key role to play in the war on terror. The embargo was earlier imposed in 1999 after the military had ravaged East Timor when it seceded from Indonesia.
Maritime security has been one of the major factors for the US to improve relations with Indonesia. The Straits of Malacca in South East Asia is one of the busiest sea lanes for global trade. Indonesia, besides one of the littoral states of this strait, straddles some other important sea lanes in this region. The US proposal for a Regional Maritime Security Initiative (RMSI) was protested by all the littoral states at it impinged on their sovereignty.
Defense Secretary Donald Rumsfeld visited Indonesia in June 2006. At that time the Indonesian Defence Minister had pointed out that the US approach to fighting terrorism was perceived as overbearing and that US needs to be sensitive to local concerns. Indonesian Foreign Minister also indicated that US proposal of Proliferation Security Initiative would be studied and that Indonesia would be willing to carry out some of the activities that are called for under the plan.
US President George W. Bush made a 10-hour visit to Indonesia on 13 November 2006, amidst widespread protests from some of the hard line Muslim organizations.
The US government will help Indonesia in setting up a tsunami early warning system. An agreement was signed in this regard in February 2007 between US National Oceanic and Atmospheric Administration and the Indonesian Agency for Assessment and Applications of Technology. The US government will give US $ 1 million to develop this system.
Philippines
Philippines has been vital for the US in projection of its military power in South East Asia for the last few decades. US military had two bases in Philippines, one at Clark air force base and the other (naval) at Subic Bay, for over a century till 1991. US has also been involved in �regime changes� (openly or discreetly) since the overthrowing of Ferdinand Marcos in 1986.
Even though the US had to vacate the two bases in 1991 under pressure from the nationalists, the US military continues to have its presence at a much depleted level under the garb of military assistance for fighting terrorism. After 9/11, the New People�s Army (NPA), the Communist Party of the Philippines and the Abu Sayyaf Group(ASG) have been included in the US list of global terrorist organizations.
US has a Joint Special Operations Task Force Philippines (JOSTFP), for advising the military for fighting the terrorists in Southern Philippines. The force is made up of marine, air force, navy, army and special forces personnel from the US Pacific Command. Currently this force is helping the Armed Forces of Philippines (AFP) in their operations against Abu Sayyaf and this terrorist group had suffered heavy casualties including some of its main leaders.
At the Track II level the Philippines Chapter of the US Institute of Peace (USIP) is involved in negotiating and helping peace talks between the Moro Islamic Liberation Front (MILF) and the Philippine government.
The 1987 constitution prohibits international forces on combat missions in Philippines. But the deployment of US troops in Southern Philippines however has been covered by the Visiting Forces Agreement between US and the Philippines signed in 1999.
Joint training exercises under the code name �Balikatan� (which means shoulder to shoulder) have become an annual feature since 1981 when it was first conducted. The aim of these exercises is to improve the Philippines �US combined planning, combat readiness and inter operability while enhancing security relations and help AFP in its campaign against terrorism. The 2007 Joint Balikatan military exercise which began on 19 February, 2007, is different in that it focused on humanitarian activities like putting up school buildings, building bridges, repairing roads and providing medical facilities to the locals in the area.
Thailand
The US has a trusted strategic ally in Thailand for a long time. Shan W. Crispin, South East Asia editor (AT on line), writes that the �US military jump started Thailand�s move toward capitalism by pumping more than $ 2.5 billion between 1951 and 1975 in military related aid to the country to develop a regional bulwark against the spread of communism�.
Growing from the cold war era, the US-Thai relations was strengthened on the basis of shared economic and trade interests and has been further bolstered since September 2001 by Thailand�s commitment to fight terrorism in South East Asia. The arrest of Hambali, a Jemaah Islamiyah leader, in 2003 in a joint US-Thai operation highlights the part played by Thailand in the US global war on terror. Thailand contributed troops and support for US military operations in both Afghanistan and Iraq and was designated as a major non-NATO ally in December 2003.
As part of its strategy in its global war on terrorism, a Counter-Terrorism Intelligence Centre (CITC) was established jointly in Thailand in 2001 between the CIA and Thai intelligence agencies. The US is learnt to be providing annually $ 10 to 15 million and some advanced surveillance equipment to the CITC. Thailand is also believed to have run a secret prison for the US where Muslim terror suspects could be held without trial.
Highlights of the longstanding involvement of the US in nurturing its relations with Thailand in the last few decades are -
* US has a bilateral security arrangement with Thailand (one of only two countries in South East Asia.
* US entered into a military assistance agreement in 1950 following the Korean war.
* The Manila Pact signed in 1954 recognizes that a threat to the security of Thailand constitutes a threat to the US. Consequent to the dissolution of SEATO, the pact was reinforced by the Thanat-Rusk Joint Communiqu� of 1962.
