4 April 2013

Global media investigation finds 612 Indians among thousands with firms in tax havens

Apr 04 2013

In the biggest global expose of its kind on offshore investments and secret financial transactions, an international group of investigative journalists has found details of more than 1.2 lakh offshore entities and trusts belonging to individuals and companies in more than 170 countries and territories, including India.

These individuals and companies include politicians, the mega rich and tax offenders, among others, who have invested in tax havens such as the British Virgin Islands, the Cook Islands, Samoa and other offshore hideaways.

The 612 Indians in this list include two members of Parliament — Lok Sabha Congress MP Vivekanand Gaddam and RS member Vijay Mallya — and several industrialists such as Ravikant Ruia, Samir Modi, Chetan Burman, Abhey Kumar Oswal, Rahul Mammen Mappillai, Teja Raju, Saurabh Mittal and Vinod Doshi.

The list also includes businessmen who have had a brush with authorities such as the Income-Tax department and the CBI. Several of the offshore investments were made in possible violation of RBI and FEMA rules.

Details of these transactions were contained in 2.5 million secret files and accounted for more than 260 gigabytes of data. They were obtained by the International Consortium of Investigative Journalists (ICIJ) and their total size is more than 160 times larger than the leak of the US State Department documents by Wikileaks in 2010.

Based in Washington DC, ICIJ (www.icij.org) is an independent network of reporters who work together on cross-border investigations.

ICIJ collaborated with 38 media organisations around the world, including the The Indian Express, for this ambitious global project and to analyse the documents. The other media partners include The Washington Post in the US, The Guardian and BBC in Britain, Le Monde in France and the Canadian Broadcasting Corporation.

The secret files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how financial secrecy has spread aggressively around the globe. They represent the biggest stockpile of inside information about the offshore system ever obtained by a media organisation.

Patently Reasonable

APRIL 3, 2013

India's Supreme Court has ruled against Big Pharma and for the country's generic drug companies. But who's the big winner in the end?

When the Swiss pharmaceutical firm Novartis lost its battle in India's highest court on Monday, April 1, it was hailed as a major victory in India. The Indian Supreme Court rejected a plea by Novartis for patent protection for the drug Gleevec, which has been called a "miracle drug" for patients with some forms of leukemia. Now, Indian companies are free to make and distribute low-cost versions of the drug to the 300,000-some Indian patients currently using Gleevec. "It is a very happy day for us. Now we can cater to all cancer patients," said Kiran Hukku of Cancer Patients Aid Association, which led the case against Novartis.

But Monday's verdict is about much more than leukemia patients in India. It's about India's ability to legally continue to uphold its reputation as "the pharmacy to the third world." Over the last decade, Indian pharmaceutical companies have pioneered the method of making cheap drugs by copy-catting brand-name medications when they go out of patent for everything from HIV to malaria. These drugs are used widely in India, where tens of millions of people still live on less than two dollars a day and cannot afford basic health care costs. It's estimated that less than 10 percent of drugs sold in India are under patent. That number can be partly accounted for by the country's thriving business in counterfeit drugs, which makes up between 8 and 25 percent of India's drug market. But Indian drug makers also export about $10 billion worth of generic medicine every year. That means tens of millions of people across the developing world have come to rely on India's cheap drugs.

Essentially, the battle between Indian and multinational pharmaceutical companies boils down to a fundamental disagreement about the definition and the ethics of innovation. India's pharmaceutical companies have a very different business model than that of the research-focused big international pharma companies. Firms like Switzerland's Novartis and America's Pfizer -- which is the world's largest pharmaceutical company -- often spend decades and billions of dollars developing a single medication. They say they need patent protection on their drugs in order to support the high research costs that come with innovation. Indian companies do not invest in research and development on the same scale. Rather, they wait until successful drugs come off patent, and then make copycat versions to sell at a fraction of the cost across the developing world. Indian generic manufacturers sell their version of Gleevec for about $175 a month; the brand-name medication costs patients in India $1,900 a month, although Novartis has a support program that has provided over $1.7 billion worth of Gleevec, free of cost, to Indian patients since 2002.


 Innovation and frugal engineering are two of the most misused terms in India

By Ashok Ganguly

The debate about the state of science education and research in India has remained as diffuse and irrelevant as shrubs and undergrowth on barren land. The decline in science and technology is in contrast to the growth in the number of educational institutions, new universities and institutes of higher learning in engineering, science and medicine. The number of engineers, scientists and doctors who graduate annually has grown enormously as well. But the quality of path-breaking scientific research and technological innovation has become abysmally retrograde. The question is whether India should be worried about the appalling quality of most scientific research in the country. The response to this question must be strongly in the affirmative. The erosion of India’s science-led knowledge-base poses a significant threat to its ambitions of economic growth and to its social and security plans.

There are a number of reasons to be not only pessimistic but also extremely concerned about the poor state of cutting-edge scientific research and technological innovation in the country. First, an economically growing nation cannot sustain its growth dynamism and ambitions without a strong underpinning of cutting-edge science and technology. Second, the challenges posed to national security by insignificant investments in indigenous discovery research and new technologies and by depending too much on suppliers from outside are, indeed, enormous. Third, universal health in India will only become affordable with the help of investments in modern medical research in areas such as tropical diseases, pre- and post-natal maternal and infant nutrition and other infectious diseases if India’s emerging demographic profile has to avoid a nightmare scenario. Finally, the uncertainties of global warming and its impact on the availability of food and water will continue to remain unpredictable challenges to our country, in the absence of a commitment to science, of debate on the threats and opportunities created by global warming, and of a robust national mitigation plan.

