From ISIS attaching a GoPro camera to a home-made armed drone in Syria to Islamists from the Democratic Republic of Congo uploading 4K videos pledging allegiance to Abu Bakr al-Baghdadi, cyberspace and emerging technologies are facilitating terrorist activities at an unprecedented scale. The convergence of technology and terrorism represents the worst kind of feedback loop between the real and the virtual. States, meanwhile, are struggling to respond to this convergence and to balance the imperatives of national security and the freedoms afforded in cyberspace.
Given the complex structural drivers of terrorism and the trade-offs involved in regulating technology, it is imperative that policy makers first assess the real and evolving dimensions of the challenge. The popular conceptual understanding of this menace is that like war, terrorism is simply politics by other means. Whoever the actor may be, terrorism is a violent expression of alternative political values and norms for organizing societies. Motivations may vary but violence is the principal instrumentality for recruiting, propagating and financing this perverse politics. And like mainstream politics, terrorist organizations have co-opted technology as a force multiplier in achieving their objectives.
Like mainstream politics, terrorist organizations have co-opted technology as a force multiplier in achieving their objectives.
As has been suggested by many scholars, terror requires spectacle to thrive and technology has allowed this opera of violence to find new audiences and locales. The Christchurch shootings in New Zealand is perhaps the most obvious example — with the shooter streaming his actions live on social media. New communication platforms afford scale and impact at virtually no cost, a service that terrorists have used with impunity and agility over the years with deleterious consequences for communities and countries.
Some features of the internet, like end-to-end encryption and virtual private network (VPN) have made it easier than ever for terrorist organizations to find recruits and manage outreach and organization. For example, migration of pro-ISIS propaganda from likes of Facebook and Twitter to Telegram was in a large part due to encryption facility offered to all its users. Technology also allows these organizations to transcend the tyranny of geography. An organization in one country can raise funds, recruit and radicalize individuals in another part of the world with ease.
Some features of the internet, like end-to-end encryption and virtual private network (VPN) have made it easier than ever for terrorist organizations to find recruits and manage outreach and organization.
Every communication opportunity online is being exploited by these malevolent actors. From the mainstream platforms such as Facebook and Telegram to chat rooms, betting sites, porn websites and online gaming hubs. These virtual venues are fertile breeding grounds for accidental and purposeful recruits and for propagating violent narratives. The importance of ‘digital terror squads’ was emphatically asserted when, in 2016, ISIS granted its ‘media mujahids’ the same rank as those fighting for the group on the ground. This gave the online radicals pride of place that was traditionally reserved for the fighters delivering carnage on the ground. This is only one of the instances that signify just how integral, sophisticated and important cyber operations are for terrorist organizations today.
Terrorist organizations are also leapfrogging traditional hawala networks to embrace Fin-Tech as a means to finance their operations. Services like e-wallets, digital currencies, crypto-currencies and even crowd funding platforms are being leveraged to raise and launder money and finance terrorist operations. This has rendered most current practices of clamping down on terror-finance obsolete, and today more terror organizations have access to more money than ever before.
Terrorist organizations are also leapfrogging traditional hawala networks to embrace Fin-Tech as a means to finance their operations.
Amidst this worrying convergence of terrorism and technology, states have struggled to respond without threatening the infrastructure of cyberspace or the freedoms and opportunities it affords. Meanwhile, the tech platforms are having troubles of their own. The word ‘social’ in social media is under scanner, with platforms facing multiple headwinds relating to their policies on responding to terrorism, fake news and political interference among others. These platforms host billions of users even as they struggle to differentiate between their ‘social’ obligations to the digital commons and their commitments to markets and investors.
As states, platforms and grassroots organizations combat the threat of tech-enabled terrorism, it is important for them to identify certain guiding principles.
First, it is crucial that they do not unintentionally limit access to technology itself. For many states, the knee-jerk response to some of these challenges is banning access or shutting down tech-based routine operations altogether—as we recently saw in Sri Lanka. Instead, states must co-opt technology and tech-actors, which allows for better surveillance of and enforcement against terrorist activities. Legislations and notifications will have limited influence in this new battle theatre. More technology, better technology and skillful deployment of technology against malign actors is the most potent option for all to embrace and one which most governments have failed to invest in.
States must co-opt technology and tech-actors, which allows for better surveillance of and enforcement against terrorist activities.
Second, the digital commons must witness the creation of new mechanisms and institutions for international cooperation on this vital issue. The challenges of terrorism are cross border — making debates held hostage by ‘regional’ or ‘international’, ‘Western’ or ‘Eastern’ silos irrelevant. States and tech companies need to find new venues and forums to cooperate on these issues in an institutionalized manner, formally or informally. The traditional distrust between governments and private actors is creating a cleavage that allows terror to flourish and succeed.
The digital commons must witness the creation of new mechanisms and institutions for international cooperation on this vital issue.
Third, technology companies must be more forthcoming about disclosures relating to terrorist activities on their platforms. The obsession with the performance of their shares on the bourses is perversely impacting the global effort to respond to terror. They must create internal mechanisms to share information with law enforcement on a real time basis. They must also publish regular public reports detailing the nature of terrorist activities they have identified, and steps taken to counter them. The reluctance of corporations to be transparent about the mishaps on their platforms and networks is a serious problem.
Technology companies must be more forthcoming about disclosures relating to terrorist activities on their platforms.
Fourth, states, for their part, must remember that tech is only a tool. It is not a substitute for real world and virtual policing. Often states attempt to undermine tech—for example through weaker encryption norms due to their naïve assessment that this would assist in their dispensation of duty. This only undermines utility and safety of technology for millions of benign users; while terrorist organizations will simply migrate to alternative platforms as witnessed in the recent past.
States…must remember that tech is only a tool. It is not a substitute for real world and virtual policing.
Fifth, localized capacity building both by state and tech firms is the need of the hour. While national intelligence organizations are certainly relevant, the first line of defense against tech-enabled terrorism will be local law enforcement. Unless these units are equipped with skills and technology, the terrorist will always remain a step ahead in an upcoming era of Do-It-Yourself (DIY) terrorism.
Localized capacity building both by state and tech firms is the need of the hour.
Finally, simultaneous investments in capacity for strategic communications by states and technology companies is a pivotal step. Unless good actors can combat the narrative appeal of radicalism and terror, most responses with be feeble and patchy. Either the states provide purpose and meaning to individuals, or radical groups will. The old methods of counter-terror will need to be dramatically upgraded and redesigned. The terrorists have developed a lethal cocktail of clicks and Kalashnikovs, even as citizens, states and other organizations, lag behind in recognizing and responding to this heady mix.
Simultaneous investments in capacity for strategic communications by states and technology companies is a pivotal step.
Any good policy response to tech-enabled terrorism must acknowledge that combating it requires an “all of society” approach. This first line of defense is always communities, no matter how the technology may change. Platforms for their part must work with them alongside states to increase awareness about this real and present danger and must transparently share their propositions that can help to balance the trifecta of growth, rights and security.
At a discussion in Washington DC this spring, I was quizzed with a degree of annoyance on the multiple messages coming out of New Delhi with respect to India’s position on a global agreement to combat climate change. In the same discussion there was also an exasperated inquisition on why Indian needs and priorities must hold the world to ransom (as if there were a consensus) and why India imagines that it merits a special space, attention or exception in the climate arena.
The response to these two central propositions on India and climate change must of course come from the officialdom at Raisina Hills, home to Delhi’s executive offices. However, as we move down the road to COP 21 in Paris, it is crucial that any response, if formulated and then communicated (a bigger ‘if’), would need to engage with the most important climate proposition put before India by the world, and its interplay with the country’s development/growth imperatives.
Viewed from New Delhi, and after sifting through the chaff, the proposition for India’s climate change response posed by a large section of OECD countries, and certainly from the influential capitals in Europe, is fairly straightforward:
1. India must be the first country in the world (of size and significance) to successfully transition from a low-income, agrarian existence to a middle income, industrialised society without burning even a fraction of the fossil fuels consumed by other developed countries. China was the last country to enjoy this privilege. India will be the first that will have to cede this option and of course this may well be the new template for other developing countries to emulate.
2. The scale of this transition and the current economic situation in some parts of the world, alongside the complex and privately controlled innovation landscape, means that there is limited ability for the Annex 1 countries (the developed world) to offer any meaningful support in terms of financing or technology transfer. Official Development Assistance (ODA) is a small fraction of what is necessary today, and India will therefore need to mobilise domestic resources to power the non-fossil-fuel-fired Indian story.
3. Even as India adopts this ‘exceptional’ approach to industrialisation, and creates the necessary financial and commercial arrangements to achieve it, mostly through its own endeavors, the developed world and others want to retain the right to judge Indian performance. India will be monitored with an increasingly extensive system of compliance verification, and will be criticised for its missteps on the journey despite the novelty and scale of its undertaking.
My response to the thesis of ‘Indian exceptionalism’ therefore is that India does not seek to be an exception, but the demands imposed upon it that will require it to be exceptional. This is a truth for others to accept, and the climate reality for which India must discover creative policy. Three distinct narratives among various actors in India have so far shaped its response.
The first set of responses is from a group of people I like to call India’s ‘cold war warriors’. This group believes that no matter the contemporary political, economic and environmental reality, an alternate universe can be constructed through the mandate of the UNFCCC. These persons are the architects of the global intergovernmental processes and have faith in them. They believe that an agreement in Paris this December at COP 21, that is sensitive to Indian needs, will somehow assist in the transition required by India and will ensure that India only needs to make incremental changes to its ‘business as usual’ approach to economic growth and development. This group has ignored the changing economic system, which is increasingly disinvesting from fossil fuels politically, and in terms of financial flows and promoting green energy markets. The ‘green’ economic and market realities that will shape India’s future are seen as something that can be circumvented by creatively crafted text and clauses in a legal (read weak legal agreement) agreement in Paris. Despite 20 years of failure to achieve this ‘world of equity’ with ‘differentiated responsibility’ they continue to believe that a global agreement is the end in itself.
The second set of strategies to the proposition facing India are advanced by a group I refer to as the climate evangelists. They believe that 2050 is already upon us. Commercially viable clean energy solutions are available, and these hold the answer to both our immediate and future energy woes. The opportunities that exist in the creation of a new green economy must be grabbed with both hands. This group wants subsidies and incentives for clean energy technology, and taxes and regulation of fossil fuels. These green pioneers are sanguine that sufficient ‘push’ and ‘pull’ will deliver technology innovation and development on the requisite scale. They reject that fossil fuels are necessary as baseline sources of energy and instead insist that the technological revolution is already here, and that India must get on board or be left behind. Their argument is often a moral one: we have a moral obligation to save the earth for its own sake and for future generations – ignoring the fact that at this level of income disparity, inequality and differential access to the right to life, the planet is in fact being saved for the rich to flourish.
The third set of responses is from the group I call the climate realists. The realists understand that the global climate proposition is inherently unfair, and that India could and probably should push back against such an imposition by the developed world. However, they also recognise that no matter how hard they try to construct a ‘fairer’ agreement in Paris, the combined forces of the market, society and technology are all pointing towards a ‘greener’ transition. The political economy of climate change necessitates a transformation, and it is not necessarily in India’s interests to fight against it. Instead, the realists understand that there is an opportunity to lead in constructing a green economy. They believe that this moment can be used to reshape the tax, financial and global governance systems. They also see no contradiction in also ensuring continued flow of investments and emphasis on lifeline sources of energy for India’s poor.
Analysis shows that India does better than Germany, the United States, China and others on per capita coal dependence, with about a third of the consumption levels of the greenest among these three. It also already commits, as a proportion of its GDP, more towards renewable energy off-take than most (except Germany). It therefore does not need to defend its coal consumption. On the other hand, it must certainly be the champion to encourage ‘greener’ performance from others. The equity that it seeks lies in this. The rich must continue to invest more in renewables. This must be demanded and enforced.