* Thailand and US conduct over 40 joint military exercises every year. The annual military exercise code named �Cobra Gold� is one of the largest military exercises involving US forces anywhere in Asia.
* An agreement entered into with US in July 2001, allows Thailand to purchase advanced medium range air-to-air missiles for its F-16 fighters, a first for a South East Asian state.
* Thailand has opened the Vietnam era air base in Utapao and a naval base in Sattahip from where the US can provide logistic support to forces in Afghanistan and the Middle East.
* Thailand is one of the largest recipients of International Military Education Training (IMET) program funding in the world with approximately $ 2.5 million annually.
* On the economic front, the US is currently Thailand�s largest trading partner, while Thailand is United States� 17th largest trading partner. A Free Trade Agreement (FTA) between US and Thailand is under negotiation since June 2004 and when finalized the bilateral trade of approximately $ 20 billion is expected to rise considerably.
There have been differences between US and Thailand on the Burma Policy and human rights issues. Thailand has always advocated a policy of constructive engagement with Myanmar (Burma) while US has pursued a policy of economic and diplomatic sanctions against the military junta. The US State Department Human Rights Report (2004) asserts that Thailand�s record worsened and cites excessive use of force by some members of the police and links these elements to extra judicial killings.
Despite the strong ties between Thailand and US, the US was pushed to an awkward situation, When Thaksin was ousted in September 2006 through a military coup. US is morally and legally bound not to support a military government that seized power by overthrowing the democratically elected government. However the US seems to have circumvented the legal provisions and continue to support the ruling Council for National Security, as it suits the overall aim of counterbalancing the increasing influence of China.
Malaysia
During the cold war era the bilateral relations between US and Malaysia was just normal as Malaysia did not figure much in the regional or world affairs. Under the long rule of Dr. Mahathir Mohammad and the current Prime Minister Abdullah Ahmad Badawi, Malaysia�s influence in the regional and world affairs had increased considerably through ASEAN, the OIC and the NAM. US started paying more attention since September 11 2001, as it perceived that Malaysia can play a significant role in the US global war on terror.
US and Malaysia share a diverse and expanding partnership. The US is Malaysia�s largest trading partner and Malaysia the tenth largest trading partner of the US. The two way trade amounts to $ 45 billion. The US is the largest foreign investor in Malaysia. A Free Trade Agreement (FTA) between the two nations is under negotiations since June 2006.
The Malaysia-US Defence Cooperation has been steadily growing in the last few decades. Malaysian forces regularly conduct joint training with US counterparts and the US has had access to Malaysian airfields and ports. Malaysia has also provided a base for US jungle warfare military training. US military ships make regular port calls. The US NAVY SEALs conduct training in Malaysia twice a year. A large number of Malaysian defence personnel continue to benefit from the US IMET (Internal Military Education Training) program.
Highlights of the growing relations between these two nations are -
* US chose Malaysia in 2003 to host the South East Asia Regional Center for Counter Terrorism (SEARCCT), bypassing Indonesia- the most populous Muslim nation in the world.
* During the tsunami (Dec. 2004) relief operations, US forces used Malaysian air force bases for ferrying supplies to Aceh (Indonesia).
* In 2005 Malaysia and US renewed a military logistics cooperation pact called the Acquisition and Cross Servicing Agreement for 10 years. The agreement enables armed forces from the two countries to share logistics & supplies.
* Both countries have signed a Trade and Investment Framework Agreement (TIFA) in 2004. This has paved the way for a Free Trade Agreement (FTA) expected to be completed by July 2007. The bilateral trade may almost be doubled on implementation of the FTA.
* Over the past three decades the US has been a popular destination for Malaysian students. Since 1975 Malaysia has been one of the top 20 countries that have sent students to US. From 1981 to 1999 it was one of the top 10 sources for international students in America.
Differences between the two nations have often surfaced during the tenure of Dr. Mahathir Mohamad. In the 1997 financial crisis he indicated that the international pressure on the Malaysian currency was due to a Jewish Plot and he often made anti-Semitic remarks. Relations soured in 1998 when Vice President Al Gore made some undiplomatic remarks at the APEC Forum meeting in Kuala Lumpur over the arrest and sacking of former Deputy Prime Minister Anwar Ibrahim. Dr. Mahathir was an outspoken critic of US policies on the Israeli-Palestinian conflict, Iraq and globalization. US has often been critical of the lapses of the Malaysian Government on human rights, particularly on the excessive use of the Internal Security Act (ISA). US was also instrumental in stifling the proposal mooted by Dr. Mahathir for an East Asian Economic Caucus.
Singapore
Singapore has maintained strong diplomatic ties with US since the time it became independent in 1965. When the US carried out a strategic shift in its policy on South East Asia in the early 90�s by having access to this region rather than holding permanent bases, Singapore was the first nation to offer access to US Forces to Singaporean military facilities (at Paya Lebar Airbase and Sembawang wharves) by entering into a Memorandum of Understanding in November 1990. This allowed the US to locate military personnel and fighter aircrafts, help in conducting training exercises with the Singapore forces and also rotate these personnel and aircrafts at regular intervals. US access was further augmented in January 1992 when an agreement for a naval logistics facility to be relocated from Subic Bay (in Philippines) to Singapore was entered into.
The following highlight the level of cooperation and bonhomie between these two nations:
* The MOU signed in 1990 was amended in 1999 to permit US Naval vessels to berth at Changi Naval base.
* In October 2003 (when President Bush visited) Singapore and US announced that they will expand cooperation in defense and security by initiating negotiations for a Framework Agreement for a Strategic Cooperation Partnership.
* US and Singapore signed a bilateral Free Trade Agreement in May 2003 which came into effect on 01 January 2004.
* US is a popular destination for Singaporean students.
* US Government sponsors visitors from Singapore each year under the International Visitor Program.
* Singapore was the United States� 13th largest trading partner in 2003. US continue to be Singapore�s largest market for electronics and non-oil domestic exports.
* Some 1300 US corporations operate in Singapore, with total investments of $ 61.4 million (in 2002).
* US Navy maintains a logistical command unit in Singapore
* Singapore supported the US led coalition in the Iraq war and the operation in Afghanistan allowing American aircraft and ships access to Singapore bases. Singapore also sent some transport aircrafts and ships to Iraq.
* Singapore was a founding member of Proliferation Security Initiative and the first Asian country to join the Container Security Initiative which allows US customs to screen US bound containers.
As with the other SEA nations, there were some hiccups in the relations, with particular reference to human rights. The US State Department�s Human rights practices reports had been critical of the ruling PAP for its political dominance and using extensive powers to stifle the political opponents and for misuse of defamation suits.
Myanmar
The relation between US and Myanmar (Burma) is at its nadir. Myanmar has never been a foreign policy concern for Washington, although it does have some limited effect on US economic and strategic interests as well as on the counter narcotics policy.
US withdrew its ambassador from Yangon in 1990. US is still to recognize even the change of the country�s name from Burma to Myanmar. Since 1990 US has opposed Myanmar�s membership in various multilateral financial organizations. US has imposed unilateral economic sanctions on Myanmar since 1997 and have made these sanctions more stringent over the years. The US has frozen Myanmar Government assets in the US and has also denied visas to Myanmar officials.
US think tanks have often come up with their views as to how the US sanctions against Myanmar have proven to be a failure on all fronts - have harmed the American strategic and economic interests, have hit the Burmese people the hardest, have alienated the regional allies and have proved to be a strategic boon to China.
US also failed in its recent effort (Jan 2007) to get a draft resolution on Burma to be considered by the UN Security Council. The resolution was vetoed both by China and Russia.
Cambodia, Laos and Vietnam
There is a warming up of relations between US and Cambodia. The port call made by USS Gary at Sihanoukville (Cambodia) in February 2007 was the first by a US military vessel to dock in Cambodia in over 30 years. The congressional ban on direct funding to Cambodia has also been lifted by a budget resolution made into law in February 2007. According to a news report the US officials have said that the shift of strategy was driven in part by the exigencies of the US-led war on terror though some analysts are of the opinion that the increasing influence of China is the prime factor. Prior to this port call, an Admiral of the Pacific Command and a Vice-Admiral of Pacific Fleet had visited Cambodia in July 2006 and January 2007 respectively. Budgetary provisions have also been made by US State Department under IMET since 2005 and grants in the form of Foreign Military Financing, though at times these were not disbursed due to Congressional resistance.
US-Laos relations were largely based on the issue of granting Normal Trade Relations (NTR) treatment to Laos. US and Laos People�s Democratic Republic signed a bilateral trade agreement in 1997. Due to Congressional resistance, legislation to extend NTR status was not approved because of the human rights conditions of the Hmong Lao minority. It was only in November 2004, Laos was granted non discriminatory treatment to the products of Laos under the Miscellaneous Trade and Technical Corrections Act of 2004.
US and Laos cooperate in important areas including recovering remains of Americans missing in action (MIAs) from the Vietnam war, counter-narcotics and de-mining efforts. In 2005 US signed a cooperation agreement with Laos in which $ 3.4 million was pledged for controlling outbreaks of avian flu. US foreign assistance to Laos focuses on counter-narcotics and de-mining programs and is mostly channeled through NGOs.
US exerts pressure on Laos to accept international monitoring of the resettlement of former Hmong militia members and their communities, by offering funds under Economic Support Funds and IMET. According to the US State Department the LPDR�s human rights record continues to be poor.
