Tag Archives: IMF

World

Gwadar Military Base a reality: CPEC not Benign

Leave a comment

Major General S B Asthana,SM,VSM

China’s handing over of two combat ships to Pakistan on January 14, 2017, for ‘safety of Gwadar Port’ (Dawn, 15 January,2017) and later the headline was changed to ‘for Maritime Security’, on clarification from Pakistan Maritime Security Agency. It opens a new line of argument, which China has been avoiding to commit so far, that the project is not as benign as China has been claiming it to be, and its conversion to a military base, besides commercial hub is a matter of time.  With arrival of first Chinese commercial ship at Gwadar port on 11 November 2016, sailing of two container ships from there on 13 November, preceded by a Chinese trade convoy reaching there through land route from Xinjiang, carrying exports for Asian, Gulf and other countries, a formal signaling of the 3218 km long China Pakistan Economic Corridor (CPEC) project commencing to be a potential reality is evident. Pakistan was overjoyed to advertise a windfall of economic bounty, was very quick to announce the Chinese Naval deployment in Gwadar, and over assured presence of Chinese military to secure their Lines of Communication and related SLOC, with release of such statements. (The Times of India, 26 and 27 November 2016). Pakistan was also quick to announce the Russians request to use Gwadar Port (Geo News), although Russian media later denied it. The Chinese on the other hand, seem to be trying hard to convince everyone that CPEC and Gwadar port are purely developmental, integrative, economical activities with no military intent. China seems to be adopting step by step approach, by testing the water, without ignoring the potential security concerns. Both these countries know it well that it is not going to be that easy, as it is made out to be. It also raises some concerns for India by re-igniting its sovereignty issue of POK and recalibrating Indian response in potential conflict, assuming Chinese presence in Pakistan. It also signals encroachment of China into historic strategic space of US, who cannot dump Pakistan completely due to its strategic location, and usefulness for having a foothold in Middle-East, although no significant statement has appeared from President-elect Donald Trump on this specific issue.


