Month: January 2018

World in flux: India’s choices may help manage disruptions

Samir Saran

The political and cultural arrangements states and communities arrive at will be heavily implicated by the one major transition Foreign Secretary S. Jaishankar identified: that a rule based order is no longer limited to the developed world.

India, Foreign Secretary, disruptions, China, United States, global posture, Asia strategy, non-market, economics, terrorism, state policy, nuclear umbrella, sophisticated firepower, global security, morality, geopolitical gain, malicious, dynamic, radicalisation, terror

L to R: Maurice Gourdault-Montagne, Secretary-General, Ministry of Europe and Foreign Affairs, France; General (Retd.) David H. Petraeus, US Army, Retired; S. Jaishankar, Foreign Secretary, India; Samir Saran, Vice President, ORF | Photolabs@ORF

‘Managing Disruptive Transitions’ was the theme this year at the Raisina Dialogue, and while more than a few disruptions were discussed over the past week, India’s Foreign Secretary S. Jaishankar articulated four key ones: the rise of China; the current churning in United States global posture and Asia strategy; “non-market” economics; and terrorism from governed spaces.

While India’s top diplomat exhibited customary refrain, General David Petraeus was more candid in his assessment about the last two trends, “let’s be clear who we’re talking about: China.”


India’s Foreign Secretary articulated four key ones [disruptions]: the rise of China; the current churning in United States global posture and Asia strategy; “non-market” economics; and terrorism from governed spaces.


First, the normalisation of state capitalism and the rise of non-market economies threaten to upend traditional understandings of economic relations. Complete control over industry by the party-state, and utilisation of markets to maximise state power and legitimacy with disregard for corporate independence form the essence of “capitalism with Chinese characteristics.”

For some time now, China has attempted to leverage this model to script a relationship of dependency with smaller nations, while it has used coercive economics with larger ones. 2017 was testament to this new normal: Across Asia, Africa, Latin America and even in parts of Europe, smaller economies are now straddled with high levels of debt payable to Beijing’s state-owned enterprises. Countries like the United States, Germany and Japan, on the other hand, must now contend with China’s targeted and state-led or promoted investments in sensitive high technology sectors.

The advent of non-market economics and the rise of the Beijing Consensus may mark the end of a golden age of entrepreneurship, and the free flow of ideas and technology which flourished under transparent free markets for nearly three decades. Beijing’s opaque and distorted whole-of-government approach to market power will likely have ripple effects as China’s economy makes its way towards nearly US $20 trillion by 2030. Along the way, this transition will undoubtedly influence the economic choices of smaller states that are heavily dependent on Beijing, with destabilising consequences for the world economy.

Second, terrorism emanating from and protected by governed spaces will imperil global peace and security. To some extent, conventional military power and diplomacy can address the threats originating from ungoverned spaces. When states use terrorism as an instrument of state policy, especially under a nuclear umbrella or the protection of sophisticated firepower, a comprehensive approach towards regional and global security becomes arduous.


When states use terrorism as an instrument of state policy, especially under a nuclear umbrella or the protection of sophisticated firepower, a comprehensive approach towards regional and global security becomes arduous.


Again, the fact that China seeks to curry favour with such states — as it has with Pakistan —and intends to build parochial relationships with these actors significantly muddies the waters. More importantly, China believes that through some complex political formulation, it will be able to strike a deal with non-state groups. In fact, where responsible powers see adversity and risk, China sees an opportunity — its connectivity projects pass through some of the most unstable regions in the world.

Without dedicated and targeted policing measures, which Beijing is reluctant to undertake, such projects will ultimately make it easier for terrorists and other criminal groups to expand their outreach, find new avenues for rent-seeking, create insidious partnerships and recruit additional members. China’s subjugation of morality for petty self-serving geopolitical gain will create a new — conceivably malicious — dynamic in the fight against radicalisation and terror.

In these trying and chaotic times, perhaps Israeli Prime Minister Benjamin Netanyahu’s statement at the Raisina Dialogue that states must choose between hard power and soft power was more prophetic than intended. While Netanyahu was clear in his support for the former, many states around the world will struggle to find a suitable balance between the two. At the same time, countries will have to defend another aspect of power that the Prime Minister identified — one that binds India and Israel to each other and their strongest partners: democratic values.


China’s subjugation of morality for petty self-serving geopolitical gain will create a new — conceivably malicious — dynamic in the fight against radicalisation and terror.