US and Vietnam restored diplomatic ties in 1995. US signed a trade pact with Vietnam in 2000. America is now Vietnam�s largest export market. Current disputes between the two countries are more on tariffs and market access than on war crimes or missing soldiers. Commercial flights between the two nations began in 2005.
Admiral Thomas Fargo of the Pacific Command visited the Danang naval base in February 2004. This was an indication of Hanoi�s interest in stepping up military to military relations. Consequent to this visit US naval vessels started making port calls to Saigon (now Ho Chi Minh).
In an agreement signed in 2006 with the US, Vietnam was granted the most-favored-nation status. However Vietnam�s textile industry is unhappy of the special monitoring arrangement included in the agreement to guard against possible dumping violations. Vietnam joined the WTO in January 2007.
Conclusion
The focus of US policy on South East Asia, has been on containment of Communism during the Cold -war era, on primarily economic interests in the post Cold- war period till the beginning of the twenty first century and now on cooperation in the war on terror from September 11, 2001. Of late 'the China factor' has also set in.
The strategic shift in having access to the region than occupying military bases (since US vacated the bases in Philippines) has given a new direction to the US policy.
The US policy accords a higher priority to bilateral ties as against multilateral relationships.
The 1997 financial crisis in this region has been a turning point in US relations in that the countries affected were disappointed with the US attitude of total reliance on IMF and not making any efforts to bail out these nations.
The US is often accused of overlooking the sensitivities and concerns of the South East Asian Nations and is keen on conducting business or establishing relationship on its own terms.
Undue emphasis on human rights issues has often irked the nations of this region in their relations with US.
The US policy of economic sanctions against Myanmar has failed in that the military junta has taken the support of other regional nations, it has harmed the American economic interests and has worsened the living conditions of the Burmese people.
US policies on the Palestinian conflict, the Iraq war and globalization have been irritants in relations with the Muslim nations of this region.
The US interests in South East Asia are well looked after by its allies Philippines, Singapore and Thailand.
Negotiating or entering into Free Trade Agreements with most of these nations for its economic interests and improving military to military relations through aids and grants are the highlights of the current level of US relations with these nations.
US does not seem to be keen on signing the Treaty of Amity and Cooperation with ASEAN and thereby not to get involved with the East Asia Summit as well. US options are restricted to interaction at the multilateral level through the APEC Forum.
Many analysts are of the view that the region needs more US involvement and the administration�s emphasis on counter terrorism cooperation has pushed the economic and diplomatic relations to a lower priority.
On the contrary, China has an aggressive ASEAN policy and has improved relations with all these nations (including those that were anti-communist). The driving force has been the mutual need for economic and military security. China is ASEAN�s second largest trading partner. China is also planning to have joint military exercises with troops from ASEAN (for the first time) in July 2007. The US interaction with ASEAN pales in comparison to China�s in the recent years.
By C. S. Kuppuswamy
Introduction
The main focus of the US policy on South East Asia during the cold war period was on security to maintain its influence gained during World War II. The purpose was containment of communism and to achieve this it supported even the authoritarian governments of South East Asia, as long as the US interests were served.
In the early 90s (after cold war ended) US shifted its focus from security to economic issues. The establishment of the Asia-Pacific Economic Cooperation Forum (APEC) in 1989 with the active participation of US was evidence of this shift in the US policy. In the late 90s the American policy was tilted more towards North East Asia (China, Japan and Korea). The lukewarm response to the 1997 financial crisis in SE Asia was perhaps the turning point of the waning US interests in SE Asia.
Since September 11, 2001, US focus has shifted on to terrorism, designating SE Asia as the second front on its global �war on terror�.
Presently China�s increasing economic clout and political influence over South East Asia has pushed US to the background and the role of the leading player is taken over by China.
ASEAN
Despite the fact that US has strong economic and trade relations with most of the ASEAN members, US economic engagement with ASEAN as a group is not appreciable. Cumulatively, US is ASEAN�s largest trading partner, with ASEAN�s total trade with US being $ 128 billion (in 2004). US remains the biggest investor in ASEAN ($136 billion) though China may soon relegate US to the second position.
US initiated an ASEAN Cooperation Plan (ACP) in 2002. This plan is focused mainly on trans-national issues such as narcotics, piracy, terrorism, disaster management, environment and HIV/AIDS, including support to ASEAN integration initiatives and strengthening of the ASEAN Secretariat. US also formed in 2002, the Enterprise for ASEAN Initiatives (EAI), for negotiating bilateral free trade agreements with ASEAN countries, who are WTO members.
A joint comprehensive framework called �ASEAN-US Enhanced Partnership� was chalked out on the side lines of the APEC Summit in Busan (South Korea) in November 2005. This partnership will include cooperation on political, security, economic and socio cultural issues. A joint plan of action to implement the partnership was also signed within eight months of the proposal.
