Category: TPF Analysis

  • Chinese Economic Sops over the South China Sea: A Mixed Bag of Successes

    Chinese Economic Sops over the South China Sea: A Mixed Bag of Successes

    The South China Sea is a resource-rich sea space and its net worth is estimated to be US$ 2.5 trillion.[i]  The proven oil reserves are around 7.7 billion barrels and natural gas reserves could be around 266 trillion cubic feet.[ii] The Chinese strategy in the South China Sea against other claimant States is a mix of aggressive posturing including the threat of use of force as also offering economic incentives and sops such as ‘joint development of resources’ in the contested waters.

    Deng preferred a “moderate approach” i.e. “sovereignty remains ours; shelve disputes; pursue joint development.

    The idea of joint development can be attributed to Deng Xiaoping, the Chinese leader and author of market-economy reforms in the 1980s that earned him the title of ‘Architect of Modern China’. Deng preferred a “moderate approach” i.e. “sovereignty remains ours; shelve disputes; pursue joint development.”[iii]

     

    Map Credit: The Australian Naval Institute

    China’s current thinking on joint development of resources in South China is built around at least seven policy choices i.e. (a) promote good faith in the South China Sea; (b) limit unilateral activities in disputed areas; (c) focus on less-sensitive areas of the South China Sea; (d) reach joint development arrangements by establishing relevant working mechanism; (e) begin the process in areas where there are only two claimants; (f) define sea areas for the joint development by seeking consensus, and (g) discuss the feasibility of setting up a Spratly Resource Management Authority (SRMA) with supranational character.[iv] Further, it has been argued that the ASEAN-China Single Draft Negotiating Text of the Code of Conduct (COC) is “conducive to creating benign bilateral relations, which serves as a prerequisite to joint development”.[v]

    The general belief among the claimants is that China thinks ‘what is mine [Chinese] is of course mine, but what is your [claimants] is also mine’

    However, the above policy choices for joint development and intention are flawed and dismissed by the aggrieved claimants of the South China Sea. The general belief among the claimants is that China thinks ‘what is mine [Chinese] is of course mine, but what is your [claimants] is also mine’; i.e.  Chinese joint development initiatives are based on the wrong assumption that what belongs to China is for China only to develop, and what belongs to other claimants is for development.

    In 2018, China and the Philippines signed a Memorandum of Understanding on Cooperation on Oil and Gas Development. President Xi Jinping urged President Philippine President Rodrigo Duterte to “set aside disputes, eliminate external interference, and concentrate on conducting cooperation, making pragmatic efforts and seeking development”; furthermore, “both sides can take a ‘bigger step’ in the joint development of offshore oil and gas”.[vi] The Philippines proposed a “60-40 sharing arrangement in its favour” and both sides could then develop the “Reed Bank, the main site of the oil and gas reserves, despite the arbitration award declaring that Manila had sovereign rights to exploit them”.[vii]

    Similarly, Brunei has an ongoing arrangement with China on bilateral joint development/cooperation in the South China Sea. Economic and strategic considerations are Brunei’s twin drivers; it has been “pushing hard to diversify its economy away from the oil and gas industry” for a long time and the “unstable oil market, a slow foreign investment growth (especially in non-oil and gas sector) and a contracting national GDP” has acted as a catalyst to diversify and “joint development” is an integral part of Brunei’s wider economic diversification strategy. [viii]

    Unlike the Philippines and Brunei, Malaysia and Vietnam have shied away from joint development of resources with China in the South China Sea.

    Unlike the Philippines and Brunei, Malaysia and Vietnam have shied away from joint development of resources with China in the South China Sea. This is despite the March 2005 China, the Philippines and Vietnam Tripartite Agreement for Joint Marine Scientific Research in Certain Areas in the South China Sea by respective national oil companies.

    Malaysia is not averse to joint development with other claimants except China and at least four such projects were undertaken i.e. (a) Malaysia-Thai Joint Development Authority in the Gulf of Thailand based on the 1979 MOU; (b) 1992 MOU which designates overlapping continental shelf claims (about 2000km square) in the Gulf of Thailand as Commercial Arrangement Area (CAA); (c) the 2009 CAA between Brunei and Malaysia; and (d) Fisheries MOU between Malaysia and Indonesia, quasi-joint exploitation of fisheries resources, in overlapping claim area of about 14,300 square kilometres in the Straits of Malacca.[ix]

    Vietnam’s boundary and territorial disputes with China in the South China Sea including clashes over the Parcels have resulted in mistrust and preclude joint development with China. In essence, Vietnam does not accept joint development in areas that belong to Vietnam according to the UNCLOS 1982.

    Vietnam promotes international cooperation on resource development and has a rich body of laws to support such initiatives such as the 1982 United Nations Law of the Sea, the Petroleum Law (Article 3, No. 12), the Navigation Law, Fisheries Law, the Law on Natural Resources and Environment of Sea and Islands (Article 4, No. 5), the Tourism Law, and the Mineral Law. However, its boundary and territorial disputes with China in the South China Sea including clashes over the Parcels have resulted in mistrust and preclude joint development with China. In essence, Vietnam does not accept joint development in areas that belong to Vietnam according to the UNCLOS 1982.

    The US rejects Chinese maritime claim in the South China Sea and proclaimed “any PRC action to harass other states’ fishing or hydrocarbon development in these waters – or to carry out such activities unilaterally – is unlawful.”[x]Furthermore, while extending help to Vietnam on the matter, US Secretary of State Michael Pompeo announced that “America stands with our South-East Asian allies and partners in protecting their sovereign rights to offshore resources, consistent with their rights and obligations under international law.”

    Notes

    [i]China Escalates Coercion against Vietnam’s Longstanding Oil and Gas Activity in the South China Sea”, https://china.usembassy-china.org.cn/china-escalates-coercion-against-vietnams-longstanding-oil-and-gas-activity-in-the-south-china-sea/  (accessed 15 September 2020).

    [ii] “South China Sea: Beijing has a major natural advantage in the geopolitical power game”, https://economictimes.indiatimes.com/news/defence/south-china-sea-beijing-has-a-major-natural-advantage-in-the-geopolitical-power-game/articleshow/76423659.cms (accessed 15 September 2020).
    [iii] “Xi Jinping and China’s Maritime Disputes”, https://taylorfravel.com/2013/08/xi-jinping-and-chinas-maritime-disputes/  (accessed 15 September 2020).
    [iv] “Joint development in the South China Sea: China’s incentives and policy choices”,https://www.tandfonline.com/doi/full/10.1080/24761028.2019.1685427  (accessed 15 September 2020).
    [v] Ibid.
    [vi] “China Focus: Xi, Duterte meet on pushing forward ties”, http://www.xinhuanet.com/english/2019-08/30/c_138350348.htm  (accessed 15 September 2020).
    [vii] “China’s Xi sees bigger role for joint energy exploration with Philippines”, https://www.reuters.com/article/us-china-philippines/chinas-xi-sees-bigger-role-for-joint-development-of-offshore-oil-gas-with-philippines-idUSKCN1VK00M  (accessed 15 September 2020).
    [viii] “Cooperative Research Report on Joint Development in the South China Sea: Incentives, Policies & Ways Forward”, http://www.iis.fudan.edu.cn/_upload/article/files/9f/21/992faf20465fae26c23ccce1ecc6/f003a68f-eb6a-4b09-a506-3c00897b0862.pdf  (accessed 15 September 2020).
    [ix] “Cooperative Research Report on Joint Development in the South China Sea: Incentives, Policies & Ways Forward”, http://www.iis.fudan.edu.cn/_upload/article/files/9f/21/992faf20465fae26c23ccce1ecc6/f003a68f-eb6a-4b09-a506-3c00897b0862.pdf  (accessed 15 September 2020).
    [x] “China pressurizes Vietnam to cancel, compensate offshore firms operating in South China Sea”, https://energy.economictimes.indiatimes.com/news/oil-and-gas/china-pressurises-vietnam-to-cancel-compensate-offshore-firms-operating-in-south-china-sea/77189060  (accessed 15 September 2020).

    Image Credit: nbcnews.com

  • US-China Tensions Could Spill Into Lancang-Mekong River Basin

    US-China Tensions Could Spill Into Lancang-Mekong River Basin

     The Lancang-Mekong River is the 12th longest river and runs through six countries i.e. China (upper riparian), Myanmar, Thailand, Laos, Cambodia and Vietnam (the lower riparian)and finally discharges into South China.

    A recent US government-funded study has noted that in 2019 China held back large amounts of water upstream in dams on the Mekong River which caused a  severe drought in the downstream countries,[1] prompting a US ambassador in the region accusing China of “hoarding” water and “harming the livelihoods of millions of people in downstream countries”.[2] Likewise, another report by Stimson Centre, a Washington-based think tank, has corroborated the above and pointed that in 2019 “upstream dams at Nuozhadu and Xiaowan had restricted around 20 billion cubic meters of water between July and November” and that current “satellite images show those dams are once again poised to restrict a similar amount of water from July 2020 through the end of this year … Portions of the Mekong mainstream are once again dropping to historically low levels,”[3]

    China has dismissed the reports and the Global Times in an article cited a report by the Tsinghua University and clarified that the “river dams in China [instead] helped alleviate drought along Lancang-Mekong”; furthermore, in November 2019, the Mekong River Commission (MRC) had concluded that “the drought was caused by insufficient rainfall during the wet season with a delayed arrival and earlier departure of the monsoon rain and an El Niño event that led to abnormally high temperatures and high evapotranspiration”.[4]

    At the heart of this problem is that China has built as many as 11 dams on the 4,800 kilometres long Lancang-Mekong River that originates in the Tibetan Plateau.

    At the heart of this problem is that China has built as many as 11 dams on the 4,800 kilometres long Lancang-Mekong River that originates in the Tibetan Plateau.  The Lancang-Mekong River is the 12th longest river and runs through six countries i.e. China (upper riparian), Myanmar, Thailand, Laos, Cambodia and Vietnam (the lower riparian)and finally discharges into South China.

    China has been reluctant to share hydrological data particularly during the dry seasons and releases water during rainy seasons causing flooding in lower riparian countries. This is despite the 2002 MoU under which China had agreed to provide daily river flow and rainfall data from two monitoring stations in Yunnan Province during the wet season, and the periodic MRC Heads of Government meeting over a Summit which is held every four years.

    Earlier this year, the Chinese State Councilor and Foreign Minister Wang Yi had assured that his country would “give positive consideration to share the full-year hydrological information with Mekong countries and enhance cooperation under the Lancang-Mekong Cooperation (LMC) framework to ensure reasonable and sustainable use of water resources”.[5]

    Perhaps a recent statement by the MRC may temporarily obviate suspicions over China not sharing hydrological information on the Lancang-Mekong River which notes that it welcomes China’s sharing of data “ throughout the year” as also for the “ establishment of an information-sharing platform for water resources cooperation led by China and Myanmar”.[6] Also, during the 3rd Mekong-Lancang Cooperation (MLC) Leaders’ Meeting, the Global Center for Mekong Studies (GCMS) has been tasked to study the potential benefits from “aligning and synergizing the MLC and the New International Land-Sea Trade Corridor with a vast market”.[7]

    It has been observed that although the 1995 Agreement on the Cooperation for the Sustainable Development of the Mekong River Basin is legally binding, it “does not have a compliance mechanism such as punitive measures on the party that violates the spirit and principles of the Agreement.

    In 1995, the upper and lower riparian countries had adopted Agreement on the Cooperation for the Sustainable Development of the Mekong River Basin which lays out “principles and norms of regional cooperation in managing the river basin”. A formal dialogue process under the MRC was instituted to address issues relating to Mekong River and the Member States agreed to “promote common procedures and practices throughout the region for data collection, storage and analysis to support data sharing and integration of existing data management systems based on the voluntary participation of countries and institutions.”[8] In 2001, they adopted the “Procedures for Data and Information Exchange and Sharing,” or PDIES to enable the Member States to share data ‘to provide real-time water level information and more accurate flood forecasting.

    It has been observed that although the 1995 Agreement on the Cooperation for the Sustainable Development of the Mekong River Basin is legally binding, it “does not have a compliance mechanism such as punitive measures on the party that violates the spirit and principles of the Agreement. The conflict resolution mechanism is also not clearly stipulated”.[9] This is one of the many reasons for discord among the Parties which needs to be addressed by the MRC whose mandate includes dispute resolution.

    Be that as it may, the lower Mekong countries have set up the Mekong Water Data Initiative, and at the 10th Ministerial Meeting of the Lower Mekong Initiative (LMI) in 2017 to ‘create a robust, integrated, and transparent platform for collecting, sharing, and managing data on the Mekong River system.’[10]

    there are fears that the Lancang-Mekong River issue is slowly shaping into a major ASEAN-China bilateral issue similar to the contestation in the South China Sea.

    At another level, there are fears that the Lancang-Mekong River issue is slowly shaping into a major ASEAN-China bilateral issue similar to the contestation in the South China Sea; and the current situation is being described as “becoming a geopolitical issue, much like the South China Sea, between the United States and China,”[11] Perhaps the biggest worry is that the Lancang-Mekong River should not attract contestation between the US and China which surely is going to make the region more turbulent. It would thus be prudent that ASEAN and China work on a Code of Conduct to manage the river affairs or add more robustness in the existing dialogue mechanism over the Lancang-Mekong River.

