View from Abroad: Europe and the new world order (Originally published 11/07/2015 at dawn.com)
Entangled in the Greek debt crisis, few European policymakers had the time or interest this week to pay attention to the summit talks in the Russian city of Ufa between the leaders of Brazil, Russia, India, China and South Africa (BRICS).True, Europe has its hands full with Greece and the looming possibility of a Greek exit from the Eurozone. But the world doesn’t stop for Europe. And pretending that the BRICS and their self-confident leaders don’t matter — or matter little — is not an option.Discussions about the rapidly-transforming world, the role and influence of the BRICS and Europe’s relations with the emerging powers appear to be off the European Union agenda. For now, the focus is rightly on the existential threat posed by Grexit, the acrimony the Greek crisis has triggered across the EU and the worsening relationship among Eurozone leaders.Solving the Greek problem should of course take priority. But Europeans know that more is at stake. Italy’s Prime Minister Matteo Renzi has so far been most vocal in signalling his fears that the fury unleashed by the difficulties in Greece is damaging the very existence of the EU. But this thought is also in many other minds. If Europe can’t get its house in order, it really does run the risk of becoming irrelevant on an increasingly crowded global stage.For the moment, most Europeans seem to fall into two categories: those who fear the rapidly-changing world order and the increasingly long list of nations clamouring for a stronger role on the world stage and those who hope that if they look the other way, firm up their bonds with the United States, the world won’t change too much and the BRICS will gradually fade away.There are some, wiser, people in the middle: they may not be enthusiastic about the changes being made to the global status quo; but they also know that times are changing fast and that Europe needs to adapt, adjust and accommodate.It was on the advice of such people that despite strong pressure from the US not to do so, several EU countries decided to join the Asian Infrastructure Investment Bank (AIIB) set up by China.While many Europeans voice fear that China is “buying up” European assets, cooler heads are urging the EU to join forces with China’s ambitious ‘One Belt, One Road’ transport networks to boost domestic growth and jobs.Similar arguments for and against cooperating with emerging nations are likely to come to the fore as Europeans discuss membership of the New Development Bank (NDB) being set up by the BRICS to fund projects in member countries.Headquartered in Shanghai, the bank is expected to be operational by end of 2015. Once fully operational, it will become an alternative financing source for the BRICS nations and other emerging markets.Like the head of the AIIB, the first chief of the BRICS bank, India’s K. V. Kamath has been quoted as saying that the NDB sees other multilateral lending institutions such as the International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB) as partners rather than rivals.And yet many continue to be suspicious. The US and Japan have not yet joined the AIIB and many EU policymakers continue to voice fears that the new banks will fall short of high Western standards of transparency and accountability.The BRICS have made clear that they don’t really care. The Old Guard is welcome to come on board, but the world is moving on and they won’t stop for the laggards.Russia, given its tense relations with the West following the crisis in Ukraine and the annexation of Crimea, has taken the toughest line in its dealing with Europe and America. As Foreign Minister Sergei Lavrov underlined in Ufa, emerging nations represent a “new polycentric system of international relations” and demonstrate new global centres of power.As he shook hands with his Chinese, Indian, South African and Brazilian counterparts, a beaming Russian President Vladimir Putin made clear that he was far from the sad and isolated man that the West wants him to be.And it’s not just about the BRICS. An array of newly-empowered nations and groupings are challenging Europe and America’s dominance of the post World War II order. Mexico, Indonesia, Korea, Turkey and Australia are part of MIKTA which claims to act as a bridge between old and new powers.New Zealand says it is the champion of “small nations” without whose support nothing can be achieved on the global stage. The Group of 20 remains relevant as a forum which brings together industrialised and emerging countries.And then there is also the Shanghai Cooperation Organisation (SCO) which EU and Nato policymakers also tend to shrug off as an impotent “paper tiger”.They shouldn’t. As India and Pakistan set out on the road to membership of the SCO, it is clear that while the security organisation does not see itself as a rival to Nato, it does intend to make its voice heard on global security challenges.Underlining just how significantly the world has changed, the five BRICS countries and the six SCO members which include China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan — joined by India, Pakistan, Afghanistan, Iran and Mongolia which have observer status — held a joint summit in Ufa.The Greek crisis was on the BRICS agenda of course. While Europe may not like the new world out there, emerging nations know that in an interconnected and interdependent world, what happens in Europe affects them. And that a failed Europe is in nobody’s interest.