Two PMs & a countdown to financial crisis


While Rajiv Gandhi ignored the advice of two Finance Secretaries, V.P. Singh’s Finance Secretary hesitated at a crucial time to give the right advice.

Tapes with the RBI reveal a fascinating story about the 1991 balance of payments crunch

Who actually was responsible for the 1991 balance of payments crisis? Rajiv Gandhi or V.P. Singh? Therein lies a tale.

In 2004, I was asked by the Reserve Bank of India (RBI) to edit and rewrite volume three of their history. During the process, we came up against significant blanks because the record was not fully complete in that many statements were unsupported — not as to what had happened but as to why they had happened in that particular way and not in some other way.

In 2006, after work on volume three was over, I was able to persuade the RBI that it should allow an oral history to be recorded. All the main dramatis personae of the 1991 crisis — and several others — would be interviewed on audio and videotape. This would help future historians.

A very senior officer of the RBI, Dr. T.K. Chakrabarty and I interviewed around 40 officers from the bank and the Finance Ministry. Those tapes are now in the RBI’s archives in Pune and can be accessed if the Governor grants permission. Another way, I imagine, is to use the RTI route because there is no security involved.

The tapes reveal a fascinating story about the 1991 crisis. Of course, there is considerable memory loss and self-exculpation. But even after allowing for all that, and after checking with contemporaneous records, a simple story emerges.

This is that Rajiv ignored the advice of two Finance Secretaries and V.P. Singh’s Finance Secretary hesitated at a crucial time to tender the proper advice. By the time he made up his mind — to go to the International Monetary Fund (IMF) — it was too late.

It turns out that in March 1988, the Managing Director of the IMF, Michael Camdessus, while in India told Rajiv that if India asked for a loan, the IMF would take a sympathetic view. The Finance Ministry and the Prime Minister’s Office advised Rajiv to go for it.

But Rajiv, reeling from the Bofors scandal in which he had been accused of accepting a Rs.64 crore bribe, was contemplating an October election. He decided not to ask the IMF. The Finance Ministry, however, did send a secret delegation a bit later to do the initial groundwork.

By the middle of 1988, Rajiv had been persuaded by his political managers to stay the full term which would finish at the end of 1989. The Finance Ministry did ask him a couple of times more.

BRICS sans cement

By S N Chary 
April 4, 2013:

India’s trade prospects with Brazil have logistical problems, simply because of the distance between the two countries.

When five nations – Brazil, Russia, India, China and South Africa (BRICS) – that are on a fairly rapid economic growth trajectory, compared to the other nations in the world, meet to plan for a common bank to address their funding needs for infrastructural and other developmental investments, it is certainly a significant event. The recent meeting of the BRICS nations held in Durban has to be seen in that light. 

BRICS nations comprise 43 per cent of the world’s population and about 16 per cent of global trade. The total exports of goods from these nations were US $ 2,361 billion out of the exports figure for the world of $ 14,950 billion (2010 data). Together, these five nations’ share of global incremental gross domestic product (GDP) for the period 2010-2016 is predicted to be over 36 per cent in nominal dollar terms. Whereas, the predictive figure for the US and European Union put together is a little below 30 per cent.

Clearly, the economic rise of the BRICS nations is noteworthy. But the quandary has always been whether there is enough incentive for these nations to really act together. It seems like a good idea for one rapidly growing economy to support another speedily rising economy. However, such thinking presumes that all these nations are in a hurry to support a ‘win-win’ situation. Now that is really a trillion dollar question.

First of all the intra-BRICS trade at the current $230 billion is quite small, a little over 5 per cent of their volume of trade with the world (2010 data exports and imports put together) of about $4,500 billion. About half of the intra-BRICS trade consists of China’s trade with India and Russia. Thus, the trade is mainly China-directed. There is nothing new in saying that any nation, BRICS or the other, would need to enlarge its trade with China. The relevant question would be: How long would China see a gain promoting a united BRICS? What India or Brazil thinks may be less significant.

Let us also understand that 70 per cent of the combined GDP growth of the BRICS nations during 2000-2010 was accounted by the growth of Chinese economy alone. China is a 70 per cent player, while rest of the four – that includes India – together account for only 30 per cent. Since the Chinese economy’s growth rate is noticeably higher than that of the other BRICS nations, the divide between China and BRIS (C for China removed) is going to grow even further. How long will ‘C’ have interest in BRIS? 


04 April 2013

The shameless UPA Government is following the practice of retreating armies, that turn the robust to ruins, as they prepare to move away. Many of the regime’s recent decisions will leave behind a mess

Watching the reckless way in which the Congress-led Government at the Centre is increasing welfare expenditure while income falls like a stone, one has to wonder at the underlying strategy. After all, the Congress prides itself on understanding governance better than all others. It has had cumulative decades in power.

Right-wing economist Surjit Bhalla wrote a scathing indictment, calling the UPA’s economic management “disastrous”. This was in a recent Op-ed piece in The Indian Express, which he ends by saying that Ms Sonia Gandhi, who runs not only the party, but de facto, the Government as well, may have ended up killing off the 128-year old Congress with her rampant welfarism/socialism.

Meanwhile, the dreadful economic facts pouring out from every survey and analysis seem to bolster Mr Bhalla’s prognosis. Business and industry has slowed to a near standstill, inflation including food inflation is shooting up, investment has stopped, the stock market is sinking, the fiscal deficit has rocketed up to an all-time high, FDI has dried up, domestic demand has fallen drastically, growth has halved, exports are languishing, the rupee has depreciated at least 20 per cent.