Prime Minister Modi’s recent statements suggest that he may be such a realist as well. He is promoting an aggressive renewable energy thrust, while being uncompromising on the point that lifeline energy will continue to rely on coal for the foreseeable future. When he takes coal off the discursive table, he is not foreclosing the right to use coal; instead he is sharpening the focus on India’s impressive credentials around green growth. He invokes religious texts, civilisational ethos and clever political word-play as he seeks a leadership role for India in global climate policy, and sets the agenda with ambitious plans for transitioning to a new energy paradigm. The ‘house always wins’ is a golden Las Vegas adage with a lesson for global politics too: unless we see strong political leadership of the kind being displayed by Prime Minister Modi and President Obama, the house – in this case national officialdom(s) and global bureaucrats – will prevail again. They will construct a new world order with words, commas and full stops, where nothing, not even the climate, can ever change.
Among the more memorable lines from Albert Camus’ haunting novel, The Plague, possibly the most read and quoted book in the Year of the Pandemic, is a starkly stated fact: “Stupidity has a knack of getting its way.”
If “You are on mute” was the most common interjection during COVID-19-enforced digital conversations in the conference circuit, a close second would be the assertion, “We have to work with a rising China to make it a responsible actor.” You could voice this assertion, or a similar variant, at a think-tank discussion or official consultation in Western Europe or America and be appreciated for possessing a wise and rational mind. If you were to say it many times over with panache and flair, you could bag a serious policy job in that part of the world. Money talks; the profundity of banal wordsmiths runs marathons.
The Old World cannot ‘make’ China act in any way it tells it to.
For there are two fatal flaws in this line of thought. The first flaw has to do with “the rise of China.” This is the last decade’s conversation; outdated and irrelevant. China has already risen, and it is everything many did not wish it to be, even as they were investing in its emergence. Deal with it now by accepting this reality. The second flaw pertains to the rather misplaced assessment of Western power embedded in these seemingly highfalutin but inane assertions. The Old World cannot ‘make’ China act in any way it tells it to. In fact, the West does not even know what it wants from China besides trade and investment. A popular refrain of yesteryears was that while all countries have an army, in Pakistan, the army has a country. Today’s refrain is reflected in what someone recently said, without exaggerating: In Germany the auto industry has its own union, the European Union.
2020 was a crucial year for China. Its claim to global leadership was severely tested by its role in, and early mismanagement of, the COVID-19 pandemic. It faced pushback, including from unexpected quarters, on its deluge of misinformation and its subversion of international institutions to divert attention from its malfeasance. The pandemic was to be the moment of reckoning, when the old and new powers would come together and hold Beijing to account. Predictions that the pandemic would prove to be China’s ‘Chernobyl moment,’ however, have turned out to be hollow. China was among the few countries that weathered the public health crisis with a modicum of control. A year later, it is leveraging trade, technology and international development to capitalise on this and further consolidate its influence and power. As a new American President prepares to assume office, China has sent him a greeting card with three messages conveying the terms of Beijing’s engagement with Washington and other world capitals.
What else could explain why the EU enthusiastically rushed to conclude the EU-China Comprehensive Agreement on Investment?
The first message is that China is too big to be ignored and too wealthy to displease. This is the obvious subtext of the EU-China Comprehensive Agreement on Investment (CAI). What else could explain why the EU enthusiastically rushed to conclude this agreement? Brussels ignored the Biden transition team’s pleas to delay the agreement. It ignored China’s rogue behaviour in 2020 — a massive human rights crackdown in Hong Kong and Xinjiang, a destabilising escalation of tensions in the Himalayas, its aggressive ‘wolf warrior’ diplomacy, and the economic coercion of Australia, among others. The EU even ignored its own evolving assessments of China, with expressions like “European values,” “systematic rival,” and “strategic autonomy” proving to be meaningless phrases that are no more than an anodyne dressing for a toxic salad. The EU has not only handed Beijing a victory ahead of the transition in Washington, but it has also bolstered China’s belief that its centrality to global value chains provides it with clout beyond its own imagination.
The second message is that China is too big to punish. Under President Donald Trump, the US attempted to systematically choke China’s access to global technology supply chains through sanctions, export controls, and coercive diplomacy. While those efforts have had some success, China has doubled down on its efforts to indigenise the development of breakthrough technologies — an effort that has seen remarkable success during the past two decades. Now it plans to return the favour. In early January, China’s Ministry of Commerce published rules encouraging firms incorporated in China to defy sanctions and export controls, and threatened to punish those that do not. When, and not if, these rules are implemented, technology and financial firms in particular will find themselves caught between a rock and a hard place. These rules are a clear warning to the Biden Administration and to its supporters and funders from Wall Street and Silicon Valley. The Chinese Communist Party (CCP) is betting that America Inc. will prefer to devote resources to lobby Washington for a rapprochement with Beijing rather than contend with fragmentation and the attendant loss of profits.
The pandemic has accorded China the chance to offer developing nations not just infrastructure finance, but a multifaceted development opportunity — one that further entrenches China’s norms, standards and preferences.
The final message is that China is simply too big to fail. Media pundits are reading a slowdown in Belt and Road (BRI) investments as a sign that China is reconsidering the project’s utility. This is way off the mark. The institutions and mechanisms of the BRI are rapidly turning into conduits for China to deliver global public goods and will remain so even as project-funding is rationalised. State Councillor Wang Yi made three priorities explicit for 2021 in his speech at December’s Belt and Road Forum: The Heath Silk Route, the Digital Silk Route and the Green Silk Route. Each plays to China’s strengths and are crucial components of its 2021 white paper on international development cooperation. The pandemic has accorded China the chance to offer developing nations not just infrastructure finance, but a multifaceted development opportunity — one that further entrenches China’s norms, standards and preferences.
These messages should not come as a surprise to those who track Beijing. As we argued in our book Pax Sinica, these recent developments represent China’s continuing efforts to recast globalisation and international governance in its own image. The year 2021 is an important milestone for the CCP and for Chairman Xi Jinping. It marks the 100th anniversary of the founding of the CCP, the first of two centenaries central to the realisation of the ‘China Dream.’ Leading up to this point, ‘Core Leader’ Xi has consolidated his hold over the CCP, and the party has, in turn, consolidated its control over society, industry, military and every aspect of policy. Xi has already acknowledged that the path towards global leadership by 2049 — the centenary of the founding of the People’s Republic of China — will be defined by “turbulent change.” While he did not explicitly say so, external risk fuelled by geopolitical rivalry with the US and a more wary international community were likely on his mind.
China’s messages should not be interpreted as a prophetic prediction of its continued and unchallenged rise or that it is immune from political strains and irrationality.
These three messages to the world in early-2021 indicate how China is anticipating and responding to emerging realities. Yet, China’s messages should not be interpreted as a prophetic prediction of its continued and unchallenged rise or that it is immune from political strains and irrationality.
The pandemic has bookended an international order living out its last days, much like King Lear. Contrary to popular expectation, a Biden White House will not — or, cannot, if you prefer — reverse this trend. The world will still be driven by populism and fragmentation. Communities across geographies are anxious about change. Information disorder, technological and industrial developments, and ecological crises are demanding new ideas and leadership. China is the first power to have a dark but coherent proposition — one defined by techno-authoritarianism and state control.
Is there any other alternative on the table? Or will the decline of the incumbents be scripted by Beijing and its growing global constituency of cheerleaders?
The CAI — despite Ursula von der Leyen’s claim that it will help the EU defend multilateralism — is not multilateral at all. It is a bilateral deal with an authoritarian power that seems to have a very different understanding of multilateralism.
On 30 December 2020, an EU Press Release proudly declared “Leaders concluded in principle the negotiations on the EU-China Comprehensive Agreement on Investment (CAI).” The conclusion — at least of this stage of the negotiations (the agreement will still have to withstand the scrutiny of the European Parliament) — has already spawned a cottage industry of commentaries.
The great and the good, particularly from the fields of Economics and Law, are having quite a time pondering and speculating over the (rather limited) detail that is available. Academic chatter is bubbling away on a range of issues: On what the agreement could mean for issues of Level Playing Field; how the terms that the EU has secured for itself compare with the US-China Phase 1 agreement (note that even though the EU-China deal is on investment while the US-China was on trade, there are some overlaps on issues like Forced Technology Transfer); how enforceable would social and environmental clauses turn out to be that the EU is touting as a major win; and so on and so forth? But much of this punditry, while tantalisingly delicious in the technocratic safety bubble that it lives in, reminds us of Nero fiddling as Rome burns. This is not the time to be bean-counting economic gains and losses. The abyss, which the EU has been gazing so greedily into, is staring back its Medusa stare.
There is much that is wrong with the deal, which we could point to, in both process and implications.
We could look askance upon the remarkable haste with which the European Union — normally a lumbering, complicated, and bureaucratic machine — has pushed this deal through. Or we could suggest that the Zaubertrank at work now be made the official beverage for the bureaucracy in Brussels.
We could raise an eyebrow at the fact that the final negotiations took place at what is usually expected to be the quietest time of the year: Holiday closures, understaffed newspaper offices, and tired citizens desperately trying to catch a breath or two in the period that is so sweetly described in German as “zwischen den Jahren” (the quiet time in between the years). Our raised eyebrows could perhaps rise further still if we turned our attention to the fact that people across Europe are caught in a surging second wave of the coronavirus pandemic (on the day that the deal was signed, Germany reached a new and depressing record of daily deaths due to COVID-19). And we could applaud that neither the pandemic nor the holiday despair could prevent this ‘systemic rivalry’ from being recast.
We could question not only the timing of the EU-China party, but also the choice of protagonists: In what capacity was President Macron present at this meeting? The impression that screenshots of the meeting give is that the two largest economies of Europe — Germany and France — are in the driver’s seat; all the attention that the union claims to give to representation and accountability for its remaining 25 members (to be reduced to 24 with Britain exiting on 31 December) is little more than lip-service.
We could even — if we were thus inclined — point out politely that we are not convinced by the European Commission President, Ursula von der Leyen’s, claim that the “Agreement will uphold our interests and promotes our core values. It provides us a lever to eradicate forced labour.” The clauses, at least as they are reported in the EU’s Press release, are weak. They are, in fact, so weak, that one might almost want to graffiti LOLOL (Laugh Out Loud On Labour standards) all over it, were it not for the tragic and horrendous human rights violations that are reported in Xinjiang.
We could raise all these issues, and more along such lines. But they still would not get us to the crux of a matter that is deeply political.
The abyss stares back
International trade and investment — for all the conceits that many economists and lawyers seem to have about these issues — are inherently political. And they have become even more political in the context of China’s rise: Not only because of the use and abuse of multilateral rules by non-market economies (which is what defenders of CAI tend to focus on), but also because of the fundamental difference in values that should define the goals of multilateral cooperation. Contra the inclination of technocrats to reduce values to labour and environmental standards, values include first-order principles of democracy, liberalism, pluralism, and more. And international trade and investment, especially in a world where interdependence can be weaponised, have become just too important to be left in disciplinary silos or technocratic bubbles. CAI is not “just” a matter of investment, or even standards; it is a matter that has potentially serious security implications. It begins to dramatically alter who we are as a society, community and people.
China has, perhaps, more than ever in 2020, given Europe ample evidence of these differences. It has threatened and bullied democratic Australia for having the gumption to push for an enquiry on the origins of the pandemic. Its new security law has all but abolished the promise of “one country two systems” for Hong Kong. Its adventurism in the neighbouring seas has increased. Its border conflict with India has escalated to a new level. Its increasing use of “wolf-warrior diplomacy” has even given up the pretence of sweet talk on many issues that most democracies hold dear.
Despite all these clear provocations, the EU has done little to update its strategy. It has — almost religiously — continued to repeat its mantra of 2019: It sees China as its partner, competitor, and rival. This, in fact, was nothing but fence-setting — and with the conclusion of the CAI negotiation, the EU has signalled to its own people, its allies, and indeed to China, which side of the fence it prefers.
The CAI — despite von der Leyen’s claim that it will help the EU defend multilateralism — is not multilateral at all. It is a bilateral deal with an authoritarian power that seems to have a very different understanding of multilateralism. It comes at an especially ill-opportune time. It signals to China that the EU now, not only turns a blind eye to, but actually rewards its increasingly aggressive behaviour. It suggests that the EU has scarce regard for its closest ally — the United States — which, under the incoming Biden administration, had clearly revealed that it would like to work together on China. It does not reassure other democracies — such as Australia, Japan, and India — and it also undermines the potential for alliances with like-minded players. And the deal is a slap in the face of multilateralism: It shows how, for all its talk in favour of reforming multilateralism, the EU actually attaches greater worth to a bilateral deal with a country that has contributed significantly to the breaking of the system.
