Is the India Story over for Singh and company?

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INDIA DIARY by COOMI KAPOOR

IT has turned out to be the worst year for the ruling United Progressive Alliance Government of Prime Minister Manmohan Singh. Everything that could go wrong, went wrong.

As the year draws to a close, the public image of the Congress-led coalition was at its nadir, with the Government scoring a series of self-goals. Indeed, such was the disenchantment with Singh that in certain sections of the ruling alliance there was hush-hush talk of replacing him with a far more politically savvy leader.

The latest fiasco that further damaged the standing of the Government concerned the unilateral decision a few weeks ago to allow majority Foreign Direct Investment in multi-brand retail. Once the announcement was made, all hell broke loose, with members of the ruling coalition itself opposing the entry of the western supermarket chains to set up shop here.

The timing of the FDI move was all wrong. The Government was mired in corruption cases of its key members. The Gandhian activist, Anna Hazare, was mounting public pressure through his hunger fasts for creating a strong and effective anti-corruption ombudsman (Lokpal). Food inflation was running high in double-digit numbers. And the stage was being set for crucial Assembly elections in UP and four other States.

Under the circumstances, the Government invited trouble by opening itself to the combined attack from the Right and the Left when it unilaterally decided to allow majority FDI in multi-brand retail. And a disaster it turned out to be.

When the Parliament opened, the Government resisted any move to debate the FDI decision on a motion involving voting. For more than a week, there was a standoff.Finally, the Government wilted under the combined pressure of the Opposition and its own allies. Finance Minister Pranab Mukherjee, virtually the lone trouble shooter for the Government, ensured the return of normalcy in Parliament by categorically stating the FDI proposal was put on hold. The Government, he admitted, did not want to debate the matter since it did not have the requisite numbers in the Lok Sabha.

Significantly, the Prime Minister, who personally pushed the FDI decision, not only spoke forcefully in its favour but also ruled out its rollback at a rally of the Youth Congress at which both Sonia Gandhi and son, Rahul were on the dais. Neither Gandhi said a word in favour of the FDI, a broad hint to the Congress troops not to go out on a limb to back it. Observers noted that increasingly the PM and the Gandhis were no longer on the same page on key issues.

That the Americans were pushing hard for opening up multi-brand retail was widely known, especially after the recent publication of the leaked US cables by WikiLeaks.

In one of these cables, US Secretary of State Hillary Clinton, a one-time board member of Wal-Mart Inc, is quoted asking a high-ranking US diplomat in New Delhi about the position of key members of the UPA Government vis-à-vis multi-brand retail.

On its part, the Prime Minister justified the decision on grounds of potential benefits to consumers, farmers, etc. Also, it was meant to boost the economic sentiment and foreign investment into the country. Politically, the Government believed that the decision would counter the common criticism that it suffered from policy-paralysis.

But sheer movement is a poor substitute for a purposeful and thoughtful action. Virtually rolling back the FDI decision pulled the image of the Government several notches down. Besides, it proved that despite their inherent differences, the Left and the Right could jointly mount pressure on the Government.

The FDI fiasco was the latest in a long series of rebuffs suffered by the Government during 2011. In a year in which key members of the ruling alliance were arrested in corruption cases, when there was record food inflation, more than 16% depreciation of the rupee against the dollar, and overall growth declining sharply, the Government had very little credit to show.

That was not all. A bigger crisis lurked in the corner, with the Gandhian leader Anna Hazare threatening to sit on another indefinite fast at the end of the on-going winter session later this month if a strong and effective Lokpal Bill was not passed by Parliament. A standing committee of Parliament had not embraced main points of the draft Bill presented by Team Anna, leading the Gandhian to accuse the Government of its wanting to pass a toothless law which would completely fail to check rampant corruption.

Given that the Government was busy fire-fighting round the year, captains of industry expressed concern that the policy paralysis would cripple the economy.

In such a gloomy scenario, it should not come as a surprise that many observers believe that the India Story is already over.

Singh, critics insist, does not have the skills and the temperament to manage a difficult coalition. Even his USP that he was personally clean is no more an advantage, with people saying that he has presided over the most corrupt government since Independence.

Of course, his fate can be decided only by Sonia Gandhi. Should she find a better alternative, or her son, Rahul, is ready to take over as prime minister, there is now little doubt that Singh will find himself eased out.

For the youth, by the youth

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NGO for the youth, by the youth – Entrepreneur sets up group to inspire peers to succeed in life

The Staronline

PETALING JAYA: A group of youths has started a non-governmental organisation to inspire their peers to become successful individuals.

ACE Youth was set up three months ago by entrepreneur Shen Yee Aun, 24, who made it his mission after going through a low point in his life last year.

“The aim of ACE Youth is to empower and develop youths to become successful in life. It is also to develop their talents according to our 10 pillars of strength,” he said.

The pillars include leadership, networking, talent development, entrepreneurship, entertainment and lifestyle.

Going places: Shen (in blue) discussing plans with (from left) ACE Youth role model Lee Yvonne, 23, ACE Youth vice-president Allen Low, 24, and ACE Youth role model Jenvine Ong, 21, at Jaya One in Petaling Jaya >

 

Shen said he was at the peak of his life, earning RM40,000 a month as a successful tuition teacher and freelance motivational speaker last year.

“However, I fell in love with the wrong girl. Things did not work out with her and I was in a bad state,” he said, adding that his earnings dwindled to RM600 a month.

“I told myself that if I were to get back on my feet again, I would do something to help youths realise their potential and stop them from taking the wrong path,” he said, adding that this then drove him to come up with ACE Youth.

He said the organisation would come up with a programme featuring nine “role models” to inspire youths to contribute to society.

“The role models will consist of young women who are successful in their careers and popular on social networking sites,” Shen said.

The organisation will also launch a website next month to share inspirational stories and motivate youths to achieve their dreams.

“On Thursday, we will be organising an event called Rise of Youth Nation to celebrate youth rights,” he said, adding that it would be held at G-Six, The Gardens at Kuala Lumpur.

ACE Youth is open to youths aged between 15 and 30.

For details, log on to www.theriseofyouthnation.net or e-mail aceyouth.my@gmail.com.

Who leads Asia? Can Asia step up to 21st century leadership?

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Can Asia step up to 21st century leadership?

ANALYSIS by Amitay Acharya

IF one had any doubts about the world being in the midst of a huge power shift, recent events should have dispelled those.

From Europeans appealing to China to save the euro to President Barack Obama arriving in Bali to lobby for Asian support, the transformation is evident. Less clear is who will lead the world in the 21st century and how.

There is plenty of talk about the 21st century being an Asian century, featuring China, Japan and India.

These countries certainly seek an enhanced role in world affairs, including a greater share of decision-making authority in the governance of global bodies. But are they doing enough to deserve it?

The intervention in Libya, led by Britain and France, and carried out by Nato, says it all. There is no Nato in Asia, and there’s unlikely to be one.

China and Japan are the world’s second and third largest economies. India is sixth in purchasing-power parity terms. China’s defence spending has experienced double-digit annual growth during the past two decades. India was the world’s largest buyer of conventional weapons in 2010.

A study by the US Congressional Research Service lists Saudi Arabia, India and China as the three biggest arms buyers from 2003 to 2010. India bought nearly US$17bil (RM54.17bil) worth of conventional arms, compared with US$13.2bil (RM42.06bil) for China and some US$29bil (RM92.4bil) for Saudi Arabia.

Chinese, Indian and Japanese foreign policy ideas have evolved. India has abandoned non-alignment. China has moved well past Maoist socialist internationalism. Japan pursues the idea of a “normal state” that can say yes to using force in multilateral operations.

Unfortunately, these shifts have not led to greater leadership in global governance. National power ambitions and regional rivalries have restricted their contributions to global governance.

President Hu Jintao has defined the objective of China’s foreign policy as to “jointly construct a harmonious world”. Chinese leaders and academics invoke the cultural idea of “all under heaven”, or Tianxia. The concept stresses harmony – as opposed to “sameness” – thus signalling that China can be politically non-democratic, but still pursue friendship with other nations.

China has increased its participation in multilateralism and global governance, but not offered leadership. This is sometimes explained as a lingering legacy of Deng Xiaoping’s caution about Chinese leadership on behalf of the developing world. More telling is China’s desire not to sacrifice its sovereignty and independence for the sake of multilateralism and global governance.

Japan’s policy conception of a “normal state”, initially presented as a way of reclaiming Japan’s right to use force, but only in support of UN-sanctioned operations, may sound conducive to greater global leadership.

But it also reflects strategic motivations: to hedge against any drawdown of US forces in the region, to counter the rise of China and the growing threat from North Korea, and to increase Japan’s participation in collective military operations in the Indian Ocean and Persian Gulf regions.

Beset by chronic uncertainty in domestic leadership and a declining economy, Japan has not been a proactive global leader when it comes to crisis management.

Its response to the 2008 global financial crisis was a far cry from that to the 1997 crisis, when it took centre-stage and proposed the creation of a regional monetary fund, a limited version of which materialised eventually within the Chiang Mai Initiative.

In 2005, Indian Prime Minister Manmohan Singh asserted that “the 21st century will be an Indian century”.

Manmohan expressed hope that “the world will once again look at us with regard and respect, not just for the economic progress we make but for the democratic values we cherish and uphold and the principles of pluralism and inclusiveness we have come to represent which is India’s heritage as a centuries old culture and civilisation”.

Yet, the Indian foreign-policy worldview has shifted in the direction of greater realpolitik. Some Indian analysts such as C. Raja Mohan have pointed out that India might be reverting from Gandhi and Nehru to George Curzon, the British governor-general of India in the early 20th century.

Indian power projection in both western and eastern Indian Ocean waters is growing, thereby pursuing a Mahanian approach for dominance of the maritime sphere – named after US Admiral Alfred Thayer Mahan – rather than a Nehruvian approach. It is partly driven by a desire, encouraged by the US and South-East Asian countries, to assume the role of a regional balancer vis-à-vis China.

Asia’s role in global governance cannot be delinked from the question: Who leads Asia?

After World War II, India was seen as an Asian leader by many of its neighbours and was more than willing to lead, but unable to do so due to a lack of resources.

Japan’s case was exactly the opposite; it had the resources from the mid-1960s onwards, but not the legitimacy – thanks to memories of imperialism for which it was deemed insufficiently apologetic by its neighbours.

China has had neither the resources nor the legitimacy, since the communist takeover, nor the political will, at the onset of the reform era to be Asia’s leader.

In Asia today, although Japan, China and India now have the resources, they still suffer from a deficit of regional legitimacy. This might be partly a legacy of the past – Japanese wartime role, Chinese subversion and Indian diplomatic high-handedness. But their mutual rivalry also prevents the Asian powers from assuming regional leadership singly or collectively.

Hence, regional leadership rests with a group of the region’s weaker states: Asean. While Asean is a useful and influential voice in regional affairs, its ability to manage Asia is by no means assured.

Greater engagement with regional forums is useful for the Asian powers to prepare for a more robust role in global governance. So many of the global problems – climate change, energy, pandemics, illegal migration and more – have Asian roots.

By jointly managing them at the regional level, Asian powers can limit their rivalries, secure neighbours’ support, and gain expertise that could facilitate a substantive contribution to global governance from a position of leadership and strength. — The Daily Star/Asia News Network

> The author is the UNESCO chair in Transnational Challenges and Governance at American University and a senior fellow of the Asia Pacific Foundation of Canada. This is based on his article, “Can Asia Lead: Power Ambitions and Global Governance in the 21st Century”, International Affairs, vol. 87, no. 4, 2011.

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 Experts urge Europe to look toward Asia-Pacific

Turbulent economic forecast for 2012

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 Eurozone crisis has caused uncertainty in global economy

By CECILIA KOK cecilia_kok@thestar.com.my

WHILE not everybody believes that the much-hyped prediction of an impending apocalypse by the ancient Mayan society holds any absolute truth, one can be sure that the gloom and doom-like feeling will continue to permeate the world economy as it approaches the new year.

As some economists put it, we are entering an era of even greater uncertainty. With the considerable amount of unknowns presented to us, we can only expect to be in for another round of wild and tumultuous ride in 2012.

The situation in the European Union (EU) at present remains the biggest wildcard for the global economy, as its sovereign debt crisis continues to spread across the region, producing new signs of strains in the financial system each passing day.

Hopes were high when the top EU leaders converge for a make-or-break meeting last week in Brussels, Belgium, to find a resolution that could douse the spreading flame of the euro and sovereign debt crisis. But the crucial meeting went past without a credible solution that could offer a long-lasting impact that could pacify investors in general.

There is no just quick fix to the EU sovereign debt crisis, economists at the Royal Bank of Scotland (RBS) explain in their recent report.

“While the recent fiscal compact’ deal might strengthen fiscal union of the EU members, it doesn’t solve the immediate insolvency problems of some members,” they say.

RBS reckons that the European Central Bank (ECB) is still at risk of being drawn into an outright quantitative easing (QE), that is printing of money, which could ultimately undermine the euro’s strength.

Although QE might help improve liquidity in the region, more of such a measure will also deepen the policy dilemma for non-QE countries such as those in Asia, RBS’ economists say.

More QE in 2012?

QE has become commonplace in developed economies from the United States to the UK and Japan in recent years since the onslaught of the global financial crisis in 2008, as governments resorted to pumping liquidity into their systems to jumpstart economic growth.

While such a measure may seem convenient to implement, it does bring with it some negative side effects such as the weakening of a country’s currency and inflation.

But desperate situation calls for desperate measures. The severity of the global economic downturn three years ago necessitated policymakers to undertake such controversial measures.

The United States, for one, has already had two rounds of QE. QE1 launched in 2008-2009 was valued at US$1.3 trillion, while QE2 announced at the end of last year was worth US$600bil.

No fresh QE by the US Federal Reserve is in sight yet, as policymakers, coming out from its last Federal Open Market Committee (FOMC) meeting for 2011 over the week, have decided to save the QE bullet for another day.

Their decision was premised on a slightly more optimistic outlook for the US economy, as indicators had been pointing to some improvements, especially in the overall labour market conditions.

Still, most experts believe QE3 is on the cards, and will probably be unleashed within the first half of 2012.

As it stands, the US Fed remains very cautious on the prospects of the country’s economy, citing significant downside risks posed by strains in global financial markets.

If and when QE3 comes – and depending on its size – one can expect to see asset prices (from stocks to commodities and properties) to be inflated once again, and some countries, especially developing markets in Asia, will likely have to contend with inflationary pressure once again. But until then, the prevailing uncertainties are already pointing to a waning global risk appetite going into 2012.

Depreciating Asian currencies

The trend of global funds reversing from emerging markets back to developed markets has started since September 2011, and it is likely to persist next year, according to analysts.

Save for China and Hong Kong, this trend will spell a further weakening of currencies for economies in Asia (excluding Japan).

(The renminbi, deemed significantly undervalued, has been under intense political pressure to appreciate faster, while the Hong Kong dollar is pegged to the US dollar.)

For reasons not related to their economic fundamentals, Asian currencies in general have already started trending lower against the US dollar since the second half of this year. This was due mainly to capital outflows arising from global risk aversion, as well as intensified deleveraging process foreign investors.

Several Asian central banks have reportedly been stepping into the foreign exchange market to smooth the volatility, even though those measures have not been sufficient to stem the decline of their currencies.

Year-to-date, Malaysia’s ringgit has weakened by around 4% to 3.1869 against the US dollar.

Expecting capital outflows to accelerate in the first quarter of 2012, economists believe the ringgit could weaken further to as much as 3.25, before recovering in the second half of next year.

Depreciating currencies aside, there is also a growing concern among experts that the continuous outflow of capital could result in tighter domestic liquidity conditions, although countries with larger current account surpluses will be less affected.

In Asia, Malaysia has the second largest buffer in its current account balances at more than 10% of its gross domestic product (GDP), after Singapore, whose buffer in current account balances exceeds 20% of its GDP.

It is unmistakable that policymakers in Asia will be kept very, very busy next year, as they contend with the challenges that await them.

Besides having to manage the lingering effects of weakness in developed economies on their economies, policymakers in some countries will also deal with domestic economic challenges that could add salt to the wound.

According to Morgan Stanley Global Economics team, the risks for Asian economies in 2012 remain skewed to the downside, with China facing the potential of a sharper-than-expected correction in its property market, India facing a weaker investment sentiment, and South Korea facing the prospects of high household debt weighing down consumption growth.

The risk factors, if materialised, could result in a bear case scenario, in which the global financial institution expect economies in Asia (ex-Japan) to slow to 5.9% next year, compared with its base-case forecast of a 6.9% GDP growth.

For Malaysia, Morgan Stanley argues that the risk factors are mainly external, with a sharper-than-expected global slowdown increasing the country’s downside growth risks via the trade and commodity channels.

This is because a severe global slowdown will not only result in the demand for Malaysia’s exports of goods and services, but it will also cause further decline in commodity prices, in which case, Malaysia, being one of the largest net commodity exporter in the region, could see the terms of trade to deteriorate further.

“Malaysia’s vulnerability to a global growth shock remains similar to that in 2008. Its open economic structure means that there is no escape from a global slowdown,” Morgan Stanley explains.

Although it notes that policymakers in the country have been making efforts to boost domestic demand, particularly in private investment, it remains concerned that such policies at this juncture have not gathered enough momentum to provide much growth catalyst in view of the country’s high trade linkages and a global slowdown that could affect investor confidence.