More relentless bad news is projected by non-partisan observers, both domestic and foreign. Everyone is horrified by the profligacy except the seniors in the Government who continue to assure the public that all is well and going to get better.

But is there a method in this madness? The UPA is hoping that the huge populism of the food Bill and the homestead Bill on top of all the subsidies and welfare programmes running presently will bring back 2009.

Then, the corruption-ridden MGNREGA caper is supposed to have delivered victory to them. So what if it has cost the nation some `1,70,000 crore, with more than half the amount — Mr Bhalla estimates it to be about $14 billion — siphoned off? Besides, the programme is faltering, only a fifth of the total spent paid out to the recipient poor in wages. It is certainly not a great success on the ground. But did it give Ms Gandhi UPA2?

So there is an attempt to pull off an encore. But if the UPA is shown the door in 2014, the Congress-led Government may want to ensure the economy will be so ruined, that the successor Government will not last either. This is particularly because of the populist compulsions of coalition politics. The successor Government will inherit empty coffers, huge indebtedness, promises to deliver on, and an all-round fiscal mess.

This is a classic scorched earth policy, generally employed by retreating armies on the march. It says, in electoral terms, ‘If I don’t get back in, whoever does will rue the day’.

The BJP-led NDA, most likely to form the next Government, is going to face huge economic challenges. Fortunately for the NDA, they are in power in a number of key States. This will stabilise the aftermath to at least some extent.

A rally for war criminals: Why are TMC, Left silent?

By Dr Anirban Ganguly 
April 03, 2013

A belligerent rally in Kolkata [ Images ] by 16 Islamic organisations in support of Delwar Hossain Sayeedi, one of the prime accused in the 1971 genocide in Bangladesh, is indicative of West Bengal [ Images ]’s liberal space shrinking, says Dr Anirban Ganguly.

Something unprecedented happened on March 30 in Kolkata. Sixteen Islamic organisations came together at the Maidan, the second largest public ground in the city, in protest against the ongoing war crimes trial in Bangladesh, against the Shahbag sit-in and in support of the vice-president of the Jamaat-e-Islami Bangladesh, Delwar Hossain Sayeedi, one of the prime accused in the 1971 genocide in Bangladesh.

It was astounding to see a huge and belligerent crowd gather from all over the state to support one of the best known razakars and collaborators with the Pakistan Army [ Images ] in its genocide against Muslims and Hindus in East Pakistan.

Speakers addressing the gathering attempted to whip up hysterical support for the Jamaat and its leaders and pledged that just as West Bengal’s Muslims prevented Salman Rushdie [ Images ] from the entering the state and hounded out Taslima Nasreen [ Images ] in 2007 they would generate a movement against the pro-war crime trial bloggers in Bangladesh and would take on their supporters with the same zeal. They even threatened to block any future visit of Bangladesh Prime Minister Sheikh Hasina [ Images ] to India [ Images ].

But most shocking was their brazen support for Sayeedi, a known vocal anti-India preacher, a rabid anti-Hindu who has been active in organising pogroms against minorities in Bangladesh over the years and one of the most avid collaborators in Pakistan’s genocide against fellow Muslims.

They openly declared their support for Sayeedi saying that a death sentence for Sayeedi in effect meant a death sentence for the Koran and Islam. These speakers chose to ignore the fact that Sayeedi was being tried for killing in cold blood their fellow religionists. It was for the first time that such a mobilisation took place in Kolkata and it simply reinforced an emerging mindset which has begun trying to consolidate a pan-Bengal Islamic identity.

Incidentally, it was from the Maidan in August 1946 that the call for ‘direct action’ was given by the Muslim League. The result of that call on the history of both parts of Bengal is too well known to even require a passing reiteration. But our politicians have deliberately chosen to ignore that past.

Not a single political party, and in them especially those who at the first opportunity, jump to dissect delusional dimensions of Hindu fascism and habitually get into describing various conjured Hindutva theatres of genocidal experiments or pontificate on the need to maintain the secular and syncretic texture of our nationhood, came forward to condemn the positions taken in the meeting.

Not a word from GOI. Bengali Hindus and Others!!

By Swadesh Roy

( April 1, 2-13, Dhaka, Sri Lanka Guardian) A new phenomenon has been emerged in Bangladesh that, every day in some parts of Bangladesh, some people are demolishing the temple or the statue of the Goddess of the Hindu community. Not only that, they are vandalizing the house and shop of Hindu owners and they often loot and arson it. Those people who are doing it, they are known by the affected; most of them are neighbors to them. They all belong to the politics of Jammate-E- Islami Bangladesh (Jammat) or Bangladesh National party (BNP). One of the vernacular and rightist linen Bengali newspapers of Bangladeshhas published news that, in the last 24 days the Jammat and BNP had attacked at least three hundredsand nineteen temples, houses and shops of the Hindu community. Among them, templesare 71, shopsare 152 and housesare 96.