In the 1990s, many were determined to embrace the “middle kingdom” and integrate it with the multilateral trading arrangement. The argument was that this would make China more like ‘us’. Tragically, many in the EU today are more like China instead. This agreement marks the move of the Union from ‘values’ to “valuations” and from ideals to trade.
Importantly, these are all choices that the EU has made. They cannot be fobbed off on China. China has simply gamed a round of Realpolitik rather effectively. Europe, in contrast, has weakened its own hand, given short shrift to its own values, and undermined the position of its friends and allies.
We will see the rise of a New World Order driven by national interest, reliability of partners, and of course, economic factors. India has to use a “Gated Globalisation” framework to negotiate this change.
The COVID-19 vaccines are coming. And along with this sanjivani comes a new age of geopolitics. The vaccines are varied, with different pricing points and affordability. Nations have secured their vaccine supplies from countries and companies they trust, often by forging new alliances. The scepticism over the vaccines from China and Russia shows that trust is the operating word in the post-pandemic era — and it is not limited to the choice of vaccines.
As we enter the third decade of the 21st century, a multipolar world awaits us. The US and China — rivals for the top slot till the pandemic hit the world — will now have to contend with traditional and rising powers like the UK, France, India and Brazil. Each country will engage with others selectively, not in every arena. We will see the rise of a New World Order driven by national interest, reliability of partners, and of course, economic factors. India has to use a “Gated Globalisation” framework to negotiate this change.
The security landscape will continue to drive partnerships, but these will no longer be omnibus alliances. India is locked in a confrontation with China in the Himalayas. The US and its traditional allies are ramping up their presence in the Western Pacific. A new Great Game is underway in the Indo-Pacific where the Quad is emerging. The Middle East is in a deep churn as Israel and Arabs discover Abrahamic commonalities. Europe is caught in a struggle to retain its values amid the diversity it has acquired over the years.
The Gated Globalisation framework requires that India should protect its interests in these unsettled times. Strong fences are necessary, but so is the creation of new partnerships (like the Quad) based on trust and common interests. Gated Globalisation has no place for parlour games like “non-alignment”; it will test the tensile strength of “strategic autonomy”. The need for a new coalition was felt after Doklam and has become a necessity post-Ladakh: India needs friends in deed.
The Gated Globalisation framework requires that India should protect its interests in these unsettled times. Strong fences are necessary, but so is the creation of new partnerships (like the Quad) based on trust and common interests
Beyond security, like everybody else, India has to make partnership choices on trade, capital flows and the movement of labour. The WTO’s multilateral trading arrangements have frayed beyond repair. Whether it is RCEP in the Indo-Pacific, the new version of NAFTA called USMCA, or the reconfigured EU, countries will have to decide whether they belong inside these gated trading arrangements. India has chosen to stay out of RCEP and the UK has left the EU.
By imposing restrictions on trade with China, India faces restrictions on capital flows. But this does not preclude enhanced capital flows from new partners. To prevent inflow of illicit funds, India has barred capital from poorly-regulated jurisdictions. India’s capital account for investment is largely open while its current account is carefully managed. Similarly, while restricting debt flows, India is open for equity flows from friendly countries. Other nations have similar policies. By managing capital flows in this manner, countries have enabled tighter financial relationships within their gated communities while shutting out those who are inimical to their interests.
India’s global diaspora is now over 30 million and sends more through remittances ($80 billion per year) than foreign capital inflows. The pandemic-enforced work-from-home may see the creation of new pools of skilled workers, living in virtual gated communities, further enhancing income from jobs physically located elsewhere. Moreover, the Indian diaspora is now increasingly impacting policy in countries like the US, UK and Australia where it has contributed politicians and technocrats, innovators and influencers, billionaires and cricket captains.
The pandemic-enforced work-from-home may see the creation of new pools of skilled workers, living in virtual gated communities, further enhancing income from jobs physically located elsewhere
Finally, technology flows and standards will also define gated communities. The internet is already split between China and everyone else. The Great Firewall of China has shut out many of the big tech players like Google, Facebook and Netflix. Instead, China has its Baidu, Alibaba and Tencent. With the advent of 5G technology, this split will get deeper and wider over issues of trust and integrity.
The EU-crafted General Data Protection Regulation (GDPR) is an excellent example of Gated Globalisation. The EU has set the terms of engagement; those who do not comply will be kept out. The Indian law on data protection that is currently being discussed follows a similar sovereign route. However, it remains to be seen whether these norms can checkmate China’s massive digital surveillance apparatus.
There are other emerging arenas that will likely become the focus of big power competition. China has moved in all possible directions to develop its global strategies. It has linked its national security interests with its Belt-and-Road Initiative and its debt programmes. It is offering a package deal of 5G technology with new telecom networks. China has learnt well from the US.
Amid these rapidly changing post-pandemic realities, India has to be swift in identifying partners whom it can trust and who will help protect and further its national interests. Ambiguity, lethargy and posturing will not do.
Key takeaways from CyFy 2020 for the Fourth Industrial Revolution
s we step into a year of uncertainties after a disruptive year of the pandemic, there is only one universal certitude: 2021 will witness the increasing adoption of technology as innovation gathers extraordinary speed. Clearly, our digital future is exciting, but it is hazy too. There are galactic black holes; and even that which is visible is overwhelming.
Despite acknowledging the need for critical discourse, our pace of enquiry, examination and action has been lethargic and out of step with the motivations of coders hardwiring our future through soft interventions. They are changing economies, societies, politics and, indeed, the very nature of humanity at an astonishing speed and with far-reaching consequences.
Nations that effectively respond to the advent of the Digital Era will be in the vanguard of the Fourth Industrial Revolution and will emerge stronger as the 21st century approaches high noon. Others will suffer the adverse consequences of the coming digital disruptions.
At the turn of the decade, Delhi hosted a stellar set of thinkers and speakers at the annual CyFy conference organised by the Observer Research Foundation, which focused on technology, security and society. Here are nine takeaways from the debates and discussions that threw up a kaleidoscope of scintillating ideas.
1. CHINA’S DIGITAL VICTORY PARADE
hat the US accomplished in the 20th century, China has set out to achieve in the 21st. The first takeaway from the CyFy debates is that China’s surge will continue, and it will profoundly change the world order. The US and its partners are witnessing the inexorable rise of an authoritarian digital power with the COVID-19 pandemic emboldening
THE US AND ITS PARTNERS ARE WITNESSING THE INEXORABLE RISE OF AN AUTHORITARIAN DIGITAL POWER… CHINA’S SURGE WILL CONTINUE, AND IT WILL PROFOUNDLY CHANGE THE WORLD ORDER.
Beijing to tighten its surveillance and suppression networks—bolstered by big data, facial recognition, et al.
The China Electronics Technology Group Corporation (CETC), a defence contractor, for instance, pitches such future applications as detecting ‘abnormal behaviour’ on surveillance cameras or among online streamers. These applications intimate such detections to law enforcement agencies.[i] Several regimes around the world are attracted to these Chinese offerings, which enable them to control their citizens.
Meanwhile, the old Atlantic Consensus is in total disarray. Europe is intent upon carving out its niche in emerging technologies while promoting new technology champions to challenge American tech dominance. After taking over the European Union presidency, Germany has called for the expansion of digital sovereignty as the leitmotif of EU’s digital policy.[ii] A new Digital Services Act may fundamentally alter intermediary liability and mark a new milestone in digital rights and freedoms.[iii]
Across the Atlantic, the US has made its fear of China Tech apparent but is yet to initiate a coherent effort to build an influential digital alliance as a sustained response to China’s relentless digital expansionism. Which brings us to the central geopolitical question: Can the US and Atlantic nations, currently marred by divisions and domestic disquiet, get their act together to respond to this emergence? Authoritarian tech is at the gates: Does the West have the resolve to respond? Will a new Administration in Washington, DC herald a new and meaningful approach? Or will America continue to turn inwards?
China will not offer any negotiated space. Beijing’s offer will be binary, so will be the outcomes. It is, therefore, imperative for a club of technology-savvy countries to come together if liberalism is to be preserved in our digital century.
2. END OF MULTILATERALISM AND THE RISE OF CLUBS OF STATES
o say that the international order is failing and floundering is not to state anything startlingly new; it’s only to underscore the bleakness of the global reality. However, like the proverbial silver lining, there is a degree of optimism around the role and centrality of smaller groupings. Regional partnerships, alliances of democracies, and plurilateral arrangements between nations with focused engagements and specific purpose platforms are seen to be important in these turbulent times. This is best exemplified by Australia, India and Japan—who with an eye towards China and propelled by their shared interest in a free, fair, inclusive, non-discriminatory and transparent trade regime—are banding together for a Supply Chain Resilience Initiative.[iv]
These small groupings, built around shared but limited objectives, are dying multilateralism’s lifeline. The Year of the Pandemic and its resultant disruptions have left the world with few options. One of them is to begin rebuilding multilateralism with smaller groups of countries with aligned interests. Hopefully, over time, this will lead to an efficient, inclusive international order.
India, Japan and Australia have taken on the responsibility abdicated by the US of building a resilient, vibrant, secure technology network in the Indo-Pacific. The role of the EU, ASEAN (more difficult due to deep divisions) and democracies in the Indo-Pacific in defending and strengthening norms and laws associated with technology and politics was elaborated loudly and clearly at CyFy.
States matter and the leadership of individual nations will have to drive the global arrangements that will best serve this century. While dialogue with geopolitical adversaries remains critical, meaningless consensus-driven multilateral approaches are not viable in a world fundamentally fractured along political, economic and ideological fault lines. We need action, not pious declarations. Given the pace at which emerging technologies are evolving, organisations like the UN are too slow, unwieldy and politically compromised to have any significant impact.
3. GLITCH IN GLOBALISATION
n the post-COVID-19 era, globalisation as we have known it will be in tatters, yet decoupling will be more difficult than before. There is a simplistic assumption that you can decouple your digital world from the real world. This is not so. If you exclude entities from your digital platforms, it will be difficult to sustain traditional trade in goods and services with them. Commerce and connectivity of the future will have a different texture.
As economic growth, national identities and digital technologies collide, “Gated Globalisation” will be the new mantra. With interdependence no longer fashionable, supply chains will be shaped by rising national security concerns. Increasingly, cross-border flows of data, human capital and emerging technologies are viewed as vulnerabilities. A focus on autonomy and indigenous capabilities has accompanied growing incidents of cross-border cyber operations and cyberattacks.
Commerce may be conditioned on norms along the lines of what the General Data Protection Regulation (GDPR) seeks to do with the digital economy. The Blue Dot Network and supply chain initiatives may all end up creating layers of permissions and permits that will create toll plazas on digital freeways. The digital domain was built on the assumption of hyper interconnectedness. Will it be able to grow with mushrooming policy barriers?
4. UNCHARTED TERRITORY: BETWEEN TECHNOLOGY AND STATE
new and fascinating dynamic is rapidly emerging between democracies and technologies, raising an interesting question: If a democratic state tames technologies, can democracy survive? This question has been posed by Marietje Schaake, the International Policy Director at the Stanford Cyber Policy Center.[v] Technology is being co-opted into a ‘techno-nationalist’ narrative: The melding of a country’s national interest with its technological capabilities while excluding ‘others’. This techno-nationalist narrative often emanates from tech giants who are increasingly speaking in the state’s protectionist language. Mark Zuckerberg’s written statement ahead of US Congressional anti-trust hearings was couched in the language of protecting the core American values of openness and fairness, as opposed
IF A DEMOCRATIC STATE TAMES TECHNOLOGIES, CAN DEMOCRACY SURVIVE? THE COROLLARY TO THAT IS EQUALLY TRUE AND PROMPTS ANOTHER QUESTION: CAN DEMOCRACIES SURVIVE IF THEY DO NOT REGULATE TECHNOLOGIES?
