Showing posts with label India. Show all posts
Showing posts with label India. Show all posts

Techno-Nationalism: India Bans PRC's TikTok

♠ Posted by Emmanuel in ,,, at 7/02/2020 12:44:00 AM
Slap Xi's image with sandals...and ban Tiktok too!
 Well, well, well: In a previous post concerning whether India could boycott China after the recent, fatal border skirmish, I said "They can burn as many Xi pictures as they like, but their compatriots won't stop buying PRC-made goods anytime soon." As it turns out, techno-nationalism is alive and well but not in the way I had envisioned. (I am still correct on technical points since [1] what's transpired concerns services not goods and [2] it's a government ban instead of a consumer boycott). The jingoistic Modi government apparently couldn't help itself from taking a swipe at China.

Nationalism aside, Modi & co. are hitting China in a way that inflicts less damage on India. True, India still cannot restrict the purchase of PRC-sourced electronic equipment since they have limited domestic manufacturing capabilities for smartphones, 5G infrastructure, and so on. But, India has no lack whatsoever of software writing talent. So, India has banned Bytedance of China's TikTok app, nearly a third of whose users are in India:
For thousands of Indian content creators [...] TikTok was a window into fame and fortune. But on Tuesday, the app, owned by China's ByteDance, went blank on phones across India after the government banned it along with 58 other Chinese-origin apps which it considered a threat to national sovereignty. The move came weeks after a deadly skirmish between Indian and Chinese soldiers along the disputed Himalayan border.
So the first key difference is that the government banned TikTok instead of there being a user backlash against the app (though some users support the Indian government's move):
TikTok was a sensation in India. With more than 600 million downloads, India accounted for 30 percent of its two billion downloads worldwide. ByteDance planned to invest $1bn in India, its top growth market where it employs 2,000 people [...]

Unlike Instagram, Facebook and Twitter, TikTok found resonance in India's hinterland as well as its cities, thanks to its less elaborate user interface, background music options and various special effects. Users - who ranged from top Bollywood stars to people in remote villages who became mini-celebrities - posted a wide variety of content, though jokes, dance clips and videos related to India's thriving movie industry dominated the platform.
And second--this is probably the key to the Modi government's thinking--there aren't many difficulties in cooking up homegrown TikTok alternatives. India is exceedingly good at software development, so why rely on China's?
Indian video-creation apps like Roposo, described on Google's app store as "India's own video app", and another named Chingari are likely to see a popularity surge after the TikTok ban.
Like Huawei, ZTE, and other Chinese telecoms firms, ByteDance's fate in overseas markets is inevitably tied to the PRC's image abroad. It's too bad since ByteDance has actually done more than you would expect to customize its offerings in overseas markets. It's the "reward" it gets from being a Chinese concern circa 2020.
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Border Conflict: Can India Boycott China?

♠ Posted by Emmanuel in ,, at 6/20/2020 07:11:00 PM
They can burn as many Xi pictures as they like, but their compatriots won't stop buying PRC-made goods anytime soon.
I have always been fascinated by territorial conflicts over uninhabitable lands. Due to its altitude, the area where Chinese and Indian forces had a border skirmish cannot sustain an appreciably-sized population of any sort. Moreover, the details of the encounter remain sketchy: Who initiated the conflict? If both sides were unarmed, why do casualties on both sides number in the double digits? There is still a lot we don't know.

Importantly from an IPE perspective, will there be economic consequences for this particular encounter? In particular, the Indians have been avid buyers of PRC tech goods--and count on Chinese sources of investment also. So despite Indian officials allowing for some public letting off of steam directed at China, there will likely not be a break in their commercial ties. Simply put, India does not have the production capabilities or an alternative supplier (ideally nearby) to China at the current time:
India imports more goods from China than any other country. And over the past decade, India and China have enabled each other's rise as emerging technology powerhouses. Chinese tech giants have invested billions of dollars into India's biggest startups, while its smartphone makers dominate the country's market and Indians have flocked to apps like TikTok. 
Now, the dispute threatens those ties. Growing anti-China sentiment in India has already led to calls for a boycott of Chinese products and services, while new rules on foreign investment could constrain China's ability to cash in on India's internet boom.
What are the chances of a realistic Indian boycott of PRC tech? Slim to none:
China has created a significant place for itself in India's technology sector over the last five years, according to a report published by Indian foreign policy think tank Gateway House. Unable to convince India to sign on to its global infrastructure project known as the Belt and Road Initiative, China entered India's tech scene by flooding the market with cheap smartphones from brands such as Xiaomi and Oppo and plowing money into Indian startups.  
Gateway House estimates that Chinese investors have poured some $4 billion into Indian tech startups since 2015. Alibaba (BABA), for example, has invested in Indian e-commerce company Snapdeal, digital wallet Paytm and food delivery platform Zomato. Tencent (TCEHY), meanwhile, has backed Indian messaging company Hike and ride hailing app Ola. Gateway House found that more than half of India's 30 unicorns — private firms worth more than $1 billion -— have Chinese investors.
Despite some new rules to curb PRC investments disguised as additional scrutiny of those emanating from countries India shares borders with--Pakistan isn't investing in Indian tech anytime soon--India can only hope to channel some PRC investment in areas which may generate some jobs there. It's a structural dependence India has on China:
"I don't think there's a widespread understanding of how difficult it would be to completely reduce India's reliance on China," said Ananth Krishnan, former Brookings India fellow and author of the report. 
India relies on China for everything "from heavy machinery and all kinds of telecom and power equipment, to active pharmaceutical ingredients," said Krishnan, who is now a reporter with The Hindu newspaper. In his Brookings report, Krishnan estimated that the total current and planned investment from China into India is at least $26 billion. Trade between the two countries reached more than $87 billion in the 2018-2019 fiscal year, according to India's Department of Commerce. China was India's second largest trading partner that year, just behind the United States.
Also note that PRC smartphone makers have set up shop in India already, making them fairly entrenched in India's commercial scene:
Last year, four of the top five best-selling smartphone makers in India were Chinese: Xiaomi, Vivo, Oppo and Realme, according to market research firm IDC [...]
And all of them have manufacturing facilities in India. Doing so allowed the Chinese firms to both embrace Prime Minister Narendra Modi's "Make in India" program and avoid stiff import tariffs. Xiaomi manufactures 95% of the phones it sells in India locally. "So if you're talking about cutting down the sales or shipment for these guys, it also impacts the factories that they have in India," which will "absolutely" affect Indian jobs, said Kiranjeet Kaur, an analyst with IDC.
Both sides may allow or even foment some jingoistic posturing since they have nationalist-leaning leaders. But ultimately, India cannot wean itself of China at this point in time--much as it would like to. With China equally keen on securing export markets, this drama can only play out so far. 
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Warmer Planet: India Adopts Air-Conditioning

♠ Posted by Emmanuel in , at 12/07/2018 04:24:00 PM

Like many others, I am of two minds about this phenomenon. As with practically everywhere else on Earth, India is warming. Most of the country was already warm to begin with, but with climate change, it's only getting warmer. What's more, economic development in that country has made it more possible for more folks to afford relatively costly air-conditioning units and the electricity bills associated with them.

A downside to all this comfort, however, is obviously further demand for power:
With India's AC market expected to explode from 30 million to a billion units by 2050, the world's second-most populous country could become the planet's top user of electricity for cooling. India is already the number-three spewer of greenhouse gases, burning through 800 million tonnes of coal every year -- and the predicted AC boom could mean the country would have to triple its electricity production to meet demand, experts say.