US has at present envoys at various levels in each of the 10 ASEAN states. Richard Lugar, a Republican Senator introduced a bill (May 2006) calling for the appointment of an ambassador to ASEAN. In his opinion an ambassador to look after the region as a whole would prove crucial as ASEAN developed an integrated free trade area and addressed matters of common concern with the US.
Abdullah Ahmad Badawi, Prime Minister of Malaysia, in an address at the Asia Society Programme in New York, in 2005 said �The Dialogue between ASEAN and US has yet to reach its full potential. The US has to listen more to ASEAN�s concerns and aspirations. The US must also make efforts to appreciate the �ASEAN way� of conducting business which may at time appear slow and sluggish to the US�.
Indonesia
US State Department maintains that relations with Indonesia are guided by progress on human rights, democratic reform and accountability.
In the cold war era, Indonesia was more of a strategic asset to the US. Since Suharto came to power in 1965, his authoritarian regime had the full support of the US as long as the containment of communism was achieved. James Van Zorge wrote in The Jakarta Post (22 February 2006) that Suharto, who was initially unwilling to invade East Timor, had later relented under the advice of the US. Suharto took the blame for the invasion while US denied everything.
Tables turned after the cold war. Military aid to Indonesia was stopped by canceling the International Military Educational Training (IMET) Program in October 1992 and banning sale of small and light arms in 1994. The joint military exercises and commercial arms sale were cancelled in 1999. In 2001 all military assistance was suspended under the Leahy amendment.
President Susilo Bambang Yudhyono visited US in May 2005 and had met George Bush. Immediately after this visit the Bush administration had partially relaxed the restrictions on military aid by permitting sale of non-lethal defence equipment. Subsequently the US resumed full military relations with Indonesia on the premise that the military has reformed and that US support for the military is part of the strategy of its global �war on terror�. Indonesia, being the world�s most populous Muslim nation and where more extremists have made some in roads, has a key role to play in the war on terror. The embargo was earlier imposed in 1999 after the military had ravaged East Timor when it seceded from Indonesia.
Maritime security has been one of the major factors for the US to improve relations with Indonesia. The Straits of Malacca in South East Asia is one of the busiest sea lanes for global trade. Indonesia, besides one of the littoral states of this strait, straddles some other important sea lanes in this region. The US proposal for a Regional Maritime Security Initiative (RMSI) was protested by all the littoral states at it impinged on their sovereignty.
Defense Secretary Donald Rumsfeld visited Indonesia in June 2006. At that time the Indonesian Defence Minister had pointed out that the US approach to fighting terrorism was perceived as overbearing and that US needs to be sensitive to local concerns. Indonesian Foreign Minister also indicated that US proposal of Proliferation Security Initiative would be studied and that Indonesia would be willing to carry out some of the activities that are called for under the plan.
US President George W. Bush made a 10-hour visit to Indonesia on 13 November 2006, amidst widespread protests from some of the hard line Muslim organizations.
The US government will help Indonesia in setting up a tsunami early warning system. An agreement was signed in this regard in February 2007 between US National Oceanic and Atmospheric Administration and the Indonesian Agency for Assessment and Applications of Technology. The US government will give US $ 1 million to develop this system.
Philippines
Philippines has been vital for the US in projection of its military power in South East Asia for the last few decades. US military had two bases in Philippines, one at Clark air force base and the other (naval) at Subic Bay, for over a century till 1991. US has also been involved in �regime changes� (openly or discreetly) since the overthrowing of Ferdinand Marcos in 1986.
Even though the US had to vacate the two bases in 1991 under pressure from the nationalists, the US military continues to have its presence at a much depleted level under the garb of military assistance for fighting terrorism. After 9/11, the New People�s Army (NPA), the Communist Party of the Philippines and the Abu Sayyaf Group(ASG) have been included in the US list of global terrorist organizations.
US has a Joint Special Operations Task Force Philippines (JOSTFP), for advising the military for fighting the terrorists in Southern Philippines. The force is made up of marine, air force, navy, army and special forces personnel from the US Pacific Command. Currently this force is helping the Armed Forces of Philippines (AFP) in their operations against Abu Sayyaf and this terrorist group had suffered heavy casualties including some of its main leaders.
At the Track II level the Philippines Chapter of the US Institute of Peace (USIP) is involved in negotiating and helping peace talks between the Moro Islamic Liberation Front (MILF) and the Philippine government.
The 1987 constitution prohibits international forces on combat missions in Philippines. But the deployment of US troops in Southern Philippines however has been covered by the Visiting Forces Agreement between US and the Philippines signed in 1999.