The corollary to that is equally true and prompts another question: Can democracies survive if they do not regulate technologies? The isolating and polarising effects of social media, for instance, have already resulted in a slew of analysts chanting the dirge for democracy.[vii] The answers to these questions are unclear, but it is certainly true that the protection of the public sphere, the integrity of political regimes, and the robustness of conversations must be common aspirations should we want democracy to survive and strengthen.
Be it regulations, education, incentives, ethics or norms, we will have to dig deeper into our toolbox to come up with answers that would allow this to happen. Currently, the negative impacts of technology on our evolving and fractured societies are threatening to overwhelm its promise and potential. Can a new regulatory compact emerge that negotiates the digital ethics for corporations, communities and governments? This decade will witness an unspoken contest over writing this new code of ethics. It remains to be seen whose code will prevail and, more importantly, for what purpose.
5. UNACCOUNTABLE TECH AND CORPORATE BOARDROOMS
e cannot overlook the changes that the relationship between big companies, technology and societies has undergone. If successive anti-trust actions in the US, EU, Australia, India and elsewhere are any indication,[viii] accountable boardrooms are now an expectation and will soon be a reality; the shape it will take will be defined by the debates taking place around the world. We can be certain that in the coming years, corporate governance is not going to be the same.
Large companies, having dominance and influence, will need to be more responsive to the communities they serve. The blueprint of new corporate governance cannot but be influenced by the needs of the locality; the nature of the framework will have to be contextual and culturally sensitive. Since mammoth corporations determine our very agency and choice, it is part of their fiduciary duty to ensure that the interests of the company and the community are ethically aligned.
Outside corporate boardrooms, we cannot ignore the role of coders or programmers in Bengaluru, Silicon Valley, Tel Aviv and other tech hubs. As we become increasingly reliant on software, can we let coders be the new cowboys of the Wild West without any accountability? As we get further entangled in the intricate web of algorithms, it has become clear that we need to demystify them. No more black box responses, no more unaccountable algorithms. What we need are programmers who are held responsible for the impact their codes make on people’s lives. We need algorithms that are not only transparent but also seen to be so.
6. THE PANDEMIC & DIGITAL SOCIETIES
he pandemic has made us reassess our approach to life and behaviour. We consume, we communicate, and we integrate using technology. Nearly a year on, COVID-19 has not only furthered technology’s invasion of our lives but also brought to the fore new realities, especially regarding privacy. The deepening concern over privacy is intertwined with the change in the ownership of data. The pandemic provided the pretext to alter the role played by big corporations and the control of the state over technological devices, products and services.[ix]
The digitalisation of our day-to-day lives may enable an unprecedented level of personalised oversight over individual behaviour. In its mildest form, this can be ‘libertarian paternalism’, a nudging predicated on the belief that individual choices are rarely made on the basis of complete information and are instead a product of psychological biases. At the other end of the spectrum, the ‘gamification’ of citizenship under this new paradigm would be the ultimate realisation of the Hobbesian social contract, whereby the Leviathan would be entrenched in every aspect of citizens’ lives.
In order to retain the ownership of data and individual autonomy, all these changes must be accompanied by the strengthening of our resolve to defend individual choice, freedom and rights by formulating adequate laws that would ensure that the values we create serve us, the people.
7. REWRITING THE SOCIAL CONTRACT
he world needs a new social contract—a digital social contract. The pandemic has thrown the old workplace order into a state of flux, thereby, reopening the debate surrounding the provision of the three Ps: Paycheck, protection and purpose to individuals. The equivalent of 475 million full-time jobs vanished in the second quarter of 2020[x] and many others found themselves without health insurance and other benefits typically linked to work contracts at the greatest time of their need. To ‘build back better’, the new order is being shaped by new terms of contract and employment, concepts of social protection and minimum wage for all, and the altered role of the state, big tech and individuals. The global shift towards virtual workspaces also provides an opportunity to induct a more diverse work force, especially individuals from historically marginalised communities. However, we need to take note of the challenges that might accompany these changes—such as ensuring safe, inclusive digital workspaces, keeping pace with ever-changing technology, meeting the demand for human skills, and coping with the displacement of jobs. As we move to a more ‘virtual first’ work environment, we need to make sure that nobody is left behind.
Meaningful engagement with vulnerable communities necessarily involves outreach by governments as well as large technology firms, both of whom have benefited from the data of these communities. It is, therefore, the responsibility of both to build bridges with the communities that would be most vulnerable to the disruptive impact of the technologies they build and benefit from. We must take advantage of this moment to forge technology that will be in service of humanity—taking ‘people-centered innovation’ from a buzzword to actual practice.
8. OUTLASTING THE VIRUS: INFODEMIC AND I
n intense battle is being waged against the Infodemic, which is running parallel to the battle against the Pandemic. Misinformation, the darkest shade of grey in the Chrome Age, is now being used to destabilise businesses and political systems, and dissolve the social cohesion shared by individuals. “Misinformation costs lives”,[xi] and the Infodemic has led to uncountable preventable deaths.
NO SINGLE AGENT CAN EVER ENSURE THE INTEGRITY OF THE GLOBAL INFORMATION SYSTEM. THE ANSWER, THEREFORE, LIES IN THE COMING TOGETHER OF ALL THE THREE IMPORTANT ACTORS—THE STATE, BIG TECH AND THE PUBLIC.
No amount of digital distancing is helping curb the spread of fake news. This emergence of a highly polarised information system should be effectively countered by a new guarantor of the public domain. No single agent can ever ensure the integrity of the global information system. The answer, therefore, lies in the coming together of all the three important actors—the state, big tech and the public.
The state should help denounce disinformation and simultaneously promote high quality content. Big tech can devise algorithms to filter out such misinformation, curtail the financial incentive acquired through it and display a higher sense of responsibility. Indeed, if platforms can display the same energy and responsiveness they did during the US elections in other jurisdictions, we may have some hope for a tenable solution.
Finally, the public should expand their information base by incorporating different sources of information, reading before posting on social media, and exposing and reporting fake news. It is only through the realisation of collective responsibility that we can hope to find a ‘vaccine’ for the Infodemic.
9. #TECHFORGOOD – A RAY OF HOPE
n a gloomy landscape of various shades of grey, we are at last beginning to see some light and some white. The emergence of a technology moment where communities are beginning to find their voices and change the course of their future, provides a glimmer of hope. Across the world, especially in Asia and Africa, people are discovering, nurturing and shaping new aspirations and goals for themselves by using technology. The African Union highlighted the need to diversify, develop and assert ownership over its digital society and economy.[xii] Community data has transformed from a fringe idea to a mainstream policy debate, receiving a nod, for instance, in India’s Non-Personal Data Governance Framework.[xiii]
Even as the pandemic upended our lives, we saw governments deploying technology for the greater social good; we saw businesses respond to it with extreme ingenuity; and we also saw women seizing this moment and retaining agency.
The post-pandemic era offers us an opportunity to build a more diverse and inclusive digital order. We can, and must, redefine diversity and support minorities and women to play a key role as a new world emerges from the debris of the war on COVID-19. The world today once again stands on the cusp of history. It cannot afford to fail in laying a new foundation which is free of the of the frailties of the past.
Eastern Focus: To what extent is Europe important for the future of the world order? Europeans feel like they count less and less on the world scene.
Samir Saran: Europe is, paradoxically, the single most important geography that will define the future trajectory of the global order. If Europe remains rooted in its fundamental principles – of being democratic, open, liberal, plural, supporting a transparent and open market economy, defending rule of law, the rights of individuals, freedom of speech – the world will have a chance of being liberal. If the European Union is split between the north and south, east and west and we see a large part of it deciding to give up on the Atlantic project and align with more authoritarian regimes – which is quite tempting, due to the material side attached to the choice – that will be the end of the Atlantic project. An EU that is not united in its ethics is an EU that will eventually write its own demise. How will Europe swing? Will it be an actor, or will it be acted upon?
I have the belief that post-pandemic EU, as a political actor, will see a new lease of life. A new political EU may be born as the pandemic ends. Unless that happens, I believe this is the end of the European Union itself. It is a do it or lose it moment. Unless Europe becomes strategically far more aggressive, far more expansive, aware of its role, obligations and destiny you will see an EU that fades. For me, the most important known unknown is the future of Europe. Will the EU hold? Will the 17+1 become more powerful than the EU 27? Which way will the wind blow on the continent? Will it really be the bastion of the liberal order or will the liberal order be buried in Europe?
The Indo-Pacific is the frontline for European safety
EF: We’ve been used to only existing as part of the transatlantic relationship. In the past few decades, Europe has never really seen itself as an individual actor, but rather in coordination with the US. That is something that is starting to shake now. Do you see Europe acting on its own terms, as a global actor, in the positive case in which the member states do get their act together? Are we rather going to continue to act together with the US? Or find some other partners?
SS: I suspect that with Brexit, you might see a far more cohesive EU, organised around the French military doctrine and French military posture. With an absent UK, I have the feeling that the political cohesion of the EU will increase and that the EU will be far more coordinated in its approach to the geostrategic and geopolitical questions. France realises that by itself, without the size of the EU, it might not be a significant actor. A French military presence will be compelling only if it acts on behalf of the EU.
Europe believed that it could change China by engaging with them, however I suspect China will change the EU before the EU changes China.
In terms of other partners, Europe has made one error. Europe believed that it could change China by engaging with them, however I suspect China will change the EU before the EU changes China. The mistake that the EU makes is that it imagines that an economic and trading partnership will create a degree of political consensus in Beijing. Nevertheless, Beijing is not interested in politics, but in controlling European markets.
What Europe should do is to consider the importance of India. If the European continent needs to retain its plural characteristics, South Asia is the frontline. What is happening today between India and China is actually a frontline debate on the future of the world order. The Himalayan standoff is just the first of the many that are likely to happen unless this one is responded to. If China is able to change the shape of Asia and recreate the hierarchical Confucian order, don’t be surprised if the fate of Europe will follow the same path. If Europe needs to feel secure in its own existence it needs to create new strong local partnerships – with India, Australia, Indonesia, Japan. The EU needs to see itself as an Indo-Pacific power. The Indo-Pacific is the frontline for European safety. If the Indo-Pacific was to go the other way, the mainland is not going to be safe.
EF: What do you think about the CEE’s role in the new emerging order? We see an increased competition for hearts and minds here. How could India help, in an environment of increased competition and active engagement of China in this space?
SS: The Central Europeans are going to be the centre of attention for many actors. China will buy their love, America will give military assurances and so on. In the near future, many actors will realise the importance of the CEE, simply because it is these countries that will decide which way Europe finally turns. In some ways they are the swing countries, the swing nations that are going to decide whether Europe remains loyal to the ideals of its past or decides to have a new path. CEE countries are in many ways the decisive countries.
CEE has two important options and two important pressures. The options: will they be able to create a consensus (between the Chinese, the Russians, the Old Europe and the new countries like India) or will they be an arena for conflict? Can we create a ‘Bucharest consensus’, where the East and the West, North and the South build a new world order and the new rules for the next 7 decades? If you play it wrong you might become the place where the powers contest, compete and create a mess.
There are also two pressures. Firstly, there is an economic divide in Europe. You are at a lower per capita income, you need to find investment funds for the infrastructure, employment, livelihoods and growth, which results in an economic pressure that needs to be tackled. Therefore, Europe will have to decide if the provenence of the money matters. Does it matter if it is red or green? Does it matter if they come from the West or the East? That is one pressure that needs consideration. How do you meet your own aspirations, while being political about it?
The other pressure is the road you want to take. How do you envisage the future? Is it going to be a future built on cheap manufacturing? Being an advanced technological society, are you going to be the rule-maker of theFourth Industrial Revolution or its rule-taker? Secondly, the nature of the economic growth that you are investing in becomes another pressure. This is the second choice that the CEE will have to make. In that sense, I believe that India becomes an actor. As we have experienced this in the past 20 years, we are one of the swing nations that could decide the nature of the world order, thus we may share this experience with you. We have also decided that we don’t want to be a low-cost manufacturing economy like China, but rather a value-creating economy, building platforms. Even if we have a small economic size, we have a billion-people digital platforms, digital cash system, AI laboratories and solutions.
What is happening today between India and China is actually a frontline debate on the future of the world order. If China is able to change the shape of Asia and recreate the hierarchical Confucian order, don’t be surprised if the fate of Europe will follow the same path.