    End Notes
    [1] “China could have choked off the Mekong and aggravated a drought, threatening the lifeline of millions in Asia”, https://www.cnbc.com/2020/04/28/china-choked-off-the-mekong-which-worsened-southeast-asia-drought-study.html  (accessed 12 September 2020).
    [2] “Water wars: Mekong River another front in U.S.-China rivalry”, https://www.japantimes.co.jp/news/2020/07/25/asia-pacific/mekong-river-us-china/  (accessed 12 September 2020).
    [3] “The next US-China battleground: Chinese dams on the Mekong River?”,https://www.scmp.com/week-asia/politics/article/3095581/next-us-china-battleground-chinese-dams-mekong-river  (accessed 12 September 2020).
    [4] “River dams in China helped alleviate drought along Lancang-Mekong, research finds”, https://www.globaltimes.cn/content/1194654.shtml  (accessed 10 September 2020).
    [5] “River dams in China helped alleviate drought along Lancang-Mekong, research finds”, https://www.globaltimes.cn/content/1194654.shtml  (accessed 10 September 2020).
    [6] “Lancang-Mekong cooperation provide stronger impetus for regional development and prosperity”, http://www.lmcchina.org/eng/hzdt_1/t1812281.htm  (accessed 12 September 2020)
    [7] “Full text of Co-chairs’ Statement on Cooperation of Synergizing the MLC and the New International Land-Sea Trade Corridor of the Third MLC Leaders’ Meeting”, http://www.lmcchina.org/eng/zyxw_5/t1808947.htm  (accessed 12 September 2020).
    [8] “Joint Statement To Strengthen Water Data Management and Information Sharing in The Lower Mekong”,
    https://www.lowermekong.org/news/joint-statement-strengthen-water-data-management-and-information-sharing-lower-mekong (accessed 14 April 219)
    [9] “Code of Conduct for the Mekong”,https://vannarithchheang.com/2018/04/04/code-of-conduct-for-the-mekong/  (accessed 12 September 2020).
    [10] “Mekong River Commission keen to improve data sharing and management in the Lower Mekong Basin”, https://mrcmekong.org/news-and-events/news/mrc-keen-data-management-in-mekong-basin/  (accessed 12 September 2020.
    [11] “Water wars: Mekong River another front in U.S.-China rivalry”, https://www.japantimes.co.jp/news/2020/07/25/asia-pacific/mekong-river-us-china/  (accessed 12 September 2020).

    Image: Mekong Riverside, Phnom Penh-Cambodia

  • The DNA Bill And State Capacity

    The DNA Bill And State Capacity

    Aristotle suggested that transmission of heredity was essentially the transmission of information. And this information was used to build an organism from scratch inside the female womb. Although the science is primitive, he was right in how information is transmitted from parents to their offspring. Modern genetics is built on studying such information, which has been coded into each cell as DNA. Scientists can now sequence the DNA and extract valuable information about each individual and the human species. They have been able to use such information to understand humans better; for example, the identification of BRCA mutation responsible for cancer has nudged great strides in cancer biology. Another important application which has varied implications in society is the use of DNA in forensics. Although already in use since its discovery in 1995, the exponential rise in the significance of information extracted using DNA Profiling warrants regulation.

    All major nations which use DNA Profiling have legislation in place to regulate the use of the technology. However, in India, the technology is unregulated even though successive governments have worked on such legislation since 2003.

    DNA Technology Bill

    All major nations which use DNA Profiling have legislation in place to regulate the use of the technology. However, in India, the technology is unregulated even though successive governments have worked on such legislation since 2003. If global examples are not enough, the 2017 Puttaswamy judgement has made such legislation necessary. The judgement asserted that privacy is a fundamental right guaranteed by the Indian Constitution and that the right to privacy includes protection over the physical body. Therefore, for the State to collect or store DNA data, a legislative mechanism principled on necessity and proportionality is requisite.

    DNA testing is being done on a very limited scale in India. About 30-40 DNA experts are working in 15-18 laboratories. They can process only about 2-3% of the total need, and even such limited testing is unregulated and unmonitored. According to the NCRB data for 2018, although 85% of rape accused have been charge-sheeted, the conviction rate for rape is just 27.2%. This technology, however, has an excellent record of increasing conviction rates; for example, a 2006 UK parliamentary report suggested that detection of crime increased from a mere 26% to a healthy 40% after they loaded DNA samples into a national database. Apart from crime detection, the technology will also help in the identification of over six million missing persons in India. Thus, legislation facilitating DNA technology to help expedite justice is long overdue.

    The DNA Technology (Use and Application) Bill 2019 is the latest form of the DNA bill and is at the parliamentary committee stage for further deliberations. The bill talks of a national DNA data bank and a DNA regulatory board to store DNA data and regulate DNA technology used in criminal and civil cases. The bill in its current form has raised many concerns including privacy issues concerning the use of DNA data, the ‘perfunctory consent’ clause which makes it hard for an individual to deny permission to collect his/her data, ethical issues in collecting and storing DNA data in DNA banks, the fear of caste-based criminal profiling because of the endogamous nature of Indian society and so on. But the biggest concern is one of state capacity, which in a way umbrellas other concerns.

    The bill in its current form has raised many concerns including privacy issues concerning the use of DNA data, the ‘perfunctory consent’ clause which makes it hard for an individual to deny permission to collect his/her data, ethical issues in collecting and storing DNA data in DNA banks, the fear of caste-based criminal profiling because of the endogamous nature of Indian society and so on.

    Problems with State Capacity

    In young nations like India, the State, although large and bloated, is not highly efficient. This may cause even government interventions with noble intentions to backfire. Therefore, it is necessary to identify places where a lack of state capacity could cause worry for the legislation to work effectively.

    We could sum three basic concerns up from the DNA Technology bill concerning state capacity. First, the high cost of technology and the lack of basic technical training regarding data collection in a crime scene. Second, the backlog burden in the Justice system. And finally, the lack of clarity in the bill as to what is being collected and stored.

    The India Justice Report 2019 published by Tata Trusts reveal important information on the Justice system in India. Over the last five years, only 6.4% of the police force has been provided in-service training. For advanced technology like DNA fingerprinting, frontline police should have basic training and knowledge of the technology. It starts with how to read and deal with the crime scene. And without awareness, the technology cannot be exploited desirably. To go from training 6.4% to at least half the police force will be a herculean task which should be contemplated before implementing the legislation. The DNA bill gives the responsibility of developing training modules to the DNA Regulatory Board, which will be set up. But it does not provide a realistic road map to reach the desired level of training to better use the technology.

    The report also suggests that on average, per capita police spending in 2017 was Rs 820. No big or medium-sized state has spent more than Rupees 1160 per person, and Bihar has spent as low as Rupees 498. Only one state has made 100% use of the modernization funds allocated for capital expenditure and technology up-gradation. But DNA fingerprinting technology is a costly affair. Each test could cost as much as Rupees 10,000. Even if only high-profile cases use DNA tests, a robust database of DNA has to be present for effective identification from the three indices mentioned in the bill. And such collection and storage of DNA samples could become another strain in the public exchequer. The bill also mandates the use of DNA testing for criminal as well as civil cases, which could again flood the system.

    Second, DNA technology could increase the backlog burden of the already burdened system. In the US, with relatively strong state capacity, DNA backlogs are in the thousands. The National Institute of Justice (USA) reports that the current backlog of rape and homicide cases is 350,000. It also estimates that there are ‘between 500,000 to 1 million convicted offenders’ samples that are owed but not yet collected’. The FBI has a backlog of approximately 18,000 convicted offender samples. Therefore, in India with an already strained Justice system, DNA backlogs could cause worry. Also, because of the significance of DNA information, backlogs could also invoke privacy concerns.

    Finally, there is a lack of clarity. This concern, however, is not one of lack of state capacity but one of potential overreach by the State.

    The lack of strong data protection legislation in place couples such concern. As the parliamentary committee suggests, the bill can also be termed ‘premature’ regarding data protection.

    Non-coding DNA is used for identification. The bill, however, does not restrict DNA Profiling to only use non-coding DNA which cannot be used for determining personal and medical characteristics. Given that the bill mandates data from all criminal and civil cases to be stored in the National data bank, concerns of privacy impingement cannot be hushed away. The lack of strong data protection legislation in place couples such concern. As the parliamentary committee suggests, the bill can also be termed ‘premature’ regarding data protection.

    Although the bill is creating a strict code of ethics regarding collection, storage and accessibility of DNA information, it is ambiguous on the removal of data. Clause 31(3) says that DNA data will be removed if a person requested in writing to the DNA bank, given that such a person is ‘neither an offender nor a suspect or an under-trial’ and whose DNA information has entered the bank ‘through crime scene index or missing persons’ index’. But it is not clear on what will happen if they do not remove such data. It is important to answer these questions due to the significance of DNA information and the fact that the bill does not restrict banks to store only non-coding DNA. Also, these questions could raise concerns about state capacity in safeguarding important data of its citizens.

    Conclusion

    To address these concerns, building state capacity is the key. A staggered implementation of DNA technology could help in building capacity and credibility for the technology. For example, if the bill provides a roadmap of implementation- say, starting with addressing the identification of missing persons and further developing capacity for criminal and civil investigation, the allocation of resources could be streamlined. This limited implementation could also help in addressing additional issues that could arise during implementation. These details cannot be let out to be decided by a regulatory body because of the importance of DNA data and the breach of fundamental rights in collecting and storing it.

    It is said that one has to cross the river by feeling the stones. The stable rule of law and a robust data protection regime which will make sure the technology is used judicially are basic requisites for technology with societal implications. Even though DNA profiling has huge potential to expedite justice, implementation of such complex technology has to be step by step. The Parliamentary Committee on Science and Technology has been scrutinizing the bill rigorously, contemplating the varied problems that might befall the implementation of the bill. But it remains to be seen if the government will heed to such advice and not dismiss them altogether; that is if it will feel the stones or deep dive into the river without contemplating the consequences.

    Image Credit: DNA Helix Material – Gerd Altmann from Pixabay

  • What Triggered Recent Chinese Naval Exercises in the South China Sea?

    What Triggered Recent Chinese Naval Exercises in the South China Sea?

    During the last few months, the PLA Navy along with the PLA Air Force conducted several exercises in the South China Sea. China used these maneuvers to deter Taiwan against its growing relationships with the US, and as a tool of “strategic communication” to signal to the US of its military capabilities to project power and defend its national interests. There are at least five important reasons that could have triggered such aggressive posturing by China.

    First is COVID-19. After Wuhan was designated as the source-destination of COVID-19 in January this year and over 80,000 of its residents were reported to have been infected by the virus, the Chinese leadership sought to boost its image among its people who had been struggling by lockdowns.[i] In the first half of February, China chose to divert international attention away from the pandemic by deploying fighter jets and bombers to intimidate Taiwan which had been critical of China over its handling of the virus. This prompted Taipei to advise authorities in Beijing to “focus on preventing the spread of the epidemic” and admonished it for “inciting nationalism at home to shift public focus away from challenges at hand” and labelled it as a “game not worth the candle”.[ii]

    the PLA Navy, led by the aircraft carrier Liaoning, conducted naval exercises and the taskforce sailed through the Miyako Strait, Bashi Channel and the South China Seaostensibly to display its military readiness during the pandemic. 

    Also, while the global community struggled to combat the pandemic and at least three US Navy carriers afflicted by COVID-19 virus, the PLA Navy, led by the aircraft carrier Liaoning, conducted naval exercises and the taskforce sailed through the Miyako Strait, Bashi Channel and the South China Sea[iii] ostensibly to display its military readiness during the pandemic. The PLA Air Force too showcased it combat readiness and fighter jets intruded into Taiwan’s air space. However, the US responded by three-carrier deployment including dual-carrier operations; B-52 Stratofortress bombers operated from Guam and the nuclear submarines were forward-deployed to conduct “contingency response operations.”[iv]

    Second, China was rattled after the US turned the Taiwan Allies International Protection and Enhancement Initiative (TAIPEI) Act into law to show that “it has the support of both branches of government, which is required for a strong and effective U.S. foreign policy”.[v] Similarly, it also introduced a new Bill ‘Taiwan Defence Act’ in the US Congress[vi] which requires the Department of Defense to provide weapons to Taipei. The Trump administration also announced a military package worth US$ 180 million to improve Taiwan’s capability against “regional threats and to strengthen homeland defense,” [vii]

    Third, is about the Pacific Deterrence Initiative (PDI) which entails fiscal support for military activities and associated infrastructure investment plans[viii] in the Pacific Ocean. The PDI is similar to the 2014 European Deterrence Initiative (targeted against Russia) and is meant to advance US priorities in the Indo-Pacific region. It aims to “focus resources on key capability gaps to ensure U.S. forces have everything they need to compete, fight, and win in the Indo-Pacific” is conspicuously targeted against China.

    India, in response to Chinese posturing in the Himalayas, deployed its naval ship in the South China Sea. This unexpected Indian posturing challenging China in its own backyard and operating in close cooperation with the US Navy, has caused alarm bells in Beijing.

    Fourth, China is concerned about the Quadrilateral Security Dialogue (QSD), a grouping of Australia, India, Japan and the US, which China believes is meant to contain it. Since 2018, India has been hosting the Malabar series of naval exercises which include Japan and the US; but this is being expanded to include Australia. The geographic focus of the Malabar exercises had so far remained in the Bay of Bengal or the Pacific Ocean (around Guam and Japanese waters), could now shift to the South China Sea. India, in response to Chinese posturing in the Himalayas, deployed its naval ship in the South China Sea. This unexpected Indian posturing challenging China in its own backyard and operating in close cooperation with the US Navy, has caused alarm bells in Beijing.