Joint training exercises under the code name �Balikatan� (which means shoulder to shoulder) have become an annual feature since 1981 when it was first conducted. The aim of these exercises is to improve the Philippines �US combined planning, combat readiness and inter operability while enhancing security relations and help AFP in its campaign against terrorism. The 2007 Joint Balikatan military exercise which began on 19 February, 2007, is different in that it focused on humanitarian activities like putting up school buildings, building bridges, repairing roads and providing medical facilities to the locals in the area.
Thailand
The US has a trusted strategic ally in Thailand for a long time. Shan W. Crispin, South East Asia editor (AT on line), writes that the �US military jump started Thailand�s move toward capitalism by pumping more than $ 2.5 billion between 1951 and 1975 in military related aid to the country to develop a regional bulwark against the spread of communism�.
Growing from the cold war era, the US-Thai relations was strengthened on the basis of shared economic and trade interests and has been further bolstered since September 2001 by Thailand�s commitment to fight terrorism in South East Asia. The arrest of Hambali, a Jemaah Islamiyah leader, in 2003 in a joint US-Thai operation highlights the part played by Thailand in the US global war on terror. Thailand contributed troops and support for US military operations in both Afghanistan and Iraq and was designated as a major non-NATO ally in December 2003.
As part of its strategy in its global war on terrorism, a Counter-Terrorism Intelligence Centre (CITC) was established jointly in Thailand in 2001 between the CIA and Thai intelligence agencies. The US is learnt to be providing annually $ 10 to 15 million and some advanced surveillance equipment to the CITC. Thailand is also believed to have run a secret prison for the US where Muslim terror suspects could be held without trial.
Highlights of the longstanding involvement of the US in nurturing its relations with Thailand in the last few decades are -
* US has a bilateral security arrangement with Thailand (one of only two countries in South East Asia.
* US entered into a military assistance agreement in 1950 following the Korean war.
* The Manila Pact signed in 1954 recognizes that a threat to the security of Thailand constitutes a threat to the US. Consequent to the dissolution of SEATO, the pact was reinforced by the Thanat-Rusk Joint Communiqu� of 1962.
* Thailand and US conduct over 40 joint military exercises every year. The annual military exercise code named �Cobra Gold� is one of the largest military exercises involving US forces anywhere in Asia.
* An agreement entered into with US in July 2001, allows Thailand to purchase advanced medium range air-to-air missiles for its F-16 fighters, a first for a South East Asian state.
* Thailand has opened the Vietnam era air base in Utapao and a naval base in Sattahip from where the US can provide logistic support to forces in Afghanistan and the Middle East.
* Thailand is one of the largest recipients of International Military Education Training (IMET) program funding in the world with approximately $ 2.5 million annually.
* On the economic front, the US is currently Thailand�s largest trading partner, while Thailand is United States� 17th largest trading partner. A Free Trade Agreement (FTA) between US and Thailand is under negotiation since June 2004 and when finalized the bilateral trade of approximately $ 20 billion is expected to rise considerably.
There have been differences between US and Thailand on the Burma Policy and human rights issues. Thailand has always advocated a policy of constructive engagement with Myanmar (Burma) while US has pursued a policy of economic and diplomatic sanctions against the military junta. The US State Department Human Rights Report (2004) asserts that Thailand�s record worsened and cites excessive use of force by some members of the police and links these elements to extra judicial killings.
Despite the strong ties between Thailand and US, the US was pushed to an awkward situation, When Thaksin was ousted in September 2006 through a military coup. US is morally and legally bound not to support a military government that seized power by overthrowing the democratically elected government. However the US seems to have circumvented the legal provisions and continue to support the ruling Council for National Security, as it suits the overall aim of counterbalancing the increasing influence of China.
Malaysia
During the cold war era the bilateral relations between US and Malaysia was just normal as Malaysia did not figure much in the regional or world affairs. Under the long rule of Dr. Mahathir Mohammad and the current Prime Minister Abdullah Ahmad Badawi, Malaysia�s influence in the regional and world affairs had increased considerably through ASEAN, the OIC and the NAM. US started paying more attention since September 11 2001, as it perceived that Malaysia can play a significant role in the US global war on terror.
US and Malaysia share a diverse and expanding partnership. The US is Malaysia�s largest trading partner and Malaysia the tenth largest trading partner of the US. The two way trade amounts to $ 45 billion. The US is the largest foreign investor in Malaysia. A Free Trade Agreement (FTA) between the two nations is under negotiations since June 2006.
The Malaysia-US Defence Cooperation has been steadily growing in the last few decades. Malaysian forces regularly conduct joint training with US counterparts and the US has had access to Malaysian airfields and ports. Malaysia has also provided a base for US jungle warfare military training. US military ships make regular port calls. The US NAVY SEALs conduct training in Malaysia twice a year. A large number of Malaysian defence personnel continue to benefit from the US IMET (Internal Military Education Training) program.