But for the hundreds of millions of Indians enduring scorching, even deadly, summers, the air conditioners are a godsend. "Summers make our life miserable," said Kumar, a 48-year-old laundryman earning $225 a month who this year installed an AC unit in his two-room house in the town of Behror in the baking-hot desert state of Rajasthan.
The paradox we must confront with A/C, as with many other modern conveniences, is that we make the Earth less convenient overall by using these electricity-dependent appliances. The user may feel cooler, but the environment becomes warmer overall:
The irony is that as humans try to stay cool, the refrigerants inside AC units and the generation of electricity needed to power the appliances are exacerbating global warming. That is, unless India can switch out of highly polluting fossil fuels for power generation:

In addition, studies -- including by the World Health Organisation and UN-Habitat -- show that the heat-generating motors inside AC units can themselves push up temperatures in urban areas, where the appliances are widely used, by a degree or more.

As demand grows, the amount of energy consumed globally by AC units could triple by 2050, requiring new electricity capacity equivalent to the combined current capacity of the US, the EU and Japan, the International Energy Agency says.

India currently generates about two-thirds of its electricity with coal and gas, and despite ambitious plans for renewable energy the country is set to remain highly dependent on hydrocarbons for decades to come.
If there is anyplace on Earth where renewable energy is most needed, it will be India as its demand for air-conditioning soars together with ambient temperatures, electricity demand and the production of carbon dioxide.
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Why India Beat China to Homegrown Smartphone OS

♠ Posted by Emmanuel in ,, at 7/31/2016 01:16:00 PM
Indus OS accommodates the hundreds of millions of Indians who do not speak English.
There's an article in Bloomberg that portrays the success of India's homegrown smartphone operating system Indus OS to harnessing market forces instead of heavy-handed government intervention. To be sure, there are advantages to having one's own operating system instead of relying on off-the-shelf offerings from Apple (iOS) or Alphabet (Android). Aside from being to develop software meeting one's needs and desires, the royalties emanating from software and app sales accrue more to a nation's firms instead of the American tech giants.

Whereas India's Indus OS has overtaken iOS to rank second only to Android through market-friendly adaptations, the Chinese equivalents--there have been many--have been hamstrung by government nannyism and anti-market moves:
For more than 15 years, China has unsuccessfully attempted to come up with a homegrown operating system that would be loved by the masses and allow the country to be freed from the shackles of Western technological imperialism. India has achieved that feat in less than two years. Indus OS is now India's second-most popular smartphone platform with a 6.3 percent market share, behind Alphabet's [formerly Google's] Android.

The multilingual system, one of many based on Android itself, reached No. 2 at the end of 2015 and maintained that position in the first two quarters, according to data released this week by Counterpoint Research. It leads iOS and other Android variants including Xiaomi's MIUI and Cyanogen. 
China, on the other hand, has gotten nowhere with its approach in contrast to the adaptable Indus OS:
China's path toward operating system nationalism is littered with the shells of failures including China OS (COS), Kylin, Red Flag and YunOS. They were all unsuccessful in getting traction for varying but similar reasons that include being pushed by the government or by a corporation with skin in the game. It matters little whether they're for desktop or mobile devices, China has failed at both...

With at least 12 major Indian languages supported, Indus OS has tapped into what the market needs, not what a government wants. That's powerful because it means the software is developing and pivoting according to demand. For example, it offers simplified predictive typing and translation between regional languages.
To be fair, Indus OS is not an entirely "new" operating system but an Android offshoot. That said, there are still advantages accruing to Indian tech and telecoms firms from this difference:
Indus OS also offers carrier billing in its App Bazaar, which means users can pay for downloads via their phone bill, for which network providers likely take a cut. This is a big motivator not only for consumers and app publishers but also for the operators themselves, who are less than happy about being left out of a smartphone party where Android and iOS drink more than their fair share of the champagne.

Since it's in their best interests to have more phones on their networks that will bill through their payment systems, operators have an incentive to promote Indus OS devices. And in turn, smartphone makers have a good reason to develop Indus OS models over Android.
Is it the market (stupid)?
Such success shows how market forces can trump government directives, and the outcome also ends up playing out well for Prime Minister Narendra Modi's Make in India campaign...While Beijing has done a lot to try and wean the country off the dominance of American software makers, India shows that all it really takes is a good product and market forces.
I think this ending statement presents a more nuanced picture. Aside from harnessing market forces like the added self-interest of Indian tech and telecoms firms in developing and refining Indus OS, the end result is software that is better suited to usage contexts of India such as having to accommodate several dialects and such.

UPDATE: The Indus OS blurb neatly explains how it differs from others:
Indus OS is addressing one of the developing world’s biggest challenges – to develop technology to cater to the economic, social and regional diversity. In our mission, we are using the smartphone as the medium to connect the digital world with the masses. We are the first to deeply customize a smartphone experience that meets the real needs of the emerging market’s regional language speaking citizens through innovation, simplification and localization.
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Globalization: Zidane Flogs Indian Real-Estate

♠ Posted by Emmanuel in , at 6/17/2016 11:20:00 AM
What does Zinedine Zidane have to do with selling kitschy Indian real-estate? Apparently nothing.
It is fairly common in booming countries of Asia for real-estate developers to embark on mega-projects. In our high inequality countries, you should be utterly unsurprised that most of these projects cater to wealthy segments, often hawking properties at exorbitant prices. And therein lies the rub: with so much development concentrated at the upper end of the market, there will inevitably be fewer takers. Such is the problem now faced by real-estate developers in India.

Now, using foreign sporting personalities to flog [to pitch or sell in Brit-speak] stuff abroad is not unusual. Witness the insufferable Cristiano Ronaldo selling a face massager on Japanese TV for a recent example. However, his coach (for now)--the legendary Zinedine Zidane of Real Madrid, recently crowned champions of Europe--is doing the same. That is, selling a somewhat iffy product in Indian luxury real-estate at a time when the inventory there is piling up:
Zinedine Zidane is renowned for his prowess on the football field. Now a Mumbai developer is counting on the retired French football star’s power off the pitch to revive flagging sales in the city’s luxury home market.

Kanakia Spaces Pvt has hired the former attacking midfielder to market a high-end residential project named Paris in Mumbai’s new business district in the northern part of the city called Bandra. Zidane has been signed on as the project’s wellness brand ambassador to design the development’s fitness and sports areas. The company did not disclose how much it’s paying for Zidane’s brand endorsement.

Kanakia, which is counting on the star power of Zizou, as 43-year-old Zidane was nicknamed during his career, features a four-story replica of the Eiffel Tower and a reproduction of the Louvre Pyramid at the Paris project. The builder has sold about 43 percent of the 464 apartments for sale at the development, where units range from 760 square feet to 1,300 square feet and cost between 37.6 million rupees ($559,000) and 64 million rupees, the company said.
It's a straightforward supply and demand problem, with the inventory of overpriced luxury homes unlikely to dissipate anytime soon as buyers have been cautious as the global economy shows signs of slowing down:
“These marketing gimmicks won’t help to sell these homes,” said Pankaj Kapoor, founder of Liases Foras Real Estate Ratings & Research Pvt. “Prices have escalated at every level and what’s needed to boost sales is a genuine price correction.”

Sales of homes costing more than 20 million rupees dropped 23 percent in the quarter ended March from the previous three-month period, according to data compiled by the property consultancy and advisory firm. The average home price in Mumbai is still near a record set in December 2014, as a limited supply of land and demand created by a growing urban population have led to “exorbitant price levels,” according to Kapoor.

As sellers have resisted dropping prices, Mumbai is grappling with record inventory. The city has 266 million square feet of unsold homes, Liases Foras said. It may take developers as many as five years to unload their inventory of luxury homes at current levels, the data show.
Actually, there is a segment of the Indian real-estate market that is growing: homes real people can actually afford:
Budget homes costing less than 2.5 million rupees is the only segment which is showing signs of demand picking up.
Selling things people can actually afford; what a radical idea.
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Apple vs India's 30% Local Content Requirement

♠ Posted by Emmanuel in , at 5/29/2016 05:09:00 PM
Apple and India don't mix--or rather Apple and protectionist retail policies.
India remains one of the last few large economies worldwide that remain avowedly protectionist in the retail sector. Even in the modern era, lawmakers have sought to appease mom-and-pop operators from the rigors of market competition. It's a small-time mentality that the government upholds with bureaucratic ferocity. "Multibrand" retailers, or large foreign retailers in particular carrying a wide range of branded products, have been subject to restrictions on entry, foreign ownership and local content requirements. Witness the earlier travails of Walmart. As a result, retail inefficiencies result in smaller selection and higher prices. not a good combination.

Now, the retail battle against all sorts of foreign devils has moved on, pitching the world's second-largest corporation against the world's second-most-populous country. With nearly nothing it currently sells being made in India--China yes, India no since it doesn't specialize in electronics assembly and manufacture--Apple is hard-pressed to meet the 30% local content requirement there:
US company's proposal to set up Apple Stores under the singlebrand policy has been approved without any relaxation in the sourcing conditions, two officials privy to the development said. Apple can set up single-brand retail stores in India but it will have to meet the 30% local content sourcing requirement, they said. "Apple's proposal is acceptable to us but we cannot make an exception for it and forego the sourcing requirement if it wants to set up its own stores here," a senior government official said.

Apple had applied for the relaxation under new foreign direct investment rules for companies bringing cuttingedge technology to India. The policy allows the sourcing condition to be waived for cutting-edge technology, a term that hasn't been clearly spelt out. The government has set up a panel to clear proposals seeking relaxation of this norm...

According to revised norms announced by the Department of Industrial Policy & Promotion in November 2015, companies that bring cutting-edge and state-of-the-art technology to India can open singlebrand outlets without meeting the local sourcing norm, subject to government approval.
In some respects India has moved forward; in retail it remains decidedly stone age--and that's not good news for modernizers like Apple.
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India vs US @ WTO on Solar Panels, Work Visas

♠ Posted by Emmanuel in ,,, at 3/09/2016 03:54:00 PM
You can have a national solar program...but the WTO says you should not discriminate against foreign solar panels.
With "friends" like the US and India, it seems there is no need for enemies--at least in the trade realm. A few years ago, the US complained that India was discriminating against foreign producers of solar panels by requiring that government-subsidized purchases meet a local content requirement under a national procurement program. [See case DS 456.] Late last year, the WTO dispute settlement mechanism ruled against India. Recently, an appeal by India on the matter was also rejected:
A three-member dispute settlement panel of the WTO, which was set up in 2013 after the US complained that India unduly favours local solar manufacturers, had ruled against India in August and the February 24 ruling is a reiteration by the panel after India went in appeal. India's Solar Mission offers a subsidy of up to Rs 1 crore per MW to solar developers sourcing components from local manufacturers. It also stipulates that 10% of the solar capacity target of 100,000 MW by 2022 should be built with domestically manufactured solar modules, which has led to a small part of the solar auctions being reserved for developers employing only domestic content.

India had suggested a compromise by which the domestic content requirement would not be imposed on private solar developers or made part of the auctions and would be restricted to public services such as the railways and defence. But even this failed to cut much ice with the US or the WTO.
Unhappy about this state of affairs, India has hit back at the US timing-wise with a complaint that the US was failing to meet its commitments concerning the temporary movement of natural persons to the US. That is, Indian services firms needing engineers and others to complete work Stateside have found it increasingly difficult to do so given (a) higher visa expenses and (b) fewer available visas. Indian firms being the largest users of such visas to America, recent cost increases are seen as violating Mode IV provisions:
In a statement, the WTO said that India has initiated a dispute proceeding against the US regarding measures imposing increased fees on certain applicants for L1 and H1B categories of non-immigrant temporary working visas into the US, as well as measures relating to numerical commitments for H1B visas.

"The government of India is of the view that these and comparable measures taken by the US are not in conformity with some of the provisions of GATS such as Articles II, V:4, XVI and XX and paragraph 3 and 4 of the GATS Annex on Movement of Natural Persons Supplying Services. These measures also appear to be inconsistent with Articles III:3 and IV:1 of the GATS," the WTO said.
What particular upsets India is that they had been lobbying the US not to change this visa policy, which fell upon deaf ears anyway:
The US government has doubled the fees for temporary work visas for skilled professionals like H1B and L1 visas to $4,000 and $4,500 respectively. India is the largest user of H1B and L1 visas -- taking 67.4 percent of the 161,369 H1B and 28.2 percent of the 71,513 L1 visas issued in FY14.

US President Barack Obama signed into law the Consolidated Appropriations Act 2016 on December 18, 2015, with the provisions applicable to companies that employ 50 or more persons in the US with more than 50 percent of them holding H1B or L1 non-immigrant status. This will remain effective till September 30, 2025.

Despite repeated requests from the Indian government, the US administration went ahead with its decision, which came into force on December 18, 2015. The US decision is expected to impact the Indian IT and ITES industry.



The complaint is viewed as "tit for tat" against the superpower, which has used the WTO as a forum to snub Indian government's plans to encourage its solar industry by offering subsidies to the manufacturers, as well as reduce its dependence on Indian imports, something encouraged as part of Prime Minister Narendra Modi's Make in India program.
If nothing else, it gives trade lawyers work :-)
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Xiaomi's Lei Jun & Overrating English Language Skills

♠ Posted by Emmanuel in ,, at 5/18/2015 01:30:00 AM
Xiaomi's Lei Jun: Zen and the art of smart phone launches in overseas markets.
One of the greatest conceits English-speaking Western nations have is that comprehension of the language is "developmental." In other words, if you can speak English, your chances of successfully integrating into global markets are increased since it is the language of business. Despite being a native English speaker--the Philippines has two official languages, English and Filipino--I have always doubted this idea. If English speaking gave countries such a leg up, why is it that the Chinese, Japanese, Koreans who have been the most successful in the region instead of, say, the Filipinos or the Indians? Fluency in English  may play a part in the development story, but it is neither a necessary or sufficient condition for development, obviously.

This idea was brought to mind by Xiaomi founder Lei Jun recently unveiling his company's new smart phone range in India--an obviously large market which considerable potential. This necessitated speaking in English, and to put it mildly, let's say his language skills were not quite as sharp as they could have been. Jokes were made on the Internet at his expense as he kept repeating "Are you OK?" when he meant "Are we doing alright?":
When the charismatic CEO of Chinese smartphone maker Xiaomi took the stage in New Delhi to launch its first product for the international market, he stumbled over his few set lines in English. “Hello, how are you?” Lei Jun asked the Indian audience last Thursday, his first time using English in a product launch. “India Mi fans, I’m very happy to be in China,” he said, then corrected himself: “to be in India.”