The political and cultural arrangements states and communities arrive at will be heavily implicated by the one major transition the Foreign Secretary identified: that a rule based order is no longer limited to the developed world. The shifting balance of power, from the Atlantic system to the Indo-Pacific, will determine the future of the 21st century. “The old order is expressing its limitations through both policy and posture,” said External Affairs Minister Sushma Swaraj, capturing the essence of this evolution. “The new order, however, is far from being clear,” she cautioned.

The Indo-Pacific will be ground zero for the economic, political and cultural disruptions that are shaping a new world order and will determine if it will be defined by democracy or autocracy. By foreign policy design and inadvertent geopolitical trends, India will form the lynchpin of this transition.

This brings us to what is perhaps the most prescient observation the Foreign Secretary articulated: that one part of the answer to many of these disruptions lies with India. A vibrant democracy, a flourishing multicultural society, a rapidly growing economy and increasingly confident on the global high table, the choices India will make implicate the future of our world. The remaining answers will be found in the partnerships it choses, the success of its economic journey and the narrative it ultimately frames around its rise.

Indeed, former Swedish Prime Minister Carl Bildt’s tweet perfectly sums up the ethos of the Raisina Dialogue, organised by the Ministry of External Affairs and Observer Research Foundation: “Bringing the debates of the world to India — and the perspectives of India to the world.” The conversations that take place at this Dialogue play an important role in shaping India’s narrative and, as the Foreign Secretary rightly believes, will ultimately complete the answer to the many predicaments that afflict the world.

The new India-US partnership in the Indo-Pacific: Peace, prosperity and security

Original link is here

Over the years, India earned the epithet of a reluctant power in Asia — exuberant in its aspirations, yet guarded in its strategy. However, as the challenges in its immediate neighbourhood and beyond continue to evolve, India is today gearing up to embrace a larger role in the far wider theatre of the Indo-Pacific.

Forming the core of the ongoing global economic and strategic transitions are a rising and assertive China, an eastward shifting economic locus, and the faltering of Western-led multilateral institutions. These converge with domestic development and national security objectives to demand that India strive to expand its presence, reach, and voice both on land and in the sea in its extended neighbourhood. Today, New Delhi is actively seeking to create opportunities for mutual development in the Indo-Pacific, in the Arabian Sea and in Africa even as it engages like-minded nations in the pursuit and preservation of a rules-based order that promotes transparency, respect for sovereignty and international law, stability, and free and fair trade. In both these endeavours, the United States is an appropriate and willing partner. As Indian Prime Minister Narendra Modi stated in his address to the US Congress in 2016, “[a] strong India-US partnership can anchor peace, prosperity, and stability from Asia to Africa and from the Indian Ocean to the Pacific.”

The US has been a principal architect and the traditional guarantor of a liberal economic and maritime order in the Indo-Pacific. While the commentariat in the US and India might express apprehension at the idea of US President Donald Trump’s ‘America First’ strategy, this moment must be seen as an opportunity to rebalance the Indo-US relationship to reflect a real convergence of strategic interests, as opposed to an abstract engagement based on values alone and one that has disregarded the core interests of both countries.

Even as the phrase ‘free and open Indo-Pacific’ replaces ‘Pivot to Asia’, it is clear that the US will continue to play an important role in the region.

The US is acutely aware that disengagement is not an option when the contests of the region are, in fact, irrevocably moving both westwards and eastwards, and ever closer to its own spheres of influence. Thus, maintaining an influential presence and assets in the region effectively responds to its agenda. The US continues to retain an unequivocally large military presence in the Indo-Pacific. Moreover, Washington appears intent on finding ways to address shortfalls in its defence budget. The most recent defence bill specifically authorises the establishment of the new Indo-Pacific Stability Initiative to increase US military presence and enhance its readiness in the Western Pacific. As it remains an invested actor across the Middle East and in Afghanistan, and as it confronts an unrelenting North Korea, it must seek to empower regional like-minded nations such as India, which it recognises as having an “indispensable role in maintaining stability in the Indian Ocean region.”

US Secretary of State Rex Tillerson’s remarks at the Center for Strategic and International Studies a few days before his visit to India in the fall of 2017 is a testament to the continuity of the relationship: “The increasing convergence of US and Indian interests and values offers the Indo-Pacific the best opportunity to defend the rules-based global system that has benefited so much of humanity over the past several decades.” In a way, the title of his speech, “Defining Our Relationship with India for the Next Century”, should set the tone for the Indo-US relationship; and this new direction must not be influenced even by changes in leadership in the two capitals. It must first be imagined and then crafted as a multi–decade relationship that engages with the disruptions that abound in a multipolar world. This 21st century partnership must take into account each country’s economic trajectory, political values and strategic posture. The Indo-Pacific region will be the theatre in which this partnership will truly be realised. Both President Trump and Prime Minister Modi seem cognizant of this reality, and are intent on creating a new blueprint for this long-term engagement.

The terms of this bilateral cannot be limited to maintaining the regional balance of power. Rather, both countries, in concert with other likeminded powers, have a stake in enabling and incubating a peaceful, prosperous, and free Indo-Pacific. As these countries align in their desire to see a new regional architecture emerge, the following present themselves as the most crucial domains where a strengthened India-US The New India-US relationship can have deep and influential impact in a region that matters to the whole world:

Defence trade and technology

India’s designation as a ‘major defense partner’ of the US, and the Defense Technology and Trade Initiative provide a bilateral platform for defence trade and technology sharing with greater ambitions and at a faster pace. The ‘Make in India’ initiative strengthens scope for coproduction and co-development. The new appetite for business reforms is catalysing the largest volumes of foreign direct investment ever received by the country.

As India undertakes broader defence transformation initiatives, US defence companies can collaborate with New Delhi in its USD 150 billion military modernisation project. They can do this by jointly identifying the gaps and working together to equip Indian forces in the short run. This must be followed by cooperation on advanced technologies to help build up the country’s defence manufacturing base in the longer term.

Continuous progress on these fronts will enhance Indian capabilities, enable greater readiness of Indian forces, and level the playing field. Specifically, priority military hardware, technologies and areas for joint production need to be identified. Pending sales, such as that of the Guardian RPVs, need to be expedited, along with the micro unmanned aerial vehicle project. Further, the matter of quality and subsequent liability of equipment made in India through joint Indian-US ventures needs immediate attention. Additionally, the hesitation of US companies in sharing proprietary and sensitive technology is a concern that will need to be taken up on a case-by-case basis.

Maritime freedom and security

There is a rare moment of clarity in US and Indian policy circles on the importance of each other in this region. This is important if the countries are to act as “anchor of stability” in the Indo-Pacific.

It is time to begin conversations on new arenas of military cooperation, intelligence sharing, and strategic planning, to include advanced platforms like fifth-generation fighters, nuclear submarines, and aircraft carriers. Already, the two countries share a maritime security dialogue, which was instituted in 2016, as well as working groups on aircraft carrier technology and jet engine technology. They should be strengthened further and complemented by new working groups.

The annual Malabar exercise, which now formally includes a third partner, Japan, is another key feature of military cooperation, improving coordination and interoperability. Adding to these efforts are the Logistics Exchange Memorandum of Agreement, which will create maritime logistic links, and a white shipping agreement which promotes regional maritime domain awareness.

India-US maritime security cooperation is critical because it supports efforts that prioritise joint stewardship for ensuring freedom of navigation and unimpeded trade across a maritime common that is a major conduit for commercial and energy supplies, and is rich in natural resources, ecosystems, and biodiversity. Moreover, the Indian Ocean Region is extremely vulnerable to extreme weather events that are likely to increase significantly in the coming years. To address these developments, the US and India can cooperate to provide humanitarian assistance and disaster relief missions in the region.

Further, the two sides are committed to resisting the aggression that China has displayed in the South China Sea and elsewhere in the Indo-Pacific. Indo-US cooperation in the Indo-Pacific must also serve to affirm the principles of freedom of navigation and peaceful settlement of maritime disputes.

An expanded bilateral maritime partnership that involves transfer of technology to build India’s capacity in the Indian Ocean Region will help create a more stable and balanced security architecture there. This same partnership should explore new forms and formats of joint exercises and naval drills, such as anti-submarine warfare and maritime domain awareness missions, and encourage support for Indian leadership as “force for stability” in the IOR.

Blue economy

India and the US must also collaborate to promote a market-driven blue economy as a framework for growth and prosperity in the Indo-Pacific — home to bountiful hydrocarbon, mineral, and food resources, as well as burgeoning coastal populations.

India and the US can further elevate cooperation in marine research and development to create common knowledge hubs and share best practices. They can collaborate to develop mechanisms and foster norms that ensure respect for international law. The US can support regional collaboration in the Indo-Pacific to explore new and environmentally conscious investment opportunities in maritime economic activities and industries, such as food production and coastal tourism. Direct investments in Indian efforts, such as in identified coastal economic zones and the Sagarmala initiative, and participation in regional groupings like the Indian Ocean Rim Association, are two ways in which it can do so.

Effectively, the US can support India in creating a resilient regional architecture in the Indo-Pacific that places an emphasis on stability, economic freedom, growth and maritime security.