Highlights of the growing relations between these two nations are -
* US chose Malaysia in 2003 to host the South East Asia Regional Center for Counter Terrorism (SEARCCT), bypassing Indonesia- the most populous Muslim nation in the world.
* During the tsunami (Dec. 2004) relief operations, US forces used Malaysian air force bases for ferrying supplies to Aceh (Indonesia).
* In 2005 Malaysia and US renewed a military logistics cooperation pact called the Acquisition and Cross Servicing Agreement for 10 years. The agreement enables armed forces from the two countries to share logistics & supplies.
* Both countries have signed a Trade and Investment Framework Agreement (TIFA) in 2004. This has paved the way for a Free Trade Agreement (FTA) expected to be completed by July 2007. The bilateral trade may almost be doubled on implementation of the FTA.
* Over the past three decades the US has been a popular destination for Malaysian students. Since 1975 Malaysia has been one of the top 20 countries that have sent students to US. From 1981 to 1999 it was one of the top 10 sources for international students in America.
Differences between the two nations have often surfaced during the tenure of Dr. Mahathir Mohamad. In the 1997 financial crisis he indicated that the international pressure on the Malaysian currency was due to a Jewish Plot and he often made anti-Semitic remarks. Relations soured in 1998 when Vice President Al Gore made some undiplomatic remarks at the APEC Forum meeting in Kuala Lumpur over the arrest and sacking of former Deputy Prime Minister Anwar Ibrahim. Dr. Mahathir was an outspoken critic of US policies on the Israeli-Palestinian conflict, Iraq and globalization. US has often been critical of the lapses of the Malaysian Government on human rights, particularly on the excessive use of the Internal Security Act (ISA). US was also instrumental in stifling the proposal mooted by Dr. Mahathir for an East Asian Economic Caucus.
Singapore
Singapore has maintained strong diplomatic ties with US since the time it became independent in 1965. When the US carried out a strategic shift in its policy on South East Asia in the early 90�s by having access to this region rather than holding permanent bases, Singapore was the first nation to offer access to US Forces to Singaporean military facilities (at Paya Lebar Airbase and Sembawang wharves) by entering into a Memorandum of Understanding in November 1990. This allowed the US to locate military personnel and fighter aircrafts, help in conducting training exercises with the Singapore forces and also rotate these personnel and aircrafts at regular intervals. US access was further augmented in January 1992 when an agreement for a naval logistics facility to be relocated from Subic Bay (in Philippines) to Singapore was entered into.
The following highlight the level of cooperation and bonhomie between these two nations:
* The MOU signed in 1990 was amended in 1999 to permit US Naval vessels to berth at Changi Naval base.
* In October 2003 (when President Bush visited) Singapore and US announced that they will expand cooperation in defense and security by initiating negotiations for a Framework Agreement for a Strategic Cooperation Partnership.
* US and Singapore signed a bilateral Free Trade Agreement in May 2003 which came into effect on 01 January 2004.
* US is a popular destination for Singaporean students.
* US Government sponsors visitors from Singapore each year under the International Visitor Program.
* Singapore was the United States� 13th largest trading partner in 2003. US continue to be Singapore�s largest market for electronics and non-oil domestic exports.
* Some 1300 US corporations operate in Singapore, with total investments of $ 61.4 million (in 2002).
* US Navy maintains a logistical command unit in Singapore
* Singapore supported the US led coalition in the Iraq war and the operation in Afghanistan allowing American aircraft and ships access to Singapore bases. Singapore also sent some transport aircrafts and ships to Iraq.
* Singapore was a founding member of Proliferation Security Initiative and the first Asian country to join the Container Security Initiative which allows US customs to screen US bound containers.
As with the other SEA nations, there were some hiccups in the relations, with particular reference to human rights. The US State Department�s Human rights practices reports had been critical of the ruling PAP for its political dominance and using extensive powers to stifle the political opponents and for misuse of defamation suits.
Myanmar
The relation between US and Myanmar (Burma) is at its nadir. Myanmar has never been a foreign policy concern for Washington, although it does have some limited effect on US economic and strategic interests as well as on the counter narcotics policy.
US withdrew its ambassador from Yangon in 1990. US is still to recognize even the change of the country�s name from Burma to Myanmar. Since 1990 US has opposed Myanmar�s membership in various multilateral financial organizations. US has imposed unilateral economic sanctions on Myanmar since 1997 and have made these sanctions more stringent over the years. The US has frozen Myanmar Government assets in the US and has also denied visas to Myanmar officials.
US think tanks have often come up with their views as to how the US sanctions against Myanmar have proven to be a failure on all fronts - have harmed the American strategic and economic interests, have hit the Burmese people the hardest, have alienated the regional allies and have proved to be a strategic boon to China.
