Politics / Globalisation, Water / Climate

Bridging the gap: Addressing international barriers to climate action projects in the developing world

ORF, Issue Briefs and Special Reports, Dec 12, 2017

Original link is here

this report is part of the Observer Research Foundation’s “Financing Green Transitions” series which aims to find potential linkages between private capital, in all its forms, and climate action projects. The series will primarily examine domestic and international barriers to private capital entry for mitigation oriented climate projects, while also examining potential avenues for private capital flow entry towards adaptation and resilience projects.

Read the series: Financing Green Transitions

Introduction

The fight against climate change is at an inflection point. Despite a myriad of actors attempting to ensure that the world is not left in a ruinous state for future generations, linkages between the release of greenhouse gases and the rise in global temperatures are still ignored by certain stakeholders. The cavalier attitude of these important actors has had a detrimental impact on the state of financial flows towards climate action projects especially in the developing world.

Box 1: The politics of climate finance flows

As discussed in an earlier issue brief in ORF’s Financing Green Transitions series, the industrialised nations of the world made a pledge under the 2015 Paris Accords to provide $100 billion in annual funding for climate action projects in developing countries. The developed world has yet to live up to its commitment, however, with estimates showing current annual flows totalling $50 billion. The apparent lack of commitment towards climate finance flows is not the sole area of concern. The politics behind the calculation and categorisation of this estimate remains a point of contention in the developing world.

While the language pertaining to the $100 billion of funding within the Paris Agreement is vague, what was envisioned at the inception of the funding conversation was a supplementary stream of financial flows. Many developed countries, however, have simply reallocated the funds within their development aid budgets in order to meet their obligations. This has had a significant detrimental effect on the achievement of important sustainable development goals across the world.

In addition to their supplementary nature, the flows were also intended to be unconditional in their original form. A closer examination of the numbers, however, shows that 25 percent of the $50 billion that is being provided, comes in the form of loans from multilateral development banks. Given that loans, by their very nature, must be paid back with interest, certain parties have protested their categorisation as “assistance” for climate action efforts. The feeling amongst some in the third world is that the $50 billion estimate is an exaggeration, bolstered by creative accounting and wilful incongruity.

While a shortfall in the funding pledges made to the developing world through public financing seems inevitable, [i] there remain possible avenues to make up for this deficit through the mobilisation of private capital. Yet, despite repeated demonstrations of the sizeable returns that can be reaped by funding climate action projects, [ii] the institutions overseeing much of the world’s private capital have been wary of making such investments in developing economies.

An examination of certain domestic hurdles preventing private capital investments in the developing world, has been conducted in the first part of this series. It is important, however, to also examine the impediments on a global scale. This issue brief, part of Observer Research Foundation’s Financing Green Transitions series, will examine the main international barriers dissuading private capital investment in climate action projects — namely institutional investor practices, foreign exchange risk, and international financial regulations.

International institutional investor practices

Any conversation pertaining to private capital flows for climate action projects, must begin with institutional investors. Institutional investors (a catch-all term for large asset managers such as pension funds and insurance companies) control close to $100 trillion of the world’s wealth, [iii] and are in many ways the key to unlocking private capital flows for climate action projects.

Given the various stakeholders they must answer to, institutional investors tend to be conservative in their investment approaches, which acts as a deterrent when attempting to steer cash flows towards climate action projects. An example of this can be seen in the cautious approach taken by institutional investors with regards to illiquid investments. [iv]Most of the private capital in the world lies in the hands of pension funds and insurance companies, who are encumbered with large annual liabilities in the form of pension obligations and insurance pay-outs. This limits the amount of exposure that such asset owners are willing to have towards large projects involving heavy capital expenditure in PPE [v] which tend to be largely illiquid as an asset class. Investors prefer to put their funds towards instruments that can be converted into cash quickly, such as bonds and equities.

The cautious nature of institutional investors is further manifested in their project evaluation criteria. Traditionally, institutional investors do not evaluate investments on a case by case basis, preferring to apportion their funds to asset managers who have the capacity and expertise to carry out the necessary analysis and due diligence. In order to invest in climate action projects, institutional investors have to either build up sector-specific expertise internally or divert their funds towards specialists with existing capacity. Building up internal expertise is a time consuming and expensive process, and the global marketplace has a dearth of financial intermediaries who specialise in climate action projects. The evaluation of the performance of financial intermediaries is also problematic, given the absence of extensive track records in the nascent industry [vi].

The conservative risk management practices of institutional investors often act as a barrier against climate action investments, as well. In order to diversify their risk portfolios, pension funds and insurances companies tend to invest across a variety of asset classes, with set limits for the proportion that can be allocated towards each sector [vii]. Climate actions projects, and more specifically renewable energy projects, tend to be classified under the energy or infrastructure sector, and as such are often crowded out by more traditionally accessible investments that institutional investors are familiar with.

This problem is exacerbated by the orthodox perceptions and attitudes of institutional investors with regard to climate action project and developing economies. Pension funds and insurance companies tend to have outdated views with regards to climate action projects especially with regards to technology risks, payment risk, and returns. Institutional investors also rely heavily on risk ratings to inform their investment decisions, which is problematic due to the unreliable metrics and evaluation methodology used to evaluate many climate action projects. Risk ratings are also often constrained by the sovereign debt rating of a country – in many cases a climate action project rating cannot be higher than the rating of the country, regardless of the financial viability of the investment.

Foreign exchange rate

While internal factors play a part in hindering international institutional investor flows, there are also external factors that must be considered. Amongst the largest hurdles for any investor attempting to invest in the developing world is the risk associated with domestic currency fluctuation. Climate action projects can be affected by foreign exchange risk during any stage of the value chain, but are especially vulnerable to risk in the post construction phase. To illustrate how foreign exchange risk can affect investors, it is perhaps best to take the example of a solar plant project.

A solar project starts with the purchase of the land on which the plant will be built. Unfortunately, in many developing nations, the property acquisition procedure is time consuming, with costly delays that can take months or even years to be resolved [viii]. Unexpected upticks in the foreign exchange rate during the land acquisition period can lead to significant variance in investor expense, with cost increases potentially reaching millions.

The acquisition of land is usually followed by the procurement of materials — namely photovoltaic panels. China holds a near monopoly in the manufacturing of solar panels, [ix]which means that investors have to factor in the possibility of fluctuations in the Reminbi, as well as the local currency. Foreign exchange risk associated with the purchase of solar panels is not limited solely to developing nations. Recently, investors in a solar plant in Cambridgeshire County had to account for a $645,000-increase in the cost of Chinese based panels as a result of the unexpected depreciation of the Pound, following the United Kingdom’s vote to leave the European Union. [x]

Putting aside the procurement of land and solar panels, foreign exchange risk continues to exist during other phases of a solar project – payments to local contractors, transport fees, and government levies must all be made in the local currency. The largest exposure to foreign exchange risk for international investors, however, is in the post construction phase. Barring certain exceptions, power purchase agreements delineate payments in local currencies, which leaves investors susceptible to foreign exchange risk for the length of the contract. The possibility of currency fluctuations over a long time frame nullifies one of the key attractive characteristics of a solar energy project — guaranteed, predictable cash flows over a fifteen to twenty year period.

Box 2: Real world example – Brazil’s currency crisis

In late 2014, Brazil awarded nine contracts to developers for the construction of 900 MWs of solar power. A global downturn in oil prices caused the value of the Brazilian Real to drop dramatically over the next two years. As a result of the currency depreciation, the contracts that were signed in 2014 generated 36-percent less revenue for developers by 2016. Eight of the nine investors ended up dropping out of the agreements, citing a lack of continued financial viability for the projects.

The unpredictability of the revenue flows can lead to severe consequences that affect more than just the status of the investment. Given the sizeable capital needed for a solar project, investors often have to borrow up to 70 percent of the start-up costs from banks. If currency fluctuations are dramatic enough, investors can face the possibility of defaulting on loan or interest payments, [xi] which can lead to ripple effects for an investor’s entire portfolio. The starkest example of the consequences of changes in the foreign exchange rate can be illustrated by examining the case of Brazil.

While foreign exchange risk is problematic for investors, it is not a new phenomenon and affects a number of sectors. It is important to note, however, that the electricity sector is more susceptible to the effects of currency fluctuation — they cannot raise prices or renegotiate the rates dictated under the power purchase agreements to cover potential losses. Additionally, financial methods available for the mitigation of foreign exchange risks for other sectors are not necessarily applicable for renewable energy or other climate action projects. One simple solution employed in certain sectors, for example, is to use domestic banks to procure loans in the local currency. As has been pointed out, however, long-term debt for climate action projects is not available in many developing economies. Alternative financial strategies which can hedge against currency risk in other sectors, are also not always viable for developing economy climate action projects. The expenses associated with such instruments can raise the interest rates charged by international banks by six to seven percent, [xii] making previously profitable projects unattractive.

International banking regulations

While internal practices and foreign exchange risk play a role in limiting private capital flows for climate action projects, the largest hurdle for green investments in developing countries comes in the form of international banking regulations. Due to the large capital requirements for climate action projects, up to 70 percent of start-up costs usually originate from bank loans [xiii]. The credit crisis of 2007-2008 has led to stricter controls being imposed on bank loans, making it more difficult for investors to access the funding needed to get a project off the ground. The problems that the norms cause for renewable energy investments can be explained by examining two of the three ratios dictating the amount of cash or near cash assets a bank must keep on hand — the capital requirement ratio and the liquidity coverage ratio.

Box 3: A brief overview of the Basel norms

The Basel norms were initially conceived in 1988, by the Basel Committee on Banking Supervision (BCBS)[1] as a mechanism designed to prevent banks from insolvency issues caused by defaults of risky assets. The norms required banks to keep a certain percent of its overall investment portfolio on hand in order to prevent the bank from going out of business in the case of widespread failure of loans and investments. These requirements proved to be insufficient during the credit crisis in the mid 2000’s to late 2000’s, however, leading to a renewed examination of international banking regulations and the subsequent release of a new version of the Basel norms. The latest iteration of these macro prudential regulations, referred to as Basel III, were introduced in 2011 with subsequent amendments added in 2013 and 2014.