The crowd of Indian Xiaomi fans laughed, but ultimately roared its welcome. Next, Mr. Lei announced a free Xiaomi smart wristband for each audience member. He sought to gauge the enthusiasm by shouting, with escalating volume, “Are you OK? Are you OK?” That “Are you OK?” has turned into an overnight meme on Chinese social media. It’s also set off a discussion in China about the hurdles Chinese executives face in the English-speaking global marketplace.
While some grammar snobs may have cringed, to me it seems utterly immaterial that the head of a Chinese firm trying to sell me cell phones has trouble expressing himself in English. Publicly speaking before a foreign audience is hard enough, but doing so in a language you don't use everyday is more so. Really, who cares if Lei Jun is not a master thespian in his English delivery? He seems enthusiastic enough, and the Indian crowd seemed to appreciate the effort he made in communicating with them. Most importantly in this case, the foreign language skills of Lei Jun have no bearing whatsoever on the functionality of Xiaomi phones. And, ultimately, I believe that's what consumers in India and elsewhere will have foremost in mind while evaluating smart phone purchases.

Following this line of reasoning, I would not even be in the least concerned if the company's head spoke no English whatsoever. Just as Apple's millions of Chinese customers don't know or care if Tim Cook speaks conversational Mandarin, I do not see why Xiaomi's overseas customers would care if Lei Jun speaks conversational English. There is a certain cultural expectation that makes the latter seem more "important" or "natural" when in fact Mandarin, not English, is the world's most widely-spoken language.

Xiaomi phones run mostly on Google Android, so there are no "localization" issues for models targeted at English-speaking markets. There are more important things to consider. Indeed, one could argue that a reason why many developing countries which have many English speakers have not done as well as they could is because they bought all this guff about English  comprehension being "developmental." As with Lei Jun, perhaps the reality is different: non-native English speakers succeed because they try harder to make up for a perceived lack of English language skills.

To me, though, speaking "straight" English ranks rather low on developmental priorities. Again, see the pecking order here in Asia. 
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Air India, From Losing Money to Pilot Fisticuffs

♠ Posted by Emmanuel in , at 4/14/2015 01:30:00 AM
Captain said knock you out: aboard not-so-amazing Air India.
Oh dear, these national carriers keep coming to our attention with their unprofitability and headline-grabbing incidents. After Malaysia Airlines and Lufthansa, we now have India's flag-bearer, Air India. Like the two others mentioned earlier, Air India is saddled with "legacy" costs being the flag carrier. Moreover, militant unions will oppose any sort of rationalization or, indeed, privatization. Still, plans were mooted late last year to do just that in the face of expected opposition from vested interests despite the money-losing airline hemorrhaging cash that the government needs to keep replenishing:
The government will form a committee within the next fortnight comprising bankers, aviation experts and technocrats to help turn around and look at privatizing money-losing national airline Air India, two government officials aware of the matter said on Thursday...

It’s the latest effort by the central government to turn around Air India, which made a loss estimated at Rs.5,389 crore in the year ended 31 March and has accumulated losses of $5 billion in addition to total debt of Rs.40,000 crore. The government, in 2012, promised an equity infusion of Rs.30,000 crore till 2021 to bail out the airline. Of this, it has already infused nearly 18,000 crore.
Air India’s woes date back to a failed merger with Indian Airlines, another state-owned airline (the latter flew domestic routes and a few international ones in the neighbourhood; the old Air India flew only international routes) in 2007 and laxity on the part of India’s aviation ministry that effectively allowed international airlines to expand their presence in India without any reciprocal benefit for Air India. “Air India is bleeding the country. Every year we have to pump in Rs.6000 crore,” one of the two government officials cited above said on condition of anonymity, adding that the mandate of the committee would be to “look at making the airline better—cut costs and increase revenues, before privatization”.
Fortunately for Air India, its headline-grabbing event is not a spectacular air crash or a flight disappearance. Then again, the event hardly paints a flattering portrait of the carrier as pilots on a flight had a fistfight [!] before taking off:
Struggling state-run carrier Air India has grounded two of its pilots after a fight erupted between the pair just before takeoff, reports said Monday. The co-pilot allegedly assaulted the captain inside the cockpit as they were preparing the passenger plane for takeoff from the Indian tourist city of Jaipur to New Delhi on Sunday night, the Hindustan Times newspaper said.

The co-pilot was irritated by his superior's request to write down critical information for the flight, such as the number of passengers on board, take off weight and fuel uptake, the Times Of India reported." The co-pilot took offence at this and reportedly beat up the captain," the newspaper said, quoting unnamed sources...

Air India -- which has not reported an annual profit since 2007 -- has been hit by a string of technical glitches and other embarrassing incidents, including staff turning up late for flights.
The unprofessionalism is beyond belief. It's been a long series of hijinks that give Air India a bad image, and the latest incident certainly doesn't help. Given keep competition on international routes from Middle East-based carriers having the advantage of straddling Euroep and Asia, comic episodes aren't bound to inspire consumer confidence.
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2017, the Year Indian Growth (Finally?) Beats China's

♠ Posted by Emmanuel in , at 1/29/2015 01:30:00 AM

As per the story of the and the hare, the World Bank is predicting something that's been a long time coming: With China slowing from its years of (reported) double-digit growth year in and year out to focus more on growth quality rather than quantity on one hand and India (hopefully) speeding up with a reformist, pro-market leadership under Nejendra Modi on the other, the World Bank is predicting that 2017 is the year Indian's growth rate moves ahead of China's. See the 2015 Global Economic Prospects from which the chart above is taken from. Onto the story:
This is a short-term forecast based on some very specific circumstances. India, for example, now has a credible central banker [Raghuram Rajan] doing sensible things like tackling inflation. The country's popular new government is finally building infrastructure and cutting the red tape that held the economy back for so many years. If India keeps it up, the World Bank expects its economy to grow 7 percent in 2017, up from 5.5 percent in 2014. Meanwhile, the forecast calls for growth in China to slow as its government reduces spending, tightens credit, and unwinds its housing bubble. The bank expects China's growth to fall from 7.4 percent in 2o14 to a modest 6.9 percent in 2017.

There are reasons to believe that the slowdown isn't a temporary blip and that, over the long term, India's economy will ultimately overtake China's. At the moment, both countries are growing so quickly because they're catching up to richer economies. They are shaking off the effects of market isolation, under-educated populations, limited access to technology, poor infrastructure, and regulations that stifled business development. Eventually, when these economies catch up, adding machines won't increase productivity. It's impossible to predict exactly how long this will take.
Then there are the supposed advantages of superior demographics and openness that should see to it that India pulls ahead:
Then growth will depend on demographics and each country's ability to innovate. India has a better outlook on both fronts. Its population is growing; China's is shrinking. It's harder to predict which country will be better at innovation. Signs point to India because democracies, with their secure property rights and general stability, tend to be better at fostering successful entrepreneurship. China's authoritarian capitalism is a new model, and it's not clear whether it can produce the sort of environment in which people take chances, form businesses, and invent things.

India still faces many hurdles. It needs to build lots of infrastructure, improve access to quality education, and remove the bureaucracy that has existed for years under many vested interests. This is an area in which China's more authoritarian system has an edge. Its leaders have greater liberty to make hard choices and smooth out rough patches. China's may prove to be a better model for catch-up growth. But managing a thriving, mature economy requires entrepreneurship and innovation. So far, India has the edge. 
I would also like to point out that the environment may be even worse in India than it is in China, but let's give the new Indian leadership the benefit of the doubt. Predictions are a terribly tricky business, and it is certainly quite possible that we will look back at this post two years from now thinking it rather foolish.