The $46bn CPEC  does provide connectivity from Kashgar to Gwadar, warm water access to Western region of China, avoiding Malacca and other choke point for her energy and trade flow, outlet to its over-capacities and trade surpluses, and development of its Western Region. It helps Pakistan in their economic development, with heavy investments and meeting critical energy shortages. Strategically, it clearly indicates China’s effort to seek security in Xinjiang through economic development, hoping that it will help in tackling insurgency by Uyghur related militant groups (especially militants taking refuge inside Pakistan like ETIM, working in conjunction with TTP and other militant groups). Although China, Pakistan and world media have published numerous articles on CPEC, highlighting its economic and developmental potential and airing some security concerns of CPEC, however, in the recent past the realistic realization of the actual problems and concerns are being aired by various authors, think-tank’s and global organizations including that of  China and Pakistan. Let me highlight some of them including military impact of the project on India.
Concerns of Pakistan
• IMF calculates that CPEC will push Pakistan into greater debt burden/trap to reach a current account deficit of approximately 1.5 Percent of its GDP. In case Pakistan fails to repay loans, China can take the ownership of the projects.
• China is not gifting money. The infrastructure will be built by its own companies using their own workers (sending revenue back to China, hence limited jobs and no significant economic bounty generated for Pakistan), and the energy produced may be too costly to be affordable by average Pakistanis.
• The dream of SEZ may remain on paper due to peculiar governance system of Pakistan, like there is no drinking water in areas around Gwadar supposed to be a SEZ, indicating the priorities of China. Such incidents do ignite resentment in Baluchistan, besides threatening crucial projects like railways through it. Declan Walsh in his article Pakistan’s secret dirty war (Guardian), has highlighted the atrocities of Baluchis by Pakistan Army since quite some time, but the recent outburst of Baluchis, and military operations of Pakistan leading to selective killings of people opposing CPEC, as highlighted by world media, definitely is leading to the belief of local population that SEZ is nowhere in sight, and CPEC is going to benefit few powerful variety of people who are Punjab centric.
• Providing double the number of security personnel to increasing number of Chinese workers may not be sustainable in the long run. The commitment of their critical combat resources like Marine Squadron on security duties in Gwadar and SSG on CPEC not being sustainable, is also a concern.
• Unrest in Baluchistan, Gilgit-Baltistan and activation of militant groups opposing any foreign elements in Pakistan, as it disturbs their Jihadist freedom and terror industry.
• Facing the collective wrath of US and India, internal political opposition (neglected population calling it China-Punjab Economic Corridor) and militant groups, vis a vis the anticipated gains is questionable.
Concerns of China
• Some of the projects may not be economically viable, e.g. the consumption of oil in Western region may not be sufficient to make an oil pipeline economically viable. Its transportation by land to mainland over rough terrain may work out to be costlier than old sea route.
• Reactivation of Uyghur related militancy in conjunction with other militant groups inside Pakistan, inimical to any foreign presence. After all some militant groups earlier nurtured by Pakistan are regularly attacking their own Army, hence assurance of Security by Pakistan cannot be relied upon. The recent incident of withdrawal of all passports of residents of Xinjiang may add fuel to fire.
• China also needs to be concerned about the sustainability of the project in terms of cost to its own security. The policy of appeasement of some militant groups like JeM does not work for long time with militants, who are uncontrollable demons, ready to bite their own sponsors. They follow their own interests, dynamics and sympathies for their Uyghur community, which may not coincide with interests of China. Once they start shooting Chinese, China will realize the dynamics of entering a new kind of warfare, just as US realized after 9/11. China needs to worry about expansion of militancy into its mainland as a result of CPEC-Gwadar adventure, because fidayeens, who are mentally prepared to die, are not easy to deal with.
• A possible US reaction to encroachment of China into some of their strategic space, and disturbing the fine equilibrium with them in using Pakistani territory for their strategic gains by both of them, without undue clash. China has made best use of pre and post election period in US, when bold decisions from US were not expected, to increase her strategic influence, but it may not be that rosy always.
• Potential of US and India to actively pursue their concerns, which may hamper success and sustainability of this project. The sovereignty issue of India over POK is being voiced much more, after CPEC plans were rolled out, with a new set of sentiments to take back POK.
• In case of hostilities, Gwadar may well prove to be a vulnerability for China rather than strength, as PLA Navy in near future may not have the combat power to take on entire hostile environment from East China Sea, South China Sea, Indian Ocean and Arabian Sea together. Chinese presence in Gwadar does not make it immune to blockade by other powers, although the other scenario based implications may have to be thought through by anyone trying such action.
Is there a Need for India to be concerned?
• Improving economic potential/opportunities, development and its trade prospects is a sovereign right of every country and to that extent, if CPEC and Gwadar improve these prospects for China, Pakistan, Iran, Turkmenistan, and possibly Russia, India has no reason to be concerned about it, but if its aligned to pass through Indian sovereign territory without its consent, then India has every reason to be concerned about it.
• India has no reason to worry as it is well used to China developing infrastructure in its neighborhood to include Nepal, Bangladesh, Myanmar and Srilanka, therefore such developments in Pakistan can be taken in a stride, but infrastructure  being a dual use facility (civil and Military) facilitates military deployment, hence India needs to calibrate her policies.
• The competition for strategic space in Asia-Pacific is a reality and US, China and India cannot ignore it. Indian concern of Sovereignty over POK needs to be addressed, because in absence of such efforts, Indian voices for taking back POK may gain momentum.
• The strategic and military options of India against Pakistan, for counter-militancy operations will have to cater for Chinese presence, and the effect on their trade, however considering their “All weather friendship” the possibility of their collusive reaction is not new for India, and has to be planned as such.
• India will have to cater for the maritime military balance in view of China handing over combat ship to Pakistan, amounting to signaling about developing  of Gwadar as a military base, strengthening Pakistan maritime capability, with a view to dominate Gulf and Indian Ocean. India will have to develop its maritime capability with similar pace, if not more.

The author is Chief Instructor, USI of India

References
http://www.dawn.com/news/1308491
https://www.theguardian.com/world/2011/mar/29/balochistan-pakistans-secret-dirty-war
Daniel S. Markey and James West (2016), Behind China’s Gambit in Pakistan, Council on Foreign Relations, May 12, 2016.     http://www.cfr.org/region/pakistan/ri246
Akber Ali (2016), China Pakistan Economic Corridor: Prospects and Challenges for Regional Integration,School of Journalism & Communication, Shanghai University, China. http://www. -2151-6200 omicsonline.com/open-access/china-pakistan-economic-corridor-prospects-and-challenges-for-regionalintegration -1000204.php?aid=77852
Ian Price (2016), Is the US Trying to Sabotage the China-Pakistan Economic Corridor? The Diplomat, September 29, 2016. http://thediplomat.com/2016/09/is-the-us-trying-to-sabotage-the-china-pakistan-economic-corridor/

World

IMF admits China’s Yuan into its currency basket

Leave a comment

Newsroom24x7 Desk

SDRWashington, DC : The International Monetary Fund (IMF) admitted China’s Yuan into its benchmark currency basket and gave China’s currency a prized reserve asset status. This came in as a successful culmination of Beijing’s campaign for recognition as a global economic power and rendered Beijing’s endeavors victorious. The decision to add the Yuan, also known as the renminbi, to the Special Drawing Rights (SDR) basket alongside the Dollar, Euro, Pound Sterling and Yen, is an important milestone in China’s integration into global finances and a nod to the progress it has made with reforms. China thus has been able to carve a niche seat within the currency basket of global platform, and therefore, Yuan is now poised to equate itself at levels parallel to the likes of Dollar, Euro, Pound Sterling and Yen.