A holdover from the previous version of the Basel norms, the capital requirement ratio dictates the amount of cash that a bank must keep on hand, by factoring in how risky the investment practices of the institution are. Each investment made by the bank is assigned a risk weighted percentage, depending on its characteristics – certain government bonds for example are considered to have almost no risk associated with them and are thus assigned 0 percent. The value of each investment is then multiplied by its risk percentage, after which all the values are collated to produce the bank’s Risk Weighted Average (RWA). According to Basel III, banks must keep between six to ten percent of the value of their RWA on hand [xiv].

The core function of private banks, like any other business, is to make a profit and any cash that they have to keep on hand to meet the capital requirement ratio cannot be invested in revenue related activities. Banks, therefore, have two options — reduce the amount of cash they have to keep on hand by making investments that are considered less “risky” or ensure that the returns they get from the “risky” investments are high enough to justify the increased cash they will have to keep on hand.

While investors view the capital requirement ratio as a hindrance, it is the addition of Liquidity Coverage Ratio (LCR) in the Basel norms that has caused the largest amount of consternation amongst institutional actors. Intended to act as a counter measure against the factors that caused the credit crisis of 2008, the LCR forecasts how a bank’s business operations would be affected by a large scale financial crisis. The projection assumes that the amount of cash received from investments will drop during the “stressed period” while the amount of cash extracted by customers will increase. The extent to which cash receivables are meant to drop and cash withdrawals are expected to increase is dependent on certain characteristics – for example, 10 percent of deposits made by individuals and small businesses are expected to be withdrawn. Large financial institutions, on the other hand, are projected to withdraw 100 percent of their deposits in a stressed scenario [xv]. In order to fulfil the requirements of the liquidity coverage ratio, banks must keep on hand cash or assets that can be easily converted into cash (referred to as High Quality Liquid Assets) to meet all obligations that might occur during a 30 day “stress period.”

The inclusion of the leverage coverage ratio in Basel III has had two major effects on banking lending processes. First, banks have started to show a preference for the types of deposits that are expected to have less of an effect on cash outflows during a financial crisis, such as small businesses. Secondly, banks have moved away from lending to long term projects in favour of more short-term liquid assets in order to meet the requirements of the liquidity coverage ratio.

The capital requirement ratio and the liquidity coverage ratio are problematic for investors attempting to access debt for investments in either climate action projects or developing countries. The high risk profiles assigned to both types of projects by the majority of rating agencies lead to a higher capital requirement burden for banks who pass the cost on by asking for significantly higher interest rates for any debt provided to climate action projects in developing countries.

The long life span and illiquid nature of climate action projects also impacts the liquidity coverage ratios of banks, leading to significantly higher interest payments on loans made to finance said projects. The high cost of international debt financing, combined with the inability to access debt from domestic banks in most developing economies, has had a considerable negative impact on climate action projects with certain analyses showing a 40 percent drop in institutional investor flows as a result of the implementation of Basel III [xvi].

The way forward

The international issues that have been discussed in this brief play a significant role in hindering private capital flows towards developing economies. The conservative investment practices of international institutional investors create restrictive internal barriers that are difficult to overcome but can be done, over time, through capacity building measures. Foreign exchange risk can result in sizeable liabilities for certain types of climate action projects and while the risk cannot be hedged using traditional mechanisms, policies such as dollar denominated tariffs or government backed hedging facilities are possible ways to mitigate it. The restrictive controls that are placed on long tenured, risky projects such as renewable energy make it difficult to access international debt financing, but policies reclassifying the risk associated with such projects could make them more attractive for creditors.

The Observer Research Foundation over the next twelve months will release a set of reports as part of their Financing Green Transition series looking at potential methods to increase the flow of private capital investments for climate action projects in developing countries. The reports will include an examination of the risk perceptions of European Institutional Investors with regards to renewable energy projects; an econometric analysis of the benefits of credit enhancement mechanisms by Multilateral Development Banks; a methods report aimed at creating a transparent and publicly accessible ratings evaluation system; and a feasibility study examining the viability of greening “Basel” through alterations in their risk calculations.


[i] Joe Ryan, “G-20 Poised to Signal Retreat From Climate-Change Funding Pledge,” Bloomberg.com, March 09, 2017, accessed July 01, 2017,

[ii] Renewable Infrastructure Investment Handbook: A guide for Institutional Investors. December 2016. Accessed July 1, 2017.

[iii] “Institutional Investors: The Unfulfilled $100 Trillion Promise” June 18, 2015. Accessed July 01, 2017.

[iv] Nelson, David, and Brendan Pierpoint. The challenge of Institutional Investment in Renewable Energy. March 2013. Accessed July 1, 2017.

[v] Plant, Property and Equipment

[vi] Nelson, David, and Brendan Pierpoint. The challenge of Institutional Investment in Renewable Energy. March 2013. Accessed July 1, 2017.

[vii] Nelson, David, and Brendan Pierpoint. The challenge of Institutional Investment in Renewable Energy. March 2013. Accessed July 1, 2017.

[viii] India: Delays in Construction Projects. January 24, 2017. Accessed July 1, 2017.

[ix] Fialka, John. “Why China Is Dominating the Solar Industry.” Scientific American. December 19, 2016. Accessed July 18, 2017.

[x] “Currency Risk Is the Hidden Solar Project Deal Breaker.” Greentech Media. May 05, 2017. Accessed July 18, 2017.

[xi] Reaching India’s Renewable Energy Targets Cost Effectively: A foreign exchange hedging facility. June 2015. Accessed July 19, 2017.

[xii] Chawla, Kanika. Money Talks? Risks and Responses in India’s Solar Sector. June 2016. Accessed July 1, 2017.

[xiii] Renewable Energy Project Financing. Accessed July 19, 2017.

[xiv] Bank of International Settlements. Basel III: A global regulatory framework for more resilient banks and banking systemsDecember 2010. Accessed July 19, 2017.

[xv] Bank of International Settlements. The Liquidity Coverage Ratio and liquidity risk monitoring toolsJanuary 2013. Accessed July 19, 2017.

[xvi] The empirics of enabling investment and innovation in renewable energy. May 24, 2017. Accessed July 19, 2017.

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Cyber (in)security: Looking back at 2017

Samir Saran

Cyber (in)security, 2017 has proven, is a great leveler. From the individual tweeting on her cellphone, to the corner storekeeper who relies on digital payments, to the multibillion-dollar corporation and the most technologically advanced nations — no stakeholder has been found immune from harm. The woes of the world may be the same, but India’s government, businesses and civil society cannot escape the reality that the country’s digital spaces are uniquely vulnerable.

India is at once a bustling digital democracy and a budding digital economy. The national imperative to keep its networks open while coming down on malicious actors is easier proclaimed than addressed. But if this unique, finely balanced model can be created and sustained, it will be a shining example for democracies and emerging markets alike. For what it is worth, 2017 illustrated the difficulties ahead for policy planners.

The potential of cyber space is a factor of the trust that it commands from users, businesses and governments. Unfortunately, malicious agents — both state and non-state — have shown themselves increasingly capable of disrupting core infrastructure and services, and undermining that trust. By some estimates, cyber crimes are expected to cost upwards of $2 trillion by 2019. The risks, however, cannot simply be measured financially. The loss of personal information, corporate reputation and national security are immeasurably more valuable.


The potential of cyber space is a factor of the trust that it commands from users, businesses and governments. Unfortunately, malicious agents — both state and non-state — have shown themselves increasingly capable of disrupting core infrastructure and services, and undermining that trust.


2017 has been a tumultuous year for both technological advances as well as the means to disrupt them. Nations around the world are now waking up to the fact that ‘protection’ of their information systems is a national priority, both for their economies as well as their democratic institutions. For democracies attuned to the free flow of information — taking both the good and bad in their stride — this is a particularly vexing problem. Is information to be controlled and vetted?

Vulnerability within consumer devices, malicious bots, artificial intelligence and information warfare were some of the most important issues confronting cyber space in 2017. However, the cyber risk landscape is dynamic and responds rapidly to new technologies and new security measures. Considering that millions of new users are coming online every year, it is useful to take stock of this changing threat landscape and examine some developing trends which can benefit conversations on cyber security.

The promise of cyberspace is immense; can India’s security architecture keep up? | Photo: Kickstarter

One of the most promising developments in cyber space is the growing interconnectivity of digital networks, and with it, communities. The internet of things (IoT) — a network of physical devices and objects designed to collect and exchange data — is perhaps the fastest growing field of technology in the 21st century. Be it moisture sensors to help farmers water their crops, or blood pressure monitoring devices placed in pacemakers, IoT has the potential to revolutionise our daily lives. Their impending ubiquity, however, makes it difficult to measure the inherent risks. As we race towards 50 billion IoT devices by 2020, each of these devices will collect vast amounts of data on our daily habits, activities, and lives. With every new IoT device, our digital footprint is set to exponentially increase — creating an ever-expanding number of entry points for hackers and cyber criminals.

In July 2017, hackers attempted to steal sensitive data from a North American casino by hacking into its internet connected fish tank. The compromised tank was then used as a gateway into other systems in the casino. The device was an unsuspecting vulnerability in the casino’s system, and is representative of the larger risks the IoT ecosystem faces.


The Internet of things (IoT) — a network of physical devices and objects designed to collect and exchange data — is perhaps the fastest growing field of technology in the 21st century.. Their impending ubiquity, however, makes it difficult to measure the inherent risks.


A 2015 report by the United States Federal Trade Commission found that fewer than 10,000 households using home-automation services were generating 150 million discrete data points every day, i.e, one data point every six seconds. Worryingly, the data collected from these devices — from ‘smart’ wristbands to TVs — are not always secured. Most IoT manufacturers place little emphasis on device security, and very few industry standards have been developed so far to tackle this problem.

