B. Raman
In our preoccupation with Pakistan's Inter-Services Intelligence (ISI), we have not been paying the required attention to the goings-on in Pakistan's Intelligence Bureau (IB), which comes under the Ministry of the Interior. It is the counterpart of our IB and is of the same pedigree. Even today, the IBs of the two countries maintain some of the traditions, nomenclatures for officers and subordinate units and methods of functioning which they had inherited from the British in 1947.
2. The founding fathers of independent India made the IB the first among equals in India's internal security and counter-intelligence set-up. It has retained and even strengthened that position. It continues to be an organisation largely staffed and led by police officers taken on deputation or permanent secondment from the Indian Police Service cadres of different States of the Indian Union, but the number of direct recruits has been increasing. The IB acts as the eyes and ears of the Government of India in all matters that could have a bearing on internal security. As the leading counter-intelligence agency of India, it plays the leadership role in countering the activities of the ISI in Indian territory and against Indian interests in India and abroad.
3. As against this primacy of the Indian IB and its significant role, the Pakistani IB saw over the years its role in the internal security management and in counter-intelligence gradually eroded, with the ISI assuming the responsibility for internal security tasks. The ISI assumed the leadership in internal security matters initially in the then East Pakistan because of the Army's suspicion of the loyalty of the Bengali police officers and then in Balochistan, Sindh and the North-West Frontier Province for similar reasons. Whereas the police officers from different States in the Indian IB enjoyed the total confidence and trust of the Government of India, in the Pakistani IB, only the Punjabi police officers enjoyed some trust and confidence. The remaining police officers of non-Punjabi origin were looked upon with suspicion.
4. The marginalisation of the Pakistani IB by the ISI in matters relating to internal security was followed by the beginning of a process of militarisation of the IB----with the induction of serving and retired military officers into the IB. This process started under Zia-ul-Haq. When Benazir Bhutto became the Prime Minister in 1988, she sought to reverse the process. She appointed Maj-Gen. Shamshur Rehman Kallu, a retired officer who was close to her father, as the DG of the ISI much to the discomfort and unhappiness of the serving army officers. On her orders, Kallu also prepared a scheme for the re-organisation of the intelligence community. One of the key points in this scheme was the demilitarisation of the IB and restoring its police character and its role as the premier internal security agency of the country. Before the scheme could be implemented, she was dismissed by the then President Ghulam Ishaq Khan in August 1990.
5. Nawaz Sharif, who succeeded her as the Prime Minister after the ISI-rigged elections held later that year, carried out the wishes of the army and threw aside the scheme drawn up by Kallue. He once again started inducting retired and serving officers of the Army into the IB. When Benazir returned to power in 1993, she once again took up the scheme for the re-organisation of the IB and strengthening its role in internal security management. She ordered a vast expansion of the strength of the IB, emulated the Indian model of having a directly-recruited civilian cadre in addition to the police officers and ordered the direct recruitment of a large number of civilian officers.
6. When Farooq Leghari, the then President, dismissed her in 1996, he stopped the expansion ordered by her and ordered that those recruited by her should not be given appointment in the IB. Those who had already joined were sacked. Nawaz Sharif, who returned as the Prime Minister after the elections, did not reverse the orders of Leghari and went along with the wishes of the Army to let the ISI retain its primacy in internal security and counter-intelligence matters. The militarisation of the IB picked up momentum under Pervez Musharraf and reached its nadir when he appointed Brig.Ijaz Shah, a highly controversial retired officer with strongly suspected links to the jihadi terrorist organisations, as the Director-General of the IB.
7. Since the Pakistan People's Party-led coalition Government came to office in March 2008, there have been indications that Asif Ali Zardari, who succeeded Pervez Musharraf as the President in September, 2008, wants to implement once again the ideas of Benazir for the re-organisation of the IB and strengthening its role in internal security. He appointed Rehman Malik, a retired police officer, who had served under Benazir in the Federal Investigation Agency (FIA) during her second tenure as the Prime Minister, as the Adviser for Internal Security with the rank of a Cabinet Minister. He now co-ordinates all internal security matters and the IB works under him.
8. Zardari also restored the practice of a senior police officer heading the IB and reportedly wanted that all those directly-recruited to the IB during Benazir's second tenure, but kept out by Leghari and Sharif should be re-appointed. Well-informed PPP sources say that Prime Minister Yousef Raza Gilani, who does not feel comfortable with Rehman Malik and who has the backing of the ISI, has been dragging his feet in the implementation of the orders of Zardari to re-appoint all the direct recruits to the IB, who were sacked or kept out by Leghari or Sharif.
9. These sources say that the differences between Zardari and Malik on the one side and Gilani and the ISI on the other regarding the relative roles of the IB and the ISI are also coming in the way of a proper investigation into the role of the five detained activists of the Lashkar-e-Toiba (LET) in the conspiracy to carry out the terrorist attack in Mumbai from November 26 to 29, 2008. According to these sources, while Zardari and Malik are in favour of a more energetic investigation and prosecution to please the US, Gilani and the ISI have been opposing such an investigation.
10. Despite the difficulties faced by him in strengthening the IB and its role in internal security management, Zardari and Malik have been persisting with their efforts. Zardari gives a high-profile role to Malik in all matters relating to internal security. Malik and the Director-General of the IB accompany Zardari on his foreign tours. These sources say that Shoaib Suddle, the then Director-General of the IB, had accompanied Zardari on his recent visits to the US and West Europe and earlier to China. Zardari has also been encouraging the IB to set up its own network of liaison relationships with foreign intelligence agencies. Malik and the IB are being given a more active role in the counter-Taliban operations.
11. These sources say that the ISI, with the backing of Gilani, has not given up its efforts to oppose any leadership role for the IB in internal security matters. It is in this connection that one notes with interest the decision taken by Gilani on May 16, 2009, to appoint Javed Noor, the Inspector-General of Police of Pakistan-Occupied Kashmir, as the DG of the IB in replacement of Suddle, who was close to Zardari. Suddle, who belonged to the Sindh cadre of the Pakistani Police Service, was the DIG of Police of Karachi in September, 1996, when Murtaza Ali Bhutto, the younger brother of Benazir, who was challenging the role of Zardari in the PPP, was allegedly killed by the police following an altercation with them. Suddle is one of the accused in the case filed in this connection.
12. Despite this, Zardari had him appointed as the DG of the IB in June, 2008. He was given an extension of two years after he reached the age of superannuation. In April last, a judge of the Supreme Court set aside the extension given to him and other police officers facing trial in connection with the murder of Murtaza. Despite this, he was taken to the US and West Europe by Zardari along with the DG of the ISI. Shortly after his return from the tour, Gilani had him replaced as the DGIB on the ground that his continuing to hold this office had become untenable because of the Supreme Court judgement. It is not known whether Javed Noor is a nominee of Zardari or Gilani or the ISI. The removal shows that the ISI continues to be opposed to any attempt to give the IB the primacy in internal security matters.
(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: seventyone2@gmail.com)
Monday, May 25, 2009
OBAMA'S JIMMY CARTER IMAGE CREATES PROBLEMS FOR THE US
B. Raman
During the US Presidential primaries last year, I had expressed my misgings that Barack Obama might turn out to be another Jimmy Carter, whose confused thinking and soft image paved the way for the success of the Islamic Revolution in Iran .The subsequent Iranian defiance of the US and his inability to deal effectively with the incident in which some Iranian students raided the US Embassy in Teheran and held a number of US diplomats hostage led to the disillusionment of sections of the US electorate with him and his failure to get re-elected in 1980. The strong line taken by him against the invasion of Afghanistan by the Soviet troops towards the end of 1979 did not help him in wiping out the image of a soft and confused President.
2. The defiant action of North Korea in testing a long-range missile with military applications last month and its latest act of defiance in reportedly carrying out an underground nuclear test on May 25, 2009, can be attributed----at least partly, if not fully--- to its conviction that it will have nothing to fear from the Obama Administration for its acts of defiance. It is true that even when George Bush was the President, North Korea had carried out its first underground nuclear test in October 2006. The supposedly strong policy of the Bush Administration did not deter it from carrying out its first test.
3. After Obama assumed office on January 20, 2009, whatever hesitation was there in North Korea's policy-making circles regarding the likely response of the Obama Administration has disappeared and its leadership now feels it can defy the US and the international community with impunity.
4. A series of actions taken by the Obama Administration have created an impression in Iran, the Af-Pak region, China and North Korea that Obama does not have the political will to retaliate decisively if they act in a manner detrimental to US interests and to international peace and security. Among such actions, one could cite the soft policy towards Iran, the reluctance to articulate strongly the US determination to support the security interests of Israel, the ambivalent attitude towards Pakistan despite its continued support to anti-India terrorist groups and its ineffective action against the sanctuaries of Al Qaeda and the Taliban in Pakistani territory, its silence on the question of the violation of the human rights of the Burmese people and the continued illegal detention of Aung San Suu Kyi by the military regime in Myanmar, and its silence on the Tibetan issue. Its over-keenness to court Beijing in order to seek China's support for dealing with the economic crisis and its anxiety to ensure the continued flow of Chinese money into the US for investment in the US Treasury Bonds have also added to the soft image of the US.
5. President Obama cannot blame the problem States of the world such as Iran, Pakistan, Myanmar and North Korea if they have come to the conclusion that they can take liberties with the present Administration in Washington DC without having to fear any adverse consequences. North Korea's defiance is only the beginning. One has every reason to apprehend that Iran might be the next to follow.
6. Israel and India have been the most affected by the perceived soft policies of the Obama Administration. Israel is legitimately concerned over the likely impact of this soft policy on the behaviour of Iran. South Korea and Japan, which would have been concerned over the implications of the soft policy of the Obama Administration, had no national option because they had no independent means of acting against North Korea. Israel will not stand and watch helplessly if it concludes that Iran might follow the example of North Korea. I have said it in the past and I say it again that Israel will not hesitate to act unilaterally against Iran if it apprehends that it is on the verge of acquiring a military nuclear capability. It will prefer to act with the understanding of the US, but if there is no change in the soft policy of the Obama Administration, it will not hesitate to act even without prior consultation with the US.
7. India too has been noting with concern the total confusion which seems to prevail in the corridors of the Obama Administration over its Af-Pak policy. Some of the recent comments of Hillary Clinton, the US Secretary of State, about alleged past incoherence in the US policy towards Pakistan and about the part-responsibility of the US for the state of affairs in the Af-Pak region have given comfort to the military-intelligence establishment and the political leaders in Pakistan. Obama's new over-generosity to the Pakistani Armed forces and his reluctance to hold them accountable for their sins of commission and omission in the war against terrorism have convinced the Pakistani leaders that they have no adverse consequences to fear from the Obama Administration. India would be the first to feel the adverse consequences of this newly-found confidence in Islamabad vis-a-vis its relations with the US.
8. India also has reasons to be concerned over the definite down-grading by the Obama Administration of the importance of the USA's strategic relationship with India. This down-grading has given satisfaction to Pakistan as well as China.
9. Jimmy Carter took a little over three years to create the image of the US as a confused and soft power. Obama is bidding fair to create that image even in his first year in office. The North Korean defiance is the first result of this perceived soft image. There will be more surprises for the US and the international community to follow if Obama and his aides do not embark on corrective actions before it is too late.
(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: seventyone2@gmail.com)
During the US Presidential primaries last year, I had expressed my misgings that Barack Obama might turn out to be another Jimmy Carter, whose confused thinking and soft image paved the way for the success of the Islamic Revolution in Iran .The subsequent Iranian defiance of the US and his inability to deal effectively with the incident in which some Iranian students raided the US Embassy in Teheran and held a number of US diplomats hostage led to the disillusionment of sections of the US electorate with him and his failure to get re-elected in 1980. The strong line taken by him against the invasion of Afghanistan by the Soviet troops towards the end of 1979 did not help him in wiping out the image of a soft and confused President.
2. The defiant action of North Korea in testing a long-range missile with military applications last month and its latest act of defiance in reportedly carrying out an underground nuclear test on May 25, 2009, can be attributed----at least partly, if not fully--- to its conviction that it will have nothing to fear from the Obama Administration for its acts of defiance. It is true that even when George Bush was the President, North Korea had carried out its first underground nuclear test in October 2006. The supposedly strong policy of the Bush Administration did not deter it from carrying out its first test.
3. After Obama assumed office on January 20, 2009, whatever hesitation was there in North Korea's policy-making circles regarding the likely response of the Obama Administration has disappeared and its leadership now feels it can defy the US and the international community with impunity.
4. A series of actions taken by the Obama Administration have created an impression in Iran, the Af-Pak region, China and North Korea that Obama does not have the political will to retaliate decisively if they act in a manner detrimental to US interests and to international peace and security. Among such actions, one could cite the soft policy towards Iran, the reluctance to articulate strongly the US determination to support the security interests of Israel, the ambivalent attitude towards Pakistan despite its continued support to anti-India terrorist groups and its ineffective action against the sanctuaries of Al Qaeda and the Taliban in Pakistani territory, its silence on the question of the violation of the human rights of the Burmese people and the continued illegal detention of Aung San Suu Kyi by the military regime in Myanmar, and its silence on the Tibetan issue. Its over-keenness to court Beijing in order to seek China's support for dealing with the economic crisis and its anxiety to ensure the continued flow of Chinese money into the US for investment in the US Treasury Bonds have also added to the soft image of the US.
5. President Obama cannot blame the problem States of the world such as Iran, Pakistan, Myanmar and North Korea if they have come to the conclusion that they can take liberties with the present Administration in Washington DC without having to fear any adverse consequences. North Korea's defiance is only the beginning. One has every reason to apprehend that Iran might be the next to follow.
6. Israel and India have been the most affected by the perceived soft policies of the Obama Administration. Israel is legitimately concerned over the likely impact of this soft policy on the behaviour of Iran. South Korea and Japan, which would have been concerned over the implications of the soft policy of the Obama Administration, had no national option because they had no independent means of acting against North Korea. Israel will not stand and watch helplessly if it concludes that Iran might follow the example of North Korea. I have said it in the past and I say it again that Israel will not hesitate to act unilaterally against Iran if it apprehends that it is on the verge of acquiring a military nuclear capability. It will prefer to act with the understanding of the US, but if there is no change in the soft policy of the Obama Administration, it will not hesitate to act even without prior consultation with the US.
7. India too has been noting with concern the total confusion which seems to prevail in the corridors of the Obama Administration over its Af-Pak policy. Some of the recent comments of Hillary Clinton, the US Secretary of State, about alleged past incoherence in the US policy towards Pakistan and about the part-responsibility of the US for the state of affairs in the Af-Pak region have given comfort to the military-intelligence establishment and the political leaders in Pakistan. Obama's new over-generosity to the Pakistani Armed forces and his reluctance to hold them accountable for their sins of commission and omission in the war against terrorism have convinced the Pakistani leaders that they have no adverse consequences to fear from the Obama Administration. India would be the first to feel the adverse consequences of this newly-found confidence in Islamabad vis-a-vis its relations with the US.
8. India also has reasons to be concerned over the definite down-grading by the Obama Administration of the importance of the USA's strategic relationship with India. This down-grading has given satisfaction to Pakistan as well as China.
9. Jimmy Carter took a little over three years to create the image of the US as a confused and soft power. Obama is bidding fair to create that image even in his first year in office. The North Korean defiance is the first result of this perceived soft image. There will be more surprises for the US and the international community to follow if Obama and his aides do not embark on corrective actions before it is too late.
(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: seventyone2@gmail.com)
Saturday, May 23, 2009
CHINESE ECONOMY MONITOR: NOTE NO 7--CAUTIOUS OPTIMISM
B.Raman
(What will be the impact of the global financial and economic melt-down on the Chinese economy? This question should be of interest to the other countries of the South and the South-East Asian region. If the Chinese economy is badly affected, they too are likely to feel the negative consequences of the down-turn in the Chinese economy. Keeping this in view, we have been bringing out a periodic "Chinese Economy Monitor" based on open information. This is the seventh in the series)
ASSESSMENT
Driven by an increase in domestic demand, the Chinese economy has started showing signs of a recovery. The signs are stronger in the interior provinces in Central and Western China where the industries are not dependent on exports than in the coastal provinces where the manufacturing sector is dependent on exports. While domestic demand, encouraged by the Government's stimulus package of last November, is increasing, exports continue to decline, but the rate of decline is slower. Chinese analysts expect that the decline in exports, at a slower rate, will continue till the end of the year. The exports may start picking up again next year if the US economy improves, but not otherwise. While the Asian Development Bank has been upbeat on the signs of a recovery in China, the World Bank has been more cautious and warned against premature optimism. One of the factors for the caution is that most of the recovery has been due to an increase in Government spending and not to an increase in private investment .Another factor is that some of the data tend to be confusing and contradictory. This has been pointed out even by Chinese analysts. An analysis of the recovery by the official Xinhua news agency points out that while industrial production, driven by an increase in domestic demand, is reported to be going up again, power consumption by the industries continues to go down. It points out that no explanation for this contradiction has been forthcoming. There are definite signs of a recovery driven by an increase in domestic demand, but are these signs ephemeral or will they be sustained? The Chinese analysts are keeping their fingers crossed. As one studies the way the Chinese leadership has been dealing with the economic down-turn, one is impressed by the refreshing transparency exhibited by the Chinese leadership in dealing with the economic distress.Instead of covering up their economic difficulties, they have been taking their people into confidence, explaining to them the reasons for the difficulties and the action being taken by the Government in dealing with the difficulties and appealing for the understanding and co-operation of the people. President Hu Jintao, Prime Minister Wen Jiabo and other leaders have been touring inside the country extensively and repeatedly for this purpose. Their efforts are showing results as could be seen from the fact that warnings by foreign analysts of extensive social unrest due to large-scale job losses have been belied so far.
MANUFACTURING SECTOR EXPANDS AGAIN, BUT TO MEET DOMESTIC DEMAND, NOT EXPORTS
2.In a report dated May 4,2009, the Credit Lyonnais Securities Asia (CLSA) based in Hong Kong, which monitors the Chinese economy, reported as follows: "The CLSA China Manufacturing PMI (Purchasing Managers' Index) rose sharply to 50.1 in April, from 44.8 in the previous month, to signal an expansion of the Chinese manufacturing sector for the first time in nine months. The upward trend observed in the index since posting a survey low last November, suggests that the sector is showing signs of stabilisation. April data pointed to the first rise in production levels at Chinese manufacturers since last July. Where firms signalled an increase in output at their plants, this was commonly attributed to modest gains in new business. Growth of new orders was signalled by April’s survey, following eight consecutive months in which order books have deteriorated. Chinese manufacturers widely reported that improved domestic demand had led sales higher in April. Despite an overall gain in new business, Chinese manufacturers pointed to a modest decline in export sales in April. That said, the latest drop in foreign orders was the least marked for eight months, with panellists commenting that improved demand from some external sources had acted to limit the rate of decline. A modest increase in staff numbers at Chinese manufacturers was recorded in April, which was the first in nine months. Employment growth largely reflected an improvement in order books and higher output requirements. Prices charged by Chinese manufacturers for their finished goods fell further in April, extending the current period of decline to eight successive months. Anecdotal evidence frequently linked the marked drop in output charges to competitive pressures and falling input costs. Average cost burdens faced by Chinese manufacturers declined for the seventh month running in April. The latest reduction was still sharp but much weaker than the rapid declines recorded towards the end of 2008. "
3.Commenting on the survey, Eric Fishwick, Head of Economic Research at CLSA, said: "China's Government has been extremely successful in stimulating investment and, combined with a sharp improvement in export orders, this has pushed the PMI back into positive territory in April. The Export Orders Index should soften again in the coming months as, inventories having been brought under control, orders track final demand overseas. However, we hope that firmer domestic demand, as Government spending gains traction, will keep the PMI above 50 in months to come."
---- CLSA survey dated May 4,2009, available at https://www.clsa.com/about-clsa/media-centre/2009-Media-releases/clsa-china-pmi-report-on-manufacturing-may-2009.php
ON THE RECOVERY PATH, SAYS ADB CHIEF
4.Addressing a press conference at the end of the annual meeting of the Asian Development Bank (ADB) at Bali in Indonesia on May 5,2009,Haruhiko Kuroda, President of Asian Development Bank, said:"China's economy is on recovery course and it could recover much earlier than other economies, but of course, at the same time, we have to be very cautious. The South Korean economy had showed signs of recovery, and Japan's industrial production showed some signs of bottoming out.On the whole, I'm cautiously optimistic that Asia will recover by the end of next year."
------ Xinhua report dated May 5,2009.
DOMESTIC CONSUMPTION DRIVES ECONOMY UP
5. China's domestic demand has started to become more of a driving force for the country's economic growth than in the past. Signs of a domestic consumption boost are apparent as people are spending more on domestic commodities and the Government plans for more consumption stimulus. Data from the National Bureau of Statistics (NBS) released on May 20,2009, showed that China's domestic consumption had maintained an upward trend since the beginning of the year. China's retail sales rose 14.8 per cent in April year on year. It was 0.1 percentage points higher than in March. Rural spending, driven by a Government rebate policy on home-appliance purchases and other commodities, grew by 16.7 per cent in April, which was 2.8 percentage points higher than urban growth. The property and auto market also showed the same trend as China became the world's largest vehicle market again with more than 1.15 million cars sold in April, up 25 per cent from a year earlier. In the housing sector, China's real-estate climate index was finally back to growth after ten months of decline. Property sales rose by 17.5 per cent in acreage from a year earlier in the first four months of 2009. "China's economic structure has started to enter a transforming period to a consumption-driven growth model," said Li Daokui, Director of the Department of Finance at Tsinghua University. According to Li, economic growth of China's inland western and central regions, which relied less on export, had exceeded that of the coastal areas in the first quarter, reflecting a strong pull from domestic consumption and investment. Data from regional statistics bureaus had shown that Western and Central China accounted for nine of the 11 provincial areas that had seen double-digit economic growth year on year in the first quarter. Such growth was contrasted by coastal regions whose economy has been mainly driven by export, such as Shanghai, Zhejiang and Guangdong. Gross domestic production (GDP) growth there dropped to three- to- six per cent. "Domestic consumption, together with fixed assets investment, had become the main forces of China's economic recovery as export continues to weaken," Li told Xinhua.
--- Xinhua dated May 21,2009
IS THE RECOVERY EPHEMERAL OR SUSTAINABLE?
6."With stronger domestic demand, China is very likely to see its economy facing better conditions this year and the Government's goal of 8 per cent growth will be more than achievable," said Wang Yuanhong, senior economist and head of the Economic Forecasting Department of the State Information Center at a seminar organized by the All-China Journalists Association. Wang, however, expressed concerns on whether the current economic recovery is sustainable. Xu Lin, Director-General of the fiscal and financial affairs department at the National Development and Reform Commission, said China can achieve its goal of 8 per cent growth this year as it has enough resources to add to Government spending if needed. Many observers suspect this may be an overestimate. The World Bank estimates that a 6.5 per cent growth is more realistic and said the enthusiasm about an economic recovery in China may be "premature" as private investment lags behind Government spending. Most China watchers, however, feel that an 8 per cent growth is required to boost employment.China will also have to identify new growth sectors apart from the saturated automobile and real estate markets, Wang said.
------" China Daily " dated May 21,2009
MIXED SIGNALS: NEED FOR CAUTION
7."With the world keeping a close watch on the Chinese economy for signs of revival, the latest data are sending mixed signals and fueling concern that a recovery, if there really is one, is not on solid footing. When gross domestic product (GDP) and exports were soaring, indicators like electricity use didn't get much attention. Now, analysts are closely examining every scrap of data. But the problem is, many statistics don't seem to be giving much insight into economic trends. Old patterns are breaking down and long-standing relationships are breaking apart. Also, many figures for the first two months of 2009 are especially confusing, because the long Lunar New Year holiday fell in January this year, two weeks earlier than in 2008. Many statistics were only released as an aggregate figure for January and February, making it almost impossible to derive accurate year-on-year data. The National Bureau of Statistics (NBS) reported this week that China's industrial output rose 7.3 per cent year on year in April, at the higher end of analysts' expectations. But power generation fell 3.55 per cent last month from a year earlier, to 274.76 billion kilowatt hours, according to the State Grid Corp. of China. Since industry consumes about 70 per cent of China's power, how do economists account for a rise in industrial production accompanied by a decline in power consumption?
A breakdown of electricity use sheds a little light on the situation. Electricity consumption started declining on a year-on-year basis last October, when it fell 3.7 per cent, the first drop since 1999.That was also before the Government announced a 4-trillion-yuan($586 billion) stimulus package in November. Power consumption fell 4 per cent to 781 billion kw/hrs in the first quarter from a year earlier. But in March, it fell 2.02 per cent, a little more than half the rate of decline in October. And not all sectors reported a power consumption drop. Consumption of agriculture and tertiary industry rose 5.12 per cent and 7.41 per cent year on year in the first quarter, respectively, according to the China Electricity Council (CEC). Residential use rose 9.88 per cent.But industrial use declined 8.21 per cent, and with exports falling, use in the manufacturing and export hubs of Guangdong and Zhejiang provinces, was "below the national average," the CEC said. Indeed, the latest industrial output figures for exporters also show a sharp decline last month, down 14.3 per cent to 566.21 billion yuan. An export revival is evidently way off, and that's bound to delay an overall economic recovery.
Zhang Liqun, a researcher with the Development Research Center of the State Council, a government think-tank, told Xinhua that exports would continue declining in the second half but at a slower pace. Zhang said the likelihood of further deterioration in the global economy was "slim" and Chinese exporters were trying to change their product mix. Exports fell 22.6 per cent last month, the sixth monthly drop in a row. Zhang predicted that for the whole year, exports might fall about 10 per cent to 15 per cent. He noted that when looking at the decline in industrial power use, it was important to remember that industrial upgrading was still in progress. The decline of electricity consumption by heavy industry, which accounts for 82 per cent of total industrial power consumption, was the leading cause for the overall decline. China has spent years working to scale back its smokestack industries so it can cut energy intensity by 20 per cent and major emissions by 10 per cent between 2006 and 2010. China plans to eliminate 15 million kw/hrs of power provided by small coal-powered plants, as well as obsolete capacity of 10 million tonnes in the iron industry and 6 million tonnes in the steel industry this year. The first-quarter output growth rate of the six most energy-intensive sectors (iron and steel, nonferrous metals, building materials, petrochemicals, coking and chemicals) fell 12.5 percentage points on average from a year earlier, to 2.3 percent, NBS figures showed. Power use by those sectors also showed large declines: iron and steel (10.24 per cent), chemicals (13.14 per cent) and nonferrous metals (16.78 per cent) in the first quarter, according to the CEC. Meanwhile, efforts to upgrade and rebalance industry showed progress in the first quarter, with tertiary industry's weight in the economy up 1.6 percentage points and secondary industry's weight down 1.9 points. Despite discouraging data on the industrial front, policy makers have taken heart from consumer behavior in recent months, which seems to show that the effort to get more economic growth out of domestic demand and less from external factors is succeeding. GDP expanded 6.1 per cent in the first quarter, and the domestic consumption provided the largest share at 4.3 percentage points, accounting for 70.5 percent of the total growth. Investment generated another 2 points, accounting for 32.8 per cent of the total growth, while the decline in exports shaved 0.2 point of the total, according to NBS figures. The economy expanded by 10.6 per cent year on year in the first quarter of 2008. Consumption accounted for 44.4 per cent of total GDP growth, with investment generating another 46.7 per cent and exports providing the remaining 8.9 per cent of the total, according to Zhu Baoliang, an expert with the NBS.
China has become the world's largest vehicle market, with more than 2.67 million cars sold in the first quarter, up 3.88 per cent year on year. Car sales were buoyed by government stimulus policies, said Zhang Yunpeng, an analyst with Beijing-based Huarong Securities. In January, China halved the purchase tax on passenger cars to 5 per cent for models with engine displacements of less than 1.6 liters. More than 1.15 million vehicles were sold last month in China, up 25 per cent in terms of units, while sales in the United States fell 34.4 per cent year on year to 819,540 units, according to the China Association of Automobile Manufacturers. Other NBS figures this week showed that retail sales rose 14.8 per cent in April year on year to 934.32 billion yuan, and the 18.5 per cent monthly vehicle sales growth in terms of sales revenue dwarfed other items by 3.7 percentage points. Private-sector housing sales rose 8.2 per cent year on year in 70 mid-sized and large cities in the first quarter, including Beijing, Shanghai, Guangzhou and other metropolises. Auto and home sales were the most important consumption sectors and their revival showed a trend of consumption recovery in China. This would stimulate the growth of related industries. Boosted by the surge in housing transactions, sales of construction and interior decoration materials rose 10.8 per cent in April from a year earlier, according to the NBS. Zhuang Jian, a senior economist with the Asian Development Bank office in Beijing, told Xinhua that although sales of cars and homes had picked up in recent months, Chinese consumers needed to have more confidence before they would spend and invest more. The Government needed to take new, responsive measures as new situations emerged. Zhuang also noted that contradictory data had been seen from time to time in earlier years in China, when the country's economy was maturing, and there still might be some difficulties ahead. He added that it had only been half a year since the major stimulus plan was announced and it would be wise to wait for another quarter to see the effects of the stimulus package. "The stimulus has already paid off, with rising investment in government-supported projects. As the weather in the second quarter is more suitable for construction work, we can expect this type of investment would continue to grow," Zhang said. China's fixed-asset investment jumped 28.8 per cent to 2.81 trillion yuan in the first quarter. The growth pace accelerated further to 34 per cent in April. Analysts said they expected further gains in shares, car sales and housing transactions in the coming months, but they warned that economic data could still be confusing and disappointing.The ADB forecast in a March report that China's economy might grow 7 per cent this year. "Judging from current conditions, economic growth might even exceed that forecast," Zhang said.
------ Xinhua analysis dated May 14,2009
GLOBALISATION OF THE YUAN
8. Chinese experts have welcomed the remarks made by Timothy Geithner, US Treasury Secretary, on May 20,2009, before the US Senate Banking Committee that China did not manipulate the renminbi for export advantage and had taken steps to enhance exchange rate flexibility. Commenting on his statement, Zhai Peng, economist, Guotai Jun'an Securities, said: "China's yuan has appreciated by 20 per cent between July 2005 and February 2009. The currency even appreciated slightly against the dollar when most other emerging markets and other currencies fell sharply against the greenback during the financial crisis.Unlike the Asian financial crisis in 1997 when the Chinese Government intervened to hold the renminbi's value against depreciation, it has become much more market oriented ever since China launched the reform of its foreign exchange mechanism in July 2005."Li Jianfeng, economist, Shanghai Securities, said: "The fact that Shanghai is to be built into a global financial center by 2020 would greatly drive the yuan to play a bigger international role. This will consequently enable the Government to promote the reform of the foreign exchange mechanism and thus result in a steady appreciation of the currency." Du Peng, the head of the current account department at the State Administration of Foreign Exchange (SAFE), said that China would give the nation's banks more price-setting capacity in the exchange of foreign currencies with customers as part of Government efforts to create a more market-oriented yuan. "The foreign exchange regulator will relax limits on exchange rates commercial banks offer customers to meet demand for two-way fluctuations of the yuan," he said and added that China would also push forward the opening of the capital account and improve the management of current account."After several years of reform, China's foreign exchange market has developed quickly and has made great strides,"he said. Zhang Guangping, deputy head of the Shanghai branch of the China Banking Regulatory Commission, said that a series of conditions would have to be met for the yuan globalization trend to gather momentum."China would have to gradually make the yuan convertible on the capital account; it needs a more liquid foreign exchange market; its bond markets and banking system needs to be more developed; and there has to be proper monitoring of cross-border capital flows," Zhang said.
------ "China Daily " dated May 22,2009
CHINA TO CONTINUE TO BUY US TREASURY BONDS
9.Addressing a press conference on March 23,2009,Hu Xiaolian, a Vice- Governor of the People's Bank of China, made the following points: (i).China will continue to buy US Treasury Bonds, viewing the credit risk as low overall."Investing in American Treasuries, as an important part of our foreign exchange reserve management, will continue." (ii). China would pay close attention to changes in the value of its Treasury holdings. "US Treasuries are an important part of our foreign exchange reserves. So we naturally care about the security and investment return on US Treasuries." (iii). She disputed the argument heard in some circles that the US economy and markets were in such deep trouble that the dollar's global supremacy was under threat. She said China's view was that studies could begin of a multi-polar global currency system but that the dollar remained the key currency in terms of trade, settlement, payments and pricing. The dollar also dominated financial investment. That was why China, though favoring research into a new multi-currency system, believed the current priority is to step up supervision of the US economy and its financial markets. (iv).The Central Government took long-term factors into account such as the structure of China's payments and trade; the risks and returns on various currencies; and the liquidity of different currencies. China would not be swayed in determining the make-up of its portfolio by short-term volatility in currency markets.
---"CHINA DAILY" dated March 23,2009.
CONSUMER GOODS PRODUCTION UP
10.China's consumer goods industry kept stable development in the first four months this year, thanks to rising domestic demand that offsets falling export, said the Ministry of Industry and Information Technology (MIIT) on May 22,2009. In the past four months, the industrial output of consumer goods grew by 8 per cent. The figures were higher for March and April at 9.8 per cent and 9.2 per cent each. Among its major sectors, textiles, tobacco and pharmaceutical, and light industry grew by 8.1 per cent, 6.6 per cent, 6.1 per cent and 13.8 per cent in industrial output respectively.Industrial output of the four sectors accounted for 30.4 per cent of the national total, statistics from MIIT showed.The light and textile industries, which had been among the ten industries supported by the Government's stimulus plans, reported shrinking decline in exports.Exports in the light industry fell by 10.9 per cent and exports in the textile industry dropped 8.4 per cent from January to April. However, the decline rates were 4.8 and 7.4 percentage points lower compared to that of the whole industrial export in the same period.
----- Xinhua dated May 22,2009
BREAK-UP OF STIMULUS PACKAGE
11.In a statement issued on May 20,2009, the National Development and Reform Commission gave for the first time a break-up of how the stimulus package of US $ 586 million announced by the Government in November last year would be utilised. At the time the stimulus package was announced, some analysts had pointed out that the Government had included in the package the amounts which it intended spending for the relief, rehabilitation and reconstruction of the quake-hit areas of the Sichuan Province.Confirming this, the statement indicated that one-fourth of the stimulus package was going towards the reconstruction in quake-devastated Sichuan province.Another 37.5 per cent of the package is going towards the construction of roads, railways, airports, irrigation and other basic infrastructure across the country. The balance is being utilised for construction of new houses and the improvement of existing houses, village improvement schemes and the improvement of public health services and education. The Central Government is providing 29.5 per cent of the funding for the overall stimulus program, with the balance coming from local governments and other sources.
---- "China Daily" dated May 22,2009
IRON ORE PRICE INDEX
12.China will unveil its first iron ore trade platform called the Rizhao International Iron Ore Trade Center in the Shandong province on May 25, 2009. It will signal that the establishment of the country's iron ore price index is under way, according to Bai Wenhui, executive of Shandong Huaxin Trade Co Ltd, a major shareholder of the trade center. Jointly started by five local private companies pursuing bulk commodity transaction in Shandong, the center mainly provides electronic commerce services for iron ore suppliers and steelmakers. Its registered capital totals 20 million yuan ($2.93 million). The trade center will offer services including electronic transaction, information exchange, quality inspection, storage, transportation, insurance, and settlement for the two parties in iron ore trading, according to Wang Lei, head of the preparation team for this program."As the biggest iron ore importer, China has not set an iron ore price index to date. The iron ore trade center will promote orderly iron ore imports and standardize activities of trading parties, and gradually facilitate China to launch its own iron ore price index in the future," said Bai.Data from China Customs shows that the country imported 443.7 million tons of iron ore in 2008, half of the world's overall iron ore exports volume over the year, and the imports in January-April period in 2009 hit 188 million tons.
----Xinhua dated May 22,2009.
( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: seventyone2@gmail.com )
(What will be the impact of the global financial and economic melt-down on the Chinese economy? This question should be of interest to the other countries of the South and the South-East Asian region. If the Chinese economy is badly affected, they too are likely to feel the negative consequences of the down-turn in the Chinese economy. Keeping this in view, we have been bringing out a periodic "Chinese Economy Monitor" based on open information. This is the seventh in the series)
ASSESSMENT
Driven by an increase in domestic demand, the Chinese economy has started showing signs of a recovery. The signs are stronger in the interior provinces in Central and Western China where the industries are not dependent on exports than in the coastal provinces where the manufacturing sector is dependent on exports. While domestic demand, encouraged by the Government's stimulus package of last November, is increasing, exports continue to decline, but the rate of decline is slower. Chinese analysts expect that the decline in exports, at a slower rate, will continue till the end of the year. The exports may start picking up again next year if the US economy improves, but not otherwise. While the Asian Development Bank has been upbeat on the signs of a recovery in China, the World Bank has been more cautious and warned against premature optimism. One of the factors for the caution is that most of the recovery has been due to an increase in Government spending and not to an increase in private investment .Another factor is that some of the data tend to be confusing and contradictory. This has been pointed out even by Chinese analysts. An analysis of the recovery by the official Xinhua news agency points out that while industrial production, driven by an increase in domestic demand, is reported to be going up again, power consumption by the industries continues to go down. It points out that no explanation for this contradiction has been forthcoming. There are definite signs of a recovery driven by an increase in domestic demand, but are these signs ephemeral or will they be sustained? The Chinese analysts are keeping their fingers crossed. As one studies the way the Chinese leadership has been dealing with the economic down-turn, one is impressed by the refreshing transparency exhibited by the Chinese leadership in dealing with the economic distress.Instead of covering up their economic difficulties, they have been taking their people into confidence, explaining to them the reasons for the difficulties and the action being taken by the Government in dealing with the difficulties and appealing for the understanding and co-operation of the people. President Hu Jintao, Prime Minister Wen Jiabo and other leaders have been touring inside the country extensively and repeatedly for this purpose. Their efforts are showing results as could be seen from the fact that warnings by foreign analysts of extensive social unrest due to large-scale job losses have been belied so far.
MANUFACTURING SECTOR EXPANDS AGAIN, BUT TO MEET DOMESTIC DEMAND, NOT EXPORTS
2.In a report dated May 4,2009, the Credit Lyonnais Securities Asia (CLSA) based in Hong Kong, which monitors the Chinese economy, reported as follows: "The CLSA China Manufacturing PMI (Purchasing Managers' Index) rose sharply to 50.1 in April, from 44.8 in the previous month, to signal an expansion of the Chinese manufacturing sector for the first time in nine months. The upward trend observed in the index since posting a survey low last November, suggests that the sector is showing signs of stabilisation. April data pointed to the first rise in production levels at Chinese manufacturers since last July. Where firms signalled an increase in output at their plants, this was commonly attributed to modest gains in new business. Growth of new orders was signalled by April’s survey, following eight consecutive months in which order books have deteriorated. Chinese manufacturers widely reported that improved domestic demand had led sales higher in April. Despite an overall gain in new business, Chinese manufacturers pointed to a modest decline in export sales in April. That said, the latest drop in foreign orders was the least marked for eight months, with panellists commenting that improved demand from some external sources had acted to limit the rate of decline. A modest increase in staff numbers at Chinese manufacturers was recorded in April, which was the first in nine months. Employment growth largely reflected an improvement in order books and higher output requirements. Prices charged by Chinese manufacturers for their finished goods fell further in April, extending the current period of decline to eight successive months. Anecdotal evidence frequently linked the marked drop in output charges to competitive pressures and falling input costs. Average cost burdens faced by Chinese manufacturers declined for the seventh month running in April. The latest reduction was still sharp but much weaker than the rapid declines recorded towards the end of 2008. "
3.Commenting on the survey, Eric Fishwick, Head of Economic Research at CLSA, said: "China's Government has been extremely successful in stimulating investment and, combined with a sharp improvement in export orders, this has pushed the PMI back into positive territory in April. The Export Orders Index should soften again in the coming months as, inventories having been brought under control, orders track final demand overseas. However, we hope that firmer domestic demand, as Government spending gains traction, will keep the PMI above 50 in months to come."
---- CLSA survey dated May 4,2009, available at https://www.clsa.com/about-clsa/media-centre/2009-Media-releases/clsa-china-pmi-report-on-manufacturing-may-2009.php
ON THE RECOVERY PATH, SAYS ADB CHIEF
4.Addressing a press conference at the end of the annual meeting of the Asian Development Bank (ADB) at Bali in Indonesia on May 5,2009,Haruhiko Kuroda, President of Asian Development Bank, said:"China's economy is on recovery course and it could recover much earlier than other economies, but of course, at the same time, we have to be very cautious. The South Korean economy had showed signs of recovery, and Japan's industrial production showed some signs of bottoming out.On the whole, I'm cautiously optimistic that Asia will recover by the end of next year."
------ Xinhua report dated May 5,2009.
DOMESTIC CONSUMPTION DRIVES ECONOMY UP
5. China's domestic demand has started to become more of a driving force for the country's economic growth than in the past. Signs of a domestic consumption boost are apparent as people are spending more on domestic commodities and the Government plans for more consumption stimulus. Data from the National Bureau of Statistics (NBS) released on May 20,2009, showed that China's domestic consumption had maintained an upward trend since the beginning of the year. China's retail sales rose 14.8 per cent in April year on year. It was 0.1 percentage points higher than in March. Rural spending, driven by a Government rebate policy on home-appliance purchases and other commodities, grew by 16.7 per cent in April, which was 2.8 percentage points higher than urban growth. The property and auto market also showed the same trend as China became the world's largest vehicle market again with more than 1.15 million cars sold in April, up 25 per cent from a year earlier. In the housing sector, China's real-estate climate index was finally back to growth after ten months of decline. Property sales rose by 17.5 per cent in acreage from a year earlier in the first four months of 2009. "China's economic structure has started to enter a transforming period to a consumption-driven growth model," said Li Daokui, Director of the Department of Finance at Tsinghua University. According to Li, economic growth of China's inland western and central regions, which relied less on export, had exceeded that of the coastal areas in the first quarter, reflecting a strong pull from domestic consumption and investment. Data from regional statistics bureaus had shown that Western and Central China accounted for nine of the 11 provincial areas that had seen double-digit economic growth year on year in the first quarter. Such growth was contrasted by coastal regions whose economy has been mainly driven by export, such as Shanghai, Zhejiang and Guangdong. Gross domestic production (GDP) growth there dropped to three- to- six per cent. "Domestic consumption, together with fixed assets investment, had become the main forces of China's economic recovery as export continues to weaken," Li told Xinhua.
--- Xinhua dated May 21,2009
IS THE RECOVERY EPHEMERAL OR SUSTAINABLE?
6."With stronger domestic demand, China is very likely to see its economy facing better conditions this year and the Government's goal of 8 per cent growth will be more than achievable," said Wang Yuanhong, senior economist and head of the Economic Forecasting Department of the State Information Center at a seminar organized by the All-China Journalists Association. Wang, however, expressed concerns on whether the current economic recovery is sustainable. Xu Lin, Director-General of the fiscal and financial affairs department at the National Development and Reform Commission, said China can achieve its goal of 8 per cent growth this year as it has enough resources to add to Government spending if needed. Many observers suspect this may be an overestimate. The World Bank estimates that a 6.5 per cent growth is more realistic and said the enthusiasm about an economic recovery in China may be "premature" as private investment lags behind Government spending. Most China watchers, however, feel that an 8 per cent growth is required to boost employment.China will also have to identify new growth sectors apart from the saturated automobile and real estate markets, Wang said.
------" China Daily " dated May 21,2009
MIXED SIGNALS: NEED FOR CAUTION
7."With the world keeping a close watch on the Chinese economy for signs of revival, the latest data are sending mixed signals and fueling concern that a recovery, if there really is one, is not on solid footing. When gross domestic product (GDP) and exports were soaring, indicators like electricity use didn't get much attention. Now, analysts are closely examining every scrap of data. But the problem is, many statistics don't seem to be giving much insight into economic trends. Old patterns are breaking down and long-standing relationships are breaking apart. Also, many figures for the first two months of 2009 are especially confusing, because the long Lunar New Year holiday fell in January this year, two weeks earlier than in 2008. Many statistics were only released as an aggregate figure for January and February, making it almost impossible to derive accurate year-on-year data. The National Bureau of Statistics (NBS) reported this week that China's industrial output rose 7.3 per cent year on year in April, at the higher end of analysts' expectations. But power generation fell 3.55 per cent last month from a year earlier, to 274.76 billion kilowatt hours, according to the State Grid Corp. of China. Since industry consumes about 70 per cent of China's power, how do economists account for a rise in industrial production accompanied by a decline in power consumption?
A breakdown of electricity use sheds a little light on the situation. Electricity consumption started declining on a year-on-year basis last October, when it fell 3.7 per cent, the first drop since 1999.That was also before the Government announced a 4-trillion-yuan($586 billion) stimulus package in November. Power consumption fell 4 per cent to 781 billion kw/hrs in the first quarter from a year earlier. But in March, it fell 2.02 per cent, a little more than half the rate of decline in October. And not all sectors reported a power consumption drop. Consumption of agriculture and tertiary industry rose 5.12 per cent and 7.41 per cent year on year in the first quarter, respectively, according to the China Electricity Council (CEC). Residential use rose 9.88 per cent.But industrial use declined 8.21 per cent, and with exports falling, use in the manufacturing and export hubs of Guangdong and Zhejiang provinces, was "below the national average," the CEC said. Indeed, the latest industrial output figures for exporters also show a sharp decline last month, down 14.3 per cent to 566.21 billion yuan. An export revival is evidently way off, and that's bound to delay an overall economic recovery.
Zhang Liqun, a researcher with the Development Research Center of the State Council, a government think-tank, told Xinhua that exports would continue declining in the second half but at a slower pace. Zhang said the likelihood of further deterioration in the global economy was "slim" and Chinese exporters were trying to change their product mix. Exports fell 22.6 per cent last month, the sixth monthly drop in a row. Zhang predicted that for the whole year, exports might fall about 10 per cent to 15 per cent. He noted that when looking at the decline in industrial power use, it was important to remember that industrial upgrading was still in progress. The decline of electricity consumption by heavy industry, which accounts for 82 per cent of total industrial power consumption, was the leading cause for the overall decline. China has spent years working to scale back its smokestack industries so it can cut energy intensity by 20 per cent and major emissions by 10 per cent between 2006 and 2010. China plans to eliminate 15 million kw/hrs of power provided by small coal-powered plants, as well as obsolete capacity of 10 million tonnes in the iron industry and 6 million tonnes in the steel industry this year. The first-quarter output growth rate of the six most energy-intensive sectors (iron and steel, nonferrous metals, building materials, petrochemicals, coking and chemicals) fell 12.5 percentage points on average from a year earlier, to 2.3 percent, NBS figures showed. Power use by those sectors also showed large declines: iron and steel (10.24 per cent), chemicals (13.14 per cent) and nonferrous metals (16.78 per cent) in the first quarter, according to the CEC. Meanwhile, efforts to upgrade and rebalance industry showed progress in the first quarter, with tertiary industry's weight in the economy up 1.6 percentage points and secondary industry's weight down 1.9 points. Despite discouraging data on the industrial front, policy makers have taken heart from consumer behavior in recent months, which seems to show that the effort to get more economic growth out of domestic demand and less from external factors is succeeding. GDP expanded 6.1 per cent in the first quarter, and the domestic consumption provided the largest share at 4.3 percentage points, accounting for 70.5 percent of the total growth. Investment generated another 2 points, accounting for 32.8 per cent of the total growth, while the decline in exports shaved 0.2 point of the total, according to NBS figures. The economy expanded by 10.6 per cent year on year in the first quarter of 2008. Consumption accounted for 44.4 per cent of total GDP growth, with investment generating another 46.7 per cent and exports providing the remaining 8.9 per cent of the total, according to Zhu Baoliang, an expert with the NBS.
China has become the world's largest vehicle market, with more than 2.67 million cars sold in the first quarter, up 3.88 per cent year on year. Car sales were buoyed by government stimulus policies, said Zhang Yunpeng, an analyst with Beijing-based Huarong Securities. In January, China halved the purchase tax on passenger cars to 5 per cent for models with engine displacements of less than 1.6 liters. More than 1.15 million vehicles were sold last month in China, up 25 per cent in terms of units, while sales in the United States fell 34.4 per cent year on year to 819,540 units, according to the China Association of Automobile Manufacturers. Other NBS figures this week showed that retail sales rose 14.8 per cent in April year on year to 934.32 billion yuan, and the 18.5 per cent monthly vehicle sales growth in terms of sales revenue dwarfed other items by 3.7 percentage points. Private-sector housing sales rose 8.2 per cent year on year in 70 mid-sized and large cities in the first quarter, including Beijing, Shanghai, Guangzhou and other metropolises. Auto and home sales were the most important consumption sectors and their revival showed a trend of consumption recovery in China. This would stimulate the growth of related industries. Boosted by the surge in housing transactions, sales of construction and interior decoration materials rose 10.8 per cent in April from a year earlier, according to the NBS. Zhuang Jian, a senior economist with the Asian Development Bank office in Beijing, told Xinhua that although sales of cars and homes had picked up in recent months, Chinese consumers needed to have more confidence before they would spend and invest more. The Government needed to take new, responsive measures as new situations emerged. Zhuang also noted that contradictory data had been seen from time to time in earlier years in China, when the country's economy was maturing, and there still might be some difficulties ahead. He added that it had only been half a year since the major stimulus plan was announced and it would be wise to wait for another quarter to see the effects of the stimulus package. "The stimulus has already paid off, with rising investment in government-supported projects. As the weather in the second quarter is more suitable for construction work, we can expect this type of investment would continue to grow," Zhang said. China's fixed-asset investment jumped 28.8 per cent to 2.81 trillion yuan in the first quarter. The growth pace accelerated further to 34 per cent in April. Analysts said they expected further gains in shares, car sales and housing transactions in the coming months, but they warned that economic data could still be confusing and disappointing.The ADB forecast in a March report that China's economy might grow 7 per cent this year. "Judging from current conditions, economic growth might even exceed that forecast," Zhang said.
------ Xinhua analysis dated May 14,2009
GLOBALISATION OF THE YUAN
8. Chinese experts have welcomed the remarks made by Timothy Geithner, US Treasury Secretary, on May 20,2009, before the US Senate Banking Committee that China did not manipulate the renminbi for export advantage and had taken steps to enhance exchange rate flexibility. Commenting on his statement, Zhai Peng, economist, Guotai Jun'an Securities, said: "China's yuan has appreciated by 20 per cent between July 2005 and February 2009. The currency even appreciated slightly against the dollar when most other emerging markets and other currencies fell sharply against the greenback during the financial crisis.Unlike the Asian financial crisis in 1997 when the Chinese Government intervened to hold the renminbi's value against depreciation, it has become much more market oriented ever since China launched the reform of its foreign exchange mechanism in July 2005."Li Jianfeng, economist, Shanghai Securities, said: "The fact that Shanghai is to be built into a global financial center by 2020 would greatly drive the yuan to play a bigger international role. This will consequently enable the Government to promote the reform of the foreign exchange mechanism and thus result in a steady appreciation of the currency." Du Peng, the head of the current account department at the State Administration of Foreign Exchange (SAFE), said that China would give the nation's banks more price-setting capacity in the exchange of foreign currencies with customers as part of Government efforts to create a more market-oriented yuan. "The foreign exchange regulator will relax limits on exchange rates commercial banks offer customers to meet demand for two-way fluctuations of the yuan," he said and added that China would also push forward the opening of the capital account and improve the management of current account."After several years of reform, China's foreign exchange market has developed quickly and has made great strides,"he said. Zhang Guangping, deputy head of the Shanghai branch of the China Banking Regulatory Commission, said that a series of conditions would have to be met for the yuan globalization trend to gather momentum."China would have to gradually make the yuan convertible on the capital account; it needs a more liquid foreign exchange market; its bond markets and banking system needs to be more developed; and there has to be proper monitoring of cross-border capital flows," Zhang said.
------ "China Daily " dated May 22,2009
CHINA TO CONTINUE TO BUY US TREASURY BONDS
9.Addressing a press conference on March 23,2009,Hu Xiaolian, a Vice- Governor of the People's Bank of China, made the following points: (i).China will continue to buy US Treasury Bonds, viewing the credit risk as low overall."Investing in American Treasuries, as an important part of our foreign exchange reserve management, will continue." (ii). China would pay close attention to changes in the value of its Treasury holdings. "US Treasuries are an important part of our foreign exchange reserves. So we naturally care about the security and investment return on US Treasuries." (iii). She disputed the argument heard in some circles that the US economy and markets were in such deep trouble that the dollar's global supremacy was under threat. She said China's view was that studies could begin of a multi-polar global currency system but that the dollar remained the key currency in terms of trade, settlement, payments and pricing. The dollar also dominated financial investment. That was why China, though favoring research into a new multi-currency system, believed the current priority is to step up supervision of the US economy and its financial markets. (iv).The Central Government took long-term factors into account such as the structure of China's payments and trade; the risks and returns on various currencies; and the liquidity of different currencies. China would not be swayed in determining the make-up of its portfolio by short-term volatility in currency markets.
---"CHINA DAILY" dated March 23,2009.
CONSUMER GOODS PRODUCTION UP
10.China's consumer goods industry kept stable development in the first four months this year, thanks to rising domestic demand that offsets falling export, said the Ministry of Industry and Information Technology (MIIT) on May 22,2009. In the past four months, the industrial output of consumer goods grew by 8 per cent. The figures were higher for March and April at 9.8 per cent and 9.2 per cent each. Among its major sectors, textiles, tobacco and pharmaceutical, and light industry grew by 8.1 per cent, 6.6 per cent, 6.1 per cent and 13.8 per cent in industrial output respectively.Industrial output of the four sectors accounted for 30.4 per cent of the national total, statistics from MIIT showed.The light and textile industries, which had been among the ten industries supported by the Government's stimulus plans, reported shrinking decline in exports.Exports in the light industry fell by 10.9 per cent and exports in the textile industry dropped 8.4 per cent from January to April. However, the decline rates were 4.8 and 7.4 percentage points lower compared to that of the whole industrial export in the same period.
----- Xinhua dated May 22,2009
BREAK-UP OF STIMULUS PACKAGE
11.In a statement issued on May 20,2009, the National Development and Reform Commission gave for the first time a break-up of how the stimulus package of US $ 586 million announced by the Government in November last year would be utilised. At the time the stimulus package was announced, some analysts had pointed out that the Government had included in the package the amounts which it intended spending for the relief, rehabilitation and reconstruction of the quake-hit areas of the Sichuan Province.Confirming this, the statement indicated that one-fourth of the stimulus package was going towards the reconstruction in quake-devastated Sichuan province.Another 37.5 per cent of the package is going towards the construction of roads, railways, airports, irrigation and other basic infrastructure across the country. The balance is being utilised for construction of new houses and the improvement of existing houses, village improvement schemes and the improvement of public health services and education. The Central Government is providing 29.5 per cent of the funding for the overall stimulus program, with the balance coming from local governments and other sources.
---- "China Daily" dated May 22,2009
IRON ORE PRICE INDEX
12.China will unveil its first iron ore trade platform called the Rizhao International Iron Ore Trade Center in the Shandong province on May 25, 2009. It will signal that the establishment of the country's iron ore price index is under way, according to Bai Wenhui, executive of Shandong Huaxin Trade Co Ltd, a major shareholder of the trade center. Jointly started by five local private companies pursuing bulk commodity transaction in Shandong, the center mainly provides electronic commerce services for iron ore suppliers and steelmakers. Its registered capital totals 20 million yuan ($2.93 million). The trade center will offer services including electronic transaction, information exchange, quality inspection, storage, transportation, insurance, and settlement for the two parties in iron ore trading, according to Wang Lei, head of the preparation team for this program."As the biggest iron ore importer, China has not set an iron ore price index to date. The iron ore trade center will promote orderly iron ore imports and standardize activities of trading parties, and gradually facilitate China to launch its own iron ore price index in the future," said Bai.Data from China Customs shows that the country imported 443.7 million tons of iron ore in 2008, half of the world's overall iron ore exports volume over the year, and the imports in January-April period in 2009 hit 188 million tons.
----Xinhua dated May 22,2009.
( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: seventyone2@gmail.com )
Friday, May 22, 2009
PAK ARMY'S TALIBAN HUNT: SEEMING MOTION WITHOUT MOVEMENT
International Terrorism Monitor -- Paper No. 526
B. Raman
The operations of the Pakistani security forces against the Tehrik-e-Taliban Pakistan (TTP) and its affiliate the Tehrik-e-Nifaz-e-Shariat-e-Mohammadi (TNSM) have been marked by a lack of intelligence, physical security in the non-tribal areas, an over-all strategy, direction and prioritisation of different stages of the operations.
2. The disconcertingly inadequate intelligence is evident from the fact that neither the Inter-Services Intelligence (ISI) of the Army nor the Intelligence Bureau (IB) of the Ministry of the Interior seem to have the vaguest idea of the command and control of either the TTP or the TNSM. One knows more about the command and control of Al Qaeda than about those of the TTP and the TNSM. One knows a lot about their leaders---- Baitullah Mehsud of the TTP and Sufi Mohammad and Maulana Fazlullah of the TNSM--- but beyond that one knows very little. How are they organised, where are they trained, who are their individual commanders, where and how are they deployed----the answers to these questions are inadequate. So much is known about their ideology, but so little about their operational capabilities and potential.
3. A basic requirement of a good counter-insurgency operation is your ability to protect your back as you are engaged in your battle against the enemy. Your ability to protect your back depends on good physical security behind you. Good physical security depends on the police and the IB of Pakistan. The fact that the TTP and the TNSM have been able to indulge repeatedly in terrorist strikes in non-tribal areas----even in Islamabad, Rawalpindi, Lahore and Sargoda---- even as the security forces are confronting them in the tribal areas speaks poorly of the state of physical security in Pakistan. This is the result of long years of neglect of the police and the IB. The need for their revamping and modernisation has not received the attention of either Pakistan or the US.
4. No counter-insurgency operation can be effective unless it is sustained and driven by a determination to succeed in the over-all national interest. The counter-insurgency operations of the Pakistani security forces in the Pashtun tribal belt have neither been sustained nor marked by a determination to succeed. One has been seeing this in the operations undertaken by them in 2003 in South and North Waziristan, in the Swat Valley since 2007 and subsequently in the Bajaur Agency, the two Dirs and Buner districts of the Malakand Division of the North-West Frontier Province (NWFP).
5. The operations have been in fits and starts depending on the extent of the pressure to act exercised on the Pakistani leadership by the US. When the pressure is high, the action is high. When the pressure declines, the action declines. The repeated statements by President Asif Ali Zardari, Prime Minister Yousef Raza Gilani and Gen. Ashfaq Pervez Kayani, the Chief of the Army Staff (COAS), on Pakistan's determination to defeat the TTP and the TNSM have not been reflected in appropriate operational action on the ground. These statements have been made to reassure the US leaders ----President Obama as well those in the Congress--- of the determination of the Pakistani security forces to act. They have not come out of a genuine conviction in the Pakistani political and military leadership that Pakistan's future would be in danger if the Security forces do not neutralise the Taliban.
6. Openly, to reassure the US, Pakistani leaders charactetrise the Taliban as a threat, but, in reality, they look upon it more as a worrisome nuisance than as a serious threat to the state of Pakistan. Since Pakistan became independent in 1947, the Pakistan Army never had effective control over the Federally Administered Tribal Areas (FATA) and the Malakand Division, which had always remained the spawning ground of religious extremism. After 9/11, even the little control that was there before 9/11 has further weakened and the religious extremism emanating from this area has further increased. Large sections of the Pakistani civil society have been concerned over this development, but not the political class and the military-intelligence establishment. The Army's objective is to reduce this nuisance to its pre-9/11 level and to contain it.
7. It thinks it will neither be possible nor advisable to totally eradicate the influence of the Taliban. It is not possible because it would not have the required local support for its operations in the tribal belt. It is not advisable because, in the Army's view, the tribals such as the Mehsuds and the Wazirs have acted as force multipliers against India during the past conflicts with India and will be prepared to do so again in any future conflict. It is also not advisable because of the strategic potential of the Taliban to serve Pakistan's interests in Afghanistan.
8. The lack of a determination to succeed is evident from the lack of an over-all strategy, direction and prioritisation of different phases of the operations. The areas affected by the activities of the Taliban fall into three categories. The first category consists of North and South Waziristan, which are under the virtual de facto control of Al Qaeda, the Taliban and their allies since 2003. The increasing number of Predator strikes by the US in this area have kept the terrorists on the run without weakening their operational presence and capability. Only sustained and effective ground operations either by the US or by Pakistan or by both can achieve this result. Pakistan is opposed to any US role in the ground operations. At the same time, it is either unwilling or unable or both to undertake such ground operations on its own.
9. The second category consists of Bajaur, Swat and other areas of the Malakand Division. The Taliban has a certain measure of de facto control in these areas. There is no role for the US in these areas. Counter-Taliban operations in these areas have to be the responsibility of the Pakistani security forces. Through their open statements, Pakistani political and military leaders seek to give the impression of admitting their responsibility for action, but this admission has not been translated into effective action. Instead of first identifying the weakest points in the control of the Taliban, targeting them, removing the Taliban from there and then expanding the operations to areas where the Taliban control is stronger, the security forces have been hitting around blindly here and there without an over-all plan. There are too many fronts and too little progress.
10. The third category consists of the other districts of the NWFP where the Taliban's presence is more ideological than operational. No plan has been drawn up for preventing these areas from coming under the operational control of the Taliban.
11. The Obama Administration's policy of showering Pakistan with money and arms and ammunition even in the absence of proof of sincerity and conviction and even in the absence of progress on the ground is once again creating a worrisome impression in the Pakistani leaders that to continue to benefit from US support and largesse all they have to do is to create an illusion of motion without actual movement. That is what they are doing.
12. That is what Pervez Musharraf did when he was the President. The two Waziristans came under the effective control of Al Qaeda, the Taliban and their associates and the Neo Taliban of Afghanistan, operating from sanctuaries in Balochistan, staged its spectacular come-back in Afghanistan when he was the President and was the beneficiary of billions of dollars given by the Bush Administration. What promises he made to the Bush Administration to reform and modernise the madrasas and prevent their misuse for jihad! How much money he took from the US for madrasa reforms! What happened to those reforms?
13. That is exactly what Zardari, Gilani and Kayani are doing now. Creating an illusion of motion without actual movement, while extracting billions of dollars from the US. The Pakistani leadership---political and military--- has developed into a fine art the extraction of money from the US by exploiting the presence of Al Qaeda and the Taliban in their territory.
14. If the Taliban ultimately succeeds in further strengthening and expanding its control in Pakistan, the US will have to share a major portion of the responsibility for failing to make Pakistan act effectively instead of merely seeming to do so.
(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-Mail: seventyone2@gmail.com)
B. Raman
The operations of the Pakistani security forces against the Tehrik-e-Taliban Pakistan (TTP) and its affiliate the Tehrik-e-Nifaz-e-Shariat-e-Mohammadi (TNSM) have been marked by a lack of intelligence, physical security in the non-tribal areas, an over-all strategy, direction and prioritisation of different stages of the operations.
2. The disconcertingly inadequate intelligence is evident from the fact that neither the Inter-Services Intelligence (ISI) of the Army nor the Intelligence Bureau (IB) of the Ministry of the Interior seem to have the vaguest idea of the command and control of either the TTP or the TNSM. One knows more about the command and control of Al Qaeda than about those of the TTP and the TNSM. One knows a lot about their leaders---- Baitullah Mehsud of the TTP and Sufi Mohammad and Maulana Fazlullah of the TNSM--- but beyond that one knows very little. How are they organised, where are they trained, who are their individual commanders, where and how are they deployed----the answers to these questions are inadequate. So much is known about their ideology, but so little about their operational capabilities and potential.
3. A basic requirement of a good counter-insurgency operation is your ability to protect your back as you are engaged in your battle against the enemy. Your ability to protect your back depends on good physical security behind you. Good physical security depends on the police and the IB of Pakistan. The fact that the TTP and the TNSM have been able to indulge repeatedly in terrorist strikes in non-tribal areas----even in Islamabad, Rawalpindi, Lahore and Sargoda---- even as the security forces are confronting them in the tribal areas speaks poorly of the state of physical security in Pakistan. This is the result of long years of neglect of the police and the IB. The need for their revamping and modernisation has not received the attention of either Pakistan or the US.
4. No counter-insurgency operation can be effective unless it is sustained and driven by a determination to succeed in the over-all national interest. The counter-insurgency operations of the Pakistani security forces in the Pashtun tribal belt have neither been sustained nor marked by a determination to succeed. One has been seeing this in the operations undertaken by them in 2003 in South and North Waziristan, in the Swat Valley since 2007 and subsequently in the Bajaur Agency, the two Dirs and Buner districts of the Malakand Division of the North-West Frontier Province (NWFP).
5. The operations have been in fits and starts depending on the extent of the pressure to act exercised on the Pakistani leadership by the US. When the pressure is high, the action is high. When the pressure declines, the action declines. The repeated statements by President Asif Ali Zardari, Prime Minister Yousef Raza Gilani and Gen. Ashfaq Pervez Kayani, the Chief of the Army Staff (COAS), on Pakistan's determination to defeat the TTP and the TNSM have not been reflected in appropriate operational action on the ground. These statements have been made to reassure the US leaders ----President Obama as well those in the Congress--- of the determination of the Pakistani security forces to act. They have not come out of a genuine conviction in the Pakistani political and military leadership that Pakistan's future would be in danger if the Security forces do not neutralise the Taliban.
6. Openly, to reassure the US, Pakistani leaders charactetrise the Taliban as a threat, but, in reality, they look upon it more as a worrisome nuisance than as a serious threat to the state of Pakistan. Since Pakistan became independent in 1947, the Pakistan Army never had effective control over the Federally Administered Tribal Areas (FATA) and the Malakand Division, which had always remained the spawning ground of religious extremism. After 9/11, even the little control that was there before 9/11 has further weakened and the religious extremism emanating from this area has further increased. Large sections of the Pakistani civil society have been concerned over this development, but not the political class and the military-intelligence establishment. The Army's objective is to reduce this nuisance to its pre-9/11 level and to contain it.
7. It thinks it will neither be possible nor advisable to totally eradicate the influence of the Taliban. It is not possible because it would not have the required local support for its operations in the tribal belt. It is not advisable because, in the Army's view, the tribals such as the Mehsuds and the Wazirs have acted as force multipliers against India during the past conflicts with India and will be prepared to do so again in any future conflict. It is also not advisable because of the strategic potential of the Taliban to serve Pakistan's interests in Afghanistan.
8. The lack of a determination to succeed is evident from the lack of an over-all strategy, direction and prioritisation of different phases of the operations. The areas affected by the activities of the Taliban fall into three categories. The first category consists of North and South Waziristan, which are under the virtual de facto control of Al Qaeda, the Taliban and their allies since 2003. The increasing number of Predator strikes by the US in this area have kept the terrorists on the run without weakening their operational presence and capability. Only sustained and effective ground operations either by the US or by Pakistan or by both can achieve this result. Pakistan is opposed to any US role in the ground operations. At the same time, it is either unwilling or unable or both to undertake such ground operations on its own.
9. The second category consists of Bajaur, Swat and other areas of the Malakand Division. The Taliban has a certain measure of de facto control in these areas. There is no role for the US in these areas. Counter-Taliban operations in these areas have to be the responsibility of the Pakistani security forces. Through their open statements, Pakistani political and military leaders seek to give the impression of admitting their responsibility for action, but this admission has not been translated into effective action. Instead of first identifying the weakest points in the control of the Taliban, targeting them, removing the Taliban from there and then expanding the operations to areas where the Taliban control is stronger, the security forces have been hitting around blindly here and there without an over-all plan. There are too many fronts and too little progress.
10. The third category consists of the other districts of the NWFP where the Taliban's presence is more ideological than operational. No plan has been drawn up for preventing these areas from coming under the operational control of the Taliban.
11. The Obama Administration's policy of showering Pakistan with money and arms and ammunition even in the absence of proof of sincerity and conviction and even in the absence of progress on the ground is once again creating a worrisome impression in the Pakistani leaders that to continue to benefit from US support and largesse all they have to do is to create an illusion of motion without actual movement. That is what they are doing.
12. That is what Pervez Musharraf did when he was the President. The two Waziristans came under the effective control of Al Qaeda, the Taliban and their associates and the Neo Taliban of Afghanistan, operating from sanctuaries in Balochistan, staged its spectacular come-back in Afghanistan when he was the President and was the beneficiary of billions of dollars given by the Bush Administration. What promises he made to the Bush Administration to reform and modernise the madrasas and prevent their misuse for jihad! How much money he took from the US for madrasa reforms! What happened to those reforms?
13. That is exactly what Zardari, Gilani and Kayani are doing now. Creating an illusion of motion without actual movement, while extracting billions of dollars from the US. The Pakistani leadership---political and military--- has developed into a fine art the extraction of money from the US by exploiting the presence of Al Qaeda and the Taliban in their territory.
14. If the Taliban ultimately succeeds in further strengthening and expanding its control in Pakistan, the US will have to share a major portion of the responsibility for failing to make Pakistan act effectively instead of merely seeming to do so.
(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-Mail: seventyone2@gmail.com)
Thursday, May 21, 2009
SOMALIAN PIRACY: COMMENTS FROM AN EXPERT
Guest Column By Vinod Goyel
(We carry with pleasure the following comments received from Shri Vinod Goel, a reader of SAAG, on the article titled “ Somalian Piracy Update (As on May 11,2009)” written by B.Raman at http://www.southasiaanalysis.org/papers32/paper3190.html --- Director, SAAG)
I read your article updating Somali piracy posted on the internet under SAAG. Safety on the high seas is of special interest and concern to me. I am a Master-Mariner (one remains a Master-Mariner for life) and served the now defunct Scindia Steam Navigation Company. I was Chief Port Harbor Master in Nigeria and saw helplessly common piracy go unchecked at anchorage off Lagos where at one time about 300 ships were at anchor awaiting berthing. A lack of political will and possible nexus between the pirates and local authorities did not allow a robust response that would have halted piracy.
In the United States I earned the MBA, MMA and Ph.D. degrees. I earned the MBA degree from the Illinois Institute of Technology at Chicago, and the latter two degrees at the University of Southern California at Los Angeles. The MMA program covered the United Nations Conference on the Law of the Sea in depth. I earned a Ph.D. in international relations and was an adjunct at USC for about one year. My doctoral dissertation was on international regimes; specifically maritime regimes.
UNCLOS III does not cover piracy. It addresses the issue of weapons on board vessels when it provides requirements on how naval vessels, including submarines and aircraft carriers can transit the Exclusive Economic Zone of another country. To protect their vessels from piracy attacks, Denmark has begun to allow armed guards aboard. Your article reports that the U.S. Coast Guard expects U.S. flagged vessels to carry guards, armed or otherwise, when going through pirate invested waters. Recently the U.S. Congress held hearings on protecting merchant vessels from piracy.
As merchant vessels call at many foreign ports, the control of weapons aboard these ships becomes an issue. Merchant ships should be seen as first responders before military and para military assistance arrives to ward off pirates. As such merchant ships would be lightly armed and are unlikely to be seen as a threat to the authority of a local jurisdiction , such as a port, much less the sovereignty of a state. A regime could be worked out that will allow the Customs to seal all weapons aboard a vessel as bonded goods that can be accessed once the vessel puts out to sea.
As UNCLOS III does not cover piracy, foreign vessels are reluctant to pursue pirates once they enter the EEZ of another country. This is a serious problem. In a recent case, the Indian Coast Guard was shadowing a sea-jacked vessel whose identity had been altered. The sea-jacked vessel was trying to reach Pakistan's EEZ in the hope that the Indians would then abandon their pursuit.
Legal jurisdiction over pirates is another issue that requires international guide-lines. An international piracy court along the lines of international criminal court could be set up in several countries, Kenya, Singapore, Philippines, etc.
Long term measures that would curb piracy will require a new international regime or an adjunct to UNCLOS III that will specify the control and custody of weapons on board merchant ships when in port, the authority of a foreign flagged government vessel when pursuing pirates in another country's EEZ, and international courts that have the jurisdiction over piracy cases.
Merchant sailors or the hired guards will have to be trained on the use of force as first responders. Training is vital as merchant ships carry inflammable and explosive cargoes.
Terrorists must be watching organized piracy. If terrorists can sea-jack a laden super-tanker (300,000 deadweight tons of crude) and explode it alongside the coastline of a targeted state, then they would have carried off their most successful terrorist act to date. Sailors and sea-borne guards must be trained to prevent this.
Oceans are vast, and piece-meal naval task forces will not be able to cover the ocean space where pirates operate. A more inclusive approach is needed. Naval units from different countries must be assigned sectors to patrol under a unified command. An ideal solution will be if all littoral states develop a level of paramilitary capabilities and cooperate with the navies patrolling the oceans. If a naval vessel is pursuing pirates in an EEZ, instead of law becoming a hindrance, the alerted Coast Guard of the littoral state mobilizes in assisting the pursuit.
Piracy is a security, economic, labor and humanitarian issue. Ship-owners and insurance companies are said to be willing to pay ransom to the pirates than use deterrence. But there are other stake-holders. In the United States, Non-Vessel Operating Carriers, NVOCC, would not like their cargoes held up indefinitely or lost. Receivers do not want their factories idle or shops empty for lack of shipments. An international fund should be established into which all the stake-holders should contribute. The cost of any rescue or response to sea-jacking should be debited to this fund. This will be cost effective for all. In the days of Conference Lines, Conferences contributed to a mutual indemnity fund. IMO should be asked to undertake studies on safety of life and cargoes if vessels are armed. Taking sailors hostages is a labor and humanitarian issue. ILO and NGOs can play a role.
Finally there is a role for diplomacy. Can we put on uniforms on the young Somali pirates and make them into Coast Guardsmen? We can. A Coast Guard manned by ex pirates could be the first effective organ of a failed state.
(We carry with pleasure the following comments received from Shri Vinod Goel, a reader of SAAG, on the article titled “ Somalian Piracy Update (As on May 11,2009)” written by B.Raman at http://www.southasiaanalysis.org/papers32/paper3190.html --- Director, SAAG)
I read your article updating Somali piracy posted on the internet under SAAG. Safety on the high seas is of special interest and concern to me. I am a Master-Mariner (one remains a Master-Mariner for life) and served the now defunct Scindia Steam Navigation Company. I was Chief Port Harbor Master in Nigeria and saw helplessly common piracy go unchecked at anchorage off Lagos where at one time about 300 ships were at anchor awaiting berthing. A lack of political will and possible nexus between the pirates and local authorities did not allow a robust response that would have halted piracy.
In the United States I earned the MBA, MMA and Ph.D. degrees. I earned the MBA degree from the Illinois Institute of Technology at Chicago, and the latter two degrees at the University of Southern California at Los Angeles. The MMA program covered the United Nations Conference on the Law of the Sea in depth. I earned a Ph.D. in international relations and was an adjunct at USC for about one year. My doctoral dissertation was on international regimes; specifically maritime regimes.
UNCLOS III does not cover piracy. It addresses the issue of weapons on board vessels when it provides requirements on how naval vessels, including submarines and aircraft carriers can transit the Exclusive Economic Zone of another country. To protect their vessels from piracy attacks, Denmark has begun to allow armed guards aboard. Your article reports that the U.S. Coast Guard expects U.S. flagged vessels to carry guards, armed or otherwise, when going through pirate invested waters. Recently the U.S. Congress held hearings on protecting merchant vessels from piracy.
As merchant vessels call at many foreign ports, the control of weapons aboard these ships becomes an issue. Merchant ships should be seen as first responders before military and para military assistance arrives to ward off pirates. As such merchant ships would be lightly armed and are unlikely to be seen as a threat to the authority of a local jurisdiction , such as a port, much less the sovereignty of a state. A regime could be worked out that will allow the Customs to seal all weapons aboard a vessel as bonded goods that can be accessed once the vessel puts out to sea.
As UNCLOS III does not cover piracy, foreign vessels are reluctant to pursue pirates once they enter the EEZ of another country. This is a serious problem. In a recent case, the Indian Coast Guard was shadowing a sea-jacked vessel whose identity had been altered. The sea-jacked vessel was trying to reach Pakistan's EEZ in the hope that the Indians would then abandon their pursuit.
Legal jurisdiction over pirates is another issue that requires international guide-lines. An international piracy court along the lines of international criminal court could be set up in several countries, Kenya, Singapore, Philippines, etc.
Long term measures that would curb piracy will require a new international regime or an adjunct to UNCLOS III that will specify the control and custody of weapons on board merchant ships when in port, the authority of a foreign flagged government vessel when pursuing pirates in another country's EEZ, and international courts that have the jurisdiction over piracy cases.
Merchant sailors or the hired guards will have to be trained on the use of force as first responders. Training is vital as merchant ships carry inflammable and explosive cargoes.
Terrorists must be watching organized piracy. If terrorists can sea-jack a laden super-tanker (300,000 deadweight tons of crude) and explode it alongside the coastline of a targeted state, then they would have carried off their most successful terrorist act to date. Sailors and sea-borne guards must be trained to prevent this.
Oceans are vast, and piece-meal naval task forces will not be able to cover the ocean space where pirates operate. A more inclusive approach is needed. Naval units from different countries must be assigned sectors to patrol under a unified command. An ideal solution will be if all littoral states develop a level of paramilitary capabilities and cooperate with the navies patrolling the oceans. If a naval vessel is pursuing pirates in an EEZ, instead of law becoming a hindrance, the alerted Coast Guard of the littoral state mobilizes in assisting the pursuit.
Piracy is a security, economic, labor and humanitarian issue. Ship-owners and insurance companies are said to be willing to pay ransom to the pirates than use deterrence. But there are other stake-holders. In the United States, Non-Vessel Operating Carriers, NVOCC, would not like their cargoes held up indefinitely or lost. Receivers do not want their factories idle or shops empty for lack of shipments. An international fund should be established into which all the stake-holders should contribute. The cost of any rescue or response to sea-jacking should be debited to this fund. This will be cost effective for all. In the days of Conference Lines, Conferences contributed to a mutual indemnity fund. IMO should be asked to undertake studies on safety of life and cargoes if vessels are armed. Taking sailors hostages is a labor and humanitarian issue. ILO and NGOs can play a role.
Finally there is a role for diplomacy. Can we put on uniforms on the young Somali pirates and make them into Coast Guardsmen? We can. A Coast Guard manned by ex pirates could be the first effective organ of a failed state.
Wednesday, May 20, 2009
THE JAFFNA TAMILS
B. Raman
As I watched TV visuals of the death of V.Prabakaran, the head of the Liberation Tigers of Tamil Eelam (LTTE), and read and heard accounts of the way his dead body was disfigured and rolled in dirt by the Sri Lankan Army , my mind went back to the years 1951-55 when I was a student of the Loyola College of Chennai, run by the Society of Jesus. Every class, including mine, had four or five Tamils from the Northern Province of Ceylon as Sri Lanka used to be known before 1972. Even in those days, they never considered themselves part of Ceylon. They would introduce themselves as Jaffna Tamils and not as Ceylonese Tamils.
2. Every middle class family in Jaffna would save whatever money it could and send its offspring to Tamil Nadu for higher education. The most popular colleges among the Jaffna Tamils were the Loyola and the Christian Colleges of Chennai and the St.Joseph's of Tiruchi. They were intelligent, hard-working and with a keen sense of humour. During off-class hours, they would keep to themselves and did not mix much with other students.
3. Every Jaffna Tamil, like a Tamil from Tamil Nadu, wanted to become a Government servant. The other popular profession was as lawyers. When they went back to Ceylon after completing their college education in India, they would join the Government service in Colombo. In the first few years after Ceylon became independent, the Jaffna Tamils dominated the Ceylonese bureaucracy.
4. They dominated the buraucracy even in the then Malaya and Singapore. The British preferred employing the Jaffna Tamils as bureaucrats in many of their Asian colonies. Apart from their intelligence, command of the English language and capacity for hard work, the Jaffna Tamils also had a good reputation for their integrity and honesty.
5. The Wikipedia writes as follows of the Jaffna Tamil community in Malaya and Singapore: "Ceylonese Tamils made up an overwhelming majority in the civil service of British Malaya and Singapore prior to independence.....Many of the first Asian and non-white doctors and engineers in Malaya and Singapore were of Sri Lankan Tamil descent. The world's first Asian surgeon was Dr S.S. Thiruchelvam, a Malayan of Ceylonese Tamil origin. Former Singaporean Prime Minister Lee Kuan Yew once said: "In terms of numbers, the Ceylonese, like the Eurasians, are among the smallest of our various communities. Yet in terms of achievements and contributions to the growth and development of the modern Singapore and Malaysia they have done more than warranted by their numbers. In the early days of Malaysia's and Singapore's history the civil service and the professions were manned by a good number of Ceylonese. Even today the Ceylonese community continues to play a prominent role in these and other fields of civil life. For example in Singapore, today, the Speaker of Parliament is a Ceylonese. So is our High Commissioner in Great Britain. So is our Foreign Minister. In the Judiciary, in the civil service, in the university, in the medical Service and in the professions they continue to make substantial contributions out of all proportion to their numbers. They are there not because they are members of a minority community but on the basis of merit. The point is that the Ceylonese are holding their own in open competition with communities far larger than them. They have asked for no special favour or consideration as a minority. What they have asked for – and quite rightly – is that they should be judged on their merits and that they be allowed to compete with all other citizens fairly and without discrimination. This, as far as the Singapore Government is concerned, is what is best for all of us. I believe that the future belongs to that society which acknowledges and rewards ability, drive and high performance without regard to race, language or religion." He used the word Ceylonese, but he was actually talking of Tamils of Jaffna origin working in Singapore.
6. In my younger days, the Jaffna Tamils had a reputation for being meek and mild. We used to make fun of them by saying that if a policeman or a soldier pointed a gun at them they would tie their lungi above the knees and run. It is remarkable how Prabakaran made them shed their meek demeanour and stand up and fight for their rights. They fought ferociously because they felt degraded and humiliated by the Sinhalese majority after the British left Ceylon in 1948.
7. They put up with all the humiliation and indignity heaped upon them for 35 years. Then, they could no longer. They took to terrorism and insurgency to give vent to their anger. Their revolt against the Sinhalese might have been crushed by the Sri Lankan Army, but their anger remains---- in the Tamil areas of Sri Lanka itself as well as in the diaspora. Since the LTTE-led revolt broke out in 1983 nearly one million Sri Lankan Tamils are estimated to have fled abroad. You find them all over West Europe, North America and Australia.
8. In response to my articles on the LTTE and Sri Lanka, I get a large number of personal messages from the members of the diaspora. Some are angry, but polite. Some downright abusive and threatening. Some curse India for allegedly letting down the Tamils and pray to God to punish India and the Indians for not helping the Tamils. "Just because Prabakaran killed Rajeev, you are punishing the entire Tamil community,' complains one message." Your Prime Minister has not uttered a word of condemnation of the cruelties inflicted on the Tamil civilians by the SL Army. I pray to God that all of you must suffer one day the same way we are suffering."
9. The Tamil diaspora is yet to come to terms with the consequences of the death of Prabakaran to the future of their struggle for dignity and equality. They are studying how the Jewish diaspora conducted itself in its darkest days in the 1940s. The message that is being tom-tomed across the Sri Lankan Tamil diaspora is: "Let us emulate the Jewish diaspora. We will prevail just as the Jewish people prevailed".
(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: seventyone2@gmail.com)
As I watched TV visuals of the death of V.Prabakaran, the head of the Liberation Tigers of Tamil Eelam (LTTE), and read and heard accounts of the way his dead body was disfigured and rolled in dirt by the Sri Lankan Army , my mind went back to the years 1951-55 when I was a student of the Loyola College of Chennai, run by the Society of Jesus. Every class, including mine, had four or five Tamils from the Northern Province of Ceylon as Sri Lanka used to be known before 1972. Even in those days, they never considered themselves part of Ceylon. They would introduce themselves as Jaffna Tamils and not as Ceylonese Tamils.
2. Every middle class family in Jaffna would save whatever money it could and send its offspring to Tamil Nadu for higher education. The most popular colleges among the Jaffna Tamils were the Loyola and the Christian Colleges of Chennai and the St.Joseph's of Tiruchi. They were intelligent, hard-working and with a keen sense of humour. During off-class hours, they would keep to themselves and did not mix much with other students.
3. Every Jaffna Tamil, like a Tamil from Tamil Nadu, wanted to become a Government servant. The other popular profession was as lawyers. When they went back to Ceylon after completing their college education in India, they would join the Government service in Colombo. In the first few years after Ceylon became independent, the Jaffna Tamils dominated the Ceylonese bureaucracy.
4. They dominated the buraucracy even in the then Malaya and Singapore. The British preferred employing the Jaffna Tamils as bureaucrats in many of their Asian colonies. Apart from their intelligence, command of the English language and capacity for hard work, the Jaffna Tamils also had a good reputation for their integrity and honesty.
5. The Wikipedia writes as follows of the Jaffna Tamil community in Malaya and Singapore: "Ceylonese Tamils made up an overwhelming majority in the civil service of British Malaya and Singapore prior to independence.....Many of the first Asian and non-white doctors and engineers in Malaya and Singapore were of Sri Lankan Tamil descent. The world's first Asian surgeon was Dr S.S. Thiruchelvam, a Malayan of Ceylonese Tamil origin. Former Singaporean Prime Minister Lee Kuan Yew once said: "In terms of numbers, the Ceylonese, like the Eurasians, are among the smallest of our various communities. Yet in terms of achievements and contributions to the growth and development of the modern Singapore and Malaysia they have done more than warranted by their numbers. In the early days of Malaysia's and Singapore's history the civil service and the professions were manned by a good number of Ceylonese. Even today the Ceylonese community continues to play a prominent role in these and other fields of civil life. For example in Singapore, today, the Speaker of Parliament is a Ceylonese. So is our High Commissioner in Great Britain. So is our Foreign Minister. In the Judiciary, in the civil service, in the university, in the medical Service and in the professions they continue to make substantial contributions out of all proportion to their numbers. They are there not because they are members of a minority community but on the basis of merit. The point is that the Ceylonese are holding their own in open competition with communities far larger than them. They have asked for no special favour or consideration as a minority. What they have asked for – and quite rightly – is that they should be judged on their merits and that they be allowed to compete with all other citizens fairly and without discrimination. This, as far as the Singapore Government is concerned, is what is best for all of us. I believe that the future belongs to that society which acknowledges and rewards ability, drive and high performance without regard to race, language or religion." He used the word Ceylonese, but he was actually talking of Tamils of Jaffna origin working in Singapore.
6. In my younger days, the Jaffna Tamils had a reputation for being meek and mild. We used to make fun of them by saying that if a policeman or a soldier pointed a gun at them they would tie their lungi above the knees and run. It is remarkable how Prabakaran made them shed their meek demeanour and stand up and fight for their rights. They fought ferociously because they felt degraded and humiliated by the Sinhalese majority after the British left Ceylon in 1948.
7. They put up with all the humiliation and indignity heaped upon them for 35 years. Then, they could no longer. They took to terrorism and insurgency to give vent to their anger. Their revolt against the Sinhalese might have been crushed by the Sri Lankan Army, but their anger remains---- in the Tamil areas of Sri Lanka itself as well as in the diaspora. Since the LTTE-led revolt broke out in 1983 nearly one million Sri Lankan Tamils are estimated to have fled abroad. You find them all over West Europe, North America and Australia.
8. In response to my articles on the LTTE and Sri Lanka, I get a large number of personal messages from the members of the diaspora. Some are angry, but polite. Some downright abusive and threatening. Some curse India for allegedly letting down the Tamils and pray to God to punish India and the Indians for not helping the Tamils. "Just because Prabakaran killed Rajeev, you are punishing the entire Tamil community,' complains one message." Your Prime Minister has not uttered a word of condemnation of the cruelties inflicted on the Tamil civilians by the SL Army. I pray to God that all of you must suffer one day the same way we are suffering."
9. The Tamil diaspora is yet to come to terms with the consequences of the death of Prabakaran to the future of their struggle for dignity and equality. They are studying how the Jewish diaspora conducted itself in its darkest days in the 1940s. The message that is being tom-tomed across the Sri Lankan Tamil diaspora is: "Let us emulate the Jewish diaspora. We will prevail just as the Jewish people prevailed".
(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: seventyone2@gmail.com)
Tuesday, May 19, 2009
SRI LANKA: LIKELY SCENARIOS
B.RAMAN
( To be read in continuation of my earlier note on the LTTE at http://www.southasiaanalysis.org/papers33/paper3204.html )
THE GROUND SITUATION:
(1). No reason to doubt the statement of the Sri Lankan Army about the death of Prabakaran, the leader of the Liberation Tigers of Tamil Eelam ( LTTE), and other leaders of the LTTE. Doubts about the circumstances relating to their death will remain. These doubts will have no impact on the ground situation. Pointless wasting time and space analyzing the doubts.
( 2 ). Almost the entire Northern component of the LTTE, including the leadership and a large number of cadres, wiped out. The Northern component specialized in terrorism and in air and naval action. Its capability for conventional military operations on land was low.
(3).The Eastern component of the LTTE, which had the largest number of well-trained conventional fighters, led by Karuna split from the LTTE leadership in March 2004. They accused Prabakaran of looking down upon the Eastern Tamils and discriminating against them. About 5,000 well-trained and competent conventional fighters from the Eastern Province under Karuna deserted from the LTTE and helped the SLA in re-capturing the territory controlled by the LTTE in the Eastern Province.
(4). Differences developed in the Eastern component itself between a group of conventional fighters led by Karuna and another led by Sivanesathurai Chandrakanthan alias Pillaiyan. Without taking sides, the Government kept both the groups on its side. It made Pillaiyan the Chief Minister of the Eastern Province and Karuna a member of the Central Cabinet in Colombo. Pillaiyan and Karuna don’t get along well with each other.
(5). There is a fourth group led by Douglas Devananda, which has also been collaborating with the Government. It is alleged that Devananda himself was trained in the past by the Popular Front For the Liberation of Palestine (PFLP) of George Habash in the Lebanon. Devananda is also a member of the central Cabinet . He is reportedly hoping that President Mahinda Rajapaksa will make him the Chief Minister of the Northern Province.
(6).It is estimated that there are about 5,500 well-trained Tamil fighters in the Eastern Province--- 5,000 of them from the two groups supporting Karuna and Pillaiyan and about 500, who did not desert with Karuna and remained loyal to Prabakaran. When Prabakaran lost control of the Eastern Province, he asked these 500 Easterners loyal to him to stay behind in the Eastern Province to keep harassing the SLA and the followers of Karuna and Pillaiyan. One does not know how many followers Devananda has and from which province.
( 7). It is likely that some of the Northern cadres of the LTTE have evaded capture by the security forces and have merged with the population. Difficult to quantify them.
( 8). The Tamil diaspora in the West and Australia is predominantly from the Northern Province ---- affluent, intelligent, well-educated, articulate and good in networking. It was fiercely loyal to Prabakaran and hated Karuna, Pillaiyan and Devananda. The SL Tamil refