Asia’s New Geopolitics Takes Shape Around India, Japan, and Australia

Japan, India, and Australia will be instrumental in determining Asia’s fate in the 21st century.

By Harsh V. Pant

July 28, 2015

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New configurations in Asian geopolitics are emerging thick and fast. Last month saw the initiative of a new trilateral involving India, Japan, and Australia when Indian Foreign Secretary S. Jaishankar met his Australian counterpart and the Japanese vice foreign minister. Japan will also be a part of bilateral India-U.S. annual naval exercises–the Malabar–slated to be held over the next few months. Though Japan has participated in these exercises in the past as well, this will be only the second time when Japan will join these exercises in the geostrategically critical Indian Ocean region.

There is a growing convergence in the region now that the strategic framework of the Indo-Pacific remains the best way forward to manage the rapidly shifting contours of Asia. Proposed first by Japan and adopted with enthusiasm by Australia under the Tony Abbott government, in particular, the framework has gained considerable currency, with even the U.S. now increasingly articulating the need for it. Though China views the framework with suspicion, many in China are acknowledging that the Indo-Pacific has emerged as a critical regional space for India and China needs to synchronize its policies across the Indian Ocean region and the Pacific.

These developments underscore the changing regional configuration in the Indo-Pacific on account of China’s aggressive foreign policy posture as well as a new seriousness in India’s own China policy. Indian Prime Minister Narendra Modi’s outreach to Japan and Australia has been a significant part of his government’s foreign policy so far as strong security ties with Tokyo and Canberra are now viewed as vital by Delhi.

China’s increasing diplomatic and economic influence, coupled with domestic nationalistic demands, has led to an adjustment of its military power and the adoption of a bolder and more proactive foreign policy. From China’s unilateral decision in 2013 to extend its air defense identification zone (ADIZ) over a contested maritime area in the East China Sea overlapping with the already existing Japanese ADIZ to announcing new fishing regulations for Hainan province in January 2014 to ensure that all foreign vessels need fishing permits from Hainan authorities to operate in more than half of South China Sea, the list of assertive moves has been growing in recent years. China’s land reclamation work in the Spratly Islands has been the most dramatic affirmation of Beijing’s desire to change the ground realities in the region in its favor. This has generated apprehensions about a growing void in the region to balance China’s growing dominance.

With the U.S. consumed by its own domestic vulnerabilities and never ending crises in the Middle East, regional powers such as India, Japan, and Australia have been more proactive than in the past in managing this turbulence. The new trilaterals emerging in Asia go beyond past attempts at rudimentary joint military exercises. In December 2013, the Japanese Maritime Self-Defense Force (JMSDF) conducted its first bilateral maritime exercise with the Indian Navy in the Indian Ocean Region. With growing strategic convergence between the two, in 2014 India invited the JMSDF to participate in the annual Malabar exercises with the U.S. Navy in the Pacific waters.

India and Japan have an institutionalized trilateral strategic dialogue partnership with the United States, initiated in 2011. Maintaining a balance of power in the Asian-Pacific as well as maritime security in the Indo-Pacific waters has become an important element of this dialogue. A similar dialogue exists between the U.S., Japan, and Australia. And now a new trilateral involving India, Japan, and Australia has joined these initiatives, which can potentially to transform into a ‘quad’ of democracies in the Indo-Pacific region. The roots of this potential partnership were laid as early as late-2004, when navies from the U.S., India, Japan, and Australia collaborated in tsunami relief operations all across the Indian Ocean.

Japan was one of the earliest vocal supporters of such initiatives. In 2007, Japanese Prime Minister Shinzo Abe, in his earlier stint as prime minister, lobbied for Asia’s democracies to come together in a ‘quadrilateral.’ This was also actively supported by the United States. Such an initiative resulted in a five nation naval exercise in Bay of Bengal in September 2007. However, China, perceiving a possible ganging-up of Asia’s democracies, issued demarches to New Delhi and Canberra, causing this initiative to lose steam, since both Australia and New Delhi felt it unwise to provoke China. However, as China becomes more aggressive in the region, there are signs that India and Australia may be warming up to the idea again.

The uncertainty of Chinese power and intentions in the region as well as the future of American commitment to maintaining the balance of power in Asia rank high in the strategic thinking of regional powers. This rapidly evolving regional geopolitics is forcing Asia’s middle powers – India, Japan and Australia – to devise alternative strategies for balancing China. Though still continuing their security partnership with the United States, these powers are actively hedging against the possibility of America’s failure to eventually balance China’s growing power. Asia’s geopolitical space is undergoing a transformation. While China’s rise is the biggest story still unfolding, other powers are also recalibrating and their influence will be of equal, if not greater, consequence in shaping the future of global politics in the Asia-Pacific.

Modi's More Muscular Foreign Policy?