As we move into theFourth Industrial Revolution, the tyranny of distance between Europe and India disappears. We don’t have to worry about trade links, land routes and shipping lines. Bits and bites can flow quite rapidly. As we move to the age of 3D printing, to the age of quantum computing, of big data and autonomous systems, the arena where we can cooperate becomes huge.
India gives Europe room to manoeuvre, room to choose. When it comes to choosing, besides the traditional American and Chinese propositions, there is also a third one – India, a billion-people market.
EF: Do you expect that there is going to be a shift in the EU toward reshoring and ensuring that manufacturing is not captive to Chinese interests or to Chinese belligerence?
SS: I think that we are going to see a degree of reshoring everywhere. It is not going to be only a European phenomenon. Political trust is going to become important. Political trust and value-chains are going to affect one another. Countries are going to be more comfortable with partners who are like-minded. They don’t have to agree on everything, but they should be on the same ideological and political spectrum.
There are two reasons for this. One is the pandemic that we are currently facing and in a way it exposed the fragility of globalisation as we know it. The hippie and gypsy styles of globalisation are over. I think that people are going to make far more political decisions. The second is that as we start becoming more digitalised societies, individual data and individual space are going to be essential, thus you don’t want those data sets to be shared with countries whose systems you don’t trust. Value is going to increasingly emerge through intimate industrial growth, far more intimate in character – it is going to be about the organs inside your body, it is going to be about the personal experiences, about how we live, transact, date or elect. They are all intimate value chains. The intimate value-chains will require far greater degree of thought than the mass production factories that created value in the XXth century.
The EU may be setting the format for managing our contested globalisation
EF: You mention the rising value of trust, as a currency even. In Europe, we often point out that we are an alliance based on values. But even our closest partner, the US seems to be moving in a much more transactional direction, let alone China and others. You are describing a worldview that is relying increasingly on shared values, at least some capacity to negotiate some common ground, on predictability, whereas in many ways it seems that things are moving in the opposite direction, a much more Realpolitik one. Is this something that is going to last?
SS: The pandemic has brought this trend to the fore. People are going to appreciate trust and value systems more than ever. But I think this was inevitable. If you would recall, India used to be quite dismissive of the EU, calling it “an Empire of gnomes”, with no strategic clout. But if you look at the last two years, India has started to absorb, and in a sense to propose solutions that the EU itself has implemented in the past. India came up with an investment infrastructure framework in the Indo-Pacific that should not create debt trap diplomacy, should create livelihoods, respect the environment and recognise the rights and sovereignty of the people. India came up with this when it saw that the Chinese were breaking all rules and all morality to capture industrial infrastructure spaces. The Americans under Donald Trump also came up with the Blue Dot American project for the Indo-Pacific – a framework that was based on values. Whenever you have to deal with a powerful political opponent you throw the rule book in there. If you don’t want to go to war with them, you will have to manage them through a framework of laws, rules and regulations. The value systems are a very political choice. They are practices and choices enshrined in our constitutions and foundational documents. Therefore, dismissing values and norms as being less political or less muscular is wrong. The EU, “the empire of gnomes” that was much criticised for the first two decades as weak and not geopolitical enough, may well become an example for other countries. If it remains solvent, a vibrant union, and if it is not salami-sliced by the Chinese in the next decade, the EU may well be setting the format for managing our contested globalisation.
This pandemic is the first global crisis where Captain America is missing
EF: How does India see the future of the Quad? Usually the Quad is associated with a certain vision of the Indo – Pacific, free from coercion and open to unhindered navigation and overflight. Are we going to see the emergence of a more formal geopolitical alignment or even an alliance to support a certain vision about Asia?
SS: The Quad is going to acquire greater importance in the coming years. It is going to expand beyond its original 4 members. We’ve already seen South Korea and the Philippines joining the discussion recently. We are going to see greater emphasis by all members doing a number of manoeuvres, projects and initiatives together. The next 5 years will be the age of the Quad. The pandemic started this process. I see three areas where the Quad can be absolutely essential.
One is in delivering global public goods, keeping the sea lines open and uncontested so that trade, energy and people can move with a degree of safety and stability. In a sense, I see the Quad replacing the Pax Americana that was underwriting stability in certain parts of the world.
The second area is going to be around infrastructure and investments in certain parts of the world. I see the Quad grouping many initiatives that will allow for big investments in countries which currently have only one option – China. The Quad will be able to spawn a whole new area of financial, infrastructure and technology instruments closer to the needs of Asians, South Asian, East African, West Asians including the Pacific Islands. The Quad will be the basis of this kind of relationships in the upcoming years.
Thirdly and most importantly, the role of the Quad will be to ensure that we won’t reach a stage where we have to reject the Chinese. None of us wants a ‘No China’ world, because all of us benefit from China’s growth and economic activities. Many of us have concluded that the only way to keep the Chinese honest in their engagements, economical or political, is to be able to put together a collective front in front of them, not negotiate individually. The EU has done that longer than anyone else and that’s why the Chinese don’t like the EU and apply a ‘divide and conquer’ methodology to get more favourable deals. The Quad is in many ways an expression of that reality, as well of that the middle powers in Asia and Pacific (Indonesia, Australia and Japan) will have to work together, sometimes without the Americans, to negotiate new terms of trade and new energy, or technological arrangements. The Quad in many ways is also the ‘make China responsible’ arrangement, an accountability framework which will keep the Chinese honest and responsible actors in the global system.
The next 5 years will be the age of the Quad. The Quad in many ways is also the ‘make China responsible’ arrangement, an accountability framework which will keep the Chinese honest and responsible actors in the global system.
EF: Do you also see this trend extending into the political sphere in a kind of collective endeavour both in Asia (through the Quad) and in the West (starting with Europe perhaps) to build a new kind of world order? Do you feel that this ‘middle powers concert’ is one possible way to go? Or do you believe that we are going to be disappointed, as we were by the BRICs, when some of the members drowned in their own domestic problems?
SS: We are part of a world that doesn’t have any superpowers. The last superpower was America, and that ended with the financial crisis ten years ago. Ever since, we have been literally in a world which had quasi-superpowers like the US, to some extent Russia, the Chinese, but there was no real hegemon that could punish people for bad behaviour and reward people for good behaviour.
Some of the most interested actors in the Indo-Pacific in the last two to three years happened to be the UK and France. A few years ago, they sensed that if they want to be relevant in the future world order, as it is built and as it emerges, they need to be present in the debates that are unfolding in this part of the world. Both partnered with India – to do military manoeuvres, to create maritime domain awareness stations, to invest in infrastructure and to create clearly the beginnings of a new order that might emerge from here. We will have to create these coalitions to be able to get things done.
The pandemic tells us something which is also quite tragic. Ever since I was born I have never witnessed a global crisis that did not have America as a response leader. This pandemic is the first global crisis where Captain America is missing. What makes it even more complicated is that the successor to Captain America has caused the crisis. Hence, you have the old power, which is absent and engrossed in its own domestic realities, and the new power that has been irresponsible and has put us in this position. Both the previous incumbent and the new contender don’t have the capacity to take action in this world by themselves. This tells us that building a coalition of middle powers is absolutely essential. It is not a luxury, it is not a choice. This is something concerning our own existential reasons that we must invest in.
EF: Do you see this coalition of middle powers as some sort of a ’league of democracies’? It is a concept that was previously advanced by John McCain and now Joe Biden is embracing as his overarching framework for foreign policy. Do you see the potential for creating this league of democracies as some sort of manager and defender of the liberal international order?
SS: I think it is inevitable. Technology is so intimate that we are not going to trust our data with folks we have a suspicion about. Thus, it is this reality that makes this coalition of democracies and like-minded countries inevitable. Even if we may never call it that, it is going to become that. We are going to notice countries engaging in these intimate industries with others who are similar, who are like-minded, who have similar worldviews. Still, this process may take longer than we have. We do not have the luxury of time, because we are going to be destroyed, divided, decimated and sliced in the meantime.
A few countries will have to take leadership – either the French, the UK, the EU itself, or India, or all of them. Until there is an agreement on a big vision for the new world order we must agree to an interim arrangement and have to create a bridging mechanism that takes us from the turmoil of the first two decades of this century to a more stable second half of the century. We don’t want to go through two world wars in order to achieve this unity, as we did in the past century. We need to have some other mechanisms that will prevent conflict, but preserve ethics.
In this context the EU-India and the CEE-India projects are essential. It is us who have the most at stake, because our future is on the line. The more the world is in turmoil, the less we will be able to grow sustainably. It is our interest to create and invest in institutions and informal institutions that could preserve a degree of values and allow for stability.
Such a coalition reuniting countries from Central Europe, Western Europe and from Asia (such as India, Australia, Japan) will normalise the behaviour of both America and China. I do not think that they behaved responsibly in the last few years – one because of its democratic insanity, and the second because of its absolutist medieval mindset. Along these lines, you have democratic failure at one end and a despotic emergence at the other end. We need to ensure that democracy will survive and that the middle powers will be able to normalise this moment.
EF: What is Russia’s role in all this? Is Russia going to be on our side? Or is it going to be on China’s – considering that sometimes they seem to, although their agendas perhaps align only when it is opportune for both of them?
SS: Russia has an odd reality. It is a country that has a very modest GDP (the second smallest within the BRICs) but it is also a country that is possibly the second most powerful military force in the world. A big military actor with a very small economic size. This is creates a policy asymmetry in Moscow. It has very little stakes in global economic stability or global economic progress, but it has huge clout in the political consequences of developments around the world. The Russians have somehow to be mainstreamed into our economic future. Unless Russia is going to have an active role in the Fourth Industrial Revolution or have real benefits, their economy will stay in the 20th century and therefore their politics is going to reflect a 20th century mindset. If they are included in the economic policies of the future, their politics will evolve too. It is not an easy transition. Nevertheless I would argue that the Russians have to be given more room in European thinking so that they don’t feel boxed into the Chinese corner. The last thing that we should be thinking of is giving Russia no option but to partner with the Chinese. Perhaps the immediate neighbours (the CEE) will not be open to a partnership, taking into account their political history. But countries like India would be able to offer space for manoeuvre. In that sense, India could be a market, a consumer, an investor in the Russian economic future and the CEE-India partnership could become important. Can we together play a role in normalising that relationship? Can we give the Russians an option other than China? If Russia’s economic future is linked to ours, it doesn’t have to be in the Chinese corner. The Russians are not the Chinese. The Chinese take hegemony to a whole new level; the Russians have this odd asymmetry that defines their place in the world. This asymmetry should be addressed with new economic possibilities and incentives.
The rise of the Middle Kingdom
EF: We’ve been discussing how to react to a world that is increasingly defined by China. But what are China’s plans? What does China want?
SS: I do not know their plans, but I can tell you how I see China’s emergence, from New Delhi. I define it through what I call the 3M framework.
Firstly, I see them increasingly becoming the Middle Kingdom. Chinese exceptionalism is defined in those terms. They believe they have a special place in the world – between heaven and earth. They will continue to defy the global rules and they will not allow the global pressures to alter their national behaviour or domestic choices. So we will see the first M, the Middle Kingdom, emerge more strongly in the years ahead.
This pandemic is the first global crisis where Captain America is missing. What makes it even more complicated is that the successor to Captain America has caused the crisis.
Secondly, this Middle Kingdom will make use of modern tools. They see Modernity as a tool, not as an experience. In that sense they use it to strengthen the Middle Kingdom, not to reform and evolve. Such tools include digital platforms, the control of media and a modern army with modern weapons to control and dominate.
Thirdly, the final M deals with a Medieval mindset. They are a Middle Kingdom with Modern tools and a Medieval mindset that believes in a hierarchical world. We are a world which has moved away from the hierarchies of the past. The world is more flat, people have equal relationships. The Chinese don’t see it like that. They see a hierarchical world, where countries must pay tribute to them. They sometimes use the Belt and Road Initiative to create the tribute system or the debt trap diplomacy to buy sovereignty. Likewise, they use other tools to ensure the subordination of the countries they deal with.