Connectivity

Today, states in the Indo-Pacific are in dire need of funds and expertise to improve infrastructure development and regional connectivity. Beijing has introduced its own project — the Belt and Road Initiative — through which it is investing in infrastructure initiatives across Eurasia and the Indo-Pacific. While connectivity is undoubtedly the primary aim of the project, it is increasingly clear that China seeks to expand its political and military influence in the region under the aegis of the BRI. To prevent the emergence of an Asian order inimical to the rules-based order, states must work together to forge a more inclusive approach towards an emerging regional architecture. This framework must be willing to accommodate everyone, including China, in connectivity projects from Ankara to Saigon, or the sea lanes seeking to link ASEAN with Africa.

For this to occur, pragmatic, democratic, and normative powers need to first create a political narrative within which Asia’s connectivity will take place. This narrative must underscore the importance of good governance, transparency, rule of law, and respect for sovereignty and territorial integrity. This can then be posited against strictly bilateral projects such as the BRI, which burden participating countries with debt and environmentally unsound projects. This alternative proposition to China’s BRI can then become the blueprint for connectivity and integration from Palo Alto to Taipei, Bengaluru to Nairobi, and Tel Aviv to Addis Ababa. The possibilities are endless and straddle hard infrastructure, digital connectivity, knowledge clusters, and value chains in the Indo-Pacific space.

The India-US partnership has an important role to play in this respect. The American vision of the Indo-Pacific Economic Corridor supplements India’s Act East policy, and India-US cooperation in physical and soft infrastructure can link cross-border transport corridors; help create regional energy connections; and facilitate people-to-people interactions. Further, India and the US can cooperate as “global partners”, with US investment in Indian projects in Africa. Accordingly, the Asia-Africa Growth Corridor proposed by Japan and India can provide a common platform to all three states. Further, the US can nurture burgeoning regional partnerships between Japan, South Korea, Australia, and India, as these countries work towards building a consultative and collective Asian framework.

Digital connectivity, trade, and technology

Digital connectivity merits particular attention. After all, in the next decade, the largest cohort of internet users will emerge from the Indo-Pacific region. China is working aggressively to ensure that digital platforms in the region will be influenced by its own model for cyberspace premised on sovereignty. A major part of China’s BRI is the new “information silk road”, which facilitates investments by Chinese companies in South Asia’s internet architecture.

Accordingly, the US and India must cooperate to ensure that digital platforms, trade, connectivity and norms are shaped according to the democratic and open nature of the internet. To do so, they must create a framework that responds to developing-country imperatives such as affordable access, local content generation and cybersecurity. Already, Prime Minister Modi’s ‘Digital India’ programme provides a model for other states in the region to use internet-enabled technology to spur economic growth. India’s Aadhaar initiative, a unique digital identity programme, has already generated significant interest amongst South Asian states. American companies have increasingly sought to adopt standards and technologies to leverage this platform and build new markets in India. For example, WhatsApp has integrated with India’s unified payments interface to provide digital payments. Examples of other development initiatives are also abundant. Elsewhere, the Google RailTel initiative aims to provide WiFi at 400 railway stations across India by 2018.

India-US bilateral cooperation in using the digital as a tool for economic development and empowerment can be the template to connect the three billion emerging users in other developing countries in the Indo-Pacific and across Africa. As digital norms are institutionalised — whether pertinent to data flows and e-commerce, or related to critical infrastructure, defence, and public services — there is a real opportunity for India and the US to build and subsequently provide a model working relationship for the digital economy. Effectively, the US and India can propose a set of ‘Digital Norms for the Indo-Pacific’ that can be operationalised under their various dialogues and mechanisms for cooperation in the region.

 

Circa 2018: Digital dragon and lessons for Digital India

Samir Saran

To ride the next wave of innovation, India needs its own strategy. Its agenda for 2018 should be to leverage the hundreds of millions it brought online in recent years and the 1,500 million GB of monthly data consumption that now powers a Digital India.

India, Digital India, innovation, data transfer, connectivity, globalisation, project, digital protectionism, information, National Development and Reform Commission, data, Washington Consensus, developmental model, China, Samir Saran
Source: Daniel V./CC BY-NC-ND 2.0

China’s National Development and Reform Commission recently announced subsidies to 56 artificial intelligence and robotics companies in line with its goal to become an “innovation nation” by 2020. Over the past three decades, Beijing has sought and aggressively pursued technology-led global dominance.