US also failed in its recent effort (Jan 2007) to get a draft resolution on Burma to be considered by the UN Security Council. The resolution was vetoed both by China and Russia.
Cambodia, Laos and Vietnam
There is a warming up of relations between US and Cambodia. The port call made by USS Gary at Sihanoukville (Cambodia) in February 2007 was the first by a US military vessel to dock in Cambodia in over 30 years. The congressional ban on direct funding to Cambodia has also been lifted by a budget resolution made into law in February 2007. According to a news report the US officials have said that the shift of strategy was driven in part by the exigencies of the US-led war on terror though some analysts are of the opinion that the increasing influence of China is the prime factor. Prior to this port call, an Admiral of the Pacific Command and a Vice-Admiral of Pacific Fleet had visited Cambodia in July 2006 and January 2007 respectively. Budgetary provisions have also been made by US State Department under IMET since 2005 and grants in the form of Foreign Military Financing, though at times these were not disbursed due to Congressional resistance.
US-Laos relations were largely based on the issue of granting Normal Trade Relations (NTR) treatment to Laos. US and Laos People�s Democratic Republic signed a bilateral trade agreement in 1997. Due to Congressional resistance, legislation to extend NTR status was not approved because of the human rights conditions of the Hmong Lao minority. It was only in November 2004, Laos was granted non discriminatory treatment to the products of Laos under the Miscellaneous Trade and Technical Corrections Act of 2004.
US and Laos cooperate in important areas including recovering remains of Americans missing in action (MIAs) from the Vietnam war, counter-narcotics and de-mining efforts. In 2005 US signed a cooperation agreement with Laos in which $ 3.4 million was pledged for controlling outbreaks of avian flu. US foreign assistance to Laos focuses on counter-narcotics and de-mining programs and is mostly channeled through NGOs.
US exerts pressure on Laos to accept international monitoring of the resettlement of former Hmong militia members and their communities, by offering funds under Economic Support Funds and IMET. According to the US State Department the LPDR�s human rights record continues to be poor.
US and Vietnam restored diplomatic ties in 1995. US signed a trade pact with Vietnam in 2000. America is now Vietnam�s largest export market. Current disputes between the two countries are more on tariffs and market access than on war crimes or missing soldiers. Commercial flights between the two nations began in 2005.
Admiral Thomas Fargo of the Pacific Command visited the Danang naval base in February 2004. This was an indication of Hanoi�s interest in stepping up military to military relations. Consequent to this visit US naval vessels started making port calls to Saigon (now Ho Chi Minh).
In an agreement signed in 2006 with the US, Vietnam was granted the most-favored-nation status. However Vietnam�s textile industry is unhappy of the special monitoring arrangement included in the agreement to guard against possible dumping violations. Vietnam joined the WTO in January 2007.
Conclusion
The focus of US policy on South East Asia, has been on containment of Communism during the Cold -war era, on primarily economic interests in the post Cold- war period till the beginning of the twenty first century and now on cooperation in the war on terror from September 11, 2001. Of late 'the China factor' has also set in.
The strategic shift in having access to the region than occupying military bases (since US vacated the bases in Philippines) has given a new direction to the US policy.
The US policy accords a higher priority to bilateral ties as against multilateral relationships.
The 1997 financial crisis in this region has been a turning point in US relations in that the countries affected were disappointed with the US attitude of total reliance on IMF and not making any efforts to bail out these nations.
The US is often accused of overlooking the sensitivities and concerns of the South East Asian Nations and is keen on conducting business or establishing relationship on its own terms.
Undue emphasis on human rights issues has often irked the nations of this region in their relations with US.
The US policy of economic sanctions against Myanmar has failed in that the military junta has taken the support of other regional nations, it has harmed the American economic interests and has worsened the living conditions of the Burmese people.
US policies on the Palestinian conflict, the Iraq war and globalization have been irritants in relations with the Muslim nations of this region.
The US interests in South East Asia are well looked after by its allies Philippines, Singapore and Thailand.
Negotiating or entering into Free Trade Agreements with most of these nations for its economic interests and improving military to military relations through aids and grants are the highlights of the current level of US relations with these nations.
US does not seem to be keen on signing the Treaty of Amity and Cooperation with ASEAN and thereby not to get involved with the East Asia Summit as well. US options are restricted to interaction at the multilateral level through the APEC Forum.
Many analysts are of the view that the region needs more US involvement and the administration�s emphasis on counter terrorism cooperation has pushed the economic and diplomatic relations to a lower priority.
On the contrary, China has an aggressive ASEAN policy and has improved relations with all these nations (including those that were anti-communist). The driving force has been the mutual need for economic and military security. China is ASEAN�s second largest trading partner. China is also planning to have joint military exercises with troops from ASEAN (for the first time) in July 2007. The US interaction with ASEAN pales in comparison to China�s in the recent years.
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