    Chinese worries about the Quad are further aggravated after Taiwanese President Tsai Ing-wen, amid rising tensions between Taiwan and China around the South China Sea region, has called for a joint alliance of democratic nations to uphold “a strategic order that encourages cooperation, transparency and problem-solving through dialogue, not threats of war”.[ix]

    Fifth, is related to Code of Conduct (CoC) for South China Sea between China and the ASEAN. The Chairman’s Statement of the 36th ASEAN Summit has “emphasised the need to maintain and promote an environment conducive to the COC negotiations”[x] and Prime Minister Nguyen Xuan Phuc has urged China to accelerate talks on an effective and efficient COC in line with international law, including the 1982 UNCLOS.[xi] China has in the past disregarded the urgency over the finalization of the CoC and has dragged the issue far too long, but now appears to have realized that there is high degree of unity among the Member States over the South China Sea issue and attempted to reassure ASEAN of its intentions to pursue the issue hopefully in right earnest.

    Among other political, diplomatic and economic toolkits to appease the ASEAN Member States, it also chose to conduct military exercises to intimidate Malaysia, Philippines and Vietnam.

    Among other political, diplomatic and economic toolkits to appease the ASEAN Member States, it also chose to conduct military exercises to intimidate Malaysia, Philippines and Vietnam. It relented only after Philippines Foreign Secretary Teodoro Locsin Jr denounced as ‘illegal provocations’ Chinese air patrols over the South China Sea and threatened if “something happens that is beyond incursion but is in fact an attack on say a Filipino naval vessel … [that] means then I call up Washington DC,”

    China’s attempts to dominate the regional security affairs, non-adherence to the 1982 United Nations Law of the Sea, coercion of other claimants to the disputed features in South China Sea and its intimidation of Taiwan has not gone well among the ASEAN Member States. ASEAN sees US’ formidable capabilities and above all its commitment to keep the Indo-Pacific ‘free and open’ against any attempts by China, as reassuring.

    In his recent remarks at the 10th East Asia Summit Foreign Ministers’ Meeting,[xii] Secretary of State Michael R. Pompeo assured his counterparts from 17 countries that the US shares and supports the “principles of openness, inclusiveness, transparency, and respect for international law contained in the US’ Indo-Pacific vision, ASEAN’s Outlook on the Indo Pacific, and the visions of many other EAS Member States”.

    Image Credit: The Globe and Mail and VoA

    References

    [i] “China Sends Ships, Planes over Disputed Seas to Show Strength after COVID-19 Outbreak”, https://www.voanews.com/east-asia-pacific/china-sends-ships-planes-over-disputed-seas-show-strength-after-covid-19-outbreak  (accessed 08 September 2020).

    [ii] “The ROC Firmly Defends its Sovereignty: The CCP Should Immediately Stop its Military Provocations and not Misjudge the Situation”, https://www.mac.gov.tw/en/News_Content.aspx?n=A921DFB2651FF92F&sms=37838322A6DA5E79&s=3AF953C12D84A525  (accessed 08 September 2020).
    [iii] “   Chinese aircraft carrier Liaoning conducts exercises in South China Sea: PLA Navy spokesperson”, https://www.globaltimes.cn/content/1185471.shtml  (accessed 08 September 2020).
    [iv] “Pacific Fleet Submarines: Lethal, Agile, Underway”, https://www.navy.mil/submit/display.asp?story_id=112909 (accessed 06 July 2020).
    [v] “Trump and the TAIPEI Act”, https://thediplomat.com/2020/04/trump-and-the-taipei-act/  (accessed 08 September 2020).
    [vi] Under the 1978 Taiwan relations Act the United States “will make available to Taiwan such defence articles and defence services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defence capabilities”;
    [vii] “Trump administration approves arms sale to Taiwan amid China tensions”, https://edition.cnn.com/2020/05/21/politics/us-taiwan-arms-sale/index.html (accessed 20 June 2020).
    [viii] “Investments in theater missile defense, expeditionary airfield and port infrastructure, fuel and munitions storage, and other areas will be key to America’s future force posture in the Indo-Pacific.” See “The Pacific Deterrence Initiative: Peace through Strength in the Indo-Pacific”, https://warontherocks.com/2020/05/the-pacific-deterrence-initiative-peace-through-strength-in-the-indo-pacific/ (accessed 20 June 2020).
    [ix] “Fed-Up of Chinese Threats, Taiwanese President Urges ‘Coalition of Democracies’ to Confront Beijing”, https://eurasiantimes.com/fed-up-of-chinese-threats-taiwanese-pm-urges-coalition-of-democracies-to-confront-beijing/ (accessed 09 September 2020).
    [x] “Chairman’s Statement of the 36th ASEAN Summit 26 June 2020” https://asean.org/storage/2020/06/Chairman-Statement-of-the-36th-ASEAN-Summit-FINAL.pdf (accessed 14 July 2020).
    [xi] “Pompeo: China cannot be allowed to treat the South China Sea as its maritime empire”, https://vietnamtimes.org.vn/pompeo-china-cannot-be-allowed-to-treat-the-south-china-sea-as-its-maritime-empire-21832.html (accessed 14 July 2020).
    [xii] “Secretary Pompeo’s Participation in the 10th East Asia Summit Virtual Foreign Ministers’ Meeting”, https://china.usembassy-china.org.cn/secretary-pompeos-participation-in-the-10th-east-asia-summit-virtual-foreign-ministers-meeting/  (accessed 10 September 2020).

  • Poverty, Inequality, and Marginalisation as Forms of Structural Violence in Pre-Conflict Syria

    Poverty, Inequality, and Marginalisation as Forms of Structural Violence in Pre-Conflict Syria

    The injustice and inequality built into the structural institutions of the Syrian society can be referred to, what has been called as the ‘structural violence’, by the well-known Norwegian sociologist, Johan Galtung.  

    The ongoing civil war in Syria that has resulted in large-scale loss of lives, and forced displacement of millions across the region, is being seen as one of the bloodiest conflicts of this century. While countries continue to witness the horrors of visible atrocities and war crimes, the underlying layers of structural and cultural violence continue to buttress the egregious brutality which is often more direct, and physical.

     

    Although the war is often seen as a result of the outburst of pro-democracy protests in 2011, a close examination of the country’s socio-economic structures would enable one to get a detailed insight into the underlying layers of frustration caused due to large-scale poverty, inequality, and marginalisation. One would also find that the relatively peaceful structure, which existed before the protests of 2011, was held intact largely due to the existence of single-party dominance, where one actor (Hafez al-Assad, and later Bashar al-Assad) held all power and authority, while those existing in lower ranks of society continued to lack resources, as well as opportunities to challenge the dominant power.

    The Syrian economic crisis has existed long before the commencement of the civil war.

    The injustice and inequality built into the structural institutions of the Syrian society can be referred to, what has been called as the ‘structural violence’, by the well-known Norwegian sociologist, Johan Galtung.  The violence, here, is reflective of a position “higher up or lower down in a hierarchy of exploitation-repression-alienation”, where the parties involved are determined either to keep the hierarchy intact or to completely obliterate it. In the case of Syria, the deprivation of the most basic and non-negotiable needs, which threatened the citizens’ need for survival, has been the primary cause for aggression to come into existence. The factors that, thus, led to the conflict in Syria can be seen rooted in years of repression, poverty, and lack of representative institutions, which manifested in the form of protests, or the Arab Spring of 2011.

    The Syrian economic crisis has existed long before the commencement of the civil war. Since the beginning of the economic crisis, Syria’s institutional structures have failed to meet the rising needs and rights of its population. In the 1980s, the country was trapped in a downward spiral of a fiscal crisis, as a result of large-scale drought, and due to both, domestic and external factors. The crisis led to high food deficit, and an increase in the cost of living, leading to a rise in patronage networks which provided small circles of elites with profitable businesses. These networks became increasingly popular in real estate and land management, leaving out large sectors of Syria underdeveloped.

    While the country witnessed a decreasing overall debt and a noticeable rise in the GDP in the 2000s, large sections of the population were excluded from benefitting from these growth rates due to differences in wage rates and declining job opportunities. Increasing inequality was reflected in a paper published by the UNDP, which claimed that 65.6% of all labour in Syria belonged to the informal sector in 2010, with Aleppo and Idlib ranking first with over 75% of their workforce belonging to the informal sector. Further, the four years of drought between 2006 and 2011, and the consequent failed economic policies led to a significant decline in the agricultural sector’s output, forcing 2 million to 3 million Syrians into abject poverty.

    Additionally, the oil revenues fell from more than 14% of GDP in the early 2000s to about 4% in 2010 due to depleting reserves. According to a report, overall poverty in Syria in 2007 impacted 33.6% of the population, of which 12.3% were estimated to be living under extreme poverty. Noting the degree of inequality in Syria in 1997, the report found out that the lower 20% of the population had a share of only 8% in expenditure, while the richest 20% of the population share about 41% of the expenditure. The degree of inequality further decreased in 2004. Moreover, the widely disputed region of North-Eastern Syria witnessed highest levels of inequality in 2007, in addition to deprivation of living standards, and worst levels of illiteracy, and access to safe water, just four years before the outbreak of the civil war. The unequal access to resources was also starkly reflected in the housing situation of the country before the war, where over 40% of the population lived under informal housing conditions, – through squatting, or on lands obtained without legal contracts.

    In addition to the economic crisis, Syrians have been the victims of decades-long political repression, in the form of restrictions on freedom of expression, torture, and enforced disappearances. The political institutions have historically been unstable, with three military coups taking place in 1949 alone, followed by one more in 1954, in addition to the Ba’athist-led coups of 1963 and 1966. The Syrian security forces (Mukhabarat) are known to have detained citizens without proper warrants even before 2010, many of whom have reportedly been tortured in prisons. In their attempts to keep the hierarchy of power relations intact, the centralised institutions are known to clamp down on any public demonstrations, with frequent arrests and employment of state violence.

    The conflict which started with citizens demanding their basic needs and rights has been sustained over the years by the involvement of foreign states, and increased state brutality which has been responded to by an increasingly similar, if not equal, force by the rebellion groups.

    Years of conflict have exacerbated the economic crisis, pushing both the state and its citizens, into chaos, with more than 80 per cent of the Syrian population living below the poverty line, with an unemployment rate of at least 55 per cent in 2018. With most of the business networks now being controlled by the selected few elites, the population at large continues to suffer the brunt of both structural, and direct violence.

    The conflict which started with citizens demanding their basic needs and rights has been sustained over the years by the involvement of foreign states, and increased state brutality which has been responded to by an increasingly similar, if not equal, force by the rebellion groups. The country, now, witnesses itself entangled in a cycle of conflict, where the war has led to steep economic deterioration, political repression, and physical violence, which in turn has led to further widespread cataclysm.

    Image Credit: Photo – Aleppo-Syria destruction in 2019 and  Syria Map – Adobe Stock

  • Consolidating India-ASEAN Strategic Partnership under Chairmanship of Vietnam

    Consolidating India-ASEAN Strategic Partnership under Chairmanship of Vietnam

    During the first six months of the year, there were 26 meetings and most of these were through video-conferencing, exhibiting a high degree of commitment by the ASEAN under the Chairmanship of Vietnam.    

    Vietnam’s Chairmanship of the ASEAN comes at a time of immense turbulence marked by COVID-19 pandemic, disruption in the global supply chains resulting in economic recession among major economies, and strategic instability in the Indo-Pacific region marked by high tensions between the United States and China in the South China Sea. However, the ASEAN calendar of engagements with its Partner countries has remained busy, and Vietnam has spearheaded the Organisation with adeptness and alacrity and sustained the momentum of the ASEAN’s mandate through meetings and conversations.  During the first six months of the year, there were 26 meetings and most of these were through video-conferencing, exhibiting a high degree of commitment by the ASEAN under the Chairmanship of Vietnam.

     On 16 June 2020, at the 20th ASEAN-India Joint Cooperation Committee Meeting, through a video conference, India and the ASEAN “reaffirmed their commitment to further strengthen and deepen their cooperation.” Both sides noted the progress made for the implementation of the ASEAN-India Plan of Action (2016-2020), and “shared their commitment to complete the development of the new Plan of Action for 2021-2025 to further strengthen their strategic partnership over the next five years”.[i]

    A month later Secretary (East), Ministry of External Affairs (MEA), India, participated in the 22nd annual meeting of the Senior officials of ASEAN countries and India, and commended Viet Nam’s ASEAN chairmanship. Both sides “agreed to continue assisting each other’s citizens affected by the coronavirus outbreak”; provide “ASEAN countries with detailed information about the Indo-Pacific Ocean Initiative proposed by Indian Prime Minister Narendra Modi at the 16th ASEAN-India Summit in 2019”; welcomed “ASEAN bringing into play its role in fostering cooperation, dialogue and trust building in the region”; and conveyed India’s support for “efforts to seriously and fully implement the Declaration on the Conduct of Parties in the East Sea and build an efficient and effective Code of Conduct in the waters in line with international law and the 1982 UN Convention on the Law of the Sea”.[ii]

    COVID-19 Pandemic

    India and ASEAN are confronted with COVID-19 pandemic and there is ample evidence that both sides have conveyed their intention to fight the pandemic together. Prime Minister Modi engaged the leaders of Indonesia, Myanmar, Thailand, Singapore and Vietnam through telephonic conversations and assured support to ASEAN Member States. Likewise, Indian Foreign Secretary Harsh Vardhan Shringla has had weekly tele-conversations with counterparts from US, Australia, Japan, South Korea, New Zealand, and Vietnam to share ideas and best practices in the Indo-Pacific region for responding to COVID-19 pandemic.[iii]

    It is an opportune moment for the officials of the health departments in India and ASEAN to set up a dedicated virtual platform/dashboard designated as ‘India-ASEAN Meeting for Health Development (AI-MHD) that can be pluggedinto the ‘ASEAN Emergency Operations Centre (EOC) Network, the ASEAN Risk Assessment and Risk Communication Centre, the ASEAN Bio Diaspora Virtual Center (ABVC) and the ASEAN Centre for Humanitarian Assistance on disaster management (AHA Centre) for future public health emergencies’.