A team of researchers from Microsoft and the University of Michigan discovered multiple vulnerabilities in Samsung’s ‘smart home’ platform. The most noteworthy of which involved them taking control of smart locks and smoke detectors connected to the network. The significance of this cannot be overstated — if hijacked by malicious hackers or criminals, these technologies can catalyse man-made disasters and bring entire cities to their knees.

These unsecured devices can also be used in an aggregated manner to attack critical internet, or public, infrastructure. In October 2016, Dyn — a domain name management product suite — suffered a massive denial of service attack. Interestingly, criminals used over 100,000 seemingly innocuous devices, such as printers, cameras and baby monitors to rapidly scale the attack. They were coordinated through the ‘Mirai’ Botnet, a freely distributed malware, used to infect the IoT devices.

By some estimates, the market size for IoT products and services in India is expected to reach around $9 billion by 2020. Apart from consumer markets, much of this growth will be spurred on by government initiatives that intend to integrate IoT devices with the smart cities mission and other infrastructure initiatives. This puts New Delhi in a vulnerable position; without an adequate cyber security framework, cities become prime targets for malicious actors, considering the damage inflicted can be rapidly scaled in terms of intensity and scope.

Source: McKinsey Global Institute

If the risks inherent in the proliferation of an IoT ecosystem offer any lessons, it is that the ubiquity of networked systems brings with it multiple vulnerabilities. The future of cyber crime is likely to be characterised both by large data breaches or sophisticated network attacks, as well as digital ‘pick-pocketing’ — millions of small value transactions that can cause disproportionately serious damage without raising suspicion. A series of aggregated, relatively low-value and distributed cyber crimes may in fact present a substantially more difficult challenge to regulators and law enforcement agencies than a single, sophisticated cyber attack.

Advance fee fraud, which contributes to billions of dollars stolen every year, is the classic example of low-level activity that goes undetected and remains undeterred. Coupled with the fact that the average time to detect a breach or fraudulent activity can take several weeks, the financial costs of such crimes can be staggering. In 2016, a criminal gang called the ‘Lazarus Group’ developed a software to manipulate the SWIFT system — which is commonly used for international financial transfers. By targeting banks with lower security, the group successfully initiated fraudulent transfer requests across multiple jurisdictions. Reports indicate that US$ 81 million went unrecovered from the Bangladesh National Bank, $10 million was lost from a Ukrainian bank, and a bank in Ecuador suffered losses up to $12 million, among several other such incidents around the world.

Just in 2016, Tesco Bank in the United Kingdom reported that cyber criminals stole up to 2.5 million pounds from over 9,000 customers. In 2016, Indian banks suffered a financial breach that affected 3.2 million debit cards. These digital pickpockets are not only harder to identify but the damage caused is nearly impossible to restitute. A pattern of attacks is not readily apparent in these circumstances, wasting crucial response time necessary for responding to these breaches. Further, many countries still lack the resources to devote time to smaller crimes.

For developing countries like India that are coming online on a wave of cheap and unsecured mobile devices, the implications are grave. This assumes added significance in light of the Aadhaar platform that seeks to improve government services, foster financial inclusion and build a digital economy. While the data in transit might be secure, the infrastructure and application layer of the ecosystem—which includes mobile handsets and services such as PayTM — continue to remain vulnerable. This is compounded by the fact that India’s supply chains reside abroad, which makes it difficult to ensure system-wide compliance with security requirements.

Already, news reports have highlighted instances of personal data leaks and attempted unauthorised authentication. While the biometric database might continue to remain secure, a new wave of sophisticated digital pickpockets are likely to find vulnerabilities to use against individual low value targets that are more attractive compared to heavily secured ‘fat cats’. The most vulnerable are likely to be the poorest, whose relative lack of digital skills and access to law enforcement capacity make them susceptible to such attacks.

A commonality between the insecurity represented by IoT and digital pocketing is that the vulnerability resides not just in the technology, but also in the human beings operating them. From forgetting to change default passwords on their thermostats to leaving access codes on a post-it note, the stage at which humans interact with machines represents a lucrative point of intrusion.

Source: 2013 Norton Report

Cyber crimes for financial gain, however, comprise only one side of the coin. Increasingly, more and more of our lives are lived online; our thoughts and actions affected by developments in the digital realm. The man-machine integration is near the cusp of completion, where every single action leaves a digital footprint. As Chief Justice Roberts of the US Supreme Court said, “modern cell phones… are now such a pervasive and insistent part of daily life that the proverbial visitor from Mars might conclude they were an important feature of human anatomy.”

Technology is fast evolving from a mere tool to an extension of our own selves — when we communicate online and store our thoughts on the cloud, we are not mere chefs wielding knives, we are authors, scripting our own private biographies. Over the past decade, scientists have been exploring the possibility of linking the human brain to computers — converting neurological impulses into code. It is only now that technological businesses like Tesla are foraying into this space, attempting a convergence of ‘biological intelligence with technological intelligence’, hinting at the commercial value in the hitherto untapped human data.

Currently, the law sees individuals and the technologies they use as two distinct entities. However, if we erode protections for our technological tools, we also encroach upon the private spaces of individuals. As this becomes viable in the next decade, how will our legal institutions seek to build distinctions between what we think and what we store online? If legal warrants can compel the divulgence of the contents of our hard drives, can the same warrants be used to divulge our thoughts? When centuries worth of legal scholarship around privacy has been navigating us towards increased control over our information, the challenge of tomorrow will be to remain private and yet connected.


Currently, the law sees individuals and the technologies they use as two distinct entities. However, if we erode protections for our technological tools, we also encroach upon the private spaces of individuals.


These same technologies will also pose constitutional challenges in India. For example, the Indian Constitution prohibits self-incrimination during criminal trial. Time and again the Supreme Court has interpreted this to protect the privacy of mental processes. Once these processes are ‘on the cloud’, will they be treated as private thoughts or merely records of thoughts to be used as documentary evidence?

Traditionally, Indian policy has been slow to evolve in the face of rapidly changing technology. The ill-fated National Encryption Policy of 2015, for example, unduly prioritised law enforcement imperatives against civil liberties and higher security standards. Once the line between the biological and technological blur, India will require new frameworks to ensure the integrity of such sensitive systems and protect the privacy and other fundamental rights of the individual.

Additionally, the direct threat from new technology is a fact that cannot be ignored. As artificial intelligence capabilities continue to grow in the near future, the likelihood of automated and autonomous attacks is on the rise. Data theft and network penetration represent only the least damaging scenarios. Former United States President Barack Obama has even gone on to say that a sophisticated machine learning algorithm could potentially steal nuclear codes.

The 2016 Dyn attack was orchestrated by real humans, who used bots to execute attacks when they saw fit. Many believe that we are inching closer to an AI powered botnet attack, which is likely to be even more devastating. The US’ Defence Advanced Research Projects Agency recently conducted a ‘Cyber Grand Challenge’, which pitted algorithms against each other to search for network vulnerabilities and patch them. Many have already warned that these techniques will be used to exploit vulnerabilities instead of fixing them.

According to Darktrace, a company which specialises in AI cyber security, countries like India are fertile testing ground for such attacks considering the lack of effective security architecture. In fact, the company reports that, already, a low-level attack took place in November 2017, which used malware that could learn as it was spreading, and altered its methods to stay in the system for as long as possible. Already, India struggles with conventional cyber attacks. The scale and intensity of new AI powered attacks could potentially cripple critical infrastructure and services.

It is unsurprising that Microsoft has called for a ‘Digital Geneva convention’ in order to establish the rules of the game when it comes to cyber space. Unfortunately, it is unclear if nation states have the necessary political will to undertake such actions. Previous attempts such as the United Nations Group of Governmental Experts on cyber norms for peaceful use of ICTs ended in a deadlock, with countries disagreeing on whether norms of non-interference would compromise their state sovereignty.


It is unsurprising that Microsoft has called for a ‘Digital Geneva convention’ in order to establish the rules of the game when it comes to cyber space. Unfortunately, it is unclear if nation states have the necessary political will to undertake such actions.


In the future, these questions can be rendered redundant with the advances in machine learning. A sophisticated automated system capable of propagating without human intervention raises a troubling question — who is in control? Already states are debating rules for ‘Lethal Autonomous Weapons Systems’ — AI systems that will be able to make life or death decisions in war.

This has raised complex questions around laws of war and human ethics. India, as chair of the Group of Governmental Experts Meeting on Autonomous Weapons, has already deliberated on many of these questions in November 2017. Where does the liability lie for machines that function outside human control? Which principles of international law provide protection against these attacks? These important questions beg resolution today; whether a consensus on the use and development of these weapons is possible, remains to be seen.

While many of these developments pose security challenges to individuals and businesses, the past year witnessed an event many thought was never attainable through technology — the subversion of democratic processes. Even today, the precise scope of Russia’s ‘influence operations’ on elections in the United States and Western Europe is unclear. What is certain, however, is that Russia deftly manipulated the electoral process and social media in some cases to achieve its desired outcomes.

Hacking into the US Democratic National Committee’s e-mail system was only the tip of the iceberg. The wave of leaks which followed damaged Hillary Clinton’s presidential prospects by throwing the Democratic Party into disarray and fueling the popular anti-establishment mood against her. Equally significant was Russia’s disruptive use of social media. The medium itself represents liberal values on and of the internet — an open and inclusive platform capable of bringing communities together. By inserting fake news and generating manipulated trends, Russia successfully undermined these values by polarising the American electorate.

For decades, Russia and other authoritarian regimes were haunted by the spectre of ‘colour revolutions’ at their doorstep. America’s creative use of information technology and civil society resistance towards the end of the 20th century represented ‘asymmetric operations’ against communist regimes. To Russia, an enfeebled economy, cyber operations represented the perfect counter force — difficult to anticipate and difficult to trace but easy to execute across oceans. The digital disruptions of tomorrow seem eerily similar to the colour revolutions of the past.