Jammat had started the attack first after the verdict of a war criminal DelwarHosain or Della Razaker, he is now one of the main leaders of Jammat –E-Islam. But from the very first day BNP people joined them and both are doing it continuously. For this reason the Hindu community people who live in villages and the small towns where Jammat -BNP organizations are powerful, they are leading their lives in a terrible situation. Sometimes,this kind of situation is awful. On March 20 and 21,in Bogra, a northern district in Bangladesh BNP- Jammat people attacked five temples and vandalized nine statues of the Goddess. The minority Hindu people made contactwith the police station at that time but police did not take any proper action. Police knew who were the criminals and who vandalized it, but police did not arrest them. Rather they kept moving in front of the police when police was in the spot. Police is not doing this everywhere, rather in some places,policies are taking quick action; but why police did it in Bogra it is a mystery. But some people of that locality have stated that, the ruling Awami league district President is giving them shelter and the District Commissioner of Bogra is a supporter of Jammat –BNP. However, it is true that, police did not or could not take proper action there. But it is true not only in Bogra but also in other places where the ruling Awami league leaders are also giving shelter to the criminals of Jammat and BNP. Another, Bengali newspaperhas published a report recently that, at Bashkhal, a southern part of Bangladesh Jammat people vandalized and torchedat least 40 shops of the Hindu owners. But now police is accusing that, they are facing trouble to catch the criminal because that Jammat people has purchased the membership token by the money from the local Awami league leaders. It is unpleasant for the Hindu people of Bangladesh because the Hindu people of Bangladesh generally support Awami league since Awami league contains a secular values.

However, though what the Awami league local leaders are doing in some places is awful, it is not the main feature. The main feature is that at least one month has been passed but everyday Jammat- BNP people are attacking on the minority people and their homes, shops overall their temples. So the minority Hindu people and their religious believe are now in danger in some places is Bangladesh. Jammat and BNP are now playing this minority card very tactfully. What they are doing, its main goal is clear that, they want to give the lesson to the minority that, they are not safe in Bangladesh even Awami league holds the power of the country. Besides, they should understand what would be their fate if Jammat-BNP comes to the power so it is better for them to leave the country and go to India. One of the websites named Basserkella, which is run by Jammat and their student organization Shibir, they have posted a status recently. “We will kill all the Malauns( they called the Hindus as Malauns which meaning is they have no proper religion) and Bangladesh will be Banglastan like Pakistan.” BNP leader Khaleda Zia has given the whole heart support to Jammat. She has given instructions to her workers to work together with Jammat. So, now the BNP men commit most of the attack on the minority.

High-Tech Naval Base to counter Chinese Expanding Navys

03 Apr , 2013

The strategic ambitions of China in the Persian Gulf and the Arabian Sea have received a giant boost with its assuming charge of the Gwadar Port from Pakistan after taking charge of port operations from Port of Singapore Authority, which has been managing operations for the last five years. The port is strategically located at the mouth of the Gulf of Hormuz and just 90 km from the Iranian border.

The Indian Navy is developing a new top-secret naval base for its nuclear submarines, code-named Project Varsha located within a radius of approximately 200 kilometers (124.27 statute miles) from Visakhapatnam.

It is a matter of grave concern for India as China´s presence in the Indian Ocean poses a serious threat to Indian maritime operations. Defence Minister A K Antony also expressed his concerns while inaugurating aero show in Bangalore recently.

It is a matter of great satisfaction that slowly but steadily, India’s new futuristic naval base is beginning to take concrete shape on the eastern seaboard. The strategic base, with an eye firmly on China, will eventually even have underground pens or bunkers to protect nuclear submarines both from spy satellites and enemy air attacks.

Sources said a flurry of discussions, presentations and meetings have been held in the PMO and Ministry of Defence (MoD) over the last couple of months to firm up “expansion plans” for a base located near Rambilli called “Project Varsha” on the Andhra coast — just about 50 km from the Eastern Naval Command headquarters at Visakhapatnam — over the coming decade.

The Indian Navy is developing a new top-secret naval base for its nuclear submarines, code-named Project Varsha located within a radius of approximately 200 kilometers (124.27 statute miles) from Visakhapatnam. Previous news reports suggested that Gangavaram had been the initial site for the new base.1

In a new world, India and China could be power allies: Chinese scholar

29 March 2013

The United States continues to forge links in the Asia Pacific, and may have hidden intentions in the region, but China has always maintained that India’s policies are independently developed, according to a senior strategic scholar from China. 

Participating in a roundtable on India-China relations at Observer Research Foundation on March 22, 2013, Mr. Ma Jiali, Executive Deputy Director of the Centre for Strategic Studies, Beijing, said that India and China are both giants and so, they must make sure their relationship is a comfortable one. 

He said smaller or weaker countries are lured by the prospect of American protection and trade and will tilt with the US. The prospect of a good relationship between China and the US is threatened by several contentious issues like the status of Taiwan, the TPP and the trade deficit between the two countries. 

Mr. Ma Jiali said there is also a danger that the US-India relationship will have a negative impact on the India-China relationship. China is also worried about reports coming out of India that suggest India is looking for allies against China. Goodwill between India and China is jeopardised by sensationalist and negative media coverage. 

Mr. Ma Jiali said India and China are developing as the major players in Asia and so it is crucial for them to sustain and nourish a mutually beneficial working relationship. Neither can afford to be used against the other by interested third parties. They must rather focus on common threats to regional progress. In a new world where the old powerhouses are in decline, India and China could be powerful allies. 

Mr. Ma Jiali was responding to the points raised by Dr. Rajeswari Rajagopalan, ORF Senior Fellow, during a discussion on the US ’Pivot to Asia’. She said the Indian perspective was that the US had never left the region, and this was merely a step to reassure its friends and reassert itself after the overreaches of Afghanistan and Iraq. The idea that the pivot is China-centric is only partially true. The US has a long and complex history with Russia, tensions with North Korea, and other interests in the area. 

Keep the door open for trade


Being economically dominant, India needs to grant trade concessions to its smaller neighbours, a move that will also contribute to the economic integration of South Asia.