     India’s External Affairs Minister Dr. S. Jayashankar, in his remarks at the 6th Roundtable Meeting of ASEAN-India Network of Think Tanks (AINTT), noted that “the impact of the Coronavirus has been beyond our collective imagination. Current estimates put the cumulative loss in the range of USD 5.8-8.8 trillion or approximately 6.5-9.7% of the global GDP.[iv]

    ASEAN Outlook on the Indo Pacific (AOIP)

    India has acknowledged the importance of the ASEAN Outlook on the Indo Pacific (AOIP) and New Delhi is committed to “explore cooperation in the key areas outlined in the AOIP, covering maritime cooperation, connectivity, sustainable development and economic cooperation, in order to contribute to the maintenance of peace, freedom and prosperity in the region”.[v] Similarly, ASEAN has endorsed synergies in various sectors and promoted regional frameworks under India’s Act East Policy, and SAGAR (Security and Growth for All in the Region) vision. Although health and pandemic issues are conspicuously absent in the AIOP and SAGAR, but these are surely part of the broader thematic issues contained therein.

    India is committed to positive contribution to ASEAN-led mechanisms such as the East Asia Summit (EAS), the ASEAN Regional Forum (ARF), the ASEAN Defence Ministers’ Meeting-Plus (ADMM-Plus). It is a staunch believer of ‘rule of law’ and India believes that a Code of Conduct is a useful solution to reduce tensions in the South China Sea.

    On November 04, 2019, Prime Minister Narendra Modi launched the Indo Pacific Oceans’ Initiative (IPOI) at the East Asia Summit held in Bangkok, Thailand.[vi] It is an “ an open global initiative” and “ draws on existing regional cooperation architecture and mechanisms to focus on seven central pillars conceived around Maritime Security; Maritime Ecology; Maritime Resources; Capacity Building and Resource Sharing; Disaster Risk Reduction and Management; Science, Technology and Academic Cooperation; and Trade Connectivity and Maritime Transport.”

    Cooperation, Dialogue and Trust Building

    India is committed to positive contribution to ASEAN-led mechanisms such as the East Asia Summit (EAS), the ASEAN Regional Forum (ARF), the ASEAN Defence Ministers’ Meeting-Plus (ADMM-Plus). It is a staunch believer of ‘rule of law’ and India believes that a Code of Conduct is a useful solution to reduce tensions in the South China Sea. India’s Foreign Minister has stated that India is working in conjunction with Vietnam and “responses to that (CoC) are being handled by the Vietnamese and that is the way it should be,” [vii]

                Finally, it has been noted that “as we come out of this pandemic, let us be clear on one fact. The world will never be the same again. That means new thinking, fresh ideas, more imagination and greater openness. We need to go beyond orthodoxies, whether of trade, politics or security. These are domains that all of you debate regularly and I am sure today you will have a very productive discussion.”[viii]  It is useful for ASEAN and India to explore commonalities and convergences in the ASEAN Outlook on the Indo Pacific (AOIP) and the Indo Pacific Oceans’ Initiative (IPOI). In this context, Vietnam has the unique opportunity to further expand, deepen and strengthen the ASEAN India Strategic Partnership.

     

    Notes

    [i] “ASEAN, India strengthen cooperation”, https://asean.org/asean-india-strengthen-cooperation/ (accessed 20 August 2020).

    [ii] “ASEAN, Indian senior officials gather at online 22nd meeting”, https://www.asean2020.vn/xem-chi-tiet1/-/asset_publisher/ynfWm23dDfpd/content/asean-indian-senior-officials-gather-at-online-22nd-meeting (accessed 20 August 2020).

     

    [iii] “Cooperation among select countries of the Indo-Pacific in fighting COVID-19 pandemic”, https://mea.gov.in/press-releases.htm?dtl/32691/Cooperation+among+select+countries+of+the+IndoPacific+in+fighting+COVID19+pandemic (accessed 20 August 2020).

    [iv] “Remarks by EAM during the 6th Roundtable Meeting of ASEAN-India Network of Think Tanks (AINTT)”,https://www.mea.gov.in/Speeches-Statements.htm?dtl/32904/Remarks_by_EAM_during_the_6th_Roundtable_Meeting_of_ASEANIndia_Network_of_Think_Tanks_AINTT(accessed 20 August 2020).

    [v] “ASEAN Outlook On The Indo-Pacific” https://asean.org/storage/2019/06/ASEAN-Outlook-on-the-Indo-Pacific_FINAL_22062019.pdf (accessed 20 August 2020).

    [vi] “Ministry of External Affairs Indo-Pacific Division Briefs”, https://mea.gov.in/Portal/ForeignRelation/Indo_Feb_07_2020.pdf (accessed 20 August 20200.

    [vii] “Incident between Indian, Chinese militaries was ‘not skirmish but face-off’: Jaishankar”,https://economictimes.indiatimes.com/news/defence/incident-between-indian-chinese-militaries-was-not-skirmish-but-face-off-  (accessed 20 August 2020).

    [viii] “Remarks by EAM during the 6th Roundtable Meeting of ASEAN-India Network of Think Tanks (AINTT)”, https://www.mea.gov.in/Speeches-Statements.htm?dtl/32904/Remarks_by_EAM_during_the_6th_Roundtable_Meeting_of_ASEANIndia_Network_of_Think_Tanks_AINTT (accessed 20 August 2020).

     

    Image Credit: Asia Times

  • The Geopolitics of Syria’s Reconstruction

    The Geopolitics of Syria’s Reconstruction

    Introduction

    Syria’s territories are controlled by a variety of actors – Al Assad’s regime (with Russia and Iran as its supporters); Kurdish dominated self-administration (with a small number of US troops supporting them); Turkey and its affiliated militias; and the Syrian Salvation Government affiliated to the Hay’at Tahrir al-Sham (HTS), a former al-Qaida offshoot.

    Fragmentation of the state’s territories, as the state lost control of its territories, resulted in the emergence of a network of localised war economies with numerous local and foreign actors being involved. War economies emerged in territories held by Assad’s regime as well as those under the control of various other opposition parties, characterised by an increase in smuggling of goods (among which essential goods, crude oil and arms were popular), extortion, rent seeking for essential services, and taxation of goods at checkpoints established by the warring parties, including local warlords, opposition armed groups or regime’s militias. The Syrian Arab army is also reported to have engaged in rent seeking behaviour through the establishment in recaptured territories (Hinnebusch, 2020).

    Another area of priority for armed opposition groups is the border crossings with Turkey whose access they have sought to control. The Ahrar-Al Sham group, established control over the Bab al-Hawa crossing between 2015-16, and earned around $5 million per month. Armed opposition groups have been involved in conflict with each other over control for border crossings, particularly conflict between Hay’at Tahrir al-Sham (HTS) and Ahrar al-Sham in 2017 (al-Kattan, 2017).

    The Syrian army (that was cross-sectarian) is in crisis of its reducing force size as it is hampered by resistance to conscriptions and many desertions. The Alawite sect was co-opted into the state’s army, political and security apparatus, resulting in tensions along sectarian lines. Another significant development was that those among the pre-war elite who advocated for a political solution based on power sharing were expelled from it, resulting in the contraction of the core to comprise of individuals along sectarian lines. Further, pro-regime militias emerged as pro-government communities were forced to rely on themselves for their defence, leading to a widespread localisation of power to fiefdoms (al-Kattan, 2017).

    The political, economic and security dimensions of the conflict which led to the emergence of war economies has been accompanied by shift of composition of the economy marked by the emergence of ‘war commanders’ and a decentralised elite, who capitalised on evading sanctions, served as middlemen between the armed groups of the state and opposition and established monopoly upon the supply of goods and services.

     These developments further led to the emergence of new centres of power which existed alongside the existing regime that consolidated its power by strengthening its relations with the new elite, army and security sector.

    The domestic dynamics of the Syrian conflict are closely related to a wider geopolitical struggle among regional and external actors who act as patrons for the domestic actors.

    In addition, by portraying itself as a bulwark against radical Islamism and strengthening its relations with influential individuals in minority communities and providing them with disproportionate authority within their societies, the regime’s efforts have redefined existing social hierarchies and co-opted pro-regime minority leaders to power. The regime’s policies, throughout the war, have not only strengthened the neo-patrimonial nature of the State and its relations with its multiple networks but lead to the decentralisation of a system of neo-patrimonialism (Middle East Institute & Etana Syria, 2020).

    The domestic dynamics of the Syrian conflict are closely related to a wider geopolitical struggle among regional and external actors who act as patrons for the domestic actors. The Syrian conflict that began as an internal conflict emerged into a proxy conflict where regional struggle for influence played out between the ‘resistance axis’ comprising of Hamas, Hezbollah and Iran, and Sunni dominated ’moderate’ states comprising of Saudi Arabia, Qatar and Turkey. The latter wished replace the Assad regime that was aligned towards the ‘resistance axis.’ Iran considers the Syrian conflict as threat to its survival and its ability to support Hizbollah against Israel.  The rival axes instrumentalised sectarianism as a part of their discourse and in their support for proxies. However, the interests of those within the Sunni camp clashed (with Turkey and Qatar’s support for the Muslim Brotherhood and Saudi Arabia and UAE against the Muslim Brotherhood and its version of political Islam) resulting in division of the Sunni camp further leading to the division of their proxies (Aita, 2020).

    The global struggle for power between the US and Russia, with the former promoting a liberal world order and advance its hegemonic interests, and the latter interested in increasing its sphere of influence, limiting US intervention while emphasising on state sovereignty. Russian intervention in Syria in support of the Assad regime tilted the power balance in its favour allowing the regime to gain control of its lost territories.

    Image Credit: Al Araby

    US sought to limit direct intervention in Syria while relying on proxies and financial sanctions (that it pursued along with the EU) to pressurise Assad’s regime to compromise to a solution that would promote its interests. Assad’s regime, due to its connection Iran, Shia militas in Iraq and Hezbollah in Lebanon, was able to manage despite the external pressure it faced. US attention and efforts were diverted to controlling ISIS. In 2019, while US withdrew from Northern Syria due Turkish intervention against the Kurdish forces, it announced it would redeploy its forces to the energy reserves in Deir ez-Zor to prevent Assad’s forces or ISIS from gaining control over them (Hinnebusch, 2020).

    The geo-political struggle for influence in the Syrian conflict among regional and global actors, has also transcended into efforts to capitalise on Syria’s post-war reconstruction efforts and business.

    With diversion of US efforts towards constraining ISIS, Russian intervention, growing differences between Saudi and Qatar, Saudi and UAE intervention in Yemen, have all resulted in a gradual withdrawal of the GCC, leading to a rise in the role played by Turkey, Iran and Russia. Turkey’s role and interests evolved from installing a Brotherhood government and targeting the regime to controlling the Syrian Kurdish PYD, which it views as a terrorist organisation. The threat of a confrontation with Moscow in Syria allowed it to participate in the Astana Process and a gradual realignment of its policy with that of Russia’s policy. More recently, Turkey and Russia have brokered a ceasefire deal in Idlib.

    The geo-political struggle for influence in the Syrian conflict among regional and global actors, has also transcended into efforts to capitalise on Syria’s post-war reconstruction efforts and business.

    This paper explores the local, regional and international dimensions of reconstruction and development Syria while analysing the impact the war has had on the political economy of Syria.

    Internal dynamics of Syria’s reconstruction

    The internal dynamics of Syria’s reconstruction are characterised by conflict among Syrian actors (supported by external actors) for resources and instruments that would lead them to strengthen their control. The regime views reconstruction efforts as a means to consolidate its authority and power over the country.

    Image Credit: NYT

    While the efforts made by the regime to consolidate its power and authority served its objectives and reduce the costs of governance, they have led to the decentralisation of political and security apparatus at the local levels. In addition, Iran and Russia continue to establish relations based on patronage with several Syrian clients. The integration of Hezbollah, Iraqi Shi’i militias and Iran’s revolutionary guards, have further loosened the control the regime holds over the security apparatus and strengthened sectarianism.

    The efforts of Assad’s regime have been directed at satisfying its loyalist elite on whom it is vitally dependent to legitimise its authority and power, and to a lesser extent the public.

    The regime sought to prevent local security apparatus from capitalising on their autonomy by incorporating them into the newly established units under centralised defence forces as in the case of the 5th Army Corps, although this was only partially successful. Russian intervention and participation in the conflict allowed it to establish order in the army.  The paucity of manpower further prevents the regime from extending its authority over the entire country, forcing it to continue to depend on its relations with tribal leaders and local warlords (Hinnebusch, 2020).

    The efforts of Assad’s regime have been directed at satisfying its loyalist elite on whom it is vitally dependent to legitimise its authority and power, and to a lesser extent the public. It encouraged its loyalists to participate and reap benefits off the war economies during the war as its authority over its local proxies declined, while the threat of being targeted by the opposition has ensured that the elites remain loyal. With the localisation of war, the regime has strengthened its relations with the elite while consolidating its power by encouraging investment of income and revenues earned through illicit means into the formal economy. The elite, the warlords, who are partners in the conflict are increasingly participating in the formal economy by setting up formal companies and businesses. However, there remains much to be done to fully integrate them into the productive economy, discourage involvement in rent seeking, and to promote the revival of a productive economy (Sinjab, 2017).

    One of the major effects of the conflict and its resulting socio-economic and political patterns has been the lawlessness, that serves as a deterrent to socio, economic and political cohesion, further preventing the investments required for reconstruction.

    Legislation aimed at Reconstruction

    The regime’s economic strategy for reconstruction namely the ‘National Partnership’, enforced in 2016, allows public bodies to form private investment companies while supporting the establishment of private firms.