While Covid-19 has disrupted societies, it has also brought greater clarity for individuals and nations. The European Union (EU) and the United Kingdom (UK) are two political geographies that may be experiencing this and are certainly at an inflection point. In this context, foreign secretary Harsh Vardhan Shringla’s visit to Paris, Berlin and London gains salience. That he has chosen Europe for his first Covid-19-era visit outside the neighbourhood suggests that New Delhi has sensed the importance of this moment.
At a recent event, external affairs minister, S Jaishankar, articulated why his ministry continued to invest time and energy in the relationship with Europe. He explained Europe’s importance for India’s most important imperatives — be it technology and the digital domain or becoming a green economy. The region holds the promise of long-term capital, innovation, markets and best practices.
Europe’s economic obsession following the 2008 Global Financial Crisis saw it withdraw from key political theatres. The pandemic has brought it right back to the great churning in Asia and indeed to the Indo-Pacific. The Indo-Pacific Strategies released by Germany and France and the India Strategy announced by EU are indications that the Old Continent is changing course. The UK has hinted that it is realigning its political positions. It is currently engaged in its most comprehensive integrated review of security, defence, development and foreign policies since the Cold War.
Much has been written about the divisions within EU. Economic differences, migration policies and the China factor all have a real basis and have impacted EU. These may well remain points of friction among member-states. The UK’s exit has also had consequences. Paradoxically, the events of 2020 have exposed the limits of fissiparous tendencies in EU.
There is now a disturbing realisation that China is no friend, and it is not like Europe. It drives the same vehicles and uses the same phones, but is not driven by the same values and principles. There is no convergence in world views. The perverse, even vulgar, conduct of mask diplomacy and thereafter the Wolf Warrior doctrine has been deeply disturbing to European sensibilities. Chinese foreign minister Wang Yi’s troublesome EU sojourn indicated a new European resolve to call out China, even as Beijing dug its heels in.
There is now a disturbing realisation that China is no friend, and it is not like Europe. It drives the same vehicles and uses the same phones, but is not driven by the same values and principles. There is no convergence in world views
In the UK, too, the boundaries of Brexitism are being tested. On 5G and technology choices, the UK and major EU countries are aligning positions. Global Britain is navigating new seas, but its ethical and strategic compass is keeping it firmly in the Atlantic Order. The earlier assumption at 10 Downing Street that it was possible to do business with China without being affected by its muscular politics has fallen short. The bears and bulls at the London Stock Exchange have danced for the Dragon far too long. In 2021, as it hosts G-7 — with India as a likely guest — and COP-26, the UK will realise exactly how much it remains embedded in Europe.
Shringla will find in his French, German and British interlocutors a new realism on trade. Free trade deals are not the issue they once were. The World Trade Organization (WTO) has reduced tariff barriers and the pandemic has enhanced the appreciation for non-tariff barriers. Boutique trade deals, supply chains restructuring where feasible, and enhanced linkages in health and vaccine value chains will be the focus. There will be less pressure on, and more opportunities for, India.
Shringla will find in his French, German and British interlocutors a new realism on trade. Free trade deals are not the issue they once were. The World Trade Organization (WTO) has reduced tariff barriers and the pandemic has enhanced the appreciation for non-tariff barriers
Realising the Sustainable Development Goals; battling the climate crisis through green transitions; and building a digital economy must also be on the menu. Post-Covid-19, we must build back green and build back better. In the past four years, the Paris Agreement has rested on European and Indian shoulders. It is time for Europe and India to shape a new global green deal. This EU+1 initiative should be on Shringla’s agenda as he engages with Paris and Berlin.
In London, he must create the ground for a bold UK-India announcement at COP-26 with an emphasis on a financing a framework that can catalyse green growth. India co-founded the International Solar Alliance with France and the Coalition for Disaster Resilient Infrastructure with the UK. These are critical legacies to be nurtured, more so since the United States (US) will continue to go through an existential crisis, to some degree, irrespective of what happens in early-November.
Technology is another shared frontier. Even as Europe invested in Chinese manufacturing zones, data from its banks, insurance and financial firms found safe and efficient homes in India. Trust was the operative word. And this same word will define partnerships in the Fourth Industrial Revolution. Digital partnerships between India and EU and concurrently India and the UK are inevitable and desirable. As they assess the extremes of the American and Chinese models, on technology norms, digital regulations and data privacy, India and various shades of Europeans will find their positions more aligned.
Technology is another shared frontier. Even as Europe invested in Chinese manufacturing zones, data from its banks, insurance and financial firms found safe and efficient homes in India. Trust was the operative word
With the US expected to be preoccupied till the new administration settles in by early-summer 2021, New Delhi is doing well to engage with other major Western democracies that, like India, are contributors to stability in the international system. Coming shortly after Jaishankar’s visit to Japan for the Quad talks and bilateral meetings, the foreign secretary’s trip to the heart of Old Europe is an important follow-up.
2020 is our Black Mirror moment. Each day reflecting back at us the deepest and darkest fissures of our digital societies and of our increasingly binary selves. Conversely and perversely, perhaps, our screens were also our only windows to the world, enabling us to stay connected and engaged, offering fulfillment even as the pandemic kept us apart, isolated and distant. We are, consequently, having to relentlessly engage with cleavages in society, amplified by technology, that we had buried and forgotten in the euphoria of globalisation.
Alongside our vulnerabilities, the ‘attention economy’, where human engagement with devices translates to value and valuations, grew at an unprecedented scale and intensity. From mobility to consumption and transactions, our existence became ever more enveloped in the embrace of big tech and smart tech. The pandemic had tilted the scales of an open debate, and, indeed, human activity and choices (data) were oil in this new industrial cycle. What the Gulf War was to television, COVID-19 has been to online platforms: millions were glued to personal screens, watching human death and misery unfold through the imagery of bar charts and log curves. Millions more were struggling to find — in the digital realm — means to sustain life and livelihood; and nearly all who engage with us at this conference today, were discovering their personas, politics, preferences and, indeed, identities in the world of chrome.
You are connected; therefore, you are.
As identities become indelibly linked to the online world and the apps that kept us connected, these became venues of renewed interest and importance for the state, corporates and communities to mobilise, market and manufacture consent. A heady cocktail of fear and uncertainty saw the emergence of digitally-induced conformity. From masking up to letting go of privacy and choice, we saw a global willingness to conform, submit and allow “draconian but necessary” surveillance measures — think of the submission to temperature readouts and the sharing of our travel history. In this scared and scarred new world, reality flipped over and, suddenly, it was the mobile device that carried a human. In the end, we were little more than our IP code or our mobile number. And the pandemic was certainly was not the only guilty party.
This year’s Digital Debates echoes the darker undertones of 2020 and the decade ahead of us. Through three big stories that have taken centre stage, the nine essays capture the zeitgeist of our times.
First, the pandemic has demonstrated that the workplace is inconsequential to the creation of value. Are we racing towards the threshold where humans themselves become inconsequential to work? Utkarsh Amitabh disagrees. There is infinite possibility, he says, afforded to ordinary individuals through online spaces. His essay celebrates the arrival of the passion economy, hailing the demise of the workplace as an enabler for people to monetise their skills and create economic opportunities for themselves. Manavi Jain, however, says it may be too early to ring the death knell on our coffee machine chats: our need for collaboration, and for a clear demarcation between work(spaces) and life, will compel us to return to brick and mortar offices. We may, in fact, finally see employee well- being and mental health being given the attention it deserves.
Yet, in the short-term, the outlook appears bleak. 400 million full-time jobs disappeared in the second quarter of the year and many others found themselves unwillingly trapped in circumstances that are typical to the gig economy: “flexible” work hours that served as a veneer for exploitation of labour, and the loss of a social safety net. Analogous to this phenomenon was the deification – though not appreciation in any concrete way – of essential workers in so-called low-skilled sectors. Is it time, as Sangeet Jain enquires in her lucid essay, to shed the denigration of manual labour and reassess what “valuable” work means? Paradoxically, will prolific digitalisation catalyse reassessment of how to price human labour?
Is it also time to formally price unpaid labour? While gender equality in the office space has been an agenda on HR manuals for some time now, the pandemic has taken that discussion straight into people’s homes. In a survey conducted across the cities of New Delhi, Mumbai, Chennai, Bengaluru, Hyderabad, Pune and Kolkata , 50% of the women reported facing motivational challenges in the work-from-home setup as they disproportionately bore the “double burden” of taking care of household duties while holding down a full-time job. It appears that while men are willing to cede women some space in a formal office set up, they seem unwilling to lend their partners a helping hand at home. Another study showed that women accounted for 55% of the increase in job losses in the US in April this year.  This threatens to push back gender equality — in the now fused home and workspace — by decades.
Second, for millennia, a regime change by an external power was achieved through violent conflict, war, and annexation. Now technology allows regimes to be destabilised with a degree of simplicity. This was first brought sharply into focus by the 2016 US Elections. Disinformation, misinformation, falsehoods and lies were the legacy of that election. Millions believe that external actors shaped the US mandate. Whether it actually happened was immaterial. Perceptions were sufficient to bring about a loss of trust in institutions and the delegitimisation of the Trump presidency. As a consequence, the US of A is still a divided polity as we head into the next election cycle. This delegitimisation of regimes is agnostic to political systems — democratic, authoritarian, or otherwise. As we entered the new millennium two decades ago, technology held the promise of giving power back to the people by democratising media and communications. The opposite has happened. The imminent US presidential election has underscored the importance of regulating technology (and with it misinformation and disinformation) to secure democracy. Genie Gan canvasses the cybersecurity landscape during the pandemic, with a focus on the Asia-Pacific, and highlights how trust and transparency have become the currency that sustains partnerships between governments and businesses, and between state and citizen.
The (lack of ) trust in tech goes beyond just politics and governance. Even as we navigate the digital realm with renewed vigour during this pandemic, the safety of cyberspace has deteriorated at an accelerated pace, resulting in a scenario where age- old divides and cleavages are only getting more pronounced. The unregulated web is rife with hate speech, phishing attempts, and cyberattacks with attacks against hospitals and healthcare institutions rising by leaps and bounds during this pandemic. Those groups that faced marginalisation in the real world are facing increased aggression in the virtual, with women and minorities on social media bearing the brunt of online abuse across the world. How do we create safe spaces in a virtual world that is lightly ordered and under- regulated?
Third, technology no longer “intersects” with politics: technology is politics. The intimate enmeshing of technology and national identity has become the driving force of geopolitics, and the pursuit of technological gains is not restricted to the realm of fabs and factories, but envelops societies and global regimes and systems as well. James Lewis delves in depth into the exercise of state control in cyberspace, the so-called “Balkanisation” of the internet, while noting with acerbity that the sovereigns are simply reclaiming their role from the quasi-sovereigns, the unwieldy tech giants, whose economic worth has skyrocketed during this pandemic even as economies contracted and half a billion people faced being pushed into poverty. Elina Noor problematises this framework by pointing to asymmetries between the so-called Global North and Global South, where although the latter represents the fastest growing market for digital products and services, they are not proportionately represented in the norms and international frameworks being built around these technologies. Coining the term technology centrism, Cuihong Cai explores the different strategies — offensive or outward-looking techno-nationalism vs. defensive or inward-looking techno-nationalism — adopted by nations in pursuit of their technological goals, whether to address or maintain global asymmetries. While Cai calls for an interdependent digital community, with the well-being of people at its core, Lewis underlines cooperation between like-minded nations, noting simply, “Seeking consensus with the authoritarians is a waste of time.” Noor, meanwhile, explores the idea of true independence, where all nations are afforded the choice of placing their own self- determination front-and-centre.
In a plagued world — in both the literal and figurative sense of the word — where gated globalisation is the consensus and digital fences are visible across jurisdictions, it is crucial that we hold on to the kernel of hope espoused by the defenders of interconnectedness. Three-quarters of humanity resides in 137 developing countries, and, according to the UNCTAD Digital Economy Report 2019 , these countries account for 90% of global digital growth. Billions residing in these nations will be lifted out of poverty through digital tools during this Fourth Industrial Revolution. The grand finale of Digital Debates, therefore, is Nisha Holla’s piece, a clarion call for the democratisation of digital technology, emphasising inclusion, rights, legal recourse, and affirmative sovereignty. Content created must now reflect the aspirations of these billions, especially in a diverse country like India. For instance, the rise of local language content in India is perhaps inevitable with enough users coming online who are conversant only in local dialects.