Although the interference with American presidential elections has gained the most attention, to Russia, this is not new. Over the past five years, it has perfected these techniques in Eastern Europe — in states like Ukraine, Georgia and even Germany. Most countries in the EU states are bracing for similar operations during their own elections — with France having successfully taken somewhat controversial countermeasures such as banning TV and creating phony email accounts and fake documents to misdirect Russian hackers.

Speaking at CyFy 2017 — Observer Research Foundation’s annual conference on technology, security and society — several panellists highlighted that Russian motivations are likely multifaceted. For one thing, they seek to undermine democratic processes in order to legitimise their own political systems. On the other hand, they also seek to disrupt the current forms of cyber governance, testing the limits to which conflict in cyber space is permissible.

India’s primary geopolitical rival, China, has already developed the tools necessary to carry out such operations. After years of perfecting cyber espionage and other such techniques, even against powerful countries such as the United States, the likelihood that China will attempt to influence India’s democratic institutions must not be dismissed. As a democracy, India will have to toe a fine line between preserving the free flow of information and preventing malicious actors from manipulating that information.

China, however, is not the only threat. Considering Pakistan’s weaker conventional military prowess, what is to stop it from using asymmetric methods of cyber warfare? The implications of these events are dire. For one thing, revisionist regimes now have a reliable template to emulate in other parts of the world. That such actions require limited financial and technical resources dramatically reduce the costs of destabilising perceived rivals. Our traditional political and military structures no longer seem capable of keeping up with the deluge of attacks that rely on misinformation and propaganda.

These methods are no longer constrained by traditional paradigms of power. In the 20th century, military capability was determined by the size of a state’s army, navy or air force. That Russia, a one-and-a-half trillion-dollar faltering economy, subverted institutions in America, an eighteen trillion-dollar superpower, only goes to show how effective ‘influence operations’ can be.

A democracy thrives on trust in government institutions and even in media. By undermining the integrity of this relationship, Russia successfully fueled polarisation and disaffection amongst the American public, thereby subverting the very basis of democratic norms and values. By all accounts, this was its ultimate objective. That other liberal democracies in Europe are bracing for similar events only serves to highlight the efficacy of these malicious methods.

These developments have thrown up critical questions around managing this upheaval. What structures and institutions must we build and empower to tackle these threats? The idea that causing disruptions through ICT activities is not a resource intensive exercise is only half true. It is steeped in western presumptions of power — that the one with the money and the muscle wins the war. The truth though is that both cyber defence and cyber offence need significant allocation of resources — not just in the institutions that emerged as a result of the teetering post-Cold War stability.

For a country like India, which still does not possess a coherent national cyber security architecture, responding to new asymmetric threats such as influence operations will be a difficult challenge. Such operations rely on political, ethnic and religious faultiness — which are abundant in India — to polarise individuals. Already, ‘fake news’ spread through WhatsApp forwards and social media has led to real instances of violence along these very lines. This year alone, for example, fake rumours about violence against Hindus in Myanmar helped fuel anger against a wave of Rohingya Muslim refugees.

Sprawling cyber commands and advanced weaponry will not address the asymmetric capability of hundreds of internet trolls glued to computer screens with the single-minded aim of falsifying news, spreading propaganda and subverting democratic institutions. It can be contained by building capacity at the grassroots — by scripting and consolidating narratives to counter untruths and empowering communities to detect and disregard falsehoods.


Sprawling cyber commands and advanced weaponry will not address the asymmetric capability of hundreds of internet trolls glued to computer screens with the single-minded aim of falsifying news, spreading propaganda and subverting democratic institutions. It can be contained by building capacity at the grassroots.


Taken together, these risks exemplify the double-edged nature of cyber space. While the internet has emerged as a vehicle for transformation, its development has come with significant costs. Today, a wide array of malicious actors — be it states or rogue individuals — threaten to disrupt and dismantle the internet’s core infrastructure and values. Unfortunately, these threats are non-traditional, dynamic and dispersed, and large cyber defence institutions are limited in their ability to tackle them. Instead, the individual is likely to be front and centre in facing these challenges. We need to reimagine the role of the individual, who is at once a target and a trustee on the internet.

Accordingly, to tackle these threats, New Delhi will have to recalibrate its policy response. For one thing, building cyber capacity at the local law enforcement level is a must — a decentralised threat requires a decentralised response. Apart from building a new cadre of cyber security specialists, the Indian police force must build the capability to detect petty cyber crimes, and to analyse how these threats aggregate and cause systemic damage. Additionally, new institutional mechanisms must be put into place to build trust between individuals, businesses and the state. Victims of cyber crimes, especially low-value crimes, are currently reluctant to share information with the government. They must be able to have faith that the state will address their loss, and provide timely access to justice.

Second, new regulatory frameworks in India must incorporate ‘security by design’ amongst commercial products and services. A 2016 report by the Ministry of Finance on digital payments suggested a hierarchical approach to cyber security based on the systemic risk posed by different infrastructure layers and applications. This is a model that deserves replicating across networks — vulnerability must be addressed at its root. For example, some legislators in the United States have introduced a bill that will require devices to conform to specified industry standards and prohibits vendors from supplying devices that have default passwords or that possess known security vulnerabilities. India must be proactive in setting its own standards and norms for digital products, even as new platforms and networks continue developing in the market.

Third, India must invest in diplomacy. First, in areas like the UN GGE, as chair of the group on autonomous weapons, India is in a position to direct the conversation on norms, technologies and regimes to favour its interests. Simultaneously, India must also cultivate relationships with cyber powers like the United States, Israel and the EU, that can help in developing cyber security products and law enforcement training. And lastly, to reform international information sharing policies between countries and tech companies, considering that most Indian data is stored abroad.

Fourth, developing new technologies in India must be treated as a national security imperative. The government must fund research into emerging technologies, their impact on society and their implications for geopolitics. The new AI arms race between America and China is taking place in universities and think tanks, with generous aid from the government. Accordingly, these same powers will have the authority to shape how such innovations will reorganise society. To avoid being relegated in global politics, the effort to develop new technologies and to shape the norms which govern their use, must be catalysed by the Indian state.

Fifth, as a democracy, India must create institutions which are capable of bringing together local communities in order to create awareness about fake news and malicious propaganda. For example, the EU now has a ‘specialized strategic communications unit’, which brings to light influence operations by foreign actors. Additionally, the United States has recently listed election institutions as critical information infrastructure; a move which India should also consider in order to better prevent politically motivated hacking into party accounts and other such malicious efforts.

For a country that aspires to be a truly digital economy, India must internalise that the security of its ICT infrastructure is not a post facto consideration but a precondition for growth. At the same time, the over-securitisation of cyber governance can often lead to undermining rights which, in turn, negates the country’s values as a free and democratic nation. The right answer ultimately rests on a fine balance between an ambitious aspiration of what Digital India will be tomorrow and a realistic assessment of what India’s capabilities are today.

To read the full issue, click here.


This piece has been submitted to Seminar Magazine for publication in their 2017 Annual Edition.

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Democratic, innovative and secure: how India can shape the future of the internet

World Economic Forum, 12 December, 2017

Original link is here

Employees demonstrate the use of the newly-designed prototype of a touch-sensitive table at Microsoft India's Development Center in the Gachibowli IT district in Hyderabad, in the southern state of Andhra Pradesh March 6, 2012. Picture taken on March 6, 2012. REUTERS/Vivek Prakash (INDIA - Tags: BUSINESS SOCIETY EMPLOYMENT SCIENCE TECHNOLOGY) - GM1E8450XD101

‘India has both the capacity and the moral authority to shape a global digital economy’

ndia is fast becoming the indispensable nation of cyberspace. The Indian market could decide the future of many technology giants. As such, she can be seen as a policy pioneer.

In November, Ajit Pai, Chairman of the US Federal Communication Commission, announced the rollback of the Obama-era rules on net neutrality. As the historic architect of the internet and arbiter of its values of openness and freedom, the US appears to be ceding its normative influence over the medium.

Meanwhile, the EU’s misgivings about US technology corporations have driven it to enact a new data protection regime that sets its own highly restrictive standards on digital markets, content regulation and privacy. This is par for the course for a community that is looking increasingly inward, and no longer sees itself as a model for other countries.

Farther east, China has outright rejected the West’s open model for the internet and has outlined a vision to become a cyber superpower premised on state sovereignty and control.

Thanks to such developments, leadership in cyberspace is contested and a new global regime will follow the model that best balances several competing priorities. With a 450 million strong – and growing – online population, India is capable of exercising considerable heft in shaping the future of the internet. India’s multiple identities only add to this weight: as the world’s largest democracy, it commands the legitimacy to shape an open and free internet; while its role as a developing country ensures it will account for what matters to the global south, such as affordable access, local content generation and platform security.

 

Two recent events have further bolstered India’s leadership in cyberspace claim. The first was the Telecom Regulatory Authority of India’s (TRAI) recommendation that access to the internet must not be restricted by discriminatory measures from service providers. Even though some rough edges remain, such as the role of the proposed multi-stakeholder ‘advisory’ body and the regulation of Over the Top Services, the TRAI has done well to endorse the principle of net neutrality in its proposals to the Department of Telecommunications.

 

Despite increasing convergence with the US on information technology issues, New Delhi was not swayed by America’s deliberations. Instead, the TRAI chose to endorse a pragmatic model that would balance commercial imperatives against consumer interest. In this process, it has also given New Delhi the ability to claim moral leadership over the principles that define the internet.

 

The second development was the publication of the Ministry of Electronics and Information Technology’s consultation paper for a Data Protection Framework for India. Prompted by the Supreme Court’s verdict in the Puttaswamy case, the Indian government is now working to protect individual privacy in the digital world. While the final law will undoubtedly generate debate, the report notably makes it clear that India will balance civil liberties, security and data-led innovation.