    Image Credit: BBC

    Private investors are encouraged to investing in the remaining public property allowing the government to retain its influence on the economic movements. This serves the purpose of attracting new investors to invest in lucrative opportunities while the investments serve to support regime’s prime customers and clients. The legislation also enables them to obtain and secure public sector properties at the cost of the state treasury’s finances, thereby raising a doubt regarding the ability of the ‘new elite’ to alter the nature of the enterprise. Another significant measure taken by the regime as part of its reconstruction repertoire are property and urban reconstruction laws, including the Law 66 of 2012 and Law No 10 of 2018, that expropriate land and property from displaced opposition supporters in substandard living conditions and reallocate them to new upscale housing. This is meant to gather the support of the regime’s loyalists. The regime by creating uncertainty about the security of the property could discourage all investors with the exception of a few capitalists (Daher, 2018).

    Despite the fact that restrictions on capital movement makes it very difficult to attract investments into Syria, the Syrian government is implementing policies and schemes to attract financial aid from outside. It intends to tax finance inflows ranging from money sent by expatriates into Syria for humanitarian aid, which must be channelled through NGO’s funded by the regime. It also intends to attract $100 billion worth Syrian currency held outside Syria through tax concessions and by launching the Syrian International Business Association (SIBA) under the auspices of World Bank. Analysts warn about the difficulties associated with investments from other nations. They suspect that given the dispersion of investments, diaspora would find it difficult to compete with loyalists for reconstruction contracts and there may be issues with fraudulent officials and widespread corruption. The assets of those businessmen who left the state have been frozen. Lastly, the US and EU-imposed multilateral sanctions led to Syria being cut off from the international banking system(Aita, 2020).

    The Syrian Government has declared that reconstruction contracts will be granted to its supporters and not countries who supported its opposition. It has also offered concessions in order to attract investments from Russia and Iran, but this may jeopardize Syria’s financial independence in the coming years.

    Reconstruction of Syria would lead to stronger relations with Iran and Russia followed by simultaneous decline in relations with the West (to whoom it exported a major portion of its oil ) and the Arab Gulf. Previous economic partners may engage in reconstruction in areas where there is negligible regime-control. The reconstruction parameters are bound to affect Syria’s social fabric. The gap between the rich and the poor has widened due to the war economy. The rigged economy will put the interests and benefits of the common people in peril.

    Geopolitical Dynamics of Reconstruction

    The geopolitical struggle over reconstruction among competing players at the regional level is centred around increasing one’s own influence, either through direct intervention or proxies. Considering that different parts of Syria is under the control of different parties there is every chance that Syrian reconstruction effort may not be an integrated effort across the nation but rather take the form of parallel reconstruction initiatives across the many different areas of Syria.

    The global geo-economic factors influence whether resources become available for reconstruction and on what terms. Because the powers that are geopolitically strongest on the ground in Syria (Russia, Iran) are geo-economically weaker than those who lost the geopolitical conflict (US, EU, Gulf), the latter are using the capital that they can withhold and obstruct or seek to leverage their contribution to effect the looming winding down of the military conflict on their terms. They, together with the World Bank, are making their participation conditional on a political settlement. Specifically, this will affect whether the regime will be able to reconstitute authority over the country’s territory and its reconstruction, or will be forced into some sort of power-sharing/territorial confederation or, these failing, reconstruction deepens fragmentation. If the parties do not reach a compromise the outcome could be a frozen conflict consolidated by separate and minimalist reconstruction tracks.

    Further, regional and global actors that have not participated in the conflict happen to be economically stronger and have the means to mobilise resources. Their support and resources to fund the reconstruction and development of Syria remain contingent on the ability of Assad’s regime to fulfil their conditions of a political settlement.

    Russia’s Reconstruction Support

    Russia’s role in Syria’s reconstruction have been driven by the benefits a stable Syria could provide it. It has provided Assad’s regime with support in economic and military terms and settled Syria’s debt. Russia also seeks to renew and recoup its pre-war investments in infrastructure and energy sector, and establish new contracts in geo-strategic areas. Assad’s regime has been granted a preferential role in redevelopment of its energy and infrastructure sectors. The state of the Russian economy has made lesser resources available for investment. The risk of investing in Syria due to the political and security climate and the threat of being targeted by US sanctions have led to minimal investment into Syria. The entities that have invested are operated/owned by oligarchs close to Putin, and those under sanctions, for instance, Gennady Tim-Chenko’s construction company (Van Veen, 2020).

    Russia has realised that it lacks the resources to actively finance Syria’s reconstruction effort and instead focussed its efforts on building the state institutions necessary to provide adequate security infrastructure, which is an important pre-condition for any reconstruction effort.

    Russia has realised that it lacks the resources to actively finance Syria’s reconstruction effort and instead focussed its efforts on building the state institutions necessary to provide adequate security infrastructure, which is an important pre-condition for any reconstruction effort. Simultaneously it tried to seek support from the European Union and international organisations to create the necessary infrastructure required to facilitate the return of refugees based out of Europe while ensuring the attainment of a political settlement that helps Bashar Al Assad to stay in power (Daher, 2018).

    Image Credit: NYT

    Russia has also worked with the Assad regime to implement policies aimed at the return of refugees thereby addressing some of the requirements and requests of the European Union. However, Bashar Al Assad has so far only paid lip service to such requests.  For instance a law intended to promote reconstruction projects has been amended under Russian pressure but without any major changes to its provisions and was used to expropriate the property of Syrians who fled abroad.

    Iran’s Role

    Iran has provided Assad’s regime around $16billion worth of financial aid since 2012.It has provided an additional $3.5 million in 2013 which was further extended by $1 billion in 2015 and $6.4 billion and $700million to pro-Iran militias in Syria.   It has expressed its interests in participating in the reconstruction of Syria. Iranian entities were awarded numerous contracts worth millions of dollars to initiate redevelopment of the electricity infrastructure by the central government as well as local governments but are yet to be implemented. The Iranian Revolutionary Guards, who have considerable experience in participating in the reconstruction of Iran after the Iran-Iraq war and own vast construction companies in Iran, have entered into agreements in the sectors of mining and communications. While Iran has stated it would offer $1 billion for reconstruction, the amount it pledged is a minuscule amount of the total funds required. Iran’s participation in Syria’s reconstruction is also likely to be limited due to the impact of US sanctions on its own economy(Van Veen, 2020).

    Diminished role of US, EU and Arab States

    As for regime controlled parts of Syria, Washington moved to block reconstruction funding in these areas. US pundits argued that the regime would inevitably be empowered by reconstruction and should not be rewarded for its brutal repression of the uprising; anti-regime interest groups moved not only to preclude US funding but also to erect obstacles to others participating in reconstruction. In April 2018 the US Congress passed the No Assistance for Assad Act (NAAA) which was designed to prevent any drift from humanitarian assistance to reconstruction stabilization, and according to Faysal Itani, had the effect of ‘killing any World Bank dreams to get funding to operate in Syria’. Indeed, the US has a long history of directing the flow of world financial capital via sanctions, conditionality, etc. for its geopolitical purposes; in Syria, it seeks to manipulate money (geo-economics) to obtain what it could not achieve via geopolitics: specifically, keeping Syria a failed state that would make it a resource-draining burden for Russia and its allies.

    The US has used its influence in North-Eastern Syria, to counter efforts by the Assad regime to consolidate its power over Syria which is a precursor to a “nationally integrated” reconstruction. Establishing control over energy reserves is essential for Assad’s regime to pursue its reconstruction efforts successfully. The US, by controlling reserves in the North-East Syria, has been able to deprive Syria’s access to essential resources.

    US efforts in reconstruction have been motivated by its interests to deter any reconstruction efforts sponsored by the regime through geo-economics measures such as sanctions, when its geo-political efforts have had limited success in motivating Syria and its allies in pursuing a political solution in line with US policy interests.

    The US campaign against ISIS devastated Raqqa but reconstruction there has remained limited to stabilization measures. The Trump administration tried to get the Saudis to assume the burden of reconstruction (asking for $4 billion). The US goal was to start enough reconstruction to deter any move in the area to join regime sponsored reconstruction efforts (Alaaldin et.al., 2018; Burcher, 2018; Harris, 2018; US Congress, 2018;). US efforts at convincing Saudi Arabia to undertake reconstruction efforts have not been successful as the latter offered relatively smaller amount (al-Khateb, 2020).

    US efforts in reconstruction have been motivated by its interests to deter any reconstruction efforts sponsored by the regime through geo-economics measures such as sanctions, when its geo-political efforts have had limited success in motivating Syria and its allies in pursuing a political solution in line with US policy interests.  It simultaneously blocked reconstruction funding directed towards territories under the control of the regime. The Caesar Act, now incorporated into the National Defence Act of 2020, targets investment into Syria, through individuals and businesses coming into the ambit of the UN sanctions (Hinnebusch, 2020).

    While the EU has provided substantial aid to Syrian refugees in Syria’s neighbouring countries, it has made its aid and participation in reconstruction contingent on efforts to reach a political solution that is in accordance with ‘UNSCR 2254 and the Geneva Communique’

    The EU has been affected by the Syrian Conflict due to the influx of refugees and large-scale migration of its citizens to partake in terrorist activities. While the EU has provided substantial aid to Syrian refugees in Syria’s neighbouring countries, it has made its aid and participation in reconstruction contingent on efforts to reach a political solution that is in accordance with ‘UNSCR 2254 and the Geneva Communique’ (Van Veen, 2020).

    Russia is making efforts to broker a political settlement of sorts, with Turkey’s support, to convince EU to invest in reconstruction to enable refugees to return. While the EU seems to be relying on the inability of Syria’s allies to support its funding and thus force Assad to agree to the EU’s conditions, the regime does not seem to be interested in accepting EU conditions and give up its power in return for support of its reconstruction. However, individuals EU states have participated in reconstruction efforts in a limited manner in both the regime-held as well as opposition-held areas.

    Turkey continues to be one of Syria’s top trading partners. Numerous Syrian businessmen who have been exiled have invested in Turkey, around 26% of foreign investment in Turkey in 2014 originated from Syrian businessmen, particularly in its border regions with Syria. While a number of exiled Syrian businessmen supported the opposition, their investment would be instrumental, if mobilised, in territories held by Turkey and its militias at a time when refugees are returning to the region. While the Syrian government is against the participation of Turkey in the reconstruction of Aleppo, Russia’s efforts in mediation would lead Turkey to participate in the reconstruction process. Turkey has invested significantly in establishing institutions facilitating the governance of areas under its control and also in building economic infrastructure in these areas (Daher, 2018).

    While Jordan and Lebanon have expressed interest in participating in the reconstruction of Syria, the resources they can mobilise are limited.  The Gulf countries have, no doubt the resources required for reconstruction, but have made their role in Syria’s reconstruction contingent on withdrawal of Iran and its proxies and in case of some countries, a regime change. The UAE as expressed its interest in participating in Syria’s reconstruction so as to limit Iran’s influence. However, Yazigi (2017) states that reconstruction efforts, in the case of  Lebanon, were contingent on a solution that emphasised upon power-sharing, backed by regional and international actors and substantial financial aid from Saudi Arabia. It is unlikely that either of the two scenarios would play out in the case of Syria.

    China: A Possible Contender?

    the Chinese state considers Al Assad’s regime as a bulwark against terrorism and its relations with the regime an asset in combating Uighurs who are participating on the behalf of terrorists.

    China has expressed its interest in participating in the reconstruction of Syria to advance its interests through investments in economy and geo-strategic areas such as the maritime sector, and to develop and connect its Belt and Road Initiative in the region. Given China’s interests, size and nature of China’s capital, China becomes a viable partner in the reconstruction of Syria.  China conducted a trade fair in 2018, which was attended by 1,000 Chinese companies and witnessed an investment of $2 billion for the reconstruction and development of Syria’s industrial sector. Private investors have been concerned about the widespread corruption in Syria and the threats of being targeted by US sanctions. Moreover, the Chinese state considers Al Assad’s regime as a bulwark against terrorism and its relations with the regime an asset in combating Uighurs who are participating on the behalf of terrorists.

    Conflict Resolution vs Conflict Management

    Given that the warring parties consider the conflict to be more-or-less of a zero-sum game, territorial and social fragmentation of Syria, it would be extremely difficult for them to pursue means to resolve the conflict through creating the need for the conflict to be managed and downsized (Dacrema, 2020). The non-recognition of certain non-state actors by the rival sides and questions regarding the participation of non-state actors in negotiations, which would only serve to legitimise them further, complicates the process of negotiating a solution.

    Temporary Arrangements

    A strategy that would allow for the management of the conflict would be to negotiate temporary agreements and deals. Turkey and Russia have been able to broker temporary ceasefires at multiple instances, throughout the conflict, in the Idlib region. Temporary arrangements would help build confidence among the warring parties in the long run, and reduce the possibility of escalation of war (Dacrema, 2020).

    Conclusion

    Given that the warring parties prefer a status quo in comparison to the resolution of a conflict and value their geo-political and economic interests, it is highly unlikely that parties would push for resolution of the conflict. In consideration of a political stalemate, reconstruction efforts among the warring parties are likely to take place parallelly, as they have played out with the localisation of the conflict. While resources in the territories held by the regime are being diverted to areas that have remained loyal during the conflict and/or areas of strategic importance with areas formerly occupied by opposition forces receiving relatively lesser attention; territories under Turkish control and those held by the Kurdish forces have witnessed efforts aimed at stabilising the territories.

    Russia and EU have the potential and the leverage required to emerge as power brokers in the reconstruction and initiate the process in a manner that promotes social, economic and political cohesion in the long run.

    Russia and EU have the potential and the leverage required to emerge as power brokers in the reconstruction and initiate the process in a manner that promotes social, economic and political cohesion in the long run. The likelihood of being able to convince themselves that the possibility of achieving one’s interests alongside the other is a far better option in comparison to its alternative of a failed state, which threats both their interests. However, their ability to convince their allies and their clients (in this instance, Assad regime is Russia’s client) and the mistrust between both the parties as well as between their allies poses a challenge.

    Russia’s efforts in brokering a constitutional committee for Syria under the aegis of the UN is an indicator of a compromise. Hinnebusch (2020) suggests that “it is not impossible to move incrementally toward a minimalist sort of political settlement that might acquire enough international legitimacy to open the door to some reconstruction funding.” While the likelihood of this occurrence is difficult amid conflicting interests, it cannot be overruled.

    The humanitarian aspects of the conflict and urgent need for reconstruction to alleviate tangible and intangible costs of the conflict have largely been ignored. The warring parties have been preoccupied with advancing and fulfilling their interests at the cost of ordinary Syrians. There is a need for parties to acknowledge and make efforts towards the realisation of the urgency of reconstruction that is vital for securing the social and economic interests of ordinary Syrians. The likelihood of the same, however, is questionable.

     

    References

    Aita, S. (2020). Reconstruction as a political-economy issue: The case of Syria. Retrieved 28 June 2020, from https://www.thecairoreview.com/tahrir-forum/reconstruction-as-a-political-economy-issue-the-case-of-syria/

    al-Kattan, R. (2017). Retrieved 25 June 2020, from https://www.atlanticcouncil.org/blogs/syriasource/the-economic-case-for-syria-s-stabilisation/

    al-Khateb, K. (2020). US outsources Syria aid to Gulf. Retrieved 4 July 2020, from https://www.al-monitor.com/pulse/originals/2018/08/us-outsources-syria-aid-gulf.html

    Dacrema, E. (2020). Three Concepts to Understand the Future of Syria. Retrieved 25 June 2020, from https://www.oasiscenter.eu/en/what-future-for-postwar-syria

    Daher, J. (2018). The political economic context of Syria’s reconstruction : a prospective in light of a legacy of unequal development. Retrieved 3 July 2020, from https://core.ac.uk/display/162303203

    Hinnebusch, R. (2020). The Battle over Syria’s Reconstruction. Retrieved 1 July 2020, from https://www.globalpolicyjournal.com/articles/development-inequality-and-poverty/battle-over-syrias-reconstruction

    Human Rights Watch. (2019). Rigging the System. Retrieved 25 June 2020, from https://www.hrw.org/report/2019/06/28/rigging-system/government-policies-co-opt-aid-and-reconstruction-funding-syria#_ftn114

    Middle East Institute, & Etana Syria. (2020). Manufacturing Division: The Assad Regime and Minorities in South-west Syria. Retrieved 2 July 2020, from https://www.mei.edu/publications/manufacturing-division-assad-regime-and-minorities-south-west-syria

    Sinjab, L. (2017). How Syria’s War Economy Propels the Conflict. Retrieved 25 June 2020, from https://syria.chathamhouse.org/research/how-syrias-war-economy-propels-the-conflict

    Veen, E. (2020). The geopolitics of Syria’s reconstruction: a case of matryoshka. Retrieved 27 June 2020, from https://www.clingendael.org/publication/geopolitics-syrias-reconstruction-case-matryoshka

    Yazigi, J. (2017). Analysis: No Funds to Foot Syria’s Reconstruction Bill. Retrieved 1 July 2020, from https://www.newsdeeply.com/syria/community/2017/12/04/analysis-no-funds-to-foot-syrias-reconstruction-bill

     

    Main Image Credit: Palmyra before its destruction by ISIS – www.citymetric.com 

     

  • Living Next to China: India’s Economic Challenge

    Living Next to China: India’s Economic Challenge

    Abstract

    Hampered by declining economic growth, India needs to take bold and practical economic measures to overcome the adverse impact of the coronavirus pandemic, compounded by past economic blunders such as the demonetisation and the haphazard implementation of the GST regime. Mohan Guruswamy analyses that the seeds of the current economic slide were sown by the UPA II regime by its populist measures that were wasteful, unproductive, and reduced capital expenditure. Non action by the NDA governments on these issues has made it worse. He argues that India must not shy away from recourse to deficit financing to overcome the current unprecedented challenges faced by the economy on account of the Covid-19 disruption. India needs to increase its stimulus package from a mere 0.3% of the GDP to at least 10% to boost economic revival and growth. India’s reserves of $490 billion ($530 billion as of recent figures) is available to be tapped for economic revival. The measures must focus on addressing the severe impact on weaker sections of the society such as the poor, lower middle-class, and the farmers.

    The Covid2019 shock hit all world economies and has caused a serious contraction in all of them. Ironically, in the advanced economies like the USA, UK, Japan, and others, it exposed their intrinsic strengths with highly evolved social security systems by and large being able to absorb the labor displacement and the ability to quickly put together a fiscal fight back plan. Even China has been able to quickly recover its pole position as the worlds leading exporter and industrial production center. In India, Covid2019 exposed our co-morbidities, and has further opened the traditional faultlines, with the large unorganized labor cohort bearing the brunt of the costs. At last count the CMIE estimates over 130 million daily wagers in the urban centers being rendered jobless and homeless.[i] India’s economy which has been in distress for most of the last decade in now seriously stricken.

    When India’s economic history is written in some future date, and when a serious examination is done of when India lost its way to its ‘tryst with destiny’, the decade of 2010-20 will be highlighted.

    When India’s economic history is written in some future date, and when a serious examination is done of when India lost its way to its ‘tryst with destiny’, the decade of 2010-20 will be highlighted. The facts speak for themselves. India’s real GDP growth was at its peak in March 2010 when it scaled 13.3%.  The nominal GDP at that point was over 16.1%. The nominal GDP in September 2019 was at 6.3%, it’s lowest in the decade. Since then the downward trend is evident and we are now scraping the bottom at about a real GDP growth rate of 4.5%, this too with the push of an arguably inflationary methodology. Our previous CEA, Arvind Subramaniam, estimated that India’s GDP growth is overestimated by at least 2.5%. BJP MP and economist Subramaniam Swamy was even more pessimistic. He estimated it to be 1.5%.

    The decline in the promise is amply evident by the change in the make up of the economy during this decade.  In 2010 Agriculture contributed 17.5% of GDP, while Industry contributed 30.2% and Services 45.4%.  In 2019 that has become 15.6%, 26.5% and 48.5% respectively.  The share of industry has been sliding.  This is the typical profile of a post-industrial economy.  The irony of India becoming post-industrial without having industrialized must not be missed.

    Decline in Capital Investment

    The most significant cause for the decline of growth is the decline in capital investment.  It was 39.8% of GDP in 2010 and is now a good 10% lower.  Clearly without an increase of capital investment, one cannot hope for more industrialization and hence higher growth.  What we have seen in this decade is the huge increase in Services, which now mostly means increase in Public Administration and informal services like pakora sellers.

    In 2010 it seemed we were well on track.  But now we are struggling to get past $3 trillion, and the $5 trillion rendezvous that Modi promised by 2024 will have to wait longer.

    At the turn of the century, as China’s GDP began its great leap forward (from about $1.2 trillion in 2010 to $14.2 trillion in 2019), was also a heady moment for India whose GDP of $470 billion began a break from the sub 5% level of most of the 1990’s to the rates we became familiar with in the recent past (to hit a peak stride of 10.7% in 2010). At that point in time, if growth rates kept creeping up, we could have conceivably gone past $30 trillion by 2050. But for that the growth rate should consistently be above 7%. It seemed so feasible then.  In 2010 it seemed we were well on track.  But now we are struggling to get past $3 trillion, and the $5 trillion rendezvous that Modi promised by 2024 will have to wait longer.

    To be fair to Modi and the NDA, the decline began early in the second term of the UPA when capital expenditure growth had begun tapering off.  Dr. Manmohan Singh is too canny an economist to have missed that.  But UPA II also coincided with the increasing assertion of populist tendencies encouraged by the Congress President and her extra-Constitutional National Advisory Council. The decline in the share of capital expenditure was accompanied by a huge expansion in subsidies, most of them unmerited.  Instead of an increase in expenditure on education and healthcare, we saw a huge expansion in subsidies to the middle and upper classes like on LPG and motor fuels. Even fertilizer subsidies, which mainly flow to middle and large farmers with irrigated farmlands, saw a great upward leap.  Clearly the money for this came from the reduction in capital expenditure.  Modi’s fault in the years since 2014 is that he did nothing to reverse the trend, and only inflicted more hardship by his foolish demonetization and ill-conceived GST rollout.

    The realities are indeed stark.  The savings/GDP ratio has been in a declining trend since 2011 and Modi has been unable to reverse it.  Consequently, the tax/GDP ratio and the investment/GDP ratio have also been declining.  The rate of economic growth has been suspect and all objective indicators point to it being padded up. The drivers of economic growth such as capital expenditure is dismal.  Projects funded by banks have declined by over half since 2014 to less than Rs.600 billion in 2018-19.  Projects funded by the market have dropped to rock bottom.  Subsequently the manufacturing/GDP ratio is now at 15%.  Corporate profits/GDP ratio is now at a 15-year-old low at about 2.7%.  You cannot have adequate job creation if these are dipping.  Declining rural labor wage indices testify to this.

    Between October 2007 and October 2013 rural wages in the agricultural and non-agricultural sectors grew at 17% and 15%, respectively.  Since November 2014, however, agricultural and non-agricultural sector wages grew at only 5.6% and 6.5%, respectively. In 2019 average rural wage growth has further fallen to 3.1%.[ii]

    Bharat and India Divide

    It is very clear now that the urban lane has been moving well in India.  Indeed, so well that an Oxfam study revealed that that as much as 73% of the growth during the last five years accrued to just 1% of the population.[iii] This does not mean it is just the tycoons of Bombay and Delhi who are cornering the gains.  Government now employs close to 25 million persons, and these have now become a high-income enclave.  The number of persons in the private and organized sector is about another ten million. In all this high-income enclave numbers not more than 175-200 million (using the thumb rule of five per family).  Much of the consumption we tend to laud is restricted to just these.

    The simple fact that the share of Agriculture is now about 15.6% of GDP and falling, while still being the source of sustenance for almost 60% of the population reveals the stark reality.  A vast section of India is being left behind even as India races to become a major global economy.

    Agriculture is still the mainstay of employment.  Way back in 1880 the Indian Famine Commission “had observed that India had too many people cultivating too little land”.  This about encapsulates the current situation also.  While as a percentage the farmers and farmworkers have reduced as a part of the work force, in absolute terms they have almost tripled since 1947.  This has led to a permanent depression in comparative wages but has also led to a decline in per farmer production due to fragmentation of holdings.  The average farm size is now less than an acre and it keeps further fragmenting every generation.[iv] The beggaring of the farming community is inevitable.  The only solution to this is the massive re-direction of the workforce into less skilled vocations such as construction.

    The simple fact that the share of Agriculture is now about 15.6% of GDP and falling, while still being the source of sustenance for almost 60% of the population reveals the stark reality.  A vast section of India is being left behind even as India races to become a major global economy.

    As the decade ends, the Bharat and India divide have never been more vivid.  Our social scientists are still unable to fix a handle to this because the class, cultural and ethnic divides still eludes a neat theoretical construct.  Yet there can be little disagreement that there are two broad parts to this gigantic country and one part is being left behind.  The distance between the two only increased from 2010 to 2020.  This is indeed the lost decade.  Recovering from this will take long and will be painful.  If we take too long, we might have used up a good bit of the ‘demographic dividend’ and the demographic window of opportunity.  The ageing of India will be upon us by 2050[v].

    Covid-19 Impact – Increasing Economic Disparities 

    In the recent months the onslaught of the Covid2019 induced lockdown has been quite relentless.  From 2004-2014 India’s GDP grew at an average of 7.8%.  At its peak it went past 10% in 2010-11 Then it started slowing down.  The new government was unable to return to the old growth rates because it did not care to learn from the experiences of the previous regime, which began to spend more on giveaways, misguidedly thinking it was welfare economics, and took the accelerator off capital expenditure.  Even though capital expenditure is driven in India by government spending, this government spending is very different from subsidies and giveaways.  Subsidies generally tend to be misdirected with the already well-off garnering most of it.  Minimum Support Prices (MSP) are a huge annual subsidy[vi]and 90% of it accrues to the states of Punjab, Haryana, and the coastal region of Andhra Pradesh.  Fertilizer subsidies tend to accumulate to the advantage of large and medium farmers or to about a quarter of all land holdings.  Ditto for free power.  The only welfare expenditure to benefit farmers is investment in irrigation, rural infrastructure, and social welfare like education and health.  Unfortunately, this has been on the decline.  This has exacerbated disparities, both local and regional.  With capital expenditures declining, job creation suffered and the inevitable slowdown of GDP growth happened.  As we started diving, the government inflicted the so-called Demonetization adding to our woes.  Just as things began to look up, the Covid2019 pandemic overtook us.

    Now the only dispute on national income is how much will be the contraction.  The Finance Ministry hopes there won’t be any. The IMF has officially said it will be 4.5%.  The rating agencies predict a contraction of 6.8%, while many more are suggesting something closer to 10%.  How do we deal with is now?  The government of India has tended to be “conservative” in its outlook and has made no serious suggestion on economic stimulus.  What it calls a stimulus is actually not a stimulus. The problem is more philosophical.

    The divide between the Keynesians and the Chicago school is as intense and often antagonistic as the Sunni-Shia, Catholic-Protestant or Thenkalai-Vadakalai Iyengar divides.

    Keynesian economics is a theory that says the government should increase demand to boost growth. Keynesians believe consumer demand is the primary driving force in an economy.  As a result, the theory supports expansionary fiscal policy.  The Chicago School is a neoclassical economic school of thought that originated at the University of Chicago in the 1930s.  The main tenets of the Chicago School are that free markets best allocate resources in an economy and that minimal or zero government intervention is best for economic prosperity.  They abhor fiscal deficits.

    Inadequate Stimulus Package 

    The instruments used to beat countries like India into submission are ratings agencies such as Moody’s, which just downgraded India.  We shouldn’t lose too much sleep over it.  India is a hardly a borrower abroad and is more of a lender holding $490 billion as reserves.

    The only reason why the actual stimulus package is only Rs.63K crs is the obsession with fiscal deficits by Chicago economists such as Raghuram Rajan and his former student the hapless Krishnamurthy Subramaniam, the present CEA. They are true disciples of the Washington Consensus to judge countries like India by the fiscal deficit size.  The instruments used to beat countries like India into submission are ratings agencies such as Moody’s, which just downgraded India.  We shouldn’t lose too much sleep over it.  India is a hardly a borrower abroad and is more of a lender holding $490 billion as reserves.

    That is why the CEA when asked about a big stimulus said: “There are no free lunches!” That’s exactly what Milton Friedman said. But they quite happily ignore the biggest deficit financed economy in the world is the USA.  Raghuram Rajan told Rahul Gandhi on his videoconference that a stimulus of Rs.65K crores would suffice in the present situation[vii]. The Nobel Laureate Abhijit Bhattacharya and former CEA Arvind Subramaniam suggest a stimulus package like the USA or Japan[viii].  The USA has just announced a stimulus of over $3.5 trillion or over 15% of GDP.  Modi’s stimulus is a mere 0.3% of GDP.

    What is ‘Fiscal Deficit?’ A fiscal deficit occurs when a government’s total expenditures exceed the revenue that it generates, excluding money from borrowings.  Deficit differs from debt, which is an accumulation of yearly deficits.

    Many serious economists regard fiscal deficits as a positive economic event.  For instance, the great John Maynard Keynes believed that deficits help countries climb out of economic recession.  On the other hand, fiscal conservatives feel that governments should avoid deficits in favor of balanced budgets.

    India’s debt/GDP ratio is by contrast a modest 62% and yet it intends to pump in a mere 0.3% of GDP as stimulus.

    The fastest growing economies in the world, and now its biggest – USA, China, Japan and most of Western Europe – have the highest debt/GDP ratios.  Japan’s debt/GDP is over 253% before the latest stimulus of 20% of GDP.  China’s debt is now over 180% of its GDP.  The USAs debt/GDP is close to 105% yet it is raising $3 trillion as debt to get it out of the Covid2019 quagmire.  India’s debt/GDP ratio is by contrast a modest 62% and yet it intends to pump in a mere 0.3% of GDP as stimulus.

    Pump priming the economy by borrowing per se is not bad.  It is not putting the debt to good use that is bad.  Nations prosper when they use debt for worthwhile capital expenditure with assured returns and social cost benefits.  But we in India have borrowed to give it away as subsidies and to hide the high cost of government.  To give an analogy, if a family has to make a choice of borrowing money to fund the children’s education or to support the man’s drinking habit, the rational choice is obvious. The children’s education will have a long-term payback, while the booze gives instant gratification. But unfortunately, our governments have always been making the wrong choices.

    If borrowed money is used productively and creates growth and prosperity, it must be welcomed.  What we want to hear from the government is not about fiscal deficit targets, but economic growth, value addition, employment, and investment targets.  Our governments have hopelessly been missing all these targets.

    Modi’s Options – Need for Bold Decisions

    So, what can Modi do now to get us out of this quagmire?  If the regime abhors a stimulus financed by deficit financing there are other options that can be exercised.  But he is hamstrung with a weak economic management team with novices as the two key players, the Finance Minister and RBI governor.

    India has over $490 billion nesting abroad earning ridiculously low interest.  Even if a tenth of this is monetized for injection into the national economy, it will mean more than Rs.3.5 lakh crores.  At last count the RBI had about Rs.9.6 lakh crores as reserves.  This is money to be used in a financial emergency.  We are now in an emergency like we have never encountered or foresaw before. Even a third of this or about Rs.3.2 lakh crores is about five times the present plan.

    There is money in the trees, and all it needs is a good shake up to pick the fruits. The pain of the lockdown must not be borne by the poor alone.  The government can easily target 5% of GDP or about Rs.10L crores for the recovery fund as an immediately achievable goal.

    There are other sources of funds also, but tapping these will entail political courage and sacrifices. Our cumulative government wages and pension bill amounts to about 11.4% of GDP.  After exempting the military and paramilitary, which is mostly under active deployment, we can target 1% of GDP by just by cancelling annual leave and LTC, and rolling back a few DA increases.

    The government can also sequester a fixed percentage from bank deposits, say 5% of deposits between Rs.10-100 lakhs and 15-20% from bigger deposits for tax-free interest-bearing bonds in exchange.  The ten big private companies alone have cash reserves of over Rs.10 lakh crores[ix].

    There is money in the trees, and all it needs is a good shake up to pick the fruits. The pain of the lockdown must not be borne by the poor alone.  The government can easily target 5% of GDP or about Rs.10L crores for the recovery fund as an immediately achievable goal.

    This money can be used to immediately begin a Universal Basic Income scheme, by transferring a sum of Rs.5000 pm into the Jan Dhan accounts for the duration of the financial emergency; fund GST concessions to move the auto and engineering sectors in particular; begin emergency rural reconstruction projects to generate millions of new jobs and get our core infrastructure sectors like steel, cement and transportation moving again.

    Getting money to move India again is not a huge problem.  What comes in between are the philosophical blinkers.  Call it Chicago economics or the Gujarati mindset.

    Notes

    [i] https://www.businesstoday.in/sectors/jobs/india-unemployment-rate-hits-26-amid-lockdown-14-crore-lose-employment-cmie/story/401707.html

    [ii] https://www.financialexpress.com/economy/farm-wages-growth-fell-to-a-four-quarter-low-in-q3-fy-20/1789235/

    [iii] https://economictimes.indiatimes.com/news/economy/indicators/wealth-of-indias-richest-1-more-than-4-times-of-total-for-70-poorest-oxfam/articleshow/73416122.cms?from=mdr#:~:text=Wealth%20of%20India’s%20richest%201%25%20more%20than%204%2Dtimes%20of,total%20for%2070%25%20poorest%3A%20Oxfam&text=The%20Oxfam%20report%20further%20said,particularly%20poor%20women%20and%20girls.

    [iv] https://www.prsindia.org/policy/discussion-papers/state-agriculture-india

    140 million hectares of land is used as agricultural area, as of 2012-13.  Over the years, this area has been fragmented into smaller pieces of land.  As seen in Table 3, the number of marginal land holdings (less than one hectare) increased from 36 million in 1971 to 93 million in 2011.  Marginal and small land holdings face several issues, such as problems with using mechanization and irrigation techniques.

    [v] https://economictimes.indiatimes.com/news/politics-and-nation/demographic-time-bomb-young-india-ageing-much-faster-than-expected/articleshow/65382889.cms

    [vi] https://www.thehindubusinessline.com/opinion/all-you-wanted-to-know-about-minimum-support-price/article7342789.ece

    [vii] https://www.hindustantimes.com/india-news/in-video-conversation-with-rahul-rajan-suggests-65k-crore-aid-for-poor/story-CtrtvW6HErR16L9m1t9wHP.html

    [viii] https://economictimes.indiatimes.com/news/economy/policy/rahul-gandhi-in-conversation-with-abhijit-banerjee-india-needs-a-bigger-stimulus-package-like-us-japan-to-revive-economy/videoshow/75549770.cms

    [ix] https://www.screener.in/screens/2551/Cash-Rich-Companies/

     

    Image credit: Adobe Stock

  • Vietnam: Bright Economic Outlook post-COVID

    Vietnam: Bright Economic Outlook post-COVID

    COVID-19 is truly a ‘Black Swan’ event and its impact is being felt across the globe. There is widespread worry about the future of economic growth in the post-pandemic period and the World Bank has observed that the pandemic caused the deepest global recession since Second World War. [i] There are at least three reasons which triggered and added to the current crisis. First, it has involved the US and China in a trade war since July 2018, when US President Donald Trump imposed wide-ranging tariffs on China for its alleged unfair trade practices. In August 2019, Trump ordered U.S. companies to “immediately start looking for an alternative to China, including bringing your companies home and making your products in the USA.”[ii] China responded in a similar manner with counter tariffs on US goods. Since then numerous negotiations between them have been held, the last in June 2020 at Hawaii, did not yield any breakthrough. This revengeful tariff war has now blown into a full-fledged trade war and President Trump aggravated with the renewed threat of a “complete decoupling from China.”

    There is widespread worry about the future of economic growth in the post-pandemic period and the World Bank has observed that the pandemic caused the deepest global recession since Second World War.

    Second, amid the trade war, the Corona-19 pandemic made matters worse for the two protagonists. The US accused China of withholding information about the Wuhan virus which was detected in December 2019 and Beijing did not make public the information till January 2020 after which it spread across the globe from Europe to the US. The pandemic has caused massive disruptions in supply chains and some countries have decided to shift businesses out of China. For instance, Prime Minister Shinzo Abe government announced US $2.2 billion stimulus package to help companies shift production out of China back to Japan or elsewhere.[iii]

    Third, the new security law in Hong Kong has triggered an exodus by several companies to move out of China. The Law “targets acts of secession, subversion, terrorism and collusion with foreign forces, with life in prison for those committing the most serious offences”[iv] has scared common people. Many technology companies, startups, entrepreneurs are now confronted with uncertainty and are exploring alternative destinations.[v]

    many companies are being forced to shut down their operation in China and rethink-reevaluate-reinvest in new destinations to remain buoyant for the time being and slowly make their networks more resilient across sectors for the future.

    Furthermore, the pandemic exposed the weaknesses and susceptibilities of many organizations, business houses and industries particularly those that are intimately connected and dependent on China to fulfil their need for raw materials or finished products. Consequently, many companies are being forced to shut down their operation in China and rethink-reevaluate-reinvest in new destinations to remain buoyant for the time being, and slowly make their networks more resilient across sectors for the future. According to a leading business research and advisory company, “tariffs imposed by the U.S. and Chinese governments during the past years have increased supply chain costs by up to 10% for over 40% of organizations” and “popular alternative locations are Vietnam, India, and Mexico.” [vi]

    Vietnam and Thailand have a very good scorecard in their fight against COVID-19 and are rearing to attract investments and kick start the economy.

    Even before COVID-19 pandemic crisis, in 2019, five Asian countries i.e. Malaysia, India, Thailand, Indonesia and Vietnam (MITI-V) or “Mighty Five” had been identified as “up-and-coming players” with high potential for being world’s next manufacturing hubs.[vii] Among these, Vietnam and Thailand have a very good scorecard in their fight against COVID-19 and are rearing to attract investments and kick start the economy.

    According to the World Economic Forum, Vietnam’s economic rise is marked by trade liberalization, domestic reforms through deregulation, lowering the cost of doing business and investments made in human resource development.[viii] During the first six months of the current year, FDI commitments was at over US$15 billion which is a positive outlook for the country. In fact, Vietnam has attracted FDI from 136 countries and territories with nearly 32,000 projects with a combined value of US$378 billion. Among these Japan is the second largest investor with over US$60 billion. Last month, Vietnam’s Ministry of Planning and Investment, Embassy of Japanese at Hanoi, Japan External Trade Organization (JETRO), and Japan Bank for International Cooperation (JBIC) held a virtual conference to explore FDI investments “especially in the context of Japanese government providing a US$2.3 billion aid package for Japanese firms to diversify their supply chains”.[ix]

    Vietnam has many common export products from China such as broadcasting equipment, and could emerge as the “top exporter of broadcasting equipment to developed countries” but is constrained by “smaller GDP and workforce”; but its   progresses in infrastructure could potentially make it a more appealing option.[x]

    Vietnam has attracted FDI from 136 countries and territories with nearly 32,000 projects with a combined value of US$378 billion. Among these Japan is the second largest investor with over US$60 billion.

    Besides, there are other contenders such as Thailand and India to attract FDI and these two countries offer attractive FDI policies and manufacturing infrastructure. In mid-2019, as many as 200 American companies were planning to move their manufacturing base from China and were looking at India.[xi] Similar trends have been reported from South Korea [xii] and Japan [xiii] who could migrate to “production-conducive economies like India, Vietnam and Thailand”.[xiv]

    According to one estimate, FDI “across the globe may decline by 40% this year due to the Covid-19 crisis”[xv], but by all counts and accounts, Vietnam is a resounding success story.  It is a stable economy, possesses necessary infrastructure and facilities, and above all it enjoys “multilateral and bilateral agreements with foreign countries”[xvi], which makes it a popular destination in the post-COVID economic revival outlook.

    Notes

    [i] “Global Economic Prospects”, https://www.worldbank.org/en/publication/global-economic-prospects (accessed 16 July 2020).
    [ii] “Trump says he’s ordering American companies to immediately start looking for an alternative to China”, https://www.cnbc.com/2019/08/23/trump-says-hes-ordering-american-companies-to-immediately-start-looking-for-an-alternative-to-china.html (accessed 30 July 2020).
    [iii] “Coronavirus Impact: Japan to offer $2.2 billion to firms shifting production out of China”, https://www.businesstoday.in/current/world/coronavirus-impact-japan-to-offer-22-billion-to-firms-shifting-production-out-of-china/story/400721.html (accessed 30 July 2020).
    [iv] “Hongkongers contemplate a second exodus”, https://www.scmp.com/week-asia/politics/article/3093517/home-and-away-after-national-security-law-hongkongers (accessed 30 July 2020).
    [v] “Tech Firms Begin to Abandon Hong Kong over Security Law”, https://webcache.googleusercontent.com/search?q=cache:tmQW3Yjx5vcJ:https://www.bloomberg.com/news/articles/2020-07-20/tech-firms-begin-to-abandon-hong-kong-because-of-security-law+&cd=13&hl=en&ct=clnk&gl=in (accessed 30 July 2020).
    [vi] “Gartner Survey Reveals 33% of Supply Chain Leaders Moved Business Out of China or Plan to by 2023”, https://www.gartner.com/en/newsroom/press-releases/2020-06-24-gartner-survey-reveals-33-percent-of-supply-chain-leaders-moved-business-out-of-china-or-plan-to-by-2023 (accessed 30 July 2020).
    [vii] “5 China Sourcing Alternatives In Asia”, https://www.intouch-quality.com/blog/5-alternatives-to-sourcing-from-china (accessed 30 July 2020).
    [viii] “Vietnam races ahead of China in economic growth: opportunities and challenges for Vietnam in the post-COVID- 19 period”, https://timesofindia.indiatimes.com/blogs/ChanakyaCode/vietnam-races-ahead-of-china-in-economic-growth-opportunities-and-challenges-for-vietnam-in-the-post-covid-19-period/ (accessed 30 July 2020).
    [ix] Ibid.
    [x] “COVID-19: Developing countries and shrouded opportunities”, https://www.orfonline.org/expert-speak/covid-19-developing-countries-and-shrouded-opportunities/ (accessed 30 July 2020).
    [xi] “About 200 US firms aim to move manufacturing base from China to India post-general election: USISPF”, https://www.businesstoday.in/current/economy-politics/about-200-us-firms-aim-to-move-manufacturing-base-from-china-to-india-post-general-election-usispf/story/341011.html ( 30 July 2020).
    [xii] “Korean companies keen to move out of China to India”, http://timesofindia.indiatimes.com/articleshow/75130387.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst (30 July 2020).
    [xiii] “Global firms look to shift from China to India”, https://www.livemint.com/industry/manufacturing/global-firms-look-to-shift-from-china-to-india-11587494725838.html  (30 July 2020).
    [xiv] “India isn’t ready yet for foreign companies that want to quit China”, https://theprint.in/opinion/india-isnt-ready-yet-for-foreign-companies-that-want-to-quit-china/415040/ (accessed 30 July 2020).
    [xv] “1,000 Japanese firms looking for investment opportunities in Vietnam”, http://hanoitimes.vn/1000-japaneses-firms-looking-for-investment-opportunities-in-vietnam-313133.html (accessed 30 July 2020).
    [xvi] “Vietnam races ahead of China in economic growth: opportunities and challenges for Vietnam in the post-COVID- 19 period”, https://timesofindia.indiatimes.com/blogs/ChanakyaCode/vietnam-races-ahead-of-china-in-economic-growth-opportunities-and-challenges-for-vietnam-in-the-post-covid-19-period/ (accessed 30 July 2020).

     

    Image: Ho Chi Minh city and Saigon River – Credit: Adobe Stock

  • Trade during the Sangam Age: Exploring the Sangam literature and Keezhadi excavations

    Trade during the Sangam Age: Exploring the Sangam literature and Keezhadi excavations

    The sculpted marvels which bejewel the ancient temples all across Tamil Nadu stand testimony to the magnificence of Sangam age (3rd century BC to 3rd century AD) and the prolific artistic innovations which are characteristic of that period. But that’s not all there is to it. Matching the artistic and cultural fervour, trade activities were also at an all-time high during the Sangam age. Evidentiating this claim, the Sangam literature chronicles details of all the fine merchandise which were produced in Ancient Tamilakam. Building up on their strengths, the Tamils ventured into lands far and wide, establishing trading associations in foreign countries, some of which till date retain imprints of their existence. Coupled with manifest cultural similarities, archaeological and inscriptional evidence add on to the credibility of Sangam literature by making a strong case for the existence of an extensive trade between Tamilakam and the rest of the Old World.

    Sangam Literature: Valuable source of Information on Trade

    Pattinappalai, one of the poems (301 lines in ‘Vanji’ meter and Asiriyapa/Akaval meter) in Pattuppāṭṭu which is a corpus of ten poems, talks in great detail about Kaveripoompattinam, the capital city of the Early Cholas.

    Even though only half of what is claimed to have been created remains, the Sangam literature is too big a chunk to be thoroughly studied in a short time. There might still be parts of it that are waiting to be looked into. But of what has been discovered, the details pertinent to trade can predominantly be found in three major literary works, namely Pattuppāṭṭu, Silappatikaram and its sequel Manimekalai. Pattinappalai, one of the poems (301 lines in ‘Vanji’ meter and Asiriyapa/Akaval meter) in Pattuppāṭṭu which is a corpus of ten poems, talks in great detail about Kaveripoompattinam, the capital city of the Early Cholas. The port of Puhar / Kaveripoompattinam had ” an abundance of horses brought over the seas, sacks of black pepper brought overland in carts, gemstones and gold from the northern mountains, and sandalwood and eaglewood from the Western hills, pearls from the southern seas and coral from the eastern seas, grains from the regions of Ganga and Kaveri, food grains from Eelam (Sri Lanka) and products from Burma and other rare and great commodities.”

    A description of the port warehouses of Kaveripoompattinam in Pattuppattu is revealing of the flourishing trade – “Like the monsoon season when clouds absorb ocean waters and come down as rains on mountains, limitless goods for export come from inland and imported goods arrive in ships. Fierce, powerful tax collectors are at the warehouses collecting taxes and stamping the Chola tiger symbols on goods that are to be exported.”

    Silappatikaram and Manimekalai, on the other hand, talk about the cities of Madurai, Puhar and Kanchipuram, which served as major centres for cloth weaving, from whence fine quality fabrics were manufactured and exported through the Coromandel Coast. Silk, cotton and wool are some of the fabrics which are mentioned to have been exported from the coast. The epics also present a vivid description of the urban market scenes. The details paint the picture of a buzzing market where trade was carried out in a variety of supreme quality products, starting from agricultural products like black pepper, food grains, areca nuts, white sugar, eaglewood to luxury commodities like gold, pearls, gems, jewels, coral and silk, among other things. In fact, the urban markets are said to have had a separate street dedicated to food grains alone. So high was the demand for food grains that despite having close to eighteen indigenous varieties, grains also had to be imported from other countries in exchange for white salt. Likewise, the demand for aromatic products were too high to be met by home-gown eagle woods and sandalwoods, resulting in the import of the same from South East Asian countries, particularly from China and Indonesia.

    Tamilakam: Maritime Trade hub-centre between the East and the West

    Both literary and archaeological evidence have time and again reaffirmed one another; the merchants of Tamilakam had traded with the East and the West with equal flair. While there is a substantial amount foreign and native literature, and archaeological findings to assert the latter, there is relatively less evidence to support the former. And not only did Tamilakam engage in direct trade with the West, but because all products from Southeast Asia had to be sent through ports along the coast of South India, Tamilakam also acted as the hub-centre for the trade between the East and the West.

    Commodities from Tamilakam had a great demand in Rome. Black pepper, cardamom, pearls and gemstones, especially Beryl which was mined from sites in Kodumanal, Padiyur and Vaniyampadi, were highly sought after in Rome.

    With regard to the West, Tamil merchants have had a long-standing trade relationship with the Egyptians and the Romans. Beginning from the period when Alexandria was the centre of Mediterranean commerce, trade with the West extended well into the time when Rome assumed dominance and became the centre-stage of Mediterranean economy. Trade with Tamilakam was in fact a deciding factor in the question of dominance in sea trade. The Arabs held ground against the competing Romans by monopolizing the knowledge regarding direct sea route to India and information about the source markets in India. Nevertheless, eventually the Romans established direct trade links with India and Rome became the largest market ground for Indian products. Commodities from Tamilakam had a great demand in Rome. Black pepper, cardamom, pearls and gemstones, especially Beryl which was mined from sites in Kodumanal, Padiyur and Vaniyampadi, were highly sought after in Rome.

     

    Picture: Interpretation map from ‘The Periplus of the Erythraean Sea”.

    In the interpretations of a historical document called ‘The Periplus of the Erythraean Sea, originally authored by a Greek Navigator in the 1st century, there is said to have been  mentions of a marketplace called Poduk’e in the historical text . G.W.B. Hunting Ford, a historian, has postulated that this place might have been Arikamedu, a location two miles away from modern day Pondicherry.  Hunting Ford also notes that Roman pottery have been excavated in Arikamedu and that these evidence point at the possibility that this region might have been a trading centre for Roman goods in the 1st century AD. Arikamedu, known as Poduk’e in the Greco-Roman world was a manufacturing hub of textiles particularly of Muslin clothes, fine terracotta objects, jewelleries from beads of precious and semi-precious stones, glass and gold. The city had an extensive glass bead manufacturing facilities and is considered as “mother of all bead centres” in the world. Most of their production were aimed for export.

    Picture: Arikamedu – credit: Wikipedia

    Arikamedu, known as Poduk’e in the Greco-Roman world was a manufacturing hub of textiles particularly of Muslin clothes, fine terracotta objects, jewelleries from beads of precious and semi-precious stones, glass and gold. The city had an extensive glass bead manufacturing facilities and is considered as “mother of all bead centres” in the world.

    Descriptions of Puhar, Korkai, Muziris and Arikamedu in Sangam literature indicate extensive presence of Yavanas’ (foreigners) settlements in port cities on account of trade. Pattinapalai describes the port activities and the Chola customs revenue system in detail.

    Keezhadi: Evidences of  Industrial and Trade Centre

     In addition to these, the Keezhadi excavation, conducted by the Archaeological Survey of India in 2016, has unearthed around 13000 antiquities like shells, glass beads, rusted old coins, weapons, pottery of various kinds and iron tools, belonging to the Sangam age. Among the fine quality red and black ware bowls excavated in the region, are the Roman roulette wares which evidentiate the existence of trade links between the Tamils and Romans. Moreover, seven furnaces were discovered at the site and these, according to the archaeologists, are an indication of the possibility that the site might have been a textile unit and settlers in the region might have been involved in industrial activities.

    Keezhadi findings places the Sangam age to an even earlier period starting from 6th century BC. As per Amarnath Ramakrishna, who led the first two phases of excavations, Keezhadi site was one among the 100 sites of possible human habitation shortlisted for excavation. Discovery of Tamil Brahmi inscriptions and graffiti that date back to earliest times as compared to any other findings in India. Quite obviously, Keezhadi points to the potential of a huge trading and manufacturing habitation and a distinct civilization – the Tamil Vaigai River Valley Civilisation. The Sangam literature is rich and a huge treasure trove of information that needs to be researched extensively.

     

    Picture: Australian seaboard, Statue of Garuda and Tamil Inscriptions, symbolising maritime culture – Credit: ancient-origins.net

    Maritime Trade in Tamilakam: A Core Activity

    Several artefacts with Tamil Brahmi inscriptions have been excavated in foreign countries as well. In Thailand, potsherd with Brahmi inscriptions were unearthed. Likewise, Cheena Kazhakam ( Chinese gold coins) were discovered in Srivijaya (modern day Sumatra in Indonesia) and Kadaram (modern day Kedah in Malaysia), places which were under the occupation of the Cholas.

    The aforementioned evidence when correlated with the inscriptional evidence, found in foreign lands about Tamil trading settlements, will help in the historical reconstruction of the maritime trade links of Ancient Tamilakam and will attest to the extensive nature of trade carried out by the Tamils during the Sangam age.

     

    References

     Mukund, Kanakalatha. The Trading World of the Tamil Merchant: Evolution of Merchant Capitalism in the Coromandel. Orient Blackswan, 1999. https://books.google.co.in/books?id=tjXdDYChdGsC&lpg=PP1&pg=PP1#v=onepage&q&f=false.

    Mukund, Kanakalatha. The World of the Tamil Merchants. Portfolio Books Limited, 2015. https://books.google.co.in/books?id=Bha2eLqMPWcC&lpg=PT6&ots=tw2qDuzDlf&dq=trade during sangam age kanakalatha mukund&pg=PT5#v=onepage&q=trade during sangam age kanakalatha mukund&f=false.

    “Roman Trade with India.” Roman Trade with India – New World Encyclopedia. Accessed June 24, 2020. https://www.newworldencyclopedia.org/entry/Roman_trade_with_India#cite_ref-31.

    Kannan, Gokul. “Keezhadi Excavation Points to Vaigai River Civilisation in Sangam Period.” Deccan Chronicle. October 1, 2016. Accessed June 24, 2020. https://www.google.com/amp/s/www.deccanchronicle.com/amp/nation/in-other-news/011016/keezhadi-excavation-points-to-vaigai-river-civilisation-in-sangam-period.html.

    Annamalai, S. “Uncovered: Pandyas-Romans Trade Link.” The Hindu. May 16, 2017. Accessed June 24, 2020. https://www.google.com/amp/s/www.thehindu.com/news/national/tamil-nadu/archaeological-excavation-in-sivaganga-uncovers-pandya-roman-trade-links/article10879282.ece/amp

    Saju, M.T. “Tamil Trade Ships That Sailed to Foreign Shores.” Times of India. March 29, 2018. Accessed June 24, 2020. https://www.google.com/amp/s/timesofindia.indiatimes.com/blogs/tracking-indian-communities/tamil-trade-ships-that-sailed-to-foreign-shore

    Main Image: Keezhadi Excavation Site – Credit – ASI