The hopes and aspirations of these next billions should serve as the motivator for all to strive towards an internet for all. Just as the Cold War “hotline” was a symbol of connectedness even in the face of protracted conflict, the digital lines must remain open even if there is disagreement. CyFy exists not just to debate discord, but to find common pathways for our common humanity. Ideas and perspectives streaming this year from CyFy, New Delhi, reflect a section of the aspirations of India’s 1.3 billion people that are mirrored in Abuja, in Jakarta, in Bogota, in Dhaka and beyond.
As investors ponder the impact of the world’s greatest economic crisis since the Great Depression, emerging markets (EMs) face a swift reversal of fortune. Some of the fastest-growing economies in the world have been brought to a virtual standstill, reeling with the effects of an exogenous shock to demand, a public health emergency, and nascent infrastructure with which to combat the pandemic.
While multilateral development banks and international financial institutions have moved swiftly to address critical funding shortfalls, the COVID-19 pandemic has dealt severe challenges to the EM growth model — and to the livelihoods of people within these countries. As governments in emerging markets and developing economies (EMDEs) have less fiscal space at their disposal — but harbour an ongoing need for spending on relief and stimulus measures — credit downgrades from the ratings agencies may be inevitable.
Yet, even in the wake of downgrades, this juncture of COVID-induced distress might open up a propitious opportunity for international investors and companies to invest in infrastructure in EMDEs. As such, these investors would address existing and future gaps in critical infrastructure, and ideally provide options for a green future. It will also be critical for governments within EMDE countries to align priorities with pools of institutional capital.
In light of the exceptional circumstances of COVID-19, as investors consider their portfolios, investment committees (ICs) will need to approach their geopolitical asset allocation in a creative way. As the clouds and confusion begin to clear with regard to living in a drastically altered landscape, a significant opportunity is likely to emerge for infrastructure investors to deploy capital to EMDEs with a long horizon.
With $13.7 trillion worth of negative yielding assets held in portfolios, the hunt for yield and long-term value are likely to reemerge as the concerns for safe havens begin to wane. As such, we explore potential guiding mechanisms for investors to help navigate the shifting macroeconomic and geopolitical environment in EMs, as well as potential policy recommendations for officials tasked with rebuilding their countries after the virus.
Macroeconomic snapshot: the perfect storm
Emerging markets and developing economies have faced a perfect storm in the wake of COVID-19. As the virus hit China in January 2020, emerging markets faced unprecedented capital outflows from foreign investors – dwarfing outflows during previous crises, including the 2008 Financial Crisis (GFC), the taper tantrum of 2013 (when investor panic triggered a spike in US Treasury yields on news that the Federal Reserve was slowly putting the breaks on its quantitative easing programme), and the renminbi depreciation of 2015. In the face of outflows – and depreciation of local currencies – sovereign borrowing costs have risen, thus placing a strain on the ability of many EMDE governments to continue to fight the public health emergency, as well as to shore up their economies amidst the reverberating shock to demand.
As a result of the sudden economic stops around the globe and the ongoing lockdowns, trade activity has plummeted. Commodity prices – typically a bellwether for economic growth for many EMDEs – have remained painfully low, with the price of West Texas Intermediate crude oil plunging to an unprecedented nadir in negative territory. Demand for tourism – another key driver of economic growth and job creation in many emerging economies, such as Mexico, the Philippines and Thailand – remains severely curtailed. Indeed, international tourist arrivals are projected to plunge by some 60 to 80% in 2020. Remittances – another key source of national income and contribution to household purchasing power for many EMDEs – are down, and this precipitous fall is currently most pronounced in Latin America.
And, while many companies rush to secure funding from governments and capital markets, non-financial corporations in EMs continue to suffer from a debt overhang. Some $31.2 trillion sits on non-bank corporate balance sheets. At the end of 2019, an estimated $3.8 trillion of this debt was denominated in US dollars, which might place undue pressure on borrowers to service their debt in light of local currency depreciation. (If one accounts for offshore borrowing and the use of FX derivatives, the total amount of US dollar denominated debt on EM corporate balance sheets could be much higher). Looking at total debt spread across corporates, banks and sovereigns, some $7 trillion of bonds and loans are due to come to maturity in EMs through the end of 2021.
The upside: amplified macroprudential measures
Despite this conflagration of economic challenges, governments and central banks within some EMDEs continue to exhibit a strong implementation of macroprudential policies – namely, by working to keep a lid on inflation, reducing the fiscal deficit and maintaining floating exchange rates. Core inflation (omitting volatile food and energy prices) remains muted within many EMDEs, underscoring the ability of central banks and economic officials to maintain successful inflation targeting regimes, both prior to and throughout the corona crisis. Notable examples on this front include Brazil, Colombia, Vietnam and the Philippines.
Additionally, at the end of 2019, as a result of concerted efforts to reduce their fiscal deficits, Colombia posted the first fiscal primary surplus in almost a decade and Brazil posted its smallest annual fiscal deficit since 2014. As a result of lockdowns and recessions, imports have also been constrained: consequently, several countries boast current account surpluses. Notably, Brazil’s trade gap has narrowed by the greatest amount since 2007. And, although EM currencies were battered throughout the start of COVID-19, depreciation against the US dollar has largely stabilized, with some currencies significantly undervalued at the time of writing.
On the whole, central banks in EMs have been able to step in and help provide liquidity support to households and corporations hard hit by the crisis. In many cases, central banks have used the architecture and tools established during the GFC to be able to help to enable price stability and sufficient liquidity and functioning of financial markets. One EM central bank has even embarked upon the policy experiment of monetary financing; that is, of monetizing state debt by buying bonds directly from the government, rather than from the secondary market.
While foreign investors digest these moves, it is important to point out that at the time of writing, governments and central banks – acting in concert with the financial sector and central banks in advanced economies – have thus far been able to avert a financial crisis, despite the onset of a global health emergency and the worst peacetime economic slowdown since the Great Depression. While many EMDEs take up the fight against COVID-19 and its aftermath – mirroring actions and commitments from officials in advanced economies to “do whatever it takes” – EMDEs do indeed have less fiscal room for manoeuvre than developed markets.
To date, the COVID-19 fiscal response in EMs has amounted to only one-fifth of that of advanced economies. In contrast, countries such as the US can reap more fiscal space by being the world’s reserve currency. Additionally, some eurozone bonds (such as the German 10-year bund) are also considered to be a safe haven for some institutional investors.
Amidst mounting sovereign debt and constrained fiscal space, credit downgrades in EMs have begun to unfurl, posing a challenge to the ways in which investment committees traditionally approach geographical asset allocation. In the wake of a downgrade, it is important for investors to take a step back and ask the following questions:
Which countries demonstrated a robust commitment to implementing macroprudential measures prior to the outbreak of COVID-19?
Which countries have a strong domestic market, rendering them somewhat resilient in the face of an exogenous shock?
Which countries have boasted strong labour force productivity, with a commitment to boost competition in sectors of long-term demand in the post-COVID recovery landscape?
Even if a country receives a downgrade as a result of its enhanced fiscal efforts deployed to help combat COVID-19 and to address the exogenous shock of the pandemic, it is important to recognize that for some countries, these efforts are an expansion of spending during exceptional circumstances, rather than a departure from an overall commitment to macroprudential measures.
Reading the tea leaves: geopolitics and deploying long-term capital to infrastructure
While we might recognize that there are some countries that fit the bill in terms of their economic planning and policy, for investors looking to EMDEs, geopolitics can often cloud the landscape for investing. For the private sector, and specifically investors and executives, geopolitics relates to infrastructure in three key ways:
1) Geopolitical asset allocation, at the portfolio level
On a country-by-country basis, which countries manifest the strongest risk-reward ratios? Here, it is important for investors to distinguish between absolute and perceived risk. For example, an institutional investor with little risk appetite might consider investing in airports in Paris to be a geopolitically low-risk investment, versus deploying capital to airports in Vietnam, which might be perceived as higher risk. However, in light of the rise of populism in advanced economies, and risks of potential nationalization, some countries or regions perceived to be less geopolitically risky might indeed harbour more absolute risk.
2) Managing geopolitical risk, at the asset management level
While operating assets on the ground, infrastructure investors are often confronted with effectively managing geopolitical risk at the asset level. Several questions that may need to be addressed include: how might any (small or large) breach of project safety engender a shift in perception by the host country, potentially rendering the investor a target of local political ire? How might changes in the regulatory environment affect investments, and how might investors anticipate potential changes in the regulatory environment? How might investors best navigate potentially conflicting positions between federal, provincial and municipal authorities? Recognizing that taxes can become a tool amidst a rise in geopolitical tensions, how might investors be able to anticipate potential changes in taxation that might hinder their position, both in terms of profits and also in ease of operation?
3) The intersection between geopolitics and economics
Infrastructure investing has the power to spur a positive feedback loop within an economy. By creating both direct and indirect economic growth and employment, and improving livelihoods and quality of life, greenfield infrastructure investments can provide a foundation for generating economic growth via agriculture, manufacturing and service activity. Brownfield infrastructure investments – including upgrades to existing assets – have the potential to greatly enhance the quality of life in a given area, as well as to boost efficiency (for example, upgrading a toll road can ease traffic and congestion). By acting as a foundation and a multiplier effect of economic growth and quality of life, infrastructure investments can, over time, potentially reduce geopolitical risk by contributing to livelihoods and generating economic opportunities.
In trying to discern which EMDE countries may prove attractive for investment, it is advisable for investors to identify which governments exhibit a strong capacity for follow-through on policy reform. In order to attract voters – or possibly, foreign investors – political leaders might promise many pro-growth or pro-business policies. To promise is, of course, not enough. The question for investors is: which countries have demonstrated the potential to ratify and implement such change?
For example, the Brazilian Congress ratified the country’s historic pension reform in October 2019. Although this had been a policy priority of the current and previous presidential administrations, the country’s legislative body followed through on the reform. In the case of India, while many executives and investors had complained about the opacity of the country’s complex tax system, the implementation of the goods and services tax (GST) greatly simplified taxation. Sometimes, policies such as the GST might induce short-term pain for long-term gain. For investors, It is advisable to identify signs from governments which might harbour this long-term vision – and the capacity to see it through to implementation.
For investors, it is advisable to identify signs from governments which might harbour this long-term vision — and the capacity to see it through to implementation. Partly, this depends upon the strength of existing institutions, as well as the ability to reform institutions as the need arises. Notably, in the case of Brazil, while some investors have been deterred from the ongoing Lava Jato investigations, this demonstrates the strength of the institution of justice.
Crucially, it is not necessarily only democracies which exhibit the capacity for follow-through on pro-business and growth-oriented policy reforms, as well as the ability to constructively reform institutions. Vietnam is a key example here, where foreign and institutional investors continue to respond positively to the government’s ongoing market reforms by deploying billions of dollars to the country. Again, taken together with a consideration of which governments might harbour a commitment to macroprudential measures, a tried-and-tested capability for follow-through on policy reform may also be a signpost for investment committees to identify in light of a potential downgrade.
At the sector level: building back green
In the World Economic Forum’s Great Reset initiative, as many governments chart out policies to constructively rebuild their countries in the aftermath of COVID-19, a clear emphasis is placed on addressing critical gaps in soft infrastructure, which may help enable countries to withstand a health crisis or a sudden stop in economic activity. This includes hospitals and public health institutions, broadband connectivity, educational platforms to continue teaching in a virtual classroom, and supporting sustainable food security, access to clean water and personal protective equipment (PPE).
Of course, these investments are not limited to EMDEs. Advanced economies such as the US and France have worked to address some of these gaps in critical infrastructure in the wake of the pandemic. Accordingly, these types of soft infrastructure categories – rather than the hard infrastructure of ports, roads, airports and bridges – are likely to be immediate policy priorities for some EMDEs in magnetizing foreign investment. Utilities and power are also likely to rank high on the list, insofar as power underpins this softer infrastructure.
In considering economic vitality after COVID-19 – and to do so in a way that shapes a more sustainable and resilient future – governments across the globe have touted green and digital as key policy priorities. However, in order to attract foreign investment, EMDEs will need both strong institutions, as well as the capacity for institutional reform, which would possibly then foster a sense of confidence in fund managers that these might be deployed effectively.
