Month: May 2017

What lies ahead for India and the world in the 2020s?

Hindustan Times, May 14, 2017, Analysis, co-authored by Ashok Malik

Original link is here

With tectonic and technological challenges causing disruptions, the neat correlation of a big economy with big power that bears big responsibilities is under scrutiny

2020s

The Black Tesla Model S electric car at a Tesla supercharger charging station. Superchargers are free connectors that charge Model S in minutes. Tesla and Uber (and Ola in India) are current and future providers of public transport networks without which cities will be unable to do business. (Getty Images)


At the cusp of the 2020s, what are the markers of change in the international system? The challenges are tectonic and technological and causing four major disruptions. First, the neat correlation of a big economy with big power that bears big responsibilities is under scrutiny. After World War II, the globe’s largest economies were also its ultimate security guarantors, institution incubators and norm shapers. Today, the economic and domestic political capital of a great power with a per capita income of US$40,000 is just not replicable by an emerging power with a per capita income of US$10,000.

The latter faces inequities and developmental gaps at home, and its generosity will perforce be constricted. Populist politics will anyway make it harder for any power – old or emerging – to be an unremitting provider of global public goods. To add to that, the largest economies of this century will also be among the weakest societies – a new paradigm.

Second, there is a creeping capture of provision of public goods and services by business corporations and large transnational philanthropic entities. For example, the developing world’s public health agenda is being influenced by a Bill and Melinda Gates Foundation, in some cases to a greater degree than by the World Health Organisation.

The Trump administration’s resolve to cut US funding for development programmes that support abortion services is being supplanted by large American charities and philanthropic institutions that see the right to choose as central to women’s health and empowerment. Such processes will curb the autonomy – or excesses – of national governments seeking to achieve politically desirable goals.

In the economic sphere too the concept of public goods and private provision – and of where the state, as the traditional provider of public goods, comes into this dynamic – has to be considered afresh. In most societies Internet and data services comprise a public utility being delivered by private corporations. Tesla and Uber (and Ola in India) are current and future providers of public transport networks without which cities will be unable to do business. Yet they are also networks over which the government – or even traditional pressure groups such as trade unions – have only nominal control.

The devolution of a “public goods provider” role has in turn generated thinking on quasi-government obligations among futuristic corporations. That is why suggestions of an income tax to be paid by robots have come from the founder of Microsoft; or why the chief executive of Tesla – its driverless cars will disrupt driver communities – has urged governments to institute a universal basic income.

Third, there is an uneasy but imminent transition in industrial production from human-intensive to machine-driven ecosystems. The early 21st century will see the maturing and possible commodification of a menu of new technologies – artificial intelligence and robotics, 3D manufacturing and custom-made biological and pharmaceutical products, lethal autonomous weapons and driverless cars.

This will pose conundrums. The moral question of how a driverless car will decide between hitting a jaywalker and swerving and damaging the car has often been debated. The answer is both simple – save the human life – and complex. At which angle should the car swerve? Just enough to save the jaywalker or more than enough? If the driverless car is in Dublin, is the decision taken by the Irish government, the car’s original code writers in California or a software programmer in Hyderabad to whom maintenance is outsourced?

If different national jurisdictions have different fine print on something that should be so apparent – prioritising a human life – how will it affect insurance and investment decisions, including transnational ones, in relation to infrastructure that lies within damage-causing distance of a driverless car while it is attempting to evade a jaywalker? The sociology and economy of the machine will determine a specialised discipline in 21st century diplomacy and trade negotiations. Already the large cyber-attack has displaced the nuclear-tipped missile as the proximate threat.

Finally, technology is blurring national boundaries just as politics is tightening them. Innovation and capital have impinged upon the domain of the state at a juncture when statism, nativism, identity and nationalism are making a comeback. As such, while the nation-state will remain the fundamental unit of reckoning in the international system, it will have to engage with, almost Brownian-motion like, other units and stakeholders in a fluid medium where disorder may have both permanence and legitimacy. On its part, geopolitics will have to reconcile to 50 shades of grey, a departure from the black-white binary that framed the Anglo-Saxon ethic.

Ashok Malik and Samir Saran are with the Observer Research Foundation

Wahhabism, meet Han-ism: CPEC betokens China’s search for lebensraum in Pakistan and Pakistan occupied Kashmir

Times of India, May 12, 2017

Original link is here

Wahhabism, meet Han-ism: CPEC betokens China’s search for lebensraum in Pakistan and Pakistan occupied Kashmir

With Beijing elevating the One Belt, One Road (OBOR) initiative’s political visibility through a heads of government summit this week, India needs to craft a sharper policy position. Over the past two years, New Delhi waited and watched as China sought political buy-in from Asian powers for OBOR. India subtly communicated to China that a trans-regional project of this magnitude required wider consultation.

When Beijing chose to sidestep this request, India articulated concerns – at the highest level, no less – regarding its own sovereign claim on those regions of Jammu & Kashmir that the China-Pakistan Economic Corridor (CPEC) would traverse.

China’s wanton disregard for Indian sensitivities suggests the debate on OBOR’s economic potential is now academic. There cannot be any serious discussion on India joining or not joining OBOR unless New Delhi feels its political sovereignty – the very basis of governance – is respected by the project. Far from this, CPEC (the life and soul of OBOR) threatens India’s territorial integrity in a manner unseen since 1962.

China, through its economic corridor with Pakistan, has proposed a dramatic redrawing of demographic and geographic boundaries. It is undertaking an unabashed, confrontational and neo-colonial smash and grab in south Asia.

It is capturing key real estate in the wider region. Beijing is building islands in South China Sea, contesting territorial claims of neighbours in the East China Sea, and even aspires for greater control of the Malacca Straits. It has bankrolled its way to political supremacy in central Asia. It now seeks to build overtly economic but covertly military facilities and bases through the CPEC route – in Gwadar but also Gilgit-Baltistan.

Islamabad is willing to offer such stations in return for Beijing’s protection and money. The most obvious attempt is to engineer a political solution to the Kashmir dispute by changing “facts on the ground”.

If China managed to do this in the South China Sea by constructing entire islands in disputed waters, CPEC will create permanent or semi-permanent projects that will change the nature of the economy and society in Gilgit-Baltistan. The region will be swamped by Chinese and Punjabis who will exploit its location and pillage its civilisation for common benefit.

Not only would CPEC run roughshod over the sacred Panchsheel principle of “mutual respect”, it would also destroy any chance of a peaceful settlement of the Kashmir dispute. In effect, Pakistan and China are suggesting that it is conceivable Jammu & Kashmir (and Gilgit-Baltistan and presumably Ladakh) can be segregated into separate units that merit unique economic, political and military engagement.

CPEC also triggers concern that economic concessions by Pakistan will lead to ceding of territory, for which the 1963 Sino-Pakistani agreement is a precedent. Ironically, China’s involvement in economic activities in contested territories goes against the grain of its own policy on FTAs between Taiwan and third parties.

By investing in CPEC, the UK and EU are complicit in this design. In effect, European money is being used by China to limit Western political leverage in Asia, and assist Pakistan to continue to sponsor anti-India radicalism.

China’s hardline approach in Xinjiang province offers a clue to what CPEC could do to Gilgit-Baltistan. The 2000 census said while the native Uyghur Muslim population in Xinjiang remained the largest ethnic group at 48%, Han Chinese made up 40%. This was an astonishing turnaround from the overwhelming 90% majority Uyghurs enjoyed in the 1950s.

Han Chinese are said to dominate the province today, as they are economically better off and awarded the best jobs and highest positions. Uyghur culture and customs have been suppressed. There are restrictions on fasting during Ramzan, Muslim baby names are labelled “extremist” and even the length of beards is regulated.

Is Gilgit-Baltistan the next frontier for such demographic re-engineering? In 1974, Pakistan abolished a rule that prevented non-locals from buying land in Gilgit-Baltistan. This Shia-dominated region saw rampant Sunni expansionism and settlement of people from all over Pakistan. “As of January 2001, the old population ratio of 1:4 (non-locals to locals) had been transformed to 3:4,” suggests the South Asia Intelligence Review.

CPEC will make Gilgit-Baltistan the meeting ground for a volatile osmosis of two supremacist projects: Wahhabism and Han-ism. Both aim for complete social domination of communities. This would not only alter the region’s demographic composition but also reduce Gilgit-Baltistan to a tinderbox of ethnic, religious and sectarian conflict, with grave security consequences for south and central Asia.

And finally China’s brazen disregard for concerns of sovereignty cuts to the heart of its bilateral relationship with India, which had long been premised on respect for principles of non-intervention, territorial integrity and peaceful resolution of disputes. If that basis no longer holds, Indian policy makers must seriously revisit the benefits of joining China-led multilateral initiatives. Some would even question the political viability of Brics going forward.

CPEC will create domestic pressures on India to incubate sub-conventional support for oppressed peoples in Gilgit, Tibet, Xinjiang and Inner Mongolia. It could intervene more directly in highlighting such issues in Balochistan, another CPEC waystation. While India’s $2.5 trillion economy brings limitations to any response, these steps will act as a benchmark for the future.

For now, India may resist the race to the bottom, ie confront violations of sovereignty with proportionate counter-violations. But policy planners in Beijing should not test India’s ability to impose Himalayan hurdles on the belt and road.

DISCLAIMER : Views expressed above are the author’s own.

A global agenda for digital economies

The G20 must foster linkages between traditional financial institutions, first-generation Internet users and the informal sources of their livelihood

Livemint, May 3, 2017

Original link is here

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The G20 is responsible for ensuring that digital supply chains are not fragmented in this era of ‘de-globalization’. Photo: Reuters

Last month, Germany convened the first-ever G20 “digital ministers” meeting, indicating how the future of connected societies and economies is now firmly at the top of the global agenda. In the run- up to the ministerial meeting, a T20 task force comprising think tanks and academia, of which this author was co-chair, was constituted to offer recommendations that would strengthen digital economies and manage the “digitalization” of traditional sectors. A prominent concern outlined by this group related to the threat to global financial systems because of greater interconnectivity and the creation of novel, untested architectures to manage payment processes. No country is more affected by the weaknesses in digital payments systems, global and domestic, than India, which is tackling the twin challenge of Internet adoption and expansive digitalization.

The future of global financial systems is tied to the security of the digital networks that sustain them. A recent report by UK-based insurance company Hiscox suggests cyberattacks cost the global economy nearly $450 billion. Whether in platforms like the UN group of governmental experts on information security, or through traditional trade agreements, the international community has struggled to offer a collective response to threats faced by the digital economy. The G20 digital ministers meeting is, therefore, a step in the right direction to give this issue the political visibility it needs.

The meeting resulted in the creation of a working group on the digital economy to articulate rules of operation for businesses, governments and users transacting on the Internet. The larger mandate of this working group is the creation of a strategy for securing the global digital economy. India should contribute to the working group’s findings, as its digital economy is qualitatively and quantitatively different from those of the advanced industrialized nations.

The working group will have to address concerns around security, digital access and international trade. Cybersecurity, traditionally understood, has come to mean the integrity of platforms, digital networks and devices. But the G20 should assess whether cybersecurity is a business objective or a means towards the larger goal of promoting digital access and financial inclusion. Should it be the latter, any ecosystem design should ensure affordability and affordable security for users at the bottom of the pyramid. The working group should also articulate policies for the digital economy that can be emulated in developing countries outside the G20. And finally, the G20 is responsible for ensuring that digital supply chains are not fragmented in this era of “de-globalization”. This is a real threat, and as the recent communique from the G20 finance ministers’ meeting suggests, the group was unable to defend the virtues of an open trading system.

The availability of digital infrastructure is not the holy grail for emerging markets. Even if the last user in the developing world were to be provided affordable and uninterrupted Internet access—a challenge in itself—her digital consumption would ride on the skills available, cybersecurity awareness, and the level of inclusion offered by technological platforms developed in advanced economies. Scholars Urvashi Aneja and Vidisha Mishra at the Observer Research Foundation make the case for a G20-wide “digital skills upliftment strategy” that can improve labour participation and competitive capacities for women and marginalized communities.

Yet another concern that the working group should address is the impact of “digitalization” on traditional industrial sectors. Here too, India like others in the developing world, is in the cross hairs of pervasive automation and the use of “intelligent” technologies. Automation will affect manufacturing jobs, and economists like Ester Faia suggest that it poses a risk to the service sector as well. Faia’s analysis, submitted as a working paper to the T20 group, also shows that the financial services sector, considered a safe haven in times of economic transition, has a 90% probability of automation in certain countries. A services-driven economy like India, therefore, must manage this disruptive transition and potential loss of jobs effectively.

How the shift to automated supply chains will affect the country’s urban demographic is also a question worthy of the Indian policymakers’ attention. For instance, as industrial supply chains become digitized, highly skilled jobs have clustered around certain urban centres with a technological focus—San Francisco, Phoenix and Munich, to name a few. Similarly, traditional manufacturing centres like Detroit and Liverpool have seen jobs plummet because of automation. Unpredictable employment trends alongside the current problems of unplanned urbanization will challenge economies within and outside the G20. This in turn will give rise to new domestic political dynamics that may sometimes clash with the G20’s stated objective of promoting globalization.

How can the G20 manage the tailwinds of such disruptive automation and “digitalization”? Carl Frey of the Oxford Martin School suggests that this disruption should be countered by policies that enable urban mobility and create a wide social safety net, such as one for national relocation support. There are discussions in India and in Silicon Valley about providing a universal basic income to manage this new dynamic. But can conservative financial institutions that thrive on old notions of risk as it relates to lending and banking adapt to such policies? The G20, through national and transnational policies, has always engaged with the formal economy. Its best shot at managing disruptive digital forces may ironically lie in embracing the informal sector via technology. Digital platforms will allow governments to provide social benefits to constituencies that formal financial instruments have been traditionally blind to, provided the G20 fosters linkages between the trifecta of traditional financial institutions, first-generation Internet users and the informal sources of their livelihood.

Samir Saran is vice-president at the Observer Research Foundation and was co-chair of the T-20 task force on the digital economy.