View from abroad : Transatlantic alliance: fact and fiction (Originally published 21/03/2015 at dawn.com)
So here’s the fiction: America and Europe stand united against the “rest of the world”. The transatlantic alliance is strong, solid and a bulwark against the machinations of China and the world’s other emerging nations.Washington and Brussels are like-minded, like-thinking entities which see eye to eye on almost everything. Together, they can still rule the world.Perhaps in the 20th century — but no longer. Here are the facts: the world has changed from unipolar to multi-polar or even “no-polar”. For all its military might, the US no longer rules the world. For proof, look no further than the way Israeli Prime Minister Benyamin Netanyahu is obstructing progress on US-Iran nuclear talks.And here are some more facts: America and the EU are divided over the death penalty, Guantanamo Bay, illegal renditions, the use of torture and the revelations of spying by the National Security Agency as revealed by Edward Snowden.They disagree over how to deal with Russia and Ukraine. And while America sees China mainly as a strategic competitor, Europe is happy to work with Beijing on tackling many 21st century challenges.Certainly, there are some points of convergence. Significantly, negotiations are underway on a Transatlantic Trade and Investment Partnership (TTIP), seen by many as the last attempt by a declining West to impose its economic rule-making model on a watching world.But even as they seek agreement on TTIP, many European states are posing the BIGGEST challenge to the US by deciding to join the Chinese-led, Chinese-inspired $50 billion Asia Infrastructure Investment Bank (AIIB) which Washington continues to firmly oppose.So far, EU members Britain, France, Germany and Italy have said they want to be founding members of the AIIB. But other Europeans will undoubtedly join their ranks.The story is not just about Washington vs Beijing; it’s about a changing world order, the shift of power from west to east, the rise of China and its challenge to years of US domination.It’s about the need to change and reform post-World War II multilateral institutions, including the World Bank and the International Monetary Fund.And it’s about a world desperately in need of cash, especially for badly-needed infrastructure projects — and a rising China which has more money than it can handle.To be fair, US Secretary of Treasury Jack Lew has said that the US was not opposed to the creation of the AIIB. “There are obviously vast needs in Asia and many parts of the world for infrastructure investment,” he told a Congressional hearing on the status of the international financial system.The US concern, he said, has always been whether such an international investment bank will adhere to the high standards such as in protecting workers’ rights, the environment and dealing properly with corruption issues.The bank, proposed by President Xi Jinping in 2013 during a visit to Indonesia, is expected to be launched formally by the end of this year.All Asian countries can apply to become founding members until March 31.Chinese experts say they are looking less for European financial support and more for Europe’s management experience to share with the AIIB.France, Germany and Italy announced they would join the Bank after Britain said it was doing so last week. Australia, a key US ally in the Asia-Pacific region which had come under pressure from Washington to stay out of the new bank, has also said that it will now rethink that position. South Korea is also expected to join.Other European countries are expected to follow the bigger EU nations’ lead. And why not? Like most Asian countries, Europeans are looking to invest in new infrastructure to raise levels of connectivity across the continent.Policymakers are hoping that China will be an important contributor to the 300 billion dollar infrastructure fund announced earlier this year by European Commission President Jean-Claude Juncker.Britain hopes to establish itself as the number one destination for Chinese investment. China is also a strong investor in Germany and in France.Analysts point out that the US has misplayed its hands and that the best way to ensure that China doesn’t dominate the AIIB is to fill it with other powers. This, they argue would result in much stricter governance rules and safeguards.The AIIB is not the only regional project China has proposed that Washington will have to grapple with. Beijing’s “one belt, one road” Silk Road projects are moving rapidly from theoretical to actual, much to the dismay of America and some European states.The Asian Development Bank has estimated Asia’s infrastructure needs at $750 billion a year, far beyond the ADB’s capacity. With connectivity the buzzword across the region, the new Bank is expected to be very busy pumping money into major infrastructure projects.China has also been quick to respond to huge and acute infrastructure needs in the developing world, in contrast with the lengthy project processes required by other lenders.In response to the Chinese initiatives, the Japanese government has also said it wants to focus on infrastructure projects in developing countries.World leaders at the G20 Summit in Brisbane in 2014 recognised infrastructure demand in the developing world as a new source of global growth in the aftermath of the global financial crisis.The transatlantic trade deal may see the light of the day by end-2015 — even though negotiations are tough and public resistance to the pact is high. But even if they do clinch an agreement on trade, America and Europe will not always share a similar vision of life in a rapidly-changing 21st century.