Bilateral crises and trade bottlenecks notwithstanding, Pakistan and India need to find ways to continue to do business

If ever a reminder was needed of the slippery nature of the grounds on which India-Pakistan relations are played out, a most recent offering is the Washington-based Wilson Center study on India-Pakistan trade. Fairly up to speed on bilateral relations, by recording developments as recent as November 2012, the study has already been rendered outdated by the subsequent turn of events. Still, it remains relevant as it reiterates a well-known and acknowledged fact — that the two countries need to find some way to do business, crises notwithstanding.

The atmospherics have changed considerably since the Asia Centre of the Wilson Center co-hosted a conference on India-Pakistan trade along with the Karachi-based Fellowship Fund for Pakistan in April 2012. The presentations made at the conference have now been put together as a study called “Pakistan-India Trade: What needs to be Done? What Does it Matter?”

Bilateral relations have gone south since the conference and the momentum that had been gained on the trade diplomacy front has lost pace; the hope that was driving it this time last year. Pakistan is yet to accord Most Favoured Nation (MFN) status to India. By all indications, that is not going to happen till midyear as Pakistan is now in election-mode. That is a six-month delay over the schedule announced in 2012.

MFN status

Though bilateral relations took a drubbing after the clashes along the Line of Control and subsequent media-induced loss of appetite for improving relations with Pakistan in India, the Pakistan Peoples Party-led coalition government maintained till its last day that, despite the delay, the country was steadfast in its commitment to granting MFN status to India.

In fact, barring the religious right wing groups, all mainstream political parties of the country agree on this.

Pak. youth favour Shariah: survey


A file picture of Pakistani students of a madrassa in Islamabad. A British Council survey says majority of Pakistani youth prefer Shariah to democracy or military rule.

94% said the country was headed in the wrong direction

Shariah has trumped democracy and military rule as the preferred option among the youth of Pakistan in a survey conducted by the British Council, ahead of the coming elections. Of the 5,000 youngsters mapped across the country, 38 per cent chose Islamic Shariah as the best political system for Pakistan.

While the study “Pakistan Next Generation Goes to the Ballot Box” reflects the deep disappointment with democracy among the youth, with only 29 per cent opting for it, the preference for Shariah is primarily because the respondents do not have a “direct experience of a non-democratic system of Islamic government”.

Further, Shariah was favoured for its ability to advance moral and religious values.

It is also thought to be the best system for giving people their rights and freedom; for promoting tolerance; and making the country a fairer one. However, not many expected it to improve security, a major concern.

On the security front, the military was found to be the best option and continues to enjoy a better acceptance than democracy with 32 per cent of the respondents voting for it.

Only 29 per cent voted for democracy while94% said the country was headed in the wrong direction

In fact, military rule was found to be most popular in the restive province of Balochistan besides Sindh and Gilgit-Baltistan.

Afghanistan’s Coming Energy Boom?

By Zachary Keck
April 4, 2013

Last month Afghanistan’s Minister of Mines, Wahidullah Shahrani, told theWall Street Journal that he expects the country to start exporting oil as early as this year. Mr. Shahrani explained that oil wells in the Amu-Darya Basin in northern Afghanistan, while currently producing no oil, will have an output level of 25,000 barrels of oil a day by the end of this year. He also said that this is expected to rise to 40,000 bpd in 2014.

All of this oil will be exported initially, as Afghanistan’s first oil refinery is not expected to come on line for at least two to three years.

The oil wells in question are operated by state-owned China National Petroleum Corp. (CNPC), China’s largest integrated oil and gas company, who is working alongside an Afghan partner.

Afghanistan is awash in natural resources. A U.S. Defense Department-funded and U.S. Geological Survey-led mapping of Afghanistan’s resource landscape found the country was sitting on top of an estimated US$ 1 trillion in various minerals and natural resources.

The WSJ report said the Afghan mining minister added that starting in May the country will be auctioning off additional blocks of oil, iron ore, gold and copper bloc to international investors. A Chinese consortiumis also developing a copper mine in Aynak, Logar province in eastern Afghanistan, about 40 km from Kabul.

None of these investments are likely to come easy for Beijing, however. Indeed, for decades the world has known that Afghanistan has enormous resources located on its territory. Two issues have prevented them from being tapped, however: a lack of security and a lack of transportation infrastructure.

The first issue shouldn’t be a huge challenge for the Amu-Darya Basin oil well project in the initial years, as the Pashtun-led insurgency is mostly concentrated in the southern and eastern areas of Afghanistan. The copper mine in Aynak may face more challenges on this front, however.

Furthermore, the challenge of transporting oil from Amu-Darya to export markets could prove more daunting. Mr. Shahrani told the WSJ that his country was currently in the final stages of negotiations with one of its northern neighbors for an agreement to allow CNPC transport the oil by truck through the neighboring country’s territory.

Behind the Success of Political Islam

By Dalibor Rohac
April 3, 2013

It’s been over two years since the beginning of protests that led to the fall of authoritarian regimes across North Africa and the Middle East, and the Arab Spring is not what most observers hoped for. Egypt is in shambles, a nasty civil war rages in Syria, and political Islam is on the rise throughout the region. It looks as if the Arab revolutions will end up replacing bad governance and authoritarianism of secular dictators with bad governance and authoritarianism of would-be theocrats.

Worrying as it is, could the rise of political Islamism in places such as Egypt, Tunisia or Algeria have been avoided? Should the West have been tougher with the Muslim Brotherhood or the Salafists? Or perhaps more accommodating?

Not so fast. Before making sweeping judgments about failures of U.S. or European foreign policy, it’s helpful to look at the roots of political Islam. Perhaps its success has little to do with religion. Available data on voting behavior from Muslim-majority democracies, such as Indonesia, show that the links between being religious and actually voting for religious candidates is weak. In short, religiosity is a poor predictor of whom people vote for and why. While similar data from Arab countries is limited, it suggests that Islam has only a small impact on political attitudes.