Beijing had worked hard towards meeting the IMF’s criteria. for this, Beijing had undertaken a variety of appropriate reforms in recent months, namely — making Chinese currency markets more friendly for access by foreigners, detailed debt issuance on a more frequent basis and increasing trade timings for currency trading which resulted in expanded Yuan trading hours.

IMF chief Christine Lagarde, who along with in-house experts had previously given her support for the inclusion, made it clear she did not expect Beijing to stop there. She said — The renminbi’s inclusion in the SDR is a clear indication of the reforms that have been implemented and will continue to be implemented.

People’s Bank of China said the move, which was backed by countries including the United States, Britain and Japan, showed the willingness of inclusion by international community; and the expectations arising out of this inclusion in terms of China now getting an opportunity to cast a bigger role in world economy. A statement released from their offices read — Going forward, China will continue to deepen and accelerate economic reforms and financial opening up, and contribute to promoting world economic growth, safeguarding financial stability and improving global economic governance.

PBOC’s vice governor Yi Gang said he expected that inclusion would make Yuan more stable and would serve as a stabilizer in preventing it from further devalueation, contrary to beliefs of one class of traders.

Yuan will have a 10.92 percent share, in line with expectations, after a review of weightings formula for SDR that also cut euro’s share by more than 6 percentage points. To be included in the SDR basket, the Yuan had to meet the criteria of ‘freely usable’ currency cadre, meaning to say — to be able to widely be used for making international payments and widely traded in foreign exchange markets — these were few yardsticks China could not tick upon and ended missing out of the last review in 2010.

The yuan’s inclusion from October 2016 is largely symbolic, with few immediate implications for financial markets. But it is the first time an additional currency has been added to the SDR basket, which determines which currencies countries can receive as part of IMF loans.

China’s response from the economy perspective stands at an elated ground of inclusive growth. China views this decision as a landmark recognition of its increased role in global economy. China believed that the Chinese Yuan clearly deserved a place in that grouping. China is world’s second-biggest economy and top trader, and its currency is liquid and stable enough to serve as a store of value, according to Chinese press agencies.

World

Obama’s budget request for 2016: Critical investments in diplomacy and development

Leave a comment
Newsroom24x7 Desk
Heather Higginbottom, Deputy Secretary of State for Management and Resources and Rajiv Shah Administrator of the U.S. Agency for International Development , Washington, DC February 2, 2015
Heather Higginbottom, Deputy Secretary of State for Management and Resources and Rajiv Shah Administrator of the U.S. Agency for International Development ,Washington, DC, February 2, 2015

Washington DC, Feb. 3: US President Obama released his Fiscal Year 2016 Budget requests that include critical investments in diplomacy and development to “secure peace and stability for the American people, strengthen the U.S. economy and global markets, and support U.S. citizens and diplomatic and development presence overseas.

Two weeks ago, in his State of the Union Address, President Obama had said, “If there’s one thing this new century has taught us, it’s that we cannot separate our work at home from the challenges beyond our shores.”

 Obama’s Budget for Fiscal Year 2016

Middle Class Economics: The President’s Fiscal Year 2016 Budget

US President Barack Obama

US President’s 2016 Budget is designed to “bring middle class economics into the 21st Century.

This Budget shows what we can do if we invest in America’s future and commit to an economy that rewards hard work, generates rising incomes, and allows everyone to share in the prosperity of a growing America. It lays out a strategy to strengthen our middle class and help America’s hard-working families get ahead in a time of relentless economic and technological change. And it makes the critical investments needed to accelerate and sustain economic growth in the long run, including in research, education, training, and infrastructure.

These proposals will help working families feel more secure with paychecks that go further, help American workers upgrade their skills so they can compete for higher-paying jobs, and help create the conditions for our businesses to keep generating good new jobs for our workers to fill, while also fulfilling our most basic responsibility to keep Americans safe. We will make these investments, and end the harmful spending cuts known as sequestration, by cutting inefficient spending and reforming our broken tax code to make sure everyone pays their fair share. We can do all this while also putting our Nation on a more sustainable fiscal path. The Budget achieves about $1.8 trillion in deficit reduction, primarily from reforms to health programs, our tax code, and immigration.

 

Briefing media-persons here Heather Higginbottom, US Deputy Secretary of State for Management and Resources, said State and USAID budget request totals $50.3 billion, which is roughly 1 percent of the federal budget. Our base budget request is $43.2 billion. This will allow us to address ongoing and emerging national security challenges, carry out our global diplomatic and development mission, advance the President’s signature policy and development initiatives, honor our security commitments to allies and partners, and carry out conflict prevention, nonproliferation, and peacekeeping activities around the world. We’ve also requested $7 billion in Overseas Contingency Operations funds to respond to immediate and extraordinary national security requirements. OCO funds will support critical programs and operations in Afghanistan, Pakistan, and Iraq, as well as exceptional costs related to our efforts to fight ISIL, respond to the conflict in Syria, and support Ukraine.

Ms. Higginbottom said: “These funds will address the underlying social, governance, and economic factors in Central America that drove last year’s crisis in unaccompanied migration – child migration, while helping Mexico secure its southern border. Our goal is to partner with our neighbors in Central America to mitigate these underlying factors before their youth risk the dangerous journey north and arrive at our border.”

For Afghanistan, the budgetary request includes $1.5 billion in assistance, which will support the Afghan unity government as it strives to implement key reforms, improve its economy, and work with us on shared security issues. Our budget request also provides $963 million to secure and support embassy operations, including $125 million to harden Embassy Kabul, all of which will enable a significant reduction in our military presence. With a new, reform-minded Afghan Government in place, we have the opportunity to solidify the progress we have made in Afghanistan over the last decade. Our request continues the security, economic, and civilian programs necessary to do so.

As part of the Administration’s collaboration with coalition partners to degrade and ultimately destroy ISIL, the request includes $3.5 billion to strengthen regional partners, provide humanitarian assistance, and strengthen Syria’s moderate opposition to advance the conditions for a negotiated political transition. The request also includes an additional $1.1 billion to support diplomatic engagement with Iraq to sustain our strategic partnership.

Last year at West Point, Ms. Higginbottom said, President Obama announced the creation of a Counterterrorism Partnerships Fund that will enable us to train, build capacity, and help facilitate partner countries on the front lines against terrorism. Our request includes $390 million to support the CTPF through security and stabilization assistance and through efforts to counter violent extremism and terrorist ideology.

The budget also includes vital support for Ukraine to counter Russian pressure and aggressive actions. This includes $275 million to support an additional loan guarantee of up to $1 billion if Ukraine continues to make progress on its IMF program and if other conditions warrant. Our request also provides support for democracy and anti-corruption measures, European integration, energy security, and public diplomacy strategies to counter Russian propaganda throughout Europe and Central Asia.

The request also provides over $5 billion for international organizations and peacekeeping efforts. These funds strengthen our strategic relationships across the globe and enable us to advance global security while sharing the burden with other nations. Our assessed contribution supports 17 UN peacekeeping missions in Africa and the Middle East and satisfy U.S. obligations to the UN and 44 other organizations.

At the same time, the request will address urgent and growing humanitarian needs around the world. We are now facing four large-scale crises in Syria, South Sudan, the Central African Republic, and Iraq. To address this unprecedented challenge, we are seeking a total of $5.6 billion in humanitarian funding.

Shifting gears a bit, according to Ms.Higginbottom, the US is investing over $800 million in clean energy, sustainable landscapes, and adaptation through the Global Climate Change Initiative. This includes $350 million of a State Department contribution to the Green Climate Fund, a new multilateral fund that will help developing countries gain access to public and private finance to invest in reducing carbon pollution and strengthening resilience to climate change.

Rajiv Shah, Administrator of the U.S. Agency for International Development said on this occasion that over the last years, investments have been refocssed to make sure that work is done in such a way that over time, our aid and assistance is no longer necessary, where self-sufficiency can replace the need for outside assistance. The President’s budget request this year includes $22.3 billion that USAID. These critical resources will allow the US to advance the country’s interests in a far-ranging set of contexts. By leveraging public-private partnerships and harnessing the power of technology, science, and innovation, the US will now able to deliver clear, focused, and measurable results with these resources, he added.

When I started five years ago, Mr. shah said, just 8 percent of USAID’s global investment focused on public-private partnerships. Today, it’s about 40 percent and the 2016 budget request will take that number to 46 percent. Nowhere has this focus on delivering real, measurable results been more significant than in our work in global health. The foreign assistance budget includes $8.2 billion for funding for global health, including HIV/AIDS, malaria, child and maternal survival, and a broad range of programs that tackle neglected tropical diseases, including Ebola.

Mr. Shah pointed out that these resources underscore our commitment to helping to realize the goal of ensuring that every child survives until the age of five and thrives beyond that timeframe. To achieve this goal, we’ve already narrowed our focus of investment in our Child Survival program to 24 countries that account for 70 percent of under-five child deaths and maternal deaths. As a result, in the past two years alone in those countries, we’ve delivered an 8 percent reduction in child mortality, more than doubling the baseline rate of reduction in child deaths.