If high-impact Chinese academic publications formed 1% of the top Scopus citations in 1997, today they are at 20%. Once synonymous with knock-off goods, China now inspires Silicon Valley to mimic even its on-demand bike rental services. But its digital economy is a testament to well-worn 20th century statecraft. Protectionism has meant Chinese payment services like TenPay and AliPay have over 800 million users and a combined market share of nearly 90%. The microblogging site Sina Weibo has 500 million Chinese users — more than Twitter’s global user base. The story repeats itself in search (Baidu), local ecommerce (Alibaba, JD.com), local commutes (Didi Dache, Kaundi Dache) and travel and accommodation (Ctrip, Tujia). Notables at the receiving end include Google, Twitter, Walmart, Amazon, Wiki, Facebook, Netflix, YouTube, Uber and Airbnb.


Data is the new oil; but our aim should be wealth creation beyond mere ancillary benefits of this ‘oil’, such as affordable connectivity.


In 1803, French economist Jean-Baptiste Say said supply creates its own demand. Beijing has vindicated his theories. Tapping into its vast internet user base, China created services that cater to its citizens’ needs, concurrently generating massive data to fuel innovation.

To ride the next wave of innovation, India needs its own strategy. Its agenda for 2018 should be to leverage the hundreds of millions it brought online in recent years and the 1,500 million GB of monthly data consumption that now powers a Digital India.

Data is the new oil; but our aim should be wealth creation beyond mere ancillary benefits of this ‘oil’, such as affordable connectivity. We must reconsider the ecosystem of data extraction from India, not merely figure out how its benefits can trickle down to citizens.

India will enter the ten-trillion-dollar club as the first economy to mature during the Fourth Industrial Revolution (4IR). The first three waves — led by Britain, the US and finally China — featured wealth creation within one’s own geographies, aided by global resources and labour. This focus on local prosperity and capacity won’t change. What will be unique to the Indian story, however, is its regulatory ecosystem around data — the 4IR’s raw material.

Google, Twitter, Walmart, Amazon, Wiki, Facebook, Netflix, YouTube, Uber, Airbnb, Beijing, agenda, connectivity, globalisation, project, digital protectionism, information, data, developmental model, China, Samir Saran

Global trading rules, which China stayed away from till the 21st century, require India to be expansive in its digital integration and in traditional offline trade. But as the Washington Consensus develops fatigue, India must infuse energy into a new globalisation project. India should offer its own developmental model that addresses key concerns on cross-border data transfer — one promoting the free flow of information globally while ensuring local value creation from data.

The Aadhaar database, among the largest global public repositories of information, can jump-start a new wave of startups and services that rely on authentication. The challenge will be in launching Indian innovation into the outside world. WhatsApp’s integration with the Unified Payments Interface this year suggests that the world is indeed ready to welcome first-rate Indian products. WhatsApp integration will drive the creation and adoption of UPI-based applications and similar products based around Aadhaar-enabled systems. Still, the story is only half-complete. UPI may have become the backbone of payments innovation but real success will come when an Indian platform can emerge on the scale of a WhatsApp or Sina Weibo.


As the Washington Consensus develops fatigue, India must infuse energy into a new globalisation project. India should offer its own developmental model that addresses key concerns on cross-border data transfer — one promoting the free flow of information globally while ensuring local value creation from data.


How do we create global Indian technology giants? It isn’t just about access to data, or obsessing over where it’s located. What we need is data refineries, not data wells — an Indian tech ecosystem that doesn’t only create and extract data, but also transforms it into higher-level products with global worth. If we do not do this, others will.

China forced global tech giants to play by their rules or forgo their market. India can’t mimic such heavy-handedness, but must have the same end: that value created by Indians is largely created forIndians and mostly enriches India. China’s provinces took the lead in creating tech giants; Alibaba and the others emerged from provincial capitals like Hangzhou to challenge the world. Ours is a continent-sized economy, and we need to think of our 29 states as 29 different ecosystems now bound together by far-reaching reforms like the GST — and each ecosystem must have a unique strategy to incubate world-beating innovation.

This must form a pivot for both the upcoming budgetary allocations and the data protection Bill that is being developed. The Bill must not just bolster privacy but also redefine India’s trade posture in a world where data fuels economies. If done right, this can foster local innovation – birthing new vernacular-language technologies that are transformative. If done wrong, it can disincentivise innovation and overseas investments.

The moment is now, and we must seize it in 2018: China’s digital protectionism and a US retreat can be analogous to Indian victory in Globalisation 4.0 – if, that is, we discover the regulatory sweet spot that brings home to India the largest chunk of online value creation, and creates a mature Indian platform economy.


An edited version of this article appeared in The Economic Times.