What’s more, the Islamist policy agenda is indistinguishable from other political platforms. Consider the Ennahda movement in Tunisia, which has had the most detailed economic program of all Islamic parties in the region. Still, it offered few specifics, besides an endorsement of market economy and a pledge to fight inequality. Egypt’s Freedom and Justice Party (FJP) is even worse. Back in June 2011, the chairman of the FJP tried to shrug off specific questions about his party’s economic platform with a smile, saying that he “did not know much about the economy.”

At the heart of Islamic politics in the Arab world lies the Muslim Brotherhood, a group originally founded in 1928 in Egypt, and involved in politics, proselytizing and provision of social services. Over time, it has become a loose network of Islamic parties throughout the region, and also a widely emulated model of organization that combines political and religious activism with the provision of social services.

What might China's policy toward Afghanistan be after the U.S. drawdown in 2014?

Question submitted by Monish Gulati, April 3, 2013

Answered by: Colonel Brian M. Killough, USAF, Military Fellow, U.S. Air Force

China has diverse interests in Afghanistan, including extracting resources and promoting regional stability. But China's future policy toward Afghanistan will largely depend on whether there is a valid election and credible government in Kabul after the planned U.S. drawdown in 2014.

If the Afghan government is able to maintain a weak but relatively stable state, China will continue to see Afghanistan as an area to invest in as it pursues resources and regional influence. China has already made several large investments in Afghanistan (e.g., China signed a contract to exploit the copper mines east of Kabul). Additionally, China has a strong relationship with Pakistan and does not want Afghanistan to threaten the fragile stability there, particularly in light of Pakistan's own upcoming elections in 2013.

If, however, the Taliban return to power after 2014 due to the Afghan government's lack of credibility, the situation would be much more complex for China. While Pakistan would work to keep the Taliban as a weak proxy power on its western border, the situation could become troublesome for China if it boiled over into a more aggressive uprising from the mainly Sunni Muslims (mostly Uighur) in western China. China would likely still try to exploit resources in Afghanistan, but that goal could be complicated by lawlessness or a break in relations due to a Uighur conflict.

Chinese Refinery in Kyrgyzstan to Reduce Russian Leverage

April 3, 2013

On April 2, 2013 Alexandros Petersen conducted an interview with Chris Rickleton, a Bishkek-based analyst and Instructor at the American University of Central Asia.

You have conducted in-depth research into Chinese plans for a refinery at Kara Balta in Kyrgyzstan. What exactly are these plans and on what sort of timetable are they to be carried out?

The refinery is already behind schedule, but is expected to be built by July of this year, and operating at full capacity by September. Local media reported some tough talk (http://www.vesti.kg/index.php?option=com_k2&view=item&id=17680:kitayskiy-npz-investiroval-v-ekonomiku-kyirgyizstana-poryadka-3-mlrd-somov&Itemid=79) in January between Chu Chan, the director of Zhongda, the Chinese state-owned firm that will run the refinery, and Kyrgyz Prime Minister Jantoro Saptybaldiyev. Saptybaldiyev was clearly very keen to see the refinery working as soon as possible and asked Chu why the facility still hadn’t been built. Chu referred to “misunderstandings” having led to the wrong equipment being delivered to the site. Chu also wanted the “sanitary zone”, which governs the distance residential homes can be from the refinery, reduced from 500 metres to 300 metres, which would have helped the company out in some of its compensation battles with local residents. When Saptybaldiyev rebuffed this offer, Chu reminded him that the company have already paid something like $4,000,000 in taxes and that they will have invested $250 million into the project by the time it is up and running.

When the two met again on March 30, things went more smoothly, and Zhongda have already begun using local media space to advertise jobs (http://yellowpages.akipress.org/idprofile:587433/) at the refinery – stressing a preference for locals who can speak some Chinese. There have been some bureaucratic delays – Zhongda bought their rights to build the refinery towards the tail end of the [former President] Bakiyev period when having your paperwork in order was of secondary importance to making a contribution to the ruling family’s coffers, so most of that has had to be done retroactively. The State Inspectorate for Environmental and Technical Safety (SIETS) has also highlighted (http://www.vb.kg/doc/214119_gostehinspekciia_obnaryjila_massovye_narysheniia_pri_stroitelstve_npz_v_kara_balte.html) numerous violations at the site, which has slowed construction down.

China is now also building a smaller scale refinery in Tokmak, another provincial town. Both Tokmak and Kara-Balta are stops along the Soviet era rail track which connects Kyrgyzstan to Kazakhstan, although the long term plan is to supply the factories via a pipeline built from Kazakhstan. Together the two are expected to create over 2,000 jobs, although whether 90% of those will be jobs for local Kyrgyz remains to be seen.

The Trillion-Dollar Bureaucrat

APRIL 2, 2013

He may be the most important central banker in the world. But is China's Zhou Xiaochuan really in charge?

The longest-serving leader of a central bank of a major world economy is not to be found in Europe, or North America, or Japan. It is a 65-year-old man named Zhou Xiaochuan who was recently reappointed to the job he has already held for a decade, namely governor of the People's Bank of China (PBOC). The surprise reappointment gives him a chance to finish the immense task on which he has labored for his adult life: no less than creating a modern financial system that can power China's booming economy forward without the crises, bubbles, and busts that have become all-too-regular features. And while he's at it, he will try to make the Chinese currency, the renminbi, as central to global commerce as the dollar is now and the pound was a century ago. And he will have to do it while exercising considerably less power than his counterparts at the world's other major central banks.