Remember also that we all had high hopes for Manmohan Singh when he became prime minister given his track record promoting economic reform as finance minister, but look how that turned out as he was unable to confront entrenched Congress Party interests. As always, we wish our Indian colleagues the best--with a guarded optimism. 
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Bleeding Forex Reserves: Russia & the 'Fragile Five'

♠ Posted by Emmanuel in ,,,,, at 1/19/2015 01:30:00 AM
The 90s "connected" developing countries through contagion . How about now?
Whether through coincidence or not, this article on developing countries quickly losing foreign exchange reserves from the Nikkei Asian Review--fast becoming my Asian periodical of choice after the demise of the late, lamented Far Eastern Economic Review--comes from an issue whose cover story is..."Living With Terror"[!] Having been a onetime foreign exchange trader during the height of the Asian financial crisis in a crisis-affected nation, I can sympathize with the feeling of being subject to fear-inspiring events I'd much rather avoid.

But the day of reckoning has come for these nations--again for a handful like Brazil, Indonesia, Russia and Thailand that were particularly hard-hit by the events near the turn of the millennium. There's an unmistakeable sense of deja vu for developing countries. Like in the aftermath of the Asian financial crisis, commodity exporters are taking it on the chin as the world economy slows down while the US seemingly does better. The combination of a developing world slowdown and dollar strength was bad then and is ominous now. A surefire sign of distress is of the aforementioned developing countries drawing down foreign exchange reserves to defend their currencies from further depreciation (the opposite of the Swiss situation in which excessive strength is the problem):
The foreign currency reserves of Brazil, Russia and four other big emerging countries fell 6% in the second half of 2014 from the preceding six months. The fall came as the countries' monetary authorities attempted to defend their home currencies in the foreign exchange market.

The decrease was the second largest since the 17% plunge in the latter half of 2008, when the global financial crisis led to emerging nations' currencies being dumped. The values of those currencies have been spiraling downward due to plummeting crude oil prices and increased dollar buying now that the U.S. Federal Reserve appears poised to raise interest rates.
Yet while the drawdowns on foreign exchange reserves have been substantial, so are the reserves these countries accumulated during the years after the Asian financial crisis. They feared a rehash during troubled times, and it appears the rainy days they saved for are upon us:
The total foreign reserves of Russia and the so-called fragile five -- Brazil, India, Indonesia, South Africa and Turkey -- stood at $1.36 trillion as of the end of December, down $92.8 billion in six months. The decline in the latter half of 2008 was $218.1 billion.

Russia suffered the largest decline, with a decrease of $89.7 billion, or 18%. Turkey recorded a 5% decline; Brazil also logged a slight drop. The Turkish lira and the Russian ruble plunged to record lows against the dollar in December, while the Brazilian real hit its lowest point in roughly nine years. The South African rand dropped to a roughly six-year low, the Indonesian rupiah to a 16-year low and the Indian rupee to a one-year low.

It is unlikely, however, that these six countries will run out of foreign reserves anytime soon; they have expanded these reserves by roughly 200% in the past decade. The market largely expects these countries will not spark a currency crisis or go into default -- at least not for the time being. Thailand, Indonesia, South Korea and even Russia experienced currency and foreign reserve crises in the 1990s. Monetary authorities have apparently learned a lesson from that era.
It's time to hang tough, then. Judging from their leadership, I'm relatively more sanguine about the prospects of India and Indonesia, but you never know how these things pan out.
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Can Modi Break Indian Coal Miners' Balls?

♠ Posted by Emmanuel in , at 12/18/2014 01:30:00 AM
It's Thatcher time for N. Modi.
(Cue the AC/DC before proceeding.) The make-or-break moment for new Indian Prime Minister Narendra Modi is at hand: Part of the process ushering in modern Britain--"neoliberalization" its critics would label it as a term of abuse--is the marginalization of organized labor. Similar things happened in the United States that set the shape of things to come as organized labor has been ground small all over the world. However, the defining moment remains Britain's showdown three decades ago. It was the Iron Lady Margaret Thatcher versus Arthur Scargill, leader of the coal miners who obviously did not want any "downsizing", "rightsizing", "rationalization" or any other modern euphemisms for closing down the money-losing coal industry. Revisit the UK circa 1984:
The coal industry, nationalized in 1947, was losing money at a horrendous rate; the government subsidy had risen to $1.3 billion a year. The industry desperately required rationalization; mines had to be closed and the workforce shrunk if there was to be any hope of revival. Scargill and his militants were unwilling to compromise. Mine pits could not be closed they said, no matter how large the losses. For them, it was not a battle over modernization but a class war.
We all remember how things turned out: the coal miners went on strike hoping to break Thatcher, but the prevailing political-economic situation had moved on:
The strike began in March 1984. It was angry and sometimes violent -- thousands were arrested during its course. Not only miners who wanted to continue working but also their families were subject to constant intimidation. Police employed mounted cavalry charges to break up mass demonstrations...

Despite the intense pressure and the disruption, the National Coal Board and the government held firm. It took a year, but the strike finally petered out, and in stark contrast to 1974, this time the miners' union capitulated. The government had won. The outcome meant a new era in the basic relationship of labor, management, and government -- in short, in how Britain fundamentally worked. The decades of labor protectionism -- which had cost the British economy heavily in terms of inflexibility, red ink, and lost economic growth -- were over.
Now, consider modern-day India. Labor militancy has long been one of the stumbling blocks to modernizing the country. Resembling Thatcher-era Britain, coal is once again at the, well, coalface of this dispute. Given recurrent power outages in India, Modi seeks to privatize large swathes of the industry to make production more efficient. As you would imagine, the unionists are up in arms:
Coal-fired power plants generate 60 percent of India’s electricity, except for when shortages lead to repeated blackouts. Outages shaved $68 billion or almost 4 percent off annual gross domestic product in the year ended March 2013, says the Federation of Indian Chambers of Commerce and Industry. Last week, Modi made a move toward ending shortages, winning partial passage of a bill that will allow him to end a 40-year government coal monopoly. The plan is to bring in more efficient private companies, which the coal unions say will mean job losses and they’ll fight him.

“Let them open up the sector, there will be strikes all across and large-scale violence,” said S.Q. Zama, secretary general at the Indian National Mineworkers Federation, a unit of the opposition’s Congress party-backed Indian National Trade Union Congress. The Indian National Trade Union Congress said all major unions would meet Dec. 17 to decide their response to Modi’s plan.
As usual, unionists bear the brunt of the blame:
Economist Surendra Laxminarayan Rao says the government needs to get out of the coal business. “One of the biggest policy blunders of India has been the government taking control of the coal industry,” said Rao at The Energy and Resources Institute in New Delhi. “The coal shortage is not just because of Coal India’s incompetence and its primitive technology. The unions are majorly responsible,” he said. “There’s no choice for Modi except to overcome them. The unions, fearing private companies will cut wages and benefits as well as jobs, said they have been seeking talks with minister Goyal for the past two months.
The essential difference between Thatcher and Modi is that the former wanted to close down state-owned coal plants while the latter want to privatize them. That is, Thatcher obliterated coal as a power source, whereas Modi wants to expand its output. That said, the means to achieving their different goals is identical--the coal unions must be brought to heel.

Can Modi break the coal miners' balls? That is the question.

UPDATE: Coal miners' unions are making plans to strike on January 6.
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You're So 2001: Fall of the BRICs?

♠ Posted by Emmanuel in ,,, at 12/04/2014 01:30:00 AM
It's yesterday once more...or is it?
It seems like only yesterday that the BRICs were all the rage: Despite the contrived nature of the grouping by Goldman Sachs' Jim O'Neill, the likes of Brazil, Russia, India and China were set to take the economic fight to the established developed countries for one reason or another. What's more, there was a synergy to it all since Brazil and Russia had lots of the commodities the likes fast-growing India and China needed.