No country has yet managed to strike a perfect balance. In countries like China, privacy has been subsumed in favour of national security. In democracies like the US, social media platforms have been left vulnerable to foreign influence; and in the EU, stringent data protection laws might stifle innovation. If India can fine-tune its own design for a data-driven economy while protecting the rights and security of its citizens, it will have created a prototype that is at once unique, and yet replicable.

Both these developments highlight something significant: India is carving out its own unique position in cyberspace, one that is likely to be emulated by emerging markets. With multiple institutions – from courts to political leadership to civil society – actively contributing to a diversity of opinion, the shape of an Indian consensus on cyberspace is slowly emerging. The Digital India initiative could culminate in a distinctive offering that will not only invigorate India’s economy but also serve as a model for other countries, including the industrialized West.

The internet is provoking new debate about the emerging social contract between citizens, businesses and the state. These debates will eventually find their way into international norms and regimes. To prevent the emergence of a “splinternet” and to preserve the democratic nature of cyberspace, India must proactively tell its own digital story.

India already has a rich history of safeguarding the global commons by blending idealism with pragmatism. Speaking at the Paris Conference in 2015, Prime Minister Modi recognized that more than 300 million Indians do not have access to energy. Despite this, India was determined to ensure that access does not come at the cost of the environment. This determination, said Modi, was “guided by our belief that people and planet are inseparable; that human well-being and nature are indivisible.”

 

India’s position on cyberspace is equally progressive. As things stand, India has both the capacity and the moral authority to shape a global digital economy. At the Global Conference on Cyber Space in New Delhi, Prime Minister Modi believed that the internet validates the ancient and inclusive Indian philosophy of “Vasudhaiva Kutumbakam” – the world is one family. “Through technology, we are able to give meaning to this expression, and indeed to the best of democratic values,” he continued.

 

A democratic, innovative and secure cyberspace is consistent with both India’s ancient moral values and its modern economic imperatives. India’s recent policy actions on net neutrality and data protection are a step in the right direction. New Delhi must now craft a narrative around India’s digital economy that appeals to the rest of the world.

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Digital India, Politics / Globalisation

Our Common Digital Future

GCCS, 2017

Original link is here

For a medium considered to have revolutionised communications, it is ironic that the many struggles around the governance of cyberspace stem from a lack of communication — communication among states, between states and citizens, and between those that create technology and those that consume it. Normative processes that will determine the future of cyber governance have greatly benefited by bringing together actors who represent diverse geographical, political, economic and social realities. One of the most important among these processes is the Global Conference on Cyberspace (GCCS).

Conceived in London in 2011, the GCCS is the largest gathering of all stakeholders on cyberspace issues. It has already managed to bring into this fold key interlocutors from government, civil society, industry and academia. The fifth edition of the conference, convened by India, is a significant landmark in the evolution of the London Process. GCCS 2017 is the first time that the gathering is hosted by a non-OECD economy. This very fact leads to an opportunity for the internet community to engage with a wholly new demographic and different set of issues animating the next billion internet users. That India hosts this process now is a message in itself and augurs well for greater degree of pluralism in the agenda, grammar and ambitions of this process.

This idea is reflected in the four main pillars for GCCS 2017 — inclusion, growth, diplomacy and security. This volume of essays captures some of the critical debates on these issues from foremost leaders, visionaries, founders and young minds in technology, policy and governance. While previous editions of this conference have been designed as high-level stocktaking exercises, this edition has the potential to go a step further and create an independent norm-setting initiative led by diverse and emerging economies. The essays in this volume are intended to guide this endeavour.

The multiple goals of policymaking — providing access, securing the medium and spurring economic activity — are no longer mutually exclusive. These are all interlinked interests. There is perhaps no better example that is more illustrative of this phenomenon than the opportunity presented by digital payments. Digital payments have immense potential in promoting financial inclusion to those at the bottom of the pyramid and in banking the unbanked. It can enable micro entrepreneurship and serve as the backbone for services in the digital age. At the same time, digital transactions have sometimes come under the shadow of technological vulnerabilities and in the unsafe practices of users who make them. Governments today have to juggle policy priorities that are often at odds with each other — providing access cannot ignore concerns around security and securing the medium cannot come at the cost of stifling innovation. Reconciling these challenges in pursuit of one goal is the digital trilemma for cyberspace policymakers today.

Addressing these challenges will require policymaking that is both technologically and socially dynamic. It will require normative guidance that is targeted and yet inclusive. With formal multilateral processes such as the UN Group of Governmental Experts on Developments in the Field of Information and Communication Technologies ending in a lack of consensus this year, initiatives such as the GCCS assume more importance. The conference can serve as a forum to make the global discourse around cyberspace more representative and plural — this year we will witness some of the normative conversations begun by bodies like the Global Commission on the Stability of Cyberspace and have these ideas deliberated upon.

The essays in this volume, covering a range of topics from cyber conflict to digital connectivity, aim to bring a diversity of interests and perspectives on to the same table, in the hopes that they will guide discussions for future gatherings and maybe even answer some of the long contested issues for policymakers today.

Asia is not only home to the largest number of internet users in the world, it is also poised to lead the world in technology, innovations and regulatory policy — it is therefore only fitting that GCCS 2017 is being stewarded by India. The process will benefit from the democratic ethos of policy conversations in India and will allow voices that have remained on the sidelines to have their chance to shape our common digital future.

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Columns/Op-Eds, Digital India

Time for Aadhaar diplomacy: Delhi GCCS conference an opportunity for India to exercise leadership in the new data economy

Times of India, November 20, 2017

Original link is here

If India has in the past punched below its weight on digital governance, its hosting of the Global Conference on Cyber Space today promises to change that. The GCCS, conceived in 2011 as the ‘London Process’, is the most influential forum on internet governance and cyber security. That India is the first non-OECD country to curate this platform is indicative of its determination to be a policy entrepreneur on digital issues.

There is good reason India can and should aspire for leadership in this space. It is today the fastest growing ‘data economy’. The characterisation of data as the new ‘oil’ is unsurprising, considering it will contribute billions of dollars to global economic output. But data is better thought of as currency. After all, data is regularly exchanged among developers, advertisers and consumers for services, and its value, like currency, is linked to capability of the geography in which it resides and the precise context in which it is traded.

Research from McKinsey reveals cross-border data flows have quadrupled over the past decade, outstripping trade in goods: data is the new driver of globalisation. By 2020, there will be 5,200 GB of data for every person on earth. The ubiquity of data, however, will also require new global institutions, similar to ones created to manage energy supplies and financial flows in the 20th century. It will necessitate new normative principles on cybersecurity and internet rights.

Today’s digital heavyweights are writing rules to retain their stranglehold over data capture and analytics. Developing countries are the fountainhead of data, but the risk is that data regimes will favour those who have the power to access and analyse it. If the European conquests of Latin America, Africa and Asia teach any lessons, it is that those who possess natural resources do not always benefit from the value they generate.

In the past, control over energy resources and financial institutions were key to exerting power. Platforms like OPEC and the World Bank were instrumental in securing geoeconomic interests of advanced economies. This is unlikely to change unless new actors can conduct ‘data diplomacy’ in order to ensure international regimes do not continue to only serve the interests of a few.

With a billion-plus population, India’s economy is sitting on a digital reserve that is invaluable. Unlike other states where the accumulation of data is largely a private endeavour, India’s unique identity project has stimulated a public data-driven, digital economy.

This public engagement has also made digital development more democratic. No other large database like Aadhaar has been subject to as much scrutiny and debate anywhere in the world. Most technology companies hide behind intellectual property and opaque business practices. Aadhaar, in contrast, has witnessed fierce discussions around privacy, leading to its recognition as a fundamental right recently by the Supreme Court of India.

It has universal security designed as a public service and features that are evolved through open debate and legislative sanction. Additionally, while global companies tend to stifle local innovation (or ignore it), Aadhaar provides an enabling platform for start-ups.

If global rules on data governance are to be different from those of energy and finance, India’s cyber diplomacy must be propositional in forums where the issue is debated.

Like its climate change diplomacy, India must be proactive in carving out its own exceptionalism. This could include bilateral arrangements with cyber powers like the US and EU, creating critical mass for norms on internet governance. Eventually, India could also host annual summits of like-minded emerging markets (a ‘digital OPEC’) capable of improving collective bargaining power over data governance. The power of bilaterals, plurilaterals and multilaterals must all be harnessed.

Second, India must use standard setting to its advantage. This year, WhatsApp announced it would integrate the Unified Payments Interface to offer financial solutions. The integration of Indian standards into digital payments of multinationals has strategic implications. With over a billion users, whatever standards India sets for digital ecosystems have the potential to become the default option across emerging markets.

Third, India’s development assistance strategy must centre around digital spaces. The next billion users will emerge from Asia and Africa. Companies like Facebook and Google are already racing to acquire their personal data, ostensibly for increasing connectivity.

For developing countries however, the tradeoff is control over such data. India can proposition an Aadhaar-based alternative – one that is seen to be a ‘privacy first’ solution that lets governments retain jurisdiction over their data, while allowing indigenous enterprises to flourish. This gives it the capacity to hardwire its influence in emerging markets.

Fourth, unlike natural resources, the wellspring for data is the individual herself. Governing data is unlikely to be a state led affair. Civil society and businesses in emerging markets are equally crucial in framing the rules of the game for digital spaces.

While current models of ‘multi-stakeholderism’ allow for a certain decentralisation of decision making, it is heavily dominated by trans-Atlantic actors. New Delhi must lead in incubating new voices from the developing world, and help shape their views on the regime complex for governing data. This will address some developing country imperatives, such as promoting affordable access, platform security and local content.

The sheer size of India’s market lends it enormous bargaining power in conversations on cyberspace. To become a key stakeholder in the digital economy, New Delhi must advance these goals by investing in global institutions, normative principles, technical standards and new voices.

 

DISCLAIMER : Views expressed above are the author’s own.
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Columns/Op-Eds, Politics / Globalisation

How India has actually done a great job in dealing with the Dragon

Hindustan Times, November 1, 2017

Original link is here

Despite the power differential, India successfully raised the cost of China’s land grab activities at Doklam, a feat that even the U.S. has struggled to accomplish in East Asia. While China was relentless in the pursuit of its goals, and had the resources to spend, India managed to call its bluff, and simultaneously allayed Bhutan’s concerns.

narendra-modi-xi-jinping_331a3bfa-be34-11e7-922e-12a52d781256

The benefits of low-key diplomacy must not be underestimated. By engaging China away from the media glare, much to the vexation of New Delhi’s foreign affairs press, the Indian government successfully arrived at a favourable compromise.(AP)


If recent news reports are to be believed, China is back on the Doklam plateau in a veritable redux of the 73-day standoff that began in June this year. For its part, the foreign ministry has denied any change in the status quo following the “mutual disengagement” in late August. Those now skeptical of the government’s apparent inability to tackle China fail to appreciate that Doklam was never just a “stand-off”. It is part of a continuum of geo-political struggles – the current one is only naked in its manifestation as an outright territorial brawl — between the heavyweight and revisionist China and the defender India. It will not be the last, either.

Defusing the crisis at Doklam was never likely to reduce tensions across the 4,000 km border that India and China share. These border disputes are only symptoms of the Chinese determination to assert itself and claim pole position in an Asia that plays by Beijing’s rules. It was but a matter of time until China, rebuffed in its earlier attempt to needle India, decided to press New Delhi harder. By utilising its time-tested technique of ‘salami slicing’, and through the coercion of India’s smaller neighbours, China continues to seek to dent India’s credibility as a regional power.

China’s perception of, and strategy towards, India is shaped by the gaping asymmetry of power between the two countries. At $11 trillion, China’s economy is roughly five times the size of India. Were China to grow 2% and add over $200 billion to its GDP, India will have to grow by 10% to remain at the same place. In real dollar terms it may well be a decade or more before India begins to close this gap. In terms of security capabilities, this gap is most visible in defence expenditure, with China’s being approximately four times larger at $215 billion, compared to India’s $55 billion.

Even though the prognosis might appear grim, smaller countries have successfully deployed denial and deterrence strategies against larger opponents, for instance China against the U.S., in the past. Despite the power differential, India successfully raised the cost of China’s land grab activities at Doklam, a feat that even the U.S. has struggled to accomplish in East Asia. While China was relentless in the pursuit of its goals, and had the resources to spend, India managed to call its bluff, and simultaneously allayed Bhutan’s concerns.

The lessons from this incident for India’s foreign policy establishment are seminal, and can help shape future responses to Chinese aggression.

During a discussion in the US last month, a defence expert asked me if any other country has entered Chinese-claimed territory and stopped construction, as Beijing alleged, or intervened on behalf of a beleaguered third party as India claims. The subtext of the question was clear: India’s defiance of China was a unique moment. This is the first lesson: the spectre of an invincible, fire-breathing dragon must not awe India. New Delhi must, and can, stand up to China when its national interests are at stake and cleverly deployed political muscle will succeed in some instances.

The second takeaway is that the benefits of low-key diplomacy must not be underestimated. By engaging China away from the media glare, much to the vexation of New Delhi’s foreign affairs press, the Indian government successfully arrived at a favourable compromise. That this diplomacy was backed by a resolute security posture on the ground only bolstered New Delhi’s credibility, both at the negotiating table, and among regional partners. Deft and quiet diplomacy works and should be pursued as the first option.

Third, by participating in the BRICS summit in Xiamen shortly after the crisis, and investing in the future development of this group, India showcased the future direction of its relationship with China. For New Delhi, the lesson was that it is both possible, and necessary, to be politically assertive with China in some cases, while co-operating on others. Until the asymmetry between India and China is bridged, every Indian government will have to walk this tightrope.

Finally, New Delhi must realise the significance of creating new normative principles to manage regional affairs to get around the asymmetry of power with its neighbour. While boycotting China’s Belt and Road Initiative Summit in May, India cogently argued that regional integration must be premised on sustainable infrastructure investment norms and respect for sovereignty. That the US the EU and Japan have endorsed India’s position underlines the importance of “norm-fare” in the years ahead as an expansionist China continues to pursue its own version of the Monroe doctrine.

Samir Saran is vice president at the Observer Research Foundation and tweets at @samirsaran

 

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Columns/Op-Eds, Politics / Globalisation

President Xi and Secretary Tillerson: what two speeches tell us about the future of China and the US

Flags of U.S. and China are placed for a meeting between Secretary of Agriculture Sonny Perdue and China's Minister of Agriculture Han Changfu at the Ministry of Agriculture in Beijing, China June 30, 2017. REUTERS/Jason Lee - RC1A8F925660

Landmark addresses by President Xi Jinping and Secretary of State Rex Tillerson were a study in contrast


The past week has been a significant one for speeches. The first was President Xi Jinping’s marathon three-and-a-half-hour-long “report”, inaugurating the Communist Party of China’s (CPC) 19th National Congress. The 68-year-old Xi, widely regarded as the most influential Chinese leader since Chairman Mao, laid his ambition for the Asian giant bare, with his plan for “socialism with Chinese characteristics” in a “new era”.

 

As head of the party, military and state, Xi has accomplished what other world leaders can only dream of: an unprecedented centralization of power. He has the authority to make the world’s largest armed forces and the huge transnational Chinese corporations an instrument of his state policy, and this gives him the muscle to rewrite the rules of international politics.

 

His repeated swipes at President Trump’s “America first” policy, and emphasis on China’s positive role in global governance, sent a clear message: this new era would be Chinese-led, with China able and willing to commit political, military and economic capital to ensure that it happens. Needless to say, the “Chinese dream” – which includes becoming a global tech leader by 2035, reconnecting Eurasia with the Belt and Road Initiative (BRI), and achieving a strong, prosperous society by 2049 – brings with it implications for the rest of the world.

 

Before China can become a global leader, however, it must consolidate its position in Asia – arguably the most important region in the 21st century. What truly defines China’s ambitions in Asia is the BRI – Xi’s signature development strategy, which he called on the country to pursue as a priority. There was an underlying message to those who oppose or question it.

Image: Lowy Institute

China’s proposition

Ostensibly, the BRI is a regional connectivity project, stretching from oil and gas projects in Myanmar to ports in Malaysia and Pakistan, to a military base in Djibouti. This also creates the physical infrastructure for China’s “march west” to capture high-value markets in Europe – an essential part of its rise.

At its core, however, the BRI creates strategic co-dependencies between China and host states, setting the stage for what may be a Sino-centric world order. Already, China is in a position to create norms and rules across the wider region. Its leadership, through institutions like the Asian Infrastructure Investment Bank and initiatives such as the Regional Comprehensive Trade Partnership, significantly aid China in this effort.

While Xi was careful to point out that China’s rise would not be hegemonic, his speech also celebrated China’s militarization of the South China Sea (SCS), regarded by some as detrimental to the smaller littorals in that region.

 

Additionally, several of China’s regional projects have saddled smaller nations with debts they are struggling to repay, as was Sri Lanka’s experience with the Hambantota port. New Delhi, which boycotted the BRI summit in May over these very concerns (alongside the principal concern around sovereignty), was rewarded with a 73-day military standoff in the Himalayas.

 

Xi is confident that other developing countries would benefit from China’s rise. He was clear, however, that China would always protect its national interests – an attitude that will by definition be disadvantageous to many of its neighbours.

A democratic counterweight

Against this backdrop, the second important speech was delivered by the US Secretary of State, Rex Tillerson, a week before he is expected to visit New Delhi. Emphasizing on the importance of “shared democratic values”, Tillerson set out to define America’s “relationship with India for the next century”. Delivered on the same day as Xi’s landmark address, the speech extolled India’s peaceful rise, while chastising China’s disdain for international law and sovereignty.

 

Notably, Tillerson’s critique of the BRI was the strongest the Trump administration has made so far. Earlier in July, an Indo-US joint statement made only an oblique reference to “regional connectivity”, echoing some of India’s concerns. Tillerson, however, was more direct.

Tillerson hailed the US and India as the “eastern and western beacons of the Indo-Pacific”. Having struggled to balance China’s rise in the SCS, the US is keen to prevent the same kind of maritime militarization elsewhere – an objective India undoubtedly shares. Tillerson sees cooperation among the “Indo-Pacific democracies” – namely, India, Japan, the US and Australia – as key to stability in Asia.

 

With an eye on China, Tillerson’s speech is a call to like-minded states to ensure a rule-based multipolar governance architecture. Already, there is clear convergence of norms between the democratic powers – the US and Japan have reiterated India’s position that regional integration must be financed responsibly and must respect sovereignty. Similarly, Japan and India have echoed the US stance on freedom of navigation and peaceful resolution of maritime disputes. India led by example when it peacefully settled its dispute with Bangladesh recently.

 

Leading from behind?

What Tillerson’s speech tells us is that the Trump administration is correct in its reading of the geopolitical currents in Asia. It also tells us, unfortunately, that the US has no coherent response. Tillerson’s vague call for “some means of countering [the BRI] with alternative financing measures” underlines the fact that this and previous American pronouncements have not been matched by actual political actions and propositions. There is little to demonstrate that there has been any serious attempt to put together an alternative to the Chinese-led BRI in Washington, DC.

Unlike China, which is forging ahead on its own with its own roadmap, America is attempting to stitch together an alliance that is heavily limited by the larger political compulsions, both its own and those of its partners. Australia, for example, is still debating the nature of its relationship with China, and refusing to take a clear stance on either the BRI or on a maritime order, while Japan is still unsure about transitioning from its pacifist constitution. The US’s own willingness to engage with Pakistan limits its ability to integrate with India. India will confirm that, while it was staring down the dragon in the Himalayas recently, it was indeed lonely.

 

Xi has transformed China into a military heavyweight. Taking into account Beijing’s relaxed purse strings, no developing country can ignore China’s allure. American reluctance to address China’s rise head-on has already seen it lose influence in Asia, including with strategic partner the Philippines. While Tillerson’s words may constitute fresh rhetoric from DC, they will have limited impact on China’s influence, unless backed by real political and economic investments in the region.

 

Hardening fault-lines

 

The speeches by Xi and Tillerson are a study in contrast, and are reflective of the complex times in which they are given. At a time when US primacy is waning, Asia is rapidly emerging as the centre of global economic growth. The geopolitical implications are significant, and the institutional arrangements in Washington to manage this development are missing or feeble.

 

Both politicians sought to address this paradigm and were distinct in their tenor. Xi was imperious and forthright; with no signs of hesitation, he appeared certain that China was a power whose time had come and that he was destined to deliver “the great rejuvenation of the Chinese nation”.

 

Tillerson, on the other hand, voiced anxiety around managing a rapidly changing environment. It was a plea for collective action; to serve ambiguous goals; on behalf of a country whose policy of “leading from behind” is fast turning into, as US diplomat Richard Haass puts it, “leaving from behind”. The fate of the international order depends on which narrative ultimately prevails. Writing the script for this era will require a strong hand. As things stand currently, we know from whom the ink flows.

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The great liberal fallacy

Samir Saran|Jaibal Naduvath

Liberal fundamentalism is now at war with unbridled street anger, whose revisionist purpose and impatience have exhibited a dangerous capacity to self-destruct.

 Mark Rothko, Tate London, liberal, fallacy, liberalism, public influence, Samir Saran
Source: Pete/CC BY-SA 2.0

PROLOGUE: In April of 2016, UC Berkeley cancelled Milo Yiannopoulos’ planned speech in response to campus protests. For an institution that prides itself on its long and stellar liberal legacy — the centerpiece of which is the freedom to hold and express a view, irrespective of its political persuasion — the Rubicon was silently crossed.


The appeal of liberalism lies in its capacity to accommodate difference, to resist the instinctive urge to reduce the ‘other’ to fit the prisms of the ‘self’, and to recognise their independent and distinct agency. This lends it the unique capacity to account for the ambivalent nature of truth, to recognise and accept the many greys of reality and allow for the creation of assimilative and syncretic spaces.

Liberal, pluralist approaches have formed the basis for modern societies, where diverse opinions, preferences and choices make up a grand social and political canvas.

Ideologies, however, possess a fundamental contradiction: they are seldom ever practised as idealised. Participation in the liberal public sphere was compromised by the inability to widen access and agency beyond a select few with economic means and social ‘status’. The poor, racial and ethnic minorities and even women remained excluded from its ambit.

Key conversations that organised politics, economics and social norms thus largely remained an elite discussion, which despite their apparent differences, shared common class interests and presumptions around morality. This convergence of interests shaped the public discourse. It trickled down to the society through one-way, mass-oriented technologies of print and broadcast media, owned and controlled by this class, informed by their thinking and influenced by their sensibilities. The discourse thus remained incestuous and public consensus often imaginary and contrived.

The inherent flaw in this model was its contrariness to the liberal dictum. It left out large swathes of people who were constrained by the economics of access and politics of acceptance. The liberal public sphere has thus always remained contested and illiberal in its practice.

The domination of a Western cultural-technological narrative, mostly at the cost of indigenous ethos in non-Western settings, meant that it soon became an ideal that was either imposed upon or embraced by societies with sometimes-different social evolutions. This then became another reason of discord in many localities, where existing socio-economic exclusions were reinforced through elite discourse. The marginalised were now also voiceless.

Then came the Internet and social media, which dramatically altered the social canvas. It mainstreamed the marginal.

The ever-reducing cost of the internet sees more users getting online each day, increasing the reach of the medium and the consequent amplification of multiple messages. The ease and simplicity of engagement afforded by social media’s two-way communication architecture has proven the most disruptive.


Breaking from the past, where power simply came to be concentrated with a new elite, and subjugating those not fortunate enough to be a part of it, the new order has dispersed discursive power.


Without the shackles of previous structures, the internet has allowed large sections of society, hitherto outside the public sphere, to organise themselves, script their own narratives and shape their own democracy. The significant lowering of the barriers of entry, allowed, for the first time, meaningful mass participation in public discourse. Attempts to control and regulate access have had limited impact at best, as the medium forever brings forth new methods to circumvent control, and new pathways to agitate, constantly altering ways to propagate and receive ideas.

While the dominant and the marginal have constantly renegotiated their power equations throughout history, what distinguishes the new dynamic is its participative nature. It has levelled class differences. That too at an unprecedented pace. Breaking from the past, where power simply came to be concentrated with a new elite, and subjugating those not fortunate enough to be a part of it, the new order has dispersed discursive power.

The newcomers with digital ‘megaphones’ are not bound by old class structures. Instead, deeply aggrieved by their long exclusion, they have set about recasting the public sphere by challenging class presumptions and breaching the boundaries that define it. For their anger is deeper, their hate more potent, and their victimhood more tragic.

Mark Rothko, Tate London, liberal, fallacy, liberalism, public influence, Samir Saran
Source: Pete/CC BY-SA 2.0

Their revenge and redemption lies in dismantling old structures and antiquated arenas that set the rules of social behaviour and public debate. They have successfully challenged, and in several cases, even usurped established political systems, catapulting into power the marginal, whose project now is to legitimise their world-view and consolidate their new-found power and authority. They sought to recast institutions of state and society in the mould of their truths and beliefs. In many instances, these truths and beliefs were defined not by substantive new ethics but being in contest with the normative.

The new wave was responsible for several populist mass movements in the last decade. The Tunisian Revolution, Arab Spring or the 2011 pro-democracy protests in China constitute resistance at the bleeding edge of this change. On the other hand, the coming to power of populist governments on a fierce anti-establishment plank in the US, India, Indonesia, the Philippines and elsewhere through a process of democratic transition constitutes resistance at the soft edge. Nevertheless, at their core, they share similar objectives and use similar approaches, which combine aggressive street dissent and internet activism. Arising from their disillusionment, the objective of the new stakeholders has mostly gravitated to dismantle what existed while seldom possessing a meaningful alternate blueprint.


The newcomers with digital ‘megaphones’ are not bound by old class structures. Instead, deeply aggrieved by their long exclusion, they have set about recasting the public sphereby challenging class presumptions and breaching the boundaries that define it.


In How the Mind Works, Steven Pinker says that binary logic helps one to quickly choose: between fight or flight, between one moral position and another. This lends it a near hypnotic capacity in public discourses where attention spans are notoriously short and competitive appeal relies more on rhetoric than meaning. Diminished in influence and capacity to influence political change, the old elite’s response has situated itself in exploiting this pernicious blindside of mass psyche.

They have sought to oversimplify the discourse by obfuscating inherent subtleties and ambiguities that inform reality, reducing the conversation to binary labels built around reciprocal determination: ‘fake news’; our liberalism versus their illiberalism; our accommodativeness versus their intolerance, our goodness versus their evil. This simplistic binary logic is easier to perpetuate as it does not ensnare the ‘plebs’ in complex subtleties.

Their project relies on reducing newcomers through selective representations made up of half-truths, lumpenising, and denial of agency, in a colonial intellectualism redux. In the manifest, their new narrative is built upon the twin pillars of condescension and fear.

They seek to entangle the newcomers in discussions alien to them, using a mix of provocation and patronage. Their anxiety and uncertain response in new settings is used to contrast this seemingly inferior agency with superior experiences of the ‘self’. The ‘different’ approach of the ‘other’ then becomes the rationale of the politics of disdain, of their boorishness, and lesser agency.

This is captured by the new energy infused into and fear perpetuated through the ‘fake news’ narrative. Framed as a novelty, the liberal elites accuse the newcomers of resorting to it, thereby diminishing the quality of debate and political response. This approach is reductive as it dismisses the real and perceived grievances attached to these narratives. Belittling them as ‘fake’ provides the perfect alibi to ignore accumulated hurt and anger.

And then the hypocrisy. Is ‘fake news’ new? Can we discount its historical role in political and public discourse, and its use by elites who hitherto dominated the public sphere, in furthering their interests and sustaining class dominance? From that standpoint, it at best constitutes a borrowed institutional practice by the new stakeholders.

William Hazlitt once said: ‘Just as much as we see in others we have in ourselves.’ In resorting to labels and framing their discourse through a narrow binary logic, in resorting to the politics of fear and denial of the other’s ‘otherness’, the old elite reveal their Janus face. In seeking to create a counter narrative which is morally absolutist, where the only just choice on offer is theirs, they have become the same as the abhorred other of their imagination — fundamentalist, polarising and dangerous, and every bit as regressive and illiberal.

This clash between the old and the new is for the crown jewels of acquisition, ownership and retention of public influence and space. The ethic at the core of this struggle is power.

Liberal fundamentalism is now at war with unbridled street anger, whose revisionist purpose and impatience have exhibited a dangerous capacity to self-destruct.

Away from this contest for the zeitpolitik, then, participants in the new public sphere, old and new alike, need to arrive at an entente cordiale built upon the vast grounds they share. The only fair redemption is in moving away from binaries, to adopting a syncretic approach that is above the politics of difference; in charting new pathways that are inclusive and representative of mainstream and marginal interests. Such space exists, but between arrogance of the ‘self’ and anger for the ‘other’.


EPILOGUE: In August of 2016, armed French policemen walked up to a woman at a beach in Nice. The woman, in a burkini, was made to remove some of her clothes and ticketed for failing to upkeep ‘secularism and good morals’.


This commentary originally appeared in Open Magazine.

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Non-Traditional Security, Politics / Globalisation

Intelligent interlocution

Economic Times, ET Commentary, 24 October, 2017

Original link is here

On Tuesday, the former chief of the Intelligence Bureau, Dineshwar Sharma, was appointed as the Government of India’s representative for Kashmir, in a bid to, in the words of Union home minister Rajnath Singh, “open a sustained dialogue” with stakeholders holding various shades of opinion in the beleaguered state of Jammu and Kashmir.

Dialogue, however, is rarely easy in Kashmir. History, religion, external actors, changing demographics and a technology-driven news environment have turned Kashmir into a perpetually simmering tinderbox of violence and cacophonous opinions.

In his book, Clash of Barbarisms: September 11 and the Making of the New World Disorder, Soas political scientist Gilbert Achcar famously wrote that the US and the Arab world were caught between two ‘barbarianisms’: Islamic fundamentalism and the military muscle of a superpower.

Kashmir, unfortunately, finds itself similarly trapped: a tragic painting of what ails many other parts of the world. A reality where the brutal response to ‘jihad’ and the ‘jihad’ itself affect similar populations.

The first ‘barbarianism’ results from poor state capacity in responding to incidents of terror, violence and unrest in J&K. Each time violence erupts in Kashmir, it generates an exasperatingly similar set of reactions.

Absent of any political guidance, and clever and contemporary security responses, the state police and army resort to brutal methods of crowd control, generating further outrage and disaffection.

Even as angry prime-time anchors fall over themselves to carry the banner of nationalism to garner TRPs, the Valley feels victimised twice over.

The second ‘barbarianism’ is the rabid violence of the extremists, who draw their self-perceived virility from social media where their perverse actions are extolled and eulogised. In turn, tech-savvy, disgruntled and often indoctrinated young men from Kashmir fall prey to the illusion of ‘Azadi’ (freedom) and the romanticism of a transnational jihad. Trapped in the futile narrative of a ‘colonising’ India and an occupied ‘Kashmir’, the aspirations of the state’s citizens remain unfulfilled and democracy mostly defeated.

The Vale Beyond the Veil

Caught between these two extremes, successive central governments in New Delhi have consistently failed to create a political opening to quell this recursive violence. If the Narendra Modi government is intent on making a sincere attempt to free Kashmir from this pattern, it must take stock of past failures and the lessons that they offer.

For one, the rest of the world is largely unsympathetic to separatist and radical movements, especially in areas where Islamic ideologies have taken hold in the post-9/11scenario. It is less likely than ever that the ‘Kashmir conflict’ will be ‘internationalised’, or other parties will seek to mediate.

This, however, may not be a bad thing as it has created enormous space for dialogue, which, in the case of Kashmir, is repeatedly wasted away by unimaginative State policy. Poor governance, failure to empower and create local institutions, and the lack of sustainable economic integration has left the Kashmiris disillusioned and secluded.

Second, despite the predictability of protests and uprisings, the Indian State’s inability to engage with the Valley manifests itself repeatedly through its failure to build police capacity that responds humanely. A larger failure in recent times has been the lack of capability to control the narrative. More often than not, sophisticated separatist propaganda successfully hijacks public perception and imagination.

Add to this, the vicious social media debates between the political parties at the Centre to use the travails of Kashmiris as a useful prop to score brownie points for, or against, the ruling dispensation. Internet shutdowns and curbs on media freedom only fuel the feeling of isolation at one level, and reveal the helplessness of the state machinery at another.

Finally, New Delhi has continued to invest political capital in a select few elite families, in the hope that they may manage the conflict. This is an unfortunate ‘colonial’ tactic. Outreach involves reaching out to disaffected communities and addressing local concerns, and in discovering new voices and new leadership that have astake in the future. Presumably, this is what Dineshwar Sharma hopes to achieve as special interlocutor.

But he has his work cut out. The predominant discord that has manifested in the past year with a spate of violence has seen the coming together of ideas and actors that are sometimes indigenous and organic, sometimes controlled and contrived, and many a times angry and irrational.

The spontaneous discord that emerged this past summer, though, may have been different and new. The response to it must also be novel. It must discard antiquity, manage malevolence and empower new and young democratic voices.

Talk Peace, Not Piece

The Indian State’s failure so far reflects lazy politics. A successful counterterrorism strategy requires outreach, minus the fear and threat of violence that the state today invokes. At the same time, conversations are meaningless if the State cannot create sufficient peace for dialogue to take place.

The key is to find a balance. Perhaps a consensus in Kashmir will require, to paraphrase Margaret Thatcher, “an abandonment of all beliefs, values and policies. So that it is something in which no one believes and to which no one objects”.

The writer is vice-president, Observer Research Foundation

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World Economic Forum, Global Agenda,  3rd October, 2017

Original link is here

Over the years, many observers have expressed skepticism about the BRICS (Brazil, Russia, India, China and South Africa) initiative – and skeptics within the BRICS member states perhaps outnumber those outside.

The reason is a clear lack of traditional logic behind the coming together of these countries. They are dispersed geographically, their economies are in different stages of development and there is a fair degree of ideological dissonance between them. And unlike other economic associations, BRICS does not seek to set up any common political or security architecture.

However, this should not obfuscate the fact that the purpose of BRICS was clear from its inception: to form a convenient and pragmatic 21st-century relationship that pools the influence of its members in order to achieve objectives agreed to by all five countries. In a multipolar world in which economic and political power is rapidly diffusing, the BRICS nations seek to influence and shape the norms of global governance, which have been fashioned by the Atlantic system in the past. BRICS, then, is a coming together of nation states at a particular geopolitical moment to achieve a set of goals.

Each member of BRICS also has their own reason to sustain this plurilateral movement. Russia sees BRICS as a geopolitical counterweight to the eastward expansion of the Atlantic system. For South Africa, BRICS is a means to legitimize its role as a gateway to and powerhouse of the African continent. BRICS allows Brazil to collaborate in the shaping of the Asian century, despite its geographical location. China participates in the forum because it recognizes BRICS as an important vehicle for fashioning governance systems in which its political influence is commensurate to its growing economic heft. Finally, for India, BRICS is a useful bridge between its rising status as a leading power and its erstwhile identity as the leader of the developing world.

BRICS.jpg

How do the BRICS nations sit within the global economy?
Image: BRICS Summit 2015

The first decade of BRICS

BRICS’ first decade saw each of the members laying down groundwork for cooperation, from identifying areas of convergence on political issues to improving economic ties. The level of engagement between its members, ranging from high-level summit and ministerial meetings to various working groups and conferences, has only deepened over that time.

Today there is a fair degree of cooperation on issues such as trade, infrastructure finance, urbanisation and climate change. Moreover, the five members have made modest progress in people-to-people connections. Platforms such as the BRICS Academic Forum and Business Council have proved to be useful in improving their understanding of each other’s industry, academia and government.

 

Undoubtedly, the two most notable achievements of the BRICS have been the institutionalization of the New Development Bank (NDB) and the Contingency Reserve Arrangement.

 

The importance of these institutions cannot be understated. For one thing, they mark a shift from political rhetoric to delivering concrete results, alleviating some of the skepticism surrounding the BRICS initiative. More importantly, they represent a partial fulfilment of BRICS’ core raison d’être: to offer credible alternatives to the Atlantic system of global governance.

While such institutions are unlikely to ever replace the IMF or the World Bank, they represent a fundamentally different governance paradigm. By giving equal voting rights to its founding members and improving reliance on local currencies, the BRICS members are attempting to create a new, non-Bretton Woods template for the developing world to emulate.

 

The end of innocence

Despite achieving a moderate level of success over the last decade, two recent events have brought the divergence between the BRICS members into sharp focus.

The first is the recent military standoff between India and China on the Doklam plateau, which has effectively brought to an end the naive notion that a comfortable political relationship is always possible amongst the BRICS members. The second is China’s efforts at creating a ‘BRICS plus’ model, a thinly veiled attempt to co-opt nation states, which are integral to its Belt and Road Initiative, into a broader political arrangement.

 

Both of these events highlight how the foundational principles of BRICS – respect for sovereign equality and pluralism in global governance – are liable to be tested as the five member countries pursue their own national agendas.

 

However, instead of derailing the BRICS project, these developments are likely to inject a level of pragmatism into the initiative. While BRICS itself is unlikely to form the lynchpin of foreign policy for any of its members, it will continue to be an important instrument in their toolkit.

 

Essentially, the BRICS members are now likely to realise that the group itself is a ‘limited purpose partnership’ in which political barriers will always limit the partnership’s full economic potential.

The next decade?

If BRICS is to remain relevant over the next decade, each of its members must make a realistic assessment of the initiative’s opportunities and inherent limitations.

BRICS did well in its first decade to identify issues of common interests and to create platforms to address these issues. However, new political realities require the BRICS nations to recalibrate their approach and to recommit to their founding ethos.

For one, they must reaffirm their commitment to a multipolar world that allows for sovereign equality and democratic decision-making. Only by doing so can they address the asymmetry of power within the group and in global governance generally. Only this approach will strengthen multilateralism.

 

Second, they must build on the success of the NDB and invest in additional BRICS institutions. It will be useful for BRICS to develop an institutional research wing, along the lines of the OECD, which can offer solutions distinct from western-led knowledge paradigms and which is better suited to the developing world.

Third, they should consider a BRICS-led effort to meet their commitments under the Paris Agreement on climate change and the UN’s sustainable development goals. This could include, for example, setting up a BRICS energy alliance and an energy policy institution. Similarly, the NDB in partnership with other development finance institutions could be a potent vehicle to finance progress towards the sustainable development goals amongst the BRICS members.

 

Fourth, the BRICS nations can also consider expanding the remit of their cooperation to address emerging areas of global governance such as outer space, the oceans and the internet.

Finally, the BRICS members must encourage direct interactions between their constituents. In the digital age, seamless conversations amongst people, business and academia can foster relationships, which are more likely to cement the future of this alliance than any government efforts.

 

For the first decade of its existence, the group was powered by a top-down approach with large investments of political capital. The second decade must ride on the energy and entrepreneurship of the citizens and communities that reside within the BRICS countries.