Zhou's tenure at the PBOC has coincided nicely with China's emergence as an economic power. When he took the helm of the central bank in 2002, China produced $1,135 worth of goods and services per person, in present-day dollars. By 2011, that figure had reached $5,445. Behind those numbers were hundreds of millions of people who could suddenly feed themselves reliably, endure less backbreaking work, and enjoy more of the comforts of the modern age than their parents' generation could have imagined. China passed Japan to become the world's second largest economy in 2010; it will almost certainly become the world's largest within a generation.

The work of the country's central bank, led by Zhou, has been a crucial if often overlooked part of that story, as it has helped maintain steady growth in a nation buffeted by global forces. But he has had less success in creating a financial system that can lay the ground for the next generation of growth, one in which capital flows to the businesses and projects that have the best prospects, not the best political connections. To maintain China's breakneck growth, Zhou and his successors must wrest power and influence away from the country's political leaders to build a financial system that takes full advantage of all the lessons Western central bankers have learned over the centuries. Yet they must ensure that the system they build suits a Chinese culture and economy that are quite different from those of the United States and Western Europe.

Created in 1948, the PBOC in its early decades wasn't China's central bank so much as its only bank, the state-owned financial institution responsible for making credit available to state-owned companies. In 1995, the institution was formally made the country's central bank in its modern form. Like its counterparts in most countries, the PBOC carries out a wide range of tasks for the Chinese government, including printing and circulating cash, executing the government's interest rate and foreign exchange policies, and backstopping banks. The trillions of dollars in reserves that the Chinese government holds to guard itself against ups and downs of the global economy are held in accounts at the PBOC.

Understanding Myanmar’s democratic opening

Morten B. Pedersen, UNSW, Canberra

Myanmar is in the midst of momentous political change, which has seen the country emerge from decades of repressive military rule and international isolation to be lauded by Western leaders as a model of political development.While not a democracy yet, the new quasi-civilian government has brought the opposition into parliament and revitalised the country’s political life. It has also reached ceasefires with all but one of the country’s main insurgent groups, undertaken major economic reforms, and launched a campaign for ‘clean government’.

Sceptics believe change was forced upon the military leadership by Western sanctions and fear that political foment in North Africa and the Middle East might spread to Myanmar, and that reforms are intended simply to shore up the regime and protect military interests. This line of reasoning is unconvincing, however. Myanmar’s military rulers have a proud record of resisting external pressure, which goes to the heart of their self-legitimation, and there have been no clear and present threats to the regime’s power base in recent years. Most tellingly perhaps, the recent reforms have gone much further than a conservative agenda would have warranted, and have come to pose a significant threat to many vested interests.
As in any transition, the motivations for change are complex and vary among different individuals and factions. But the new government is undertaking reform because it wants to (and can afford to), not because it had to.

Five factors in particular are critical for understanding the timing, content and speed of the ongoing reform process.First, the military’s self-image. The Tatmadaw (Myanmar’s military) has never seen itself as a ruling class. Its self-image is that of a ‘guardian’, which steps in at times of crisis to save the Union and restore law and order. In the 1970s, Ne Win ended 12 years of direct military rule by introducing a socialist one-party system. By 1988, however, the world zeitgeist had changed, and the only legitimate system of government was multiparty democracy. Thus, there was never really any doubt that the military would hand back the reins of government to a, nominally at least, elected government.

Second, security perceptions. That it took two decades for the military to transfer power to civilians was due, in large part, to a deep concern with political stability and personal security. By the late 2000s, however, both the democratic and the ethnic opposition had been decimated, and with the 2008 constitution the military had a critical tool in hand to manage the pace of change. Far from bending to external pressure, the military leaders thus entered into reform from a position of strength.

Third, leadership change. Compared to Senior General Than Shwe, who ruled Myanmar from 1992 to 2011, President Thein Sein is a very different leader. He takes advice; he is not corrupt; and he is genuinely concerned not just about the country in some abstract sense but also about the welfare of ordinary people. Along with fellow reformers like the speaker of the lower house, Shwe Mann, he has demonstrated an unprecedented willingness to reach out to old enemies and make them partners in the pursuit of peace and development.

Japan Shifts From Pacifism as Anxiety in Region Rises

April 1, 2013

United States Marines and Japanese troops in February participated in training exercises at Camp Pendleton in California.

SAN CLEMENTE ISLAND, Calif. — The Japanese soldiers in camouflage face paint and full combat gear were dropped by American helicopters onto this treeless, hilly island, and moved quickly to recapture it from an imaginary invader. To secure their victory, they called on a nearby United States warship to pound the “enemy” with gunfire that exploded in deafening thunderclaps.

The exercises, held annually, included landing on a beach and for the first time involved planning by the Japanese military.

Perhaps the most notable feature of the war games in February, called Iron Fist, was the baldness of their unspoken warning. There is only one country that Japan fears would stage an assault on one of its islands: China.

Iron Fist is one of the latest signs that Japan’s anxiety about China’s insistent claims overdisputed islands as well as North Korea’s escalating nuclear threats are pushing Japanese leaders to shift further away from the nation’s postwar pacifism.

The new assertiveness has been particularly apparent under the new prime minister, Shinzo Abe, a conservative who has increased military spending for the first time in 11 years. With China’s maritime forces staging regular demonstrations of their determination to control disputed islands in the East China Sea and North Korea’s new leader issuing daily proclamations against the United States and its allies, Mr. Abe’s calls for a bolder, stronger military are getting a warmer welcome in Japan than similar efforts in the past.

“This is a very serious rethink of Japan’s security,” said Satoshi Morimoto, defense minister in the last administration, who was an architect of changes in Japan’s defense policy.

Until recently, a simulated battle against Chinese forces would have been unthinkably provocative for Japan, which renounced the right to wage war — or even to possess a military — after its march across Asia in World War II resulted in crushing defeat. The purely defensive forces created in 1954 are still constrained from acting in too offensive a manner: last year, a smaller mock assault by Japanese and American forces on an island near Okinawa was canceled because of local opposition.

That recalculation — a large step in what analysts see as a creeping over the years toward a more robust Japanese military — could have broad implications for the power balance in the region, angering China and likely giving the United States a more involved partner in its pivot to Asia to offset China’s extended reach.

At the same time, the Japanese public has more fully embraced the once-discredited Self-Defense Forces. That is in part because of anxiety over China and North Korea, but also because of the military’s prominent humanitarian presence after the 2011 tsunami.

Although Japanese liberals and critics elsewhere in Asia fear that Mr. Abe is using regional tensions as an excuse to ram through a hawkish agenda, opinion polls show he has broad public support for his overall policies.

Would Captain Kirk Intervene in Syria?

APRIL 1, 2013

What 'Star Trek' teaches us about international relations.

From the early stirrings of modern international law in the mid-1700s, there has been a norm of military non-intervention in others' affairs -- a kind of real-world version of Star Trek's Prime Directive -- but it has been routinely violated. Beginning with Emerich de Vattel's Law of Nations (1758), continuing with John Stuart Mill's "A Few Words About Non-Intervention" (1859), and on to John Vincent's Non-Intervention and International Order (1974), a steady stream of philosophers, scholars, and statesmen have affirmed the right of nations to determine their own fates without foreign militaries coming in to settle their hash. Still, this great weight of logical argument has been overturned again and again by nations keen to intervene and spread their influence, control natural resources, or, possibly more nobly, to "improve" other peoples' lives. As the late Hedley Bull observed back in the 1980s: "[T]he gap between the rule of non-intervention and the facts of intervention [is] now so vast that the former has become a mockery."

In the decades since Professor Bull made his assessment, the United States has been one of the world's leading practitioners of intervention, often prompted by a growing willingness to use force to spread democracy. Even before George W. Bush's military misadventures in the Middle East, Bill Clinton had ratcheted up an aid mission in Somalia into an effort to tip the scales in an ongoing civil war, an intervention that ended badly on the chaotic streets of Mogadishu in 1993. The next year he ordered an invasion of Haiti -- a threat that was good enough on its own to send dictator Raoul Cedras running. Clinton also intervened twice in the Balkans, largely on humanitarian grounds -- both times only with air power, even in that pre-drone era. When it came to Rwanda, though, where nearly a million innocents were hacked to death in a few months, Clinton demurred -- an inaction that he notes in his memoirs is "his greatest regret."

Barack Obama has taken up the cudgels of intervention as well, but with much more subtlety than his immediate predecessors. In Libya, for example, he both cultivated allied participation and limited the American role to combat support. Same with Mali. Even his drone attacks on the sovereign territory of other nations have come at a slow pace -- only a few dozen have been launched this year -- and with much stealth. Now he calls for the removal of Bashar al-Assad in Syria, but he has so far limited the notion of intervening to stepped-up support for "good rebels." This is something like the position Ronald Reagan took with regard to arming the Afghan mujahideen in the 1980s -- but that action is more properly labeled a "counter-intervention," as there were over 100,000 Russian soldiers occupying Afghanistan at the time. Obama's biggest test will come over Iran, where he could argue that self-defense compels intervention to prevent nuclear weapons proliferation.

A Cyber-Survivable Military

April 3, 2013

A recent report by the Defense Science Board (DSB) proposes a comprehensive approach to improving the U.S. military’s resiliency to cyber threats. Many of its recommendations would address the cyber espionage plaguing the Department of Defense every day. But the study also considered how technologically-savvy, well-resourced states, such as China or Russia, might use cyber weapons against the United States in a war.

Within this surreal context, the DSB’s prescriptions are sensible: the United States should ensure that its nuclear forces and a portion of its conventional-strike forces would function after a sophisticated cyber attack on U.S. military networks. For example, China might disrupt the networks linking U.S. forces, weapon, and satellites, or it might corrupt the programs operating these complex systems. If effective, these attacks would make the U.S. military much less capable by undermining communication, intelligence, surveillance and reconnaissance operations, navigation and precision strikes. Of course, China and any other state capable of executing such an attack would only do so during or on the cusp of a full-scale military confrontation, probably to achieve a strategic advantage in the physical world. Whereas otherwise the risks of conventional war with the United States would be too high, the potential for high-payoff cyber attacks may give adversary leaders confidence they can prevail in a short conflict or perhaps even deter U.S. officials from intervening altogether.

Denying them the ability to incapacitate U.S. forces via cyber attacks would, theoretically at least, thwart their strategy of fighting a significantly weakened U.S. military. Forces capable of functioning after a cyber attack would thus contribute to the broader goal of deterring major powers from risking war with the United States.

With that in mind, ensuring that other states are incapable of disrupting or manipulating the U.S. nuclear arsenal (especially its command, control, and communication system, through the insertion of malicious code) is a prudent policy goal. We should not let the DSB’s more controversial argument—the threat of a nuclear retaliation may deter a catastrophic cyber attack on the United States—overshadow it. The members of the study appear to have anticipated that possibility, explaining that cyber-survivability is an essential characteristic of the U.S. nuclear posture, regardless of whether the United States would or should explicitly threaten or launch a nuclear strike after a cyber attack.