However, as the global financial crisis hit and ever after, we have learned that not all is hunky-dory in BRICs-land. As the chart above shows, the developed economies that were once disregarded as old-hat are actually performing better now than they were before, whereas the opposite holds true for the BRICs. To be sure, there is no single reason for the latter's slowdown: Brazil has been caught in the slide of commodity prices as global growth decelerates. Russia has similarly been affected on top of being ostracized as an international pariah due to its (mis)adventures in Ukraine. India remains mired in red tape that ha slowed its liberalization (although the current Modi administration is looking to fix that longstanding problem). And, of course, China has been affected by slowdowns in consumer markets it exports to.

Certainly, the headwinds the BRICs face are strong. Worse yet, long-term challenges such as demographics are starting to hurt:
Interest rates are likely to rise gradually from their current ultra low levels in the rich countries - particularly in the US and the UK. That will affect global rates and make investment more expensive to finance in emerging economies. Many also have to contend with ageing populations and slower growth in the number of people of working age. For some that demographic advantage they had previously is now fading. Russia and China are among that group. That was factored into the Goldman Sachs projections. 
Jim O'Neill says that more recently their policies in this area have been "surprisingly good". China is easing its one child policy and, he says, "Russia has had some success in raising life expectancy with much smarter policies about alcohol consumption." 
Going back to Jim O'Neill, is he much less sanguine on the BRICs now than he was over a decade ago? The overall point is that these countries may be undergoing a process of adjustment which entails a slowdown in absolute growth figures rather than a secular stagnation that will drag on for a long time like in the bad old days:
While all the Brics have slowed this decade, the weakest performers now are Brazil and Russia. Their average growth rates have been below the Asian Brics all along and this year they slowed even further. For 2014 as a whole, the IMF has projected some growth for those two but very little - 0.3% for Brazil and 0.2% for Russia. Both those figures incidentally are a good deal weaker than what has been predicted this year even for the struggling eurozone, which has been described as haunted by the "spectre of stagnation" by the Bank of England governor Mark Carney.  
As for Russia and Brazil, Jim O'Neill is not yet ready to wipe these two nations out of his Bricspicture, but the last few years have certainly been a disappointment. So it is not time to write off the Brics. They are showing some cracks for sure, and, to change the metaphor, China in particular is embarking on a high-wire journey as it seeks a different and perhaps ultimately more sustainable form of economic development. The Brics and how they perform matter for the rest of the world, more so than they did at the turn of the century, which is after all the whole point of the original idea.
In other words, the BRICs aren't necessarily out of it yet.
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Modi's India: Japan or China as Business Muse

♠ Posted by Emmanuel in ,,, at 8/28/2014 01:30:00 AM

Japanese, Chinese want the "Gujarat Model" replicated across India.

The selection of Najendra Modi as India's prime minister is taken as a sign that the rest of the country wishes to follow in the footsteps of Gujarat state that he used to govern--a liberalizing, open-for-business attitude that has seen it attract a considerable amount of foreign investment. The Japanese, in particular, seems excited. Having invested a lot in Gujarat, they look forward to similar liberalization and FDI-friendly measures being put into place nationwide:
Japanese executives at the meeting were also ebullient, praising the business sense and management capabilities of the Gujarat government, which Modi presided over for 13 years. "We don't have a very cordial relationship with China," Japanese attorney Tatsuhiro Kubo said at the Ahmedabad gathering, explaining why Japanese industry likes Gujarat, "so bonding with India is only natural."

More than a year ago, Jetro [Japan Export Trade Organization--Japan's trade promotion body] took the rare step of establishing a regional office in Ahmedabad . Suzuki Motor and Hitachi are among the Japanese companies that have invested in Gujarat. "Nearly 50 Japanese companies are in the process of setting up plants in Gujarat," said Mukesh Patel, president of the Indo-Japan Friendship Association.

In a meeting with Anandiben Patel, who replaced Modi as Gujarat's chief minister, Takeshi Yagi, Japan's ambassador to India, on June 7 expressed support for an exclusive Japanese industrial cluster in Gujarat, saying the number of Japanese companies operating in the state will soon rise from 60 to more than 100. Earlier this month, that industrial cluster began to take shape near Suzuki's existing plant in Gujarat.

Essentially, the elections in May gave Indian voters their first opportunity to say "yea" or "nay" to an economic model. Modi's party, the Bharatiya Janata Party, described what Modi accomplished in Gujarat as an "economic miracle," one that Modi promised to repeat across the country if he were to ascend to the prime minister's post.
Ironically given the Japanese lawyer's comments on their investment partly being based on India simply not being China, the model which Gujarat resembles is the so-called "Shenzen model" according to admiring Chinese (see this China Daily op-ed). Speaking of whom, the Chinese are also looking to invest in India despite historical grievances over border disputes. I guess commerce cannot be ignored:
While there is talk that Japanese investors saw which way the winds were about to blow, Chinese analysts also want to be seen as clairvoyant; they have been saying Modi's Gujarat model was built around China's Shenzhen model of development.

A direct comparision with Shenzhen, or even Guangdong, is somewhat outlandish, but there are a few similarities. During his four visits to China, Modi made inquiries into the country's system of special economic zones, which he considered important tools for rapid industrial development. Now China -- which might be looking for an edge in India -- has been pushing for special economic zones in the country. The Modi government recently gave an "in principal" approval to the request.

The coming months -- as the Modi government deals closely with investors from Japan, China and other countries -- will give a clear picture of the model Modi is working with.
As Jagdish Bhagwati put it, Indians and other Asians seemingly agree with Modi that growth must be created before it can be redistributed.
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World's Governments vs Uber: In South Korea, India

♠ Posted by Emmanuel in ,, at 8/26/2014 01:30:00 AM
To Gangnam, man, on the double! (wherever that is.)
Libertarians for the most part tout the ride-sharing service Uber as a way to avoid taxis whose need to be government-regulated allows them to charge exorbitant fares. With Uber, anyone who can afford a smartphone and a data plan can use his or her vehicle as a privateer taxicab. Break the monopoly! Or that's how Uber works in theory. In practice, local governments the world over have taken legal action against the app's developers for skirting regulations on who can offer tax services in their jurisdictions. I do not exaggerate when I say it's Uber against the world's officialdom.

Having come to Asia, Uber is under assault after complaints from taxicab services wary of being marginalized by the app. While Uber has not yet established as large a presence as it has in some Western nations, it's best to beat it up before it establishes a foothold. In tech-savvy Seoul--supposedly the most wired city in the world--the local government seeks a ban on Uber. It also plans to develop an official taxi app to counter it by the end of the year:
The Seoul city government said Monday it would seek a ban on a car-hailing smartphone app from Uber Technologies Inc., joining a global battle by municipalities and traditional taxi services against the service.

The local authority said in a statement that Uber is illegal under South Korean law, which forbids fee-paying transport services using private or rented motor vehicles unregistered with the authorities. The city added that it will launch in December an app that will provide similar features to Uber for official taxis, such as geo-location data on cabs nearby, information about them and their drivers, as well as ratings.
In India, Uber has come up against an even more formidable foe: the central bank. Because Uber's payments are handled by an offshore entity, the Reserve Bank of India is using a stipulation that payments-handling mechanisms must be locally based to effectively render Uber illegal:
Credit card rules, another road block for [Uber] which has been described as illegal by city authorities. And what's India done to put the brakes on? Well, the one stepping on the brakes is the RBI [Reserve Bank of India], the central bank.

It's closed a loophole. All actions made on India-issued credit cards have to go through a two-step procedure. For Uber users that means one additional step to the payment system and if they want to comply with the new rules, it would have to change its app or adopt a different model totally.

The actions are free [of obtaining a taxi license] with pretty much with Indian rivals have to do. This is what local taxi companies have been complaining about. [All Uber] payments are collected and transferred to a Dutch bank and the procedure goes against India's [foreign exchange control] regulations and in a way, this is what the RBI is trying to address. 
To be more specific, the RBI regulations in question concern limiting capital flight emanating from foreign exchange transactions:
 "It has come to our notice that there are instances of card not present transactions being effected without the mandated additional authentication validation even where the under lying transactions are essentially taking place between two residents in India," RBI said in its circular issued on Friday. A transaction is considered local where both the purchaser and service provider are in India.

"It is also observed that these entities are evading the mandate of additional authentication by following business models which are resulting in foreign exchange outflow. Such camouflaging and flouting of extant instructions on card security, which has been made possible by merchant transactions being acquired by banks located overseas resulting in an outflow of foreign exchange in the settlement of these transactions, is not acceptable as this is in violation of the directives issued under the Payment and Settlement Systems Act 2007 besides the requirements under the Foreign Exchange Management Act, 1999," the RBI said. 
Also see Quartz discussing the politics behind this move. Talk about having enemies in high places. Unlike Uber and its fans, I am hardly convinced that they are on the right side of technological history. Are taxis the buggy whips of the early 21st century
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Unlike China: India's Civil Approach to Territorial Disputes

♠ Posted by Emmanuel in ,, at 8/13/2014 01:30:00 AM
Civil sorts prefer going this route.
This Southeast Asian is rather tired of intrusions by would-be imperialists into our waters: China and the United States are similarly bullying presences, with the former coming more and more into the focus as the latter embarks on the road to nowhere fast. In the study of international relations, there is the so-called "power transition theory" which is frequently invoked to explain how Southeast Asia is being caught in the crossfire between these rival powers:
One by-product of differential growth is the high potential for conflict when a challenger [China] and a preeminent or dominant nation [the United States] reaches the stage of relative equivalence of power, and specifically when the challenger is dissatisfied with the status quo. Understanding the interaction of the structural and dynamic components of power transition theory provides a probabilistic tool by which to measure these changes, and to forecast likely events in future rounds of change.
The trouble with China with regard to the so-called South China Sea is that, having asserted time and again to its citizens that it is an inseparable part of China, moves to moderate its position and accommodate its smaller neighbors the Philippines and Vietnam will not likely happen. It cannot lose face. Nevermind that China does not respect international law--the law of the sea--but they've learned from the United States that might makes right since the US isn't even a signatory to this law. Imagine, however, an alternate parallel universe where China did not adapt inflexibly totalitarian positions on territorial questions. It may, in this case, be more like India. Recently, India coming into compliance with a ruling against it at the International Tribunal on the Law of the Sea (ITLOS) meant it giving in to Bangladesh--hardly a scary threat to it:
If good fences make good neighbors, that may explain why much of Asia’s recent territorial tension has centered on the ocean. India took a step toward tighter ties with Bangladesh this month in surrendering its four-decade claim to a swathe of the Bay of Bengal about the size of Lake Ontario, opting to heed a United Nations-backed ruling. Bangladesh praised its neighbor’s move, with the head of state-run oil monopoly Petrobangla saying the newfound clarity will unlock drilling opportunities. 
Contrast India's example to our rather less accommodating neighbor:
The decision provides a contrast with China, which declines to acknowledge any UN jurisdiction in its dispute with the Philippines over maritime claims. The difference in approach shows why tensions are rising in the South China Sea as companies ramp up oil and gas investment in the Bay of Bengal. “This is a showcase judgment of how countries can reach an amicable agreement,” said S. Chandrasekharan, New Delhi-based director of the South Asia Analysis Group, referring to India and Bangladesh. “The South China Sea is a glaring example of how one intransigent country can hold up everything.” 
I love that dig aimed at China. To be sure, China added exceptions to its ratification of the law of the sea precisely to avoid legal entanglements with the Philippines and Vietnam over the South China Sea. That said, its neo-imperialist intransigence does nothing for its soft power. To insist on a claim so expansive means that few could call it legitimate with a straight face given that historic grounds are not considered valid by the law of the sea. Meanwhile, here is another article on the ruling. The court's site has the particulars on the decision.

Let India show China the way.
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Bhagwati: PRC's Corruption 'Developmental', India's Isn't

♠ Posted by Emmanuel in , at 7/21/2014 01:30:00 AM
Corruption is one of the most studied phenomena given its ubiquity in developing countries. If corruption did not occur on a significant scale in these countries, then they would probably be classified as developed. That said, there are many debates about corruption. At one extreme, there is a "zero tolerance" approach that suggests all forms of using public office for private gain are unwelcome and should be discouraged. On the other hand, others would say that there are different forms of corruption--some of which are potentially beneficial such as "speed money" which hastens the processing of documentation in slow-moving and unwieldy bureaucracies.

It is a perhaps unfortunate sign of its developmental status that India features large as a setting for debates on corruption. In a recent "Lunch with the FT" feature, economist Jagdish Bhagwati explains how Chinese-style corruption is preferable to Indian-style corruption. In effect, the former is efficiency-promoting whereas the latter is not":
I ask [Bhagwati] if he thinks the country can get back on track after several mediocre years. Once there was an idea, now mostly forgotten, that the “tortoise” India could eventually overtake the “hare” – China. “That’s an exaggeration, I think,” [Bhagwati] says. A crucial difference between the two countries is the type of corruption they have. India’s is classic “rent-seeking”, where people jostle to grab a cut of existing wealth. “The Chinese have what I call profit-sharing corruption”: the Communist party puts a straw into the milkshake so “they have an interest in having the milkshake grow larger”.
You can certainly have a debate about whether "developmental corruption" is an oxymoron or otherwise. Those who espouse a "zero tolerance" approach--typically Americans and their acolytes at development banks and other international organizations--would agree. However, a more pragmatic view looks at how corruption relates to how conflicting interests are resolved. If corruption does not engender additional economic activity in a zero-sum sort of setting, then it is not beneficial in the sense most understand it. This is the Indian scenario according to Bhagwati: little growth and much fighting over what resources already exist. However, there is a possibility--admittedly rarer--in which corruption occurs after economic growth has been generated in the absence of significant spoils to quarrel over beforehand. This is the Chinese scenario.


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China, India, US & Pol Eco of Pollution Statistics

♠ Posted by Emmanuel in ,, at 5/14/2014 12:30:00 AM
We've been conditioned to believe that Chinese cities are the world's most polluted. After all, what would you expect from an authoritarian regime that brooks no dissent--especially about how damaged the environment is? With China becoming the world's factory--it seems every other consumer good is made there nowadays--this expectation is further reinforced. We all know who the environment's bad guys are...or do we, really?

Well surprise, surprise: actually, the country with the dubious distinction of having the most polluted cities in the world in terms of air quality is India, not China. Yes, precisely--the world's largest democracy that supposedly focuses on "clean" services like business process outsourcing is numero uno globally. The World Health Organization stats speak for themselves after I chart the concentration of particulate matter 2.5 micrometers or smaller in the air of these cities (PM2.5) that are particularly dangerous since they can penetrate deeply into our lungs. More information from the 2014 report can be found here. The top 15 are:
As per the country's travel campaign, it's incredible India although not in the manner intended. There's not even a contest going by this measure since Beijing, China ranks 77th worldwide among WHO monitoring stations (a PM2.5 of 56). As you can see, it's almost a lockout for the Indian subcontinent save for Qatar and Iran. Yes, Beijing PM2.5 peaks at unbelievably high levels with some regularity, but on average, particulates in these cities on the Indian subcontinent are much more plentiful. Statistically speaking, fixating on Chinese pollution by mentioning Beijing's spikes in PM2.5 is unwarranted. True, China is plenty polluted in many other ways--water, arable land and so forth--but on the measure it is most commonly criticized on, there are others doing much worse.