Environmental, social and governance (ESG) indices have outperformed traditional benchmarks during the current pandemic and are likely to attract more funds going forward. Nevertheless, it is crucial for ESG investors to identify jurisdictions with clear green taxonomies and government policies designed to enhance innovation and market creation.
Government action, alone, can’t do the job: the private sector will have to be the locus of climate action. This should require a fresh focus on the ease of doing business, policy certainty and a regulatory landscape, which prioritizes green sectors. Undoubtedly, for many companies facing high fixed costs and negative sales – as well as heightened uncertainty about the future – the coronavirus pandemic has constrained the ability for some corporations to deliver on past commitments to consume green energy.
A critical question to address in the post-pandemic era will be the creation of new growth centres and adaptations of growth models. In EMDEs, cities have been the locus of economic activity and have successfully brought millions out of poverty. However, as the current pandemic – or recent waves of natural disasters – show, one shock can risk undoing the work of years and potentially push millions back into poverty. Highly dense urban centres can also put pressure on both the environment and natural resources. As the risks of climate change mount, growth models in emerging markets should need to prioritize resilience and quality of life, alongside efficiency and profits. This can include the rapid development of smart cities, something Singapore has done remarkably well.
Additionally, while parts of global value chains might be onshored in the wake of COVID-19, a potentially significant opportunity arises for international investors to deploy capital for localizing supply chains. A well-developed domestic supply chain may require improved connectivity, both physical and digital. Digital platforms and knowledge sharing will likely be integrated nodes on the value chain. Smaller self-contained habitats will be required for workers, and sustainable solutions are likely to be needed for housing, mobility and utilities, as well as natural resource management.
Investments in clean power should be requisite to underpin both old and new economic growth: that is, for industrial activity and digital connectivity. Finally, these countries will need to develop the human capital required to carry out jobs that are likely to rely upon increasingly complex technologies. Catalyzing infrastructure investment in the wake of COVID might provide much-needed jobs, and may also sow the seeds for future skills to meet changing patterns of demand in the new economy.
Conclusion: getting it right
In the pre-COVID age, one advanced economy within the Asia-Pacific region has managed to deftly invest in infrastructure in developing countries for the long haul: Japan. Indeed, Japan has had a long history of exchanging overseas development assistance for resources to fuel its manufacturing growth. In later years, it has become an exporter of what Prime Minister Shinzo Abe calls “quality infrastructure investment”.
Recipient countries such as India have affirmed the high quality of such investments – including bullet trains and subway stations – and the Japanese government has also prioritized the facilitation of knowledge exchanges to help nurture and develop human capital. Critically, Japanese infrastructure investment is not necessarily hinged upon whether a country is classified as a democracy, suggesting that both lucrative profits and economic and financial stability may not just emanate from states which profess to be democratic.
It should be noted that Japan has been criticized for its use of coal at home and for its development of coal plants abroad. Indeed, even in light of commitments made by several Asian governments (most notably, South Korea) to “build back green”, Japan has allocated only a nominal amount of the country’s $2.1 trillion COVID relief package toward the green energy transition. However, as relief segues into stimulus and the global economy inches toward recovery in a post-pandemic world, Japan has the potential to help provide an environmental component with its quality infrastructure investments. Indeed, Environmental Minister Shinjiro Koizumi recently announced increasing regulation for building coal power plants overseas — a move that is in keeping with the Japanese business community’s action to help reduce carbon emissions.
Similarly, Australia has declared its intention to become a “renewable energy export superpower” with a commitment to export solar energy to Singapore via cables and the use of the world’s largest battery. A resource-rich country known for exporting coal and natural gas around the world, Australia has the potential to build upon its past relationships and know-how to help bolster the energy transition within emerging markets and advanced economies alike.
In a world of competing visions within foreign policy, both Japan and Australia demonstrate that it is possible to invest abroad without ideology and preconditions – which is a straightforward approach, and likely necessary to help address infrastructure gaps around the globe.
Finally, while infrastructure investors can look to generate profit in EMDEs over the long term, it is advisable for the governments within these countries to explain to their voting publics the importance of attracting foreign capital. This requires clear data, and also versatility in how this data and story is communicated to different interest groups – be it provincial or municipal governments, citizens or local businesses. The story needs to continue throughout the lifespan of such investments – and indeed, potentially after completion.
Development banks within host countries can help provide such continuity amidst changes in administration at the federal level. It is also worth exploring the ways in which some development banks can become independent entities, rather than organized via political appointments. This might provide a much-needed ballast for the dry powder that waits in the wings – and for institutional capital with nascent exposure to infrastructure in emerging markets.
The US elections are witnessing heated, contested, loud and aggressive debates, with media (new and old) donning visibly partisan robes. One such media report has sought to pull India and Indians into the middle of the Trump Vs Biden campaign battle.
First, there is a simple fact that often eludes social media platforms like Twitter and Facebook as well as the easily outraged proponents of the newly-minted ‘cancel culture’. Social media platforms may have their own terms and rules of engagement and content monitoring; it is their prerogative. But those terms and rules cannot—and, more importantly, must not—be allowed to supersede the law as framed by sovereign states, especially democracies, where these platforms operate.
Social media platforms may have their own terms and rules of engagement and content monitoring; it is their prerogative. But those terms and rules cannot—and, more importantly, must not—be allowed to supersede the law as framed by sovereign states, especially democracies, where these platforms operate
For example, the law as it exists in India, based on its constitutional and penal provisions, overrides terms and rules framed by social media companies based anywhere in the world, operating within its territory. After all, if these companies ensure compliance with Indian law in order to conduct business, equal compliance would be in order for content monitoring and management. There cannot be two separate arrangements.
It is necessary to underscore this point to unclutter the debate triggered by an article in the Wall Street Journal, which imputed that Facebook has shown extraordinary preference for the BJP on account of the political bias of some of its employees. Facts do not bear out the newspaper’s contention, which is of a piece with what is termed as ‘cancel culture’, where only those views that are endorsed by a ‘select few’ may be allowed a public platform. The ensuing shouting match needs to be contested with a tempered view on the more substantial issue of a platform’s self-assumed supreme right and absolute authority to decide what can and cannot be allowed to be said.
It is quite obvious that the upcoming US presidential election and the attempt to coerce platforms into becoming an extension of the campaign for or against the incumbent Administration—which is no secret within and outside social media corporate offices—instigated the outrage against Facebook’s alleged political bias in India. It is a proxy that prepares the ground for what lies ahead.
It is quite obvious that the upcoming US presidential election and the attempt to coerce platforms into becoming an extension of the campaign for or against the incumbent Administration—which is no secret within and outside social media corporate offices
But since it involves India, and Indian users of Facebook and all other platforms, let us locate this debate within the Indian context and focus on three crucial questions surrounding platform accountability and compliance.
First, what is the Indian consensus on what constitutes freedom of expression online? It certainly must not be what Facebook, Twitter, et al deem fit. The Constitution of India guarantees its citizens certain fundamental rights that cannot be encroached upon except under special circumstances and that too only by the state, not an external agency. Article 19 (2) qualifies freedom of speech and expression with “reasonable restrictions … in the interests of the sovereignty and integrity of India, the security of the state, friendly relations with foreign states, public order, decency or morality or in relation to contempt of court, defamation or incitement to an offence.” More often than not, these restrictions are followed in the breach, unless there is a specific complaint.
India’s judiciary has intervened to either uphold or strike down these restrictions depending on their application. In other words, there are no specific, watertight definitions guiding Article 19 (2). By and large, all speech, unless it violates India’s penal code, is held to be free. Perceptions and legal positions have changed over time. For instance, DH Lawrence, once held to be ‘obscene’ by the courts, is now a part of university curricula. Barring the early years of the Republic, the restriction on speech that may harm relations with ‘friendly countries’ has never been imposed. The Supreme Court’s Hindutva judgement has elasticised political speech. ‘Hate speech’ is broadly defined as speech that promotes enmity between communities while ‘violent speech’ is understood to be speech that calls for or poses an imminent threat of violence. There are separate laws to deal with both and judgements to guide their application.
Now, for some recent examples of free speech, social media responses and the consequences. Last week, P Naveen, a relative of Congress MLA Akhanda Srinivasa Murthy in Karnataka, posted content—in response to another post—which was deemed to be “anti-Islam” by a mob that ran riot, burning down the legislator’s house and ransacking two police stations. The police opened fire; four people lost their lives. It could be argued that had Facebook been alert and ‘unbiased’ in its content monitoring, then it would have pulled down the provocative post that prompted the response by Naveen, thus, nipping all mischief in the bud. But since the first post remained untouched, could that be imputed to Facebook’s bias towards a specific community and against another? At which point does accountability come in?
Also last week, Twitter locked the account of JNU professor and well-known public figure Anand Ranganathan for posting a verse from the Quran that called for “punishment” of those who “abuse Allah and his messenger” in the context of the Bengaluru riots. Twitter has said that Anand Ranganathan’s account has been locked because his tweet violated the platform’s rules that explicitly state, “You may not promote violence against, threaten, or harass other people on the basis of race, ethnicity, national origin, sexual orientation, gender, gender identity, religious affiliation, age, disability, or serious disease.” How can something that can be freely stated, either in writing or verbally—in Indian media because there is no legal bar on it—be out of bounds on Twitter? Do Twitter rules supersede Indian laws?
Which brings us to the second question: What should be the operating law for social media platforms? Is it the law of India or is it the law of the country where the parent company is based? Or, more ominously, is it the ‘law’ as framed by the company, regardless of the law(s) of either the parent or the host country. With respect to the brouhaha over Facebook and its alleged bias, were company officials pushing back against Indian law or were they pushing back against a presumptive ‘law’ to (selectively) govern speech globally? It is this grey area in which social media platforms operate that creates fertile ground for mischief and indeed for political capture and gaming. It is imperative that there be no ambiguity in this regard, especially because it concerns the rights of citizens.
The third big question that arises is: What recourse do we have when someone – an individual, an institution, or the state – seems to be erring on the side of hate speech? Will the errant entity or individual be held to account by law or by dissent? As of now, it is unclear as to exactly which authority we are appealing. Without a framework to approach and remedy cases like these, Indian social media users will remain subject to the whims and fancies of content platforms, who will arbitrarily decide for themselves what is the ‘common good’, often with scant regard for the law of the land. For instance, if Twitter were to ban the account of an Opposition leader, it would prompt cries of censorship. On the other hand, if a ruling party leader were to be banned, should it be seen as acting under pressure?
It is for the state, a sovereign entity, to respond (in keeping with its extant laws) if there is a speech violation, intentionally or otherwise. Platforms like Facebook and Twitter cannot be allowed to arrogate to themselves this role and render the sovereign power of the state meaningless. As mentioned earlier, the Constitution allows only for the State to restrict citizens’ rights in extraordinary situations, and even that is open to judicial scrutiny. If we were to allow Facebook, Twitter and other social media platforms to have the executive power to infringe upon our freedoms, it would create space and scope for them to be used as political tools by those in power or out of power. That would be against all canons of national sovereignty and fly in the face of freedom.
Therefore, social media platforms cannot, and must not, interfere in the domestic debates and political processes of a sovereign country. If cause and effect (to a social media post) are limited to a local jurisdiction, content platforms cannot, and must not, get involved, except for providing evidence to aid law enforcement, if called upon by the courts. If the effect of social media content is transnational, then international agreements between the countries concerned may be used for law-enforcement application.
Social media platforms cannot, and must not, interfere in the domestic debates and political processes of a sovereign country
The noise over Facebook’s alleged bias aside, we are talking about the sanctity, integrity and safety of societies, communities and countries. Sovereign states, more so in democracies, are responsible for these areas of public life and are accountable to national institutions as well as citizens. Social media and content platforms, however, are accountable to nobody but their boards. They are far removed from the concerns of the user whose time and patronage they actively solicit.
Corporate governance cannot be restricted to the non-digital world; it must now extend to digital platforms. Platforms should be held both answerable and actionable for their decisions, which cannot be unfettered from the law of the land where they operate. Everything else is superfluous.