"Quality of life" demands attention of China’s new leaders (Originally published 12/03/13)
Quality of growth, not just numbersHowever, the next decade is going to be about the quality of growth, not just numbers. Responding to pressure from the public, China’s new leaders have vowed to fight corruption, narrow the urban-rural income divide, improve the lives of China’s “urban billion” and tackle environmental problems.They will also focus on meeting the aspirations of China’s growing middle class, which wants quality-of-life improvements such as a cleaner environment, higher food-safety standards, water security, and social protection."We should unwaveringly combat corruption, strengthen political integrity, establish institutions to end the excessive concentration of power and lack of checks on power and ensure that officials are honest, government is clean and political affairs are handled with integrity," said outgoing premier Wen Jiabao at his farewell speech to the National People’s Congress.Wen enumerated major domestic challenges that have caused public discontent in recent years - air pollution, toxic factories, tainted food and abuses of power - and pledged more resources to environmental protection and public welfare.His speech was a tacit admission that quality of life had been sidelined by a focus on breakneck economic growth. The question facing President Xi and Premier Li will be to ensure high rates of growth while also addressing environmental concerns.Clean governmentAs Qin Xiaoying of the China Foundation for International and Strategic Studies (CFISS) wrote recently in China Daily, “while people struggled to get sufficient food and clothing during the Deng Xiaoping era…people today probably want rule of law and a democratic living space more ardently than people have at any time before in the country's history.”He adds that the people “want a clean government that is more self-disciplined and responsible, and more efficient in social administration. In addition, they wish for greater safety secured through legislation and law enforcement; greater happiness through completion of the social insurance system; greater dignity gained through the relentless punishment of corrupt officials and the promotion of equality and justice; and greater identity with the international community, established through rational broadening of governmental, nongovernmental, economic, trade, military and diplomatic channels.”In order to deliver on these and other public demands, China’s leaders must try and rebalance the economy by shifting from exports and labour-intensive manufacturing to growth based on domestic demand and innovation.Middle Income TrapThe Asian Development Bank (ADB) has warned that China risks being caught in the middle-income trap, an economic situation where a developing country attains a certain income but remains stuck at that level, usually because of rising wages and falling cost competitiveness.The ADB advises investing in technology, promoting innovation by the private sector and loosening the state’s control over the financial sector. In addition, it says, China should expand its service sector, speed up urbanisation, and try to reduce income inequality so that ordinary people benefit more from economic growth.Clearly while China used to focus on constructing factories, roads and bridges; it must now devote as much time, money and attention on improving its education system and encouraging innovation.Urbanisation is a key driver of China’s modernisation – and is also expected to spur growth. More than 50% of China’s total population now lives in cities, compared to less than 20% in 1980.The urban economy will continue to be a “huge engine” of China’s economic growth, spurring domestic consumption and generating over 90% of China’s GDP by 2025, says Li Keqiang who is known as a “champion” of urbanisation.“Urban billion”“Urbanisation is not about simply increasing the number of urban residents or expanding the area of cities,” Li said in a recent article in People’s Daily. “More importantly, it’s about a complete change from rural to urban style in terms of industry structure, employment, living environment and social security.”However, China’s “urban billion” pose a number of urgent challenges to the new leaders who must take action to integrate migrant workers into urban life, ensure sufficient public funding for social services, work for a pollution-free environment and improve water and waste management. Regulation of the real estate sector is also urgently needed.A key – and divisive - challenge facing the new leaders is to give rural migrants and their families the same opportunities in cities as other urban inhabitants. Changes in the Hukou system under which rural migrants have limited access to local social services enjoyed by urban residents will not come easy. The new leaders have, however, suggested the introduction of a system of national resident permits.Seeking to counter public anger over corruption, Xi Jinping has declared a ban on official extravagance and banished some of the usual pomp from this year's gathering of the National People's Congress.It will be much tougher, however, to pass laws forcing government officials and their family members to declare their assets and financial activities. Action is needed however: The lavish lifestyles of some officials - who often drive luxury cars, own multiple villas and send their children to elite foreign universities – are much hated by the public and have become a source of strong public discontent.Ageing before becoming richAs a result of advances in healthcare and nutrition, combined with the one child policy and very low fertility rates, China is one of a small number of countries in which the population has aged before it has become rich. An estimated 14% of the Chinese population is aged 60 or above and the country is expected to count some 400 million people (or about one-third of the population) over 60 year by 2050.Foreign policy poses another headache: China's new leaders will have to contend with an increasingly fraught relationship with the US and their Asian neighbours. The recent announcement of a 10.7% increase in defence budget to 115.7 billion dollars has increased regional concerns about Beijing’s military spending, especially in view of tensions in the East and South China Seas.Beijing is also under pressure to take on “international responsibilities” by joining the Western consensus on tougher action against North Korea, Iran and Syria.Both the new president and premier are experienced party officials who can be expected to navigate the sometimes-choppy waters ahead with skill and creativity. Given the scale of the tasks ahead, China's new leaders will also have to be especially nimble and fleet-footed to adapt to emergencies relating to public discontent on quality of life issues, including the environment.