 
 

Sumit Ganguly believes that Narendra Modi’s new approach to dealing with Pakistan has three distinct elements – 1) working with India’s other neighbors to put pressure on its rival; 2) responding vigorously to Pakistani ‘provocations’ along their disputed border, and 3) improving trade and commercial ties. See the analysis here.

By Sumit Ganguly for ISN

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In May 2014, in a striking departure from precedent, India’s Prime Minister Narendra Modi chose to invite all the prime ministers from the South Asian Association for Regional Cooperation (SAARC) to his inauguration. Even his critics in India lauded this gesture and hoped that it was a portent of his government’s interest in improving ties with India’s immediate neighbors. Even the leader of India’s fractious neighbor, Prime Minister Nawaz Sharif, attended the event.

In the wake of the meeting, the Modi regime also chose to revive the Foreign Secretary level talks with Pakistan to deal with a range of outstanding issues. However, on the eve of the talks in August 2014, despite his government’s explicit warning to Pakistan to refrain from doing so, the Pakistani High Commissioner, Abdul Basit, chose to meet with the members of the Kashmiri separatist organization, the Hurriyat Conference. Past regimes, while unhappy with this practice, had overlooked such gestures. After expressing mild displeasure they had allowed the talks to proceed as planned. On this occasion, however, the new government swiftly called off the talks. The decision to terminate the dialogue signaled a significant departure from the attitude of previous regimes on matters pertaining to this fraught relationship.

Trust and mistrust

Since then the Modi regime has made a concerted effort to improve ties with India’s smaller neighbors. For example, in a remarkably deft move, it has resolved a series of minor but highly charged border disputes with Bangladesh. This settlement was far from trivial because it involved the acquiescence of more than one Indian state that borders Bangladesh and also required a constitutional amendment. Modi has also sought to mend fences with Sri Lanka especially in the wake of the emergence of a new regime following elections early this year. In the aftermath of a major earthquake in Nepal in April of this year his government moved with considerable dispatch to provide relief to many hapless victims.

All of these diplomatic moves suggest that after much palaver and considerable neglect of India’s neighbors a regime in New Delhi takes their concerns seriously and is even prepared to make asymmetric concessions to improve relations at multiple levels. The exception to this new orientation in the country’s foreign policy, however, may well prove to be Pakistan. It is obviously beyond the scope of this brief analysis to provide even a sketch of the long, troubled history of the Indo-Pakistani relationship. However, suffice to say that it has long foundered on the central issue of the disputed status of the border state of Jammu and Kashmir. Owing to its irredentist claim to the state, Pakistan has initiated three wars (1947-48, 1965 and 1999) to seize the territory. None of these efforts have brought it any closer to the realization of its goal. Interestingly enough, the 1971 war, which was not over Kashmir but stemmed from the exigencies of Pakistani domestic politics, and led to the break-up of the country, did not lead to an end to Pakistan’s quest to appropriate the state.

Nor, for that matter, have either multilateral or bilateral negotiations proved any more productive in resolving the dispute. Most recently, in the wake of a major crisis in 2001-2002 the two sides undertook a substantial bilateral dialogue that lasted several years. No official account of what was accomplished in this so-called composite dialogue has yet been released. However, there are a number of press reports that suggest that the two sides arrived at a four-point formula that might have served as the basis for conflict resolution. Briefly stated, the blueprint called for local self-governance, the demilitarization of the region, the joint management of a number of functional issues and the eventual easing of travel restrictions across the border. No actual territorial compromise, however, was envisaged under the terms of this plan.

Of course, it is far from clear if the former Pakistani military dictator, General Pervez Musharraf, who is widely credited with having generated the scheme, actually enjoyed the support of the corps commanders of the Pakistani military needed to implement it. The point, however, is moot as, with Musharraf’s ouster in 2007 following a series of domestic protests, the dialogue stalled. In the aftermath of the major terrorist attack on Bombay (Mumbai) in November 2008, the dialogue was effectively terminated. Much evidence implicated the members of a Pakistan-based terrorist network, the Lashkar-e-Taiba (LeT), in the attack. Following the incident, despite the fitful efforts of the United Progressive Alliance (UPA) regime in New Delhi to revive the talks, the dialogue always lacked serious momentum. Most importantly, the civilian regime of President Asif Ali Zardari in Pakistan, which assumed power after the end of General Musharraf’s rule, was under the watchful eye of the overweening Pakistani military, and not in any position to make credible commitments to New Delhi.

A new approach?

The Modi regime, which had sent an initial signal about its interest in resuming the dialogue, now seems to have hardened its position yet again. The most recent episode that has undermined the prospects of a renewed set of discussions took place after a seemingly cordial meeting between Prime Minister Nawaz Sharif of Pakistan and his counterpart, Mr. Modi, at Ufa in Russia on the sidelines of a Shanghai Cooperation Organization (SCO) conference in early June. Following the meeting an agreement was reached that the National Security Advisers of the two countries would meet to discuss a range of outstanding issues.

However, the apparent bonhomie has not lasted. In mid-July Indian press reports indicated that Pakistani forces had initiated hostilities along the Line of Control (LoC), the de facto border in Kashmir. The Pakistani press, as well as the government, claimed that an Indian drone had crossed into Pakistani territory and had been shot down. Indian authorities, for their part, claimed that the drone was not of Indian military origin but was simply an off-the-shelf item of Chinese commercial technology.

Based upon discussions with key officials in New Delhi it is apparent that the Modi regime has arrived at a new approach to dealing with Pakistan and that it has three distinct prongs. First, it involves working with all of India’s neighbors to enhance cooperation across a range of areas. Pakistan, of course, is at liberty to participate in these ventures. If it chooses not to, India will simply move ahead with its efforts to engage other neighbors, leaving Pakistan increasingly isolated. Second, it will respond with vigor to any provocative Pakistani actions along the disputed border. The tough-minded Indian response in following the latest Pakistani firing across the border is indicative of a changed stance. Third and finally, on a more conciliatory note, to the extent that the regime in Pakistan appears willing to pursue practical initiatives such as improving trade and commercial ties, India will respond favorably.

Domestic critics of the Modi regime have not responded favorably to this new muscularity in India’s approach toward Pakistan. However, given that the government enjoys a clear parliamentary majority, that substantial numbers of India’s citizenry have little patience with Pakistani aggravation on the Kashmir question and the ideological proclivities of its leadership, the country may well be witnessing a significant shift in how its conducts its foreign and security policies toward its nettlesome neighbors, most notably, Pakistan.

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Sumit Ganguly is a Professor of Political Science and directs the Center on American and Global Security at Indiana University, Bloomington. He is a also a Senior Fellow at the Foreign Policy Research Institute in Philadelphia.

India must play a more active role in Arab world

The Arab world is experiencing drastic changes and a paramount transformation is in the security scenario. The world is becoming multi-polar and economically China and India are becoming strong. So far the US was the main guarantor of security in the Arab Gulf region. However, America is now reluctant to provide security. Hence, there should be some power to fill the void. In view of the peaceful past of India, the Gulf countries aspire that India should be ready to play a vigorous role in the region.

The Middle East is a very complex area. There are quite a few issues; the prominent issues are: the Shia-Sunni conflict, the emergence of an Islamic State, rising extremism/terrorism in the area, disagreements between the Gulf Cooperation Council (GCC) and Iran, ideological differences between Saudi Arabia and Iran and the continuous hostility between Israel and Palestine. Arab countries are also worried about India’s growing relationship with Israel. Hence India has to be careful so that excellent relations with one should not become the reason for unpleasantness with others.

The rulers as well as the masses of the Arab world feel that Western countries have a poor opinion about the Muslim world since they view Muslims with suspicion. On the other hand, India, which has the second largest Muslim population in the planet, is viewed as a peaceful country as it was never an aggressor.

India has close relations with the Arab world since ancient times; the contact was at all fields, including cultural, social, historical and trade. The cordial relations were at the Government and people-to-people levels. India has been an ardent supporter of the Palestinian cause since the beginning.

More than 6.5 million Indians are working in Arab countries and they remitted US$70 billion in 2012 alone. Indian trade with the region was more than $205 billion in 2012-13.  Not only this, the region meets the major portion of India’s energy requirements.

Besides this, in view of the close proximity, India is deeply concerned about developments in the region. In the last leg of 2010, the protests which started from Tunisia soon spread in the region and residents of several countries, especially Egypt, Libya, Yemen, Syria, Algeria, Jordan, Iraq, and Bahrain, staged demonstrations for more democratic rights and economic betterment.

India is also concerned about the rise of an Islamic State (IS) in the region. The IS is a Salafi terrorist organisation which controls large portions of Iraq and Syria and also controls some areas of Libya and Nigeria. The IS has increased extremism and terrorism in the area and terrorists from all over the world are joining this wealthy terrorist outfit.

NEED FOR A DETAILED POLICY

It was high time India chalked out a detailed policy towards the Arab world. The dignitaries of both the countries must exchange visits and chalk out a result-oriented, pragmatic policy. India can also appoint a senior Foreign Service Officer as a special envoy for the region who can formulate a mutually beneficial policy.

India has outstanding relations with several countries of the region, including Palestine. Nonetheless after the establishment of diplomatic relations with Israel in 1992, the close defence ties between India and Israel bothered several countries of the Arab world. Israel has emerged as a major supplier of defence and agricultural equipment to India. Therefore India should reinforce bilateral ties in such a way that the Arab countries feel that India-Israel relationship is not against them and India is more close and friendly to them.

Bilateral relationship is important but India should also develop multilateral relationship through various pacts, including the Gulf Cooperation Council (GCC) which is a political and economic alliance of six Middle East countries, The Organisation of Islamic Cooperation (OIC) has a membership of 57 Muslim countries which protects the interests of the Muslim world and the Arab League which has a membership of 22 Arab countries.

The Gulf countries have abundance of cash and India being a developing economy needs investments. Hence India should launch an aggressive campaign to procure investments from the Gulf. India should identify the areas and if need be rules should also be made investor-friendly. Besides this, India should include more items as well as more countries for exports.

At present India purchases bulk of its energy from the region. However, now India should start joint ventures in the energy field with the local companies of Middle East countries. India has technical manpower and it can start joint ventures in natural gas, desalination plants, fertilizer and refineries. India can also discuss the exchange programme like food for oil as it will enhance interdependence to each other.

CULTURAL CENTRES 

India should open cultural centres in the area; our foreign missions should spread the foreign policy of the country more aggressively. India should establish more educational institutions in the Arab world and there should be more exchange of scholars and foreign policy planners between India and the countries of the region.

More than six million Indians reside in this volatile area. Hence India needs to devise a comprehensive plan to evacuate its citizens in the hour of need. Recently Indians from Egypt and Libya had to be withdrawn.

The Arab countries have to be dealt with independently as there are fundamental differences, diverse priorities and objectives between them. These countries will also not like to be treated under the “Islamic agenda”. Hence India has to deal with every country as an independent entity.

India must play an active role and there should be a multilateral system which guarantees stability, peace and prosperity in the region which is full of contradictions and problems. The planners in India must remember that there cannot be a vacuum and if India does not act, some other powers, including China, may initiate action.

(The writer is a former Director of the Cabinet Secretariat. This column is courtesy South Asia Monitor.)

India’s 2 Percent Solution

By mandating corporate social responsibility, Narendra Modi is helping the government shirk its most basic obligations.

• BY RUPA SUBRAMANYA
• JULY 28, 2015
• 

How do you compel corporations to do some good? New Delhi thinks it has the answer. On April 1, 2014, an unprecedented law went into effect in India — one designed to mandate virtuous behavior by businesses operating across the country. It requires them to direct at least 2 percent of their pretax profits toward corporate social responsibility (CSR) each year, making India the first and only country in the world to mandate CSR. That sounds great, in theory. In practice it’s much more complicated.

Originally passed in 2013 by the Congress-led, left-of-center government, the mandate applies to both private and publicly owned firms with an annual turnover of 10 billion rupees (or about $160 million), a net worth of 5 billion rupees, or a net profit of 50 million rupees. This past May, the Indian Institute of Corporate Affairs, a government-established think tank,estimated that it will affect some 6,000 Indian firms and could result in CSR spending of as much as $4.2 billion at the current exchange rates.

Oddly, the enforcement provisions of the law are quite thin. The only penalties it exacts are for failing to report CSR spending. In fact, news reports suggest that at the end of the first year of the CSR mandate, some two-thirdsof the companies it covered had failed to meet the 2 percent threshold. That may be in part because firms were uncertain of how strongly the Modi government — elected in May 2014, not long after the start of the first full fiscal year covered by the law — would enforce a law passed by a predecessor it had soundly defeated.

More than a year in, it’s clear that Modi takes the CSR mandate quite seriously, viewing it as a way of kick-starting funding for some of hissignature programs — most notably the Swachh Bharat (Clean India) initiative, which aims to build toilets in India to help end the scourge of open defecation and institute a culture of cleanliness in a society not especially known for sterling public hygiene. Ever the pragmatist, the ostensibly business-friendly Modi has gone so far as to exhort businesses to direct their CSR funding toward the building of new toilets, either by contributing to the government program or by investing directly through their own activities. Recently, Modi also urged firms to devote CSR spending to an apprenticeship program to help workers find jobs, another one of his pet projects. “I want industrialists to hire more apprentices,” he said. “Never mind if your profit margins fall. It is your social responsibility.”

In an emerging economy like India, one with a limited state capacity to deliver public goods and services, CSR could theoretically provide acomplement to government programs. But allowing the government to lean on the private sector in this way may not work as intended, especially if the government expects CSR spending to bear the brunt of the cost and implementation for a range of new policies aimed at improving the quality of life for Indians.

If all goes as planned, the mandate will raise a major chunk of change.

If all goes as planned, the mandate will raise a major chunk of change. The money that the mandate will raise amounts to just under 0.2 percent of India’s GDP, compared with the roughly 1.7 percent of GDP the government spends on welfare programs, as estimatedby the Asian Development Bank in 2013. Given that this amount is relatively low even among emerging economies (China spends 5.4 percent of its GDP on social welfare), the extra kick from CSR spending could make a huge difference.

The mandate allows firms to give money to a wide range of social causes, either by funding such activities directly through their own foundations or trusts or by funneling money to nongovernmental organizations. In the case of Swachh Bharat, it appears that firms prefer to build toilets because of their greater visibility, rather than focusing on fixing municipal sanitation systems. The latter would require greater time and financial commitments, would require coordination with municipal authorities, and doesn’t tend to lend itself to high-profile photo opportunities.

The mandate also raises the possibility that the new funds won’t reach those who need them the most. Richard Rossow, a senior fellow at the Center for Strategic and International Studies in Washington, has argued that the CSR requirement may actually exacerbate regional inequalities. That’s because large firms are more likely to spend their CSR funds where the bulk of their operations and markets are based, and not where they’re most needed. And as it turns out, large firms tend to be headquartered in relatively prosperous states, leaving India’s most-impoverished behind.

What’s more, those firms that don’t manage their CSR through an in-house foundation or trust are more likely to invest a good chunk of the cash in India’s bloated NGO sector. It may be hard to believe, but there is one NGO for every 600 Indians. The global consulting firm Bain & Company’s annualIndia Philanthropy Report for this year notes that “donor apathy and a mistrust” of nonprofit organizations permeate the system. Given the proliferation of private firms and NGOs involved with the CSR mandate, it’s unlikely that there will be any kind of cooperation among individual actors, economies of scale to bring down costs and increase efficiency, or measures to avoid redundancy among thousands of competing programs.

Yet another danger is that the law’s vague, opaque compliance norms, which lack any specific penalty for noncompliance, may allow unscrupulous firms to game the system. They might, for instance, try to direct CSR funding to cronies, somehow siphon it off themselves, or pay it out only to engineer its return in the form of kickbacks. None other than veteran Indian industrialist and philanthropist Ratan Tata alluded to this danger before the new law came into effect. He reiterated his warning in June at the Indian Merchants’ Chambers annual meeting in Mumbai, acknowledging that while some companies would make substantial contributions, “there would be some companies which would be either wasting the money or siphoning [it] in some form.” Tata certainly has the moral authority to speak on the subject: Several companies in the large business conglomerate he headed until only recently gave well above the mandated 2 percent requirement even before the law went into effect.

Indeed, though the law is still too new to have produced any malfeasance, CSR scams had already surfaced before its passage. The in-house auditors of the state-owned National Aluminium Company, for example, have alleged that the company mishandled its CSR spending in 2012 by steering its contributions to one favored private university. Ironically, this same company went on to receive an award for best CSR practices in 2013.

Broadly speaking, the CSR mandate poses two dangers: first, the possibilities of cronyism and corruption that Tata highlighted, thanks to its tough-to-enforce compliance norms; and second, the possibility that the government may react to such scams by creating a new, costly layer of bureaucracy to enforce the rules. 

In an economy still saddled with too many leftover socialist-era rules and regulations, mandatory CSR is a move in the wrong direction.

In an economy still saddled with too many leftover socialist-era rules and regulations, mandatory CSR is a move in the wrong direction. Modi himself has publicly declared his wish for India to improve its abysmally low rank in the World Bank’s Ease of Doing Business ranking, and it’s hard to see how forcing charitable activity onto companies in an opaque and poorly regulated business environment would help.

This perverse effect on the private sector is what makes Modi’s embrace of the CSR requirement so dissonant. But it’s also disappointing. By encouraging the private sector to spend its CSR money in basic areas like sanitation, he’s implicitly acknowledging that all levels of government are failing to provide basic public goods and services. Voters swept Modi into power with a big majority on a mandate to fix poor governance — not to force the private sector to fix a broken government system of substandard and creaky public infrastructure.

Of late, the abdication of responsibility has reached tragicomic proportions. Rather than owning up to the government’s failure to provide public goods and services, one minister even chided a group of business leaders for not doing enough to help the government achieve its social welfare goals. And apart from the outspoken Tata, few if any major business leaders have spoken out against the CSR mandate.

As I argued earlier, Modi has supposedly been trying to break the nexus between big business and government by cutting off the cozy access to the prime minister and senior politicians that business leaders once enjoyed. Unfortunately, a murky mandatory CSR rule is only likely to foster cronyism and corruption rather than reduce it.

India Need to Revamp Look Latin America Policy

Mridu Kumari

Though, it has to face huge Chinese challenge there, India need to tap South American market, if it is serious to pare economic losses due to slowdown in first world

In the past 14 months, Prime Minister Narendra Modi has undertaken visits of 24 countries, including Brazil, a lone Latin American nation where he had gone to attend the 2014 BRICS summit. On the sidelines of the 6th BRICS summit, though, Modi had held meetings with leaders of a dozen South American nations, yet he has hardly made serious diplomatic overtures with these nations of the region whose landmass is five times that of India and combined GDP is $5.5 trillion. In 2013, Latin American countries received $179 billion of FDI, the highest record for any region in the world.

What can explain the cavalier outlook of New Delhi towards the South American nations than this that the task to give momentum to bilateral engagement with this region has been left to junior ministers like Gen (Rtd) V K Singh and Dharmendra Pradhan. External Affairs Minister Sushma Swaraj has not ever visited these countries, except for holding a meeting with her counterparts from Cuba, Costa Rica, Ecuador and Antigua &Barbuda on the siddlines of the UN General Assembly in September last year.

In comparison, China has built up a robust and mutually benefiting relationship with all 33-members of Community of Latin American and Caribbean States (CELAC). Early this year it organized the first ministerial level meeting of CELAC members. By 2025, China has decided to increase direct investment to $250 billion in Latin America; it has also pledged to double the trade from $261 billion to $500 billion in a decade. It would all help China cement its position in the region as the second-largest trading partner after the US whose annual trade with Latin America stands at above $900 billion. In an attempt to enlarge Chinese footprint in Latin America, President Xi Jinping, after attending the BRICS summit in Brazil, undertook a visit to Argentina, Venezuela and Cuba. Starting from BRICS summit to his Latin American countries’ visit, the Chinese President gave three major policy speeches, provided lengthy written interviews to regional media, attended more than 70 multilateral and bilateral events, and met more than 20 heads of state or government. Also, he signed over 150 MoUs and framework agreements with Brazil, Argentina, Venezuela and Cuba. Involving over $70 billion worth of investments, these agreements covered areas such as energy, mining, electric power, agriculture, science and technology, infrastructure and finance.

High profile visit of the Chinese President to Latin America was followed by Prime Minister Li Keqiang’s official trip to Brazil, Colombia, Peru and Chile in May this year. China has pledged to invest $103 billion worth of investment for improvement of Brazilian infrastructure. China which earlier signed $3.5 billion deal for development of the Brazilian energy sector, agreed to finance $7 billion for this Latin American country’s state-owned oil firm Petrobras during Premier Li Keqiang’s visit. Its largesse also included development of railway, mining, power and equipment manufacturing sector. China is the 12th largest investor in Brazil. In keeping with its South American strategy, China is not only pumping in money but also enlarging its cultural ambience across the Western hemisphere. It is beaming radio and television programme in local official languages of the Latin American nations. Then, over the past few years, China has opened 32 Confucius Institutes all over Latin America. It is said that even hotels in Latin American countries remain prepared for an increasing number of Chinese tourists’ visit; they are served Chinese menus too. China and Latin American countries’ relations are developing unobtrusively fast.

In contrast, India which is already slow in positioning itself on the high turf of diplomatic engagement with the countries of the region, has not yet given pace to economic relations with Latin American and Caribbean countries. The two-way trade which was $2 billion in 2000 has grown to only $46 billion in 2013-14. India’s investment in South America is also unimpressive: till last year it was around $20 billion. To maximize economic engagement, India held its first India-Latin America and Caribbean states’ conclave in October last year. It was attended by 23 countries of the region.

Experts say unlike China which has surplus money, India does not have capital enough to pour in billions of dollars in infrastructure and other developmental sectors of the region; instead, New Delhi-like in Africa-is taking the human resource route by upgrading skills and imparting technological education to the people of Latin American nations. It is setting up IT centres. In Peru, Ecuador and Guyana, IT centres have begun to function. It has also set up vocational training institutes in Jamaica and Belize. Under Technical and Economic Cooperation programme, it is already providing scholarship to 200 Caribbean students. Then for the capacity building purposes, India offered Guatemala several assistances. It offered to establish a regional Barefoot Vocational Training Centre for Central American Integration System (SICA) member countries in Guatemala. While all this is done within the ambit of South-South cooperation, India has tried to increase trade and commerce with SICA members Guatemala, Belize, Costa Rica, El Salvador, Honduras, Nicaragua and Panama to push its economic engagement with the regional block with which New Delhi established linkage in 2004. In 2014, the two-way trade was $1.4 billion. At the recent ministerial level meeting between India (represented by Minister of State for External Affairs Gen(Rtd) V K Singh) and SICA countries in Guatemala, both sides agreed to hold meeting of the India-SICA Business Forum as soon as possible to encourage trade and investments between the two sides. To promote peace and democracy in the world, India participated in the just concluded 8th Ministerial Conference in San Salvador, national capital of El Salvador.

Then with the region’s another notable block, 15-member Caribbean Community (CARICOM) India’s bilateral trade is mediocre. Engagement with the block that comprises former British colonies like Antigua&Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and Grenadines, Suriname, Trinidad &Tobago-began in the early 2000. Yet the two-way trade is only $1 billion. At the first ever CARICOM-India Joint Commission meet in Georgetown in Guyana, New Delhi admitted that there is much scope for growth of bilateral trade. But it is surprising that India despite having deep rooted ethnic ties and good cricketing relations with many countries of CARICOM which play under the banner of West Indies, failed to give its bilateral ties a significant push. Such omissions in diplomatic initiative in Latin American and Caribbean countries may put India on the spot, given that 20 per cent of its oil resources are imported from the region.

Pakistan: Compounding Folly – Analysis

The Supreme Court (SC) of Pakistan on July 22, 2015, observed that the war against terrorism could not be fought without choking funds to terror outfits. The Court expressed grave concern over the Federal Government as well as the Provincial Governments for their failure to compile the baseline data pertaining to sources of funding of local as well as International Non-Governmental Organisations (INGOs) operating in the country.

Though the Apex Court did not directly blame the Pakistani establishment for involvement in funding terror groups, it is widely believed internationally that Islamabad continues with this policy.

During the Financial Action Task Force (FATF) meet at Brisbane in Australia in June 2015, India had strongly raised the issue of non-compliance by Islamabad on freezing assets of Lashkar-e-Taiba (LeT) and its affiliates. India pointed out that Muhammad Iqbal, the founding member of Falah-e-Insaniyat Foundation (FIF), one of LeT’s many front organisations, had been put on the list of Specially Designated Global Terrorists (SDGT) by the United States in August 2014. Iqbal had made the payment to purchase Voice over Internet Protocol (VoIP) used by perpetrators of November 26, 2008, (26/11) Mumbai attacks. According to sources, India with the support of allies included the United States (US), managed to derail China’s bid, backed by Australia, to shield Pakistan on the issue of terror financing.

Several countries – including Pakistan’s “all weather friend” China; Russia, which in recent times have started moving closer to Pakistan to counter India’s perceived improving relations with the US; and Australia – knowingly or unknowingly fell prey to Pakistani propaganda that it was doing its level best and submitting reports to the Asia Pacific Group (APG), which works in collaboration with FATF. Nevertheless, FATF finally decided in Brisbane, supporting India’s argument, that, though Pakistan was not part of FATF, it was part of APG, and its enforcement of targeted financial sanctions against terrorism should be subject to monitoring by FATF through APG.

Interestingly, on February 27, 2015, during the FATF meeting at Paris, Pakistan’s name was put into the category of “Jurisdictions no longer Subject to the FATF’s On-Going AML/CFT Compliance Process”. This list included seven countries, including Albania, Namibia, Kuwait, Cambodia, Zimbabwe and Nicaragua, apart from Pakistan. Explaining Pakistan’s position, FATF had then observed,

The FATF welcomes Pakistan’s significant progress in improving its AML/CFT [Anti-Money Laundering and Countering Financing of Terrorism] regime and notes that Pakistan has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2010. Pakistan is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Pakistan will work with APG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report, in particular, fully implementing UNSC [United Nations Security Council] Resolution 1267.

On October 28, 2011, FATF had expressed its disappointment regarding five countries, including Pakistan, stating:

The FATF is not yet satisfied that the following jurisdictions have made sufficient progress on their action plan agreed upon with the FATF. The most significant action plan items and/or the majority of the action plan items have not been addressed. If these jurisdictions do not take sufficient action to implement significant components of their action plan by February 2012, then the FATF will identify these jurisdictions as being out of compliance with their agreed action plans and will take the additional step of calling upon its members to consider the risks arising from the deficiencies associated with the jurisdiction.

On missing the deadline, Pakistan was blacklisted by FATF on February 16, 2012. Later, in June 2012 FATF had reiterated that laws on counter-terrorism financing and anti-money laundering in Pakistan either did not exist or were ineffective. Further, in October 2012, FATF included Pakistan in its Public Statement, underlining continuing deficiencies in its AML/CTF regime.

Pakistan had first been publicly identified by the FATF in February 2008 for deficiencies in its AML/CTF regime. On February 28, 2008, FATF urged Pakistan to continue its efforts to improve its AML/CFT laws to come into closer compliance with international AML/CFT standards and to work closely with the APG to achieve this.

In response to mounting concern over money laundering, FATF had been established by the G-7 Summit that was held in Paris in 1989. FATF is a policy‐making body, whose objectives include setting standards to combat money laundering and the financing of terrorism and supporting implementation of these standards. At present FATF has 36 members (including India) along with two observers. APG is something of a mini‐FATF and is committed to the effective implementation and enforcement of standards set by FATF.

Developments at FATF meets in 2015 clearly indicate that the international community, or at least sections thereof, have either failed to understand the Pakistani design or are willingly attempting to underplay Islamabad’s role in international terrorism and its willful failure to apply civilized norms of government and enforcement to curb the menace. This is despite the mounting evidence that nothing has changed on the ground to suggest that Pakistan has stopped the export of terror and the funding of terror groups.

Indeed, as recently as on July 7, 2015, Pakistan’s Interior Minister Chaudhry Nisar Ali Khan gave a clear indication to the Upper House (Senate) of Pakistan’s Parliament that JuD, the “public face” of LeT, was unlikely to be banned and that, “JuD has been on observation under Section 11 D of the Anti-Terrorism Act (ATA) 1997 since 15 November, 2003. The activities of JuD are monitored by law enforcement agencies and if report of any of such activity (having connection with LeT) that fulfils requirement of Section 11 B of ATA was presented, the organisation shall be proscribed.” Section 11 B of ATA 1997 provides for the proscription a terror organisation, while Section 11 D is meant to keep organisations under observation where the Federal Government has reason to believe that an organisation is acting in a manner that suggests it may be linked to terrorism.

Crucially, JuD has been designated a terrorist organisation by the US, UK, the European Union, Russia, Australia and, of course, India. JuD’s ‘chief’ Saeed, the mastermind of the 26/11 attacks in Mumbai, openly engages in the collecting funds to carry out his ‘charity work’ – and the organisation is widely acknowledged as a front of LeT. Despite international exposure and opprobrium, the Pakistani Government continues to contribute to his various ‘charities’. The Pakistan Muslim League-led Punjab State Government, for instance, has long provided financial support to JuD for its ‘welfare’ activities. A grant-in-aid of PKR 61.35 million was given to the administrator of the group’s training camp Markaz-e-Taiba in the Provincial budget for fiscal year 2013–14. The budget also included an allocation of PKR 350 million for a knowledge park at Muridke – JuD’s headquarters – and various other development initiatives across Punjab.

On March 25, 2015, Indian Minister of State for Home Haribhai Parathibhai Chaudhary informed the Lok Sabha (Lower House of Indian Parliament) that Pakistan, through its Inter-Services Intelligence (ISI) continued to aid terror activities in India by providing shelter, training, patronage and financial assistance to terrorists.

Meanwhile, Pakistan continues to pump increasing volumes of Fake Indian Currency Notes (FICNs) into India and its neighbourhood in its campaign to provide finances for Islamist terrorists, and to destabilize the Indian Economy. According to a July 2014 report quoting the Intelligence Bureau (IB), Sri Lanka and Maldives have been identified as two new transit destinations for FICN, with Chennai in Tamil Nadu as the point of arrival. An unnamed IB official stated, “Until now, FICN was known to come from Bangladesh and Nepal. The addition of two more neighbours to this list is rather worrying.” Moreover, the ISI-run mafia engaged in production of FICN has altered patterns of circulation, increasingly emphasizing lower denomination notes, INR 500 and below, as compared to an overwhelming flow of INR 1,000 notes in the past. According to a report by the Central Economic Intelligence Bureau (CEIB), “Pakistani operators based in Nepal, Bangladesh, Malaysia and Thailand act as recipients of FICN from Pakistan as well as conduits to the distribution channels in India through air and land border.”

Under the circumstances, the apparent eagerness of several members of FATF, and of the organisation itself, to let Pakistan off the hook is certainly surprising. In the present and deeply unstable regional and international environment, it would have been expected that the most stringent standards would have been imposed on suspected state sponsors of terrorism – a status that few in the global community could honestly deny to Pakistan.

*Sanchita Bhattacharya

Italian army chief praises his Pakistani counterpart: Why India should be worried

by Karan Pradhan  Jul 29, 2015 16:20 IST

There may be more to the gratitude expressed by Italian Chief of Defence Forces General Claudio Graziano to Pakistani counterpart General Raheel Sharif, for the Pakistani Army’s "sacrifices/role in securing the region", than meets the eye.  While the degree of regional security is up for debate, particularly with the Pakistani Army continuing to violate the ceasefire on the India-Pakistan border, the meeting in Italy was in itself hardly peculiar, coming as it did a little over eight months since the last one in Rawalpindi.

It is, however, the timing of these strange remarks that raises concerns. Sharif and Graziano met barely a fortnight before the ITLOS public hearing of the case between India and Italy—to decide the fate of the two Italian marines detained by India for allegedly killing two of its fishermen in February 2012—is scheduled to take place in Hamburg. On one hand, the statement is an acknowledgment of the arguable success of Pakistan’s Operation Zarb-e-Azb against the Taliban, and on the other, it appears to be a way to put pressure on India ahead of the hearing.

The case against the two marines could be affected. PTI Image

The killing of St Antony crewmembers Ajesh Binki and Valentine, allegedly by Massimiliano Latorre and Salvatore Girone, marines aboard the Italian-flagged commercial oil-tanker MT Enrica Lexie, has in the past three years led to a deterioration of India-Italy bilateral relations. During this time, India cancelled a $770 million deal to purchase helicopters from Italian manufacturer Finmeccanica, which contributed to the souring of bilateral relations.

Former Italian Foreign Minister Federica Mogherini, appointed as the European Union’s foreign policy chief late last year, also pointed out that this diplomatic fallout could percolate into India-EU relations. Considering Mogherini’s vitriolic statements in the past, it is not entirely unimaginable that the cancellation of Prime Minister Narendra Modi’s visit to Brussels in May, was related to the marines issue.

So what’s next? Italy and Pakistan, which have been united in their opposition to the expansion of permanent membership in the UN Security Council, signed a Strategic Engagement Plan, an agreement to deepen cooperation in security and defence among other areas, in February 2013. Meanwhile, India remains confident that the tribunal has no jurisdiction over offences occurring within the country.

The implications on India-Italy relations, if any, of the bonhomie between Graziano and Sharif remain to be seen. The August 10 hearing can provide some clarity in this regard.