What, then, explains popular beliefs that China is the world's most polluted country? There is likely a political economy of statistics at play. The United States--a large democracy and service-oriented economy just like India--would of course prefer that a communist and authoritarian system be blamed for intolerably high pollution. CCP authorities hide how bad the situation is, etc. Hence the American Embassy in Beijing providing its own air quality stats to "embarrass" Chinese authorities over their environmental destruction:
Despite Beijing’s widespread reputation of having some of the most polluted air of any major city in the world, an examination of daily pollution figures collected from both cities suggests that New Delhi’s air is more laden with dangerous small particles of pollution, more often, than Beijing’s. Lately, a very bad air day in Beijing is about an average one in New Delhi...

The United States Embassy in Beijing posts on Twitter the readings of its air monitor, helping to spur awareness of the problem. The readings have more than 35,000 followers. The United States does not release similar readings from its New Delhi Embassy, saying the Indian government releases its own figures [my emphasis].
Aside from the questionable assertion that the Chinese government does not collect its own pollution figures, that Indian authorities do is also a convenient excuse:
“It’s always puzzled me that the focus is always on China and not India,” said Dr. Angel Hsu, director of the environmental performance measurement program at the Yale Center for Environmental Law and Policy. “China has realized that it can’t hide behind its usual opacity, whereas India gets no pressure to release better data. So there simply isn’t good public data on India like there is for China.”
Putting 2 and 2 together, the picture we arrive at is that American scaremongering about Beijing's air quality is undoubtedly responsible for part of this misplaced focus. In order to bash an ideological rival, it harps on pollution in a city whose pollution isn't nearly as bad as that of others--like chummy India whom it shares nuclear technology with. Petty American political points scoring, however, distracts focus from where the real problems lie. What to do with air pollution on the Indian subcontinent is a particularly urgent one for serious-minded people to tackle. If you are genuinely concerned about the environment, blindly listening to frivolous Americans will lead you astray. I won't even go into who exactly buys all those China-made products.

The political economy of pollution statistics it is.
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Screw Asian Dev't Bank: PRC's Asian Infra Invsmt Bank

♠ Posted by Emmanuel in ,,,, at 5/13/2014 02:00:00 AM
The PRC looks to storm ADB strongholds.
What's a country to do with (nearly) $4 trillion in FX reserves? To paraphrase Captain Kirk, China has boldly gone where no other country has gone before in accumulating them since Japan at full pomp "only" had slightly over $1 trillion; Japan now has about $1.3 trillion. Obviously, buying friends and subsidizing people is on the agenda--witness China in Africa--but this approach has its drawbacks. First, precisely because they are viewed as PRC-only endeavors, others are suspicious of its motives. Second, there is limited interaction with international institutions China seeks to be more influential with in going it alone.

Hence, China's recently mooted plans to set up an Asian Infrastructure Investment Bank (AIIB) to address both these points. The PRC has made limited inroads at the region's multilateral lending institution, the Asian Development Bank (ADB).  After all, the ADB cast of characters aren't Japan's natural allies: the largest shareholders in the ADB are Japan and the United States. Meanwhile, it is headquartered in the Philippines, the nation that has taken China to  court over its, how should I put this, expansive territorial claims over warnings not to "internationalize" the dispute. So if you can't join 'em, beat 'em by setting up your own regional lender. As for the present ADB ownership structure:
As of 31 December 2013, ADB’s five largest shareholders are Japan (with 15.7% of total shares), the United States (US) (15.6%), People’s Republic of China (6.5%), India (6.4%), and Australia (5.8%). ADB members who are also members of OECD hold 64.6% of total subscribed capital and 58.5% of total voting power.
This Bloomberg article makes much of China having territorial disputes with India, but then again, it has them with a lot of folks--add Brunei, Indonesia, Japan, Malaysia, the Philippines "Taipei," Vietnam and so forth. To ensure this bank is not viewed as someone's pet project--it is, but similar criticisms can be leveled against the ADB--the supposed plan is for China to provide half the $50B over a period of five years with other Asian nations contributing the rest:
The planned bank was first announced by Chinese President Xi Jinping and Premier Li Keqiang during visits to Southeast Asia last October as part of efforts by China to boost its regional clout. The planned bank would have start-up capital of US$50 billion, half of which will be contributed by China and the rest by other Asian countries. China estimates fund contributions would hit $50 billion billion within 5-7 years, and the bank would then be ready to become a channel to fund infrastructure projects with a low [interest] rate.
The Chinese foreign minister proposing the AIIB is none other than the former chairman of the China Investment Corporation (CIC) sovereign wealth fund, Lou Jiwei. CIC started with a cool $200B, but its capitalization has increased to $500B. So, who's to say that AIIB is not going to increase in size over time if it fulfills its role in serving Chinese interests?
When he was appointed CIC chairman, a minister-level post, he was put in charge of investing US$200 billion. The fund is now valued at US$500 billion thanks to additional capital injections from the government and heavy dividend payouts by the biggest state-owned banks, and has recorded an annualised 5.03 per cent return since its inception.

Lou, 62, kept a low profile while CIC chairman, but the sovereign wealth fund became involved in several controversies due to unsuccessful investments and the blocking of some attempts to acquire foreign assets.
Just as China proposes the Regional Comprehensive Economic Partnership (RCEP) to counterbalance the TPP, so does it put forward the AIIB idea to set up an alternate, China-centric group of development and trade institutions. What is its unique selling proposition? Simple: aside from offering substantial fresh loanable funds, it will impose few to no conditionalities and will certainly not insist on Western-style "good governance" so beloved by ADB folks:
The AIIB will differ from the ADB by focusing on building infrastructure rather than prioritizing poverty reduction, Lou said at the Boao Forum in April. The bank is unlikely to attach political conditions to its loans due to Beijing’s policy of not interfering in other countries’ internal affairs, according to Zhao Jianglin, a researcher with the National Institute of International Strategy at the Chinese Academy of Social Sciences in Beijing.
Territorial disputes aside, the Indonesians are already eyeing it...
China’s recent initiative to establish the Asian Infrastructure Investment Bank (AIIB) is a potential game-changer. Indonesia has welcomed this initiative and stated its intention to participate in the new development bank. The AIIB can be expected to accelerate investment in economic infrastructure to boost Asia’s productivity.
...and so are the Thais for megaprojects:
Thailand can tap the Chinese-initiated Asian Infrastructure Investment Bank (AIIB) as a funding source for its infrastructure megaprojects now that the 2-trillion-baht borrowing bill has been derailed by the Constitutional Court, says a senior Finance Ministry official. Somchai Sujjapongse, director-general of the ministry’s Fiscal Policy Office, said establishing the AIIB, whose function would be to fund infrastructure projects in the region, could be a boon to countries that need funding for their infrastructure developments.
The Chinese are quite canny in focusing on infrastructure. Not only can they (conveniently) claim that they are not in competition with the ADB which is more into poverty alleviation, but they also can tap a widely-shared need throughout the region for infrastructure lending. Heck, even its territorial disputants can probably be swayed by that. If the Chinese can provide technical assistance on top of it all, then AIIB would represent a formidable new international institution in comparison to the ADB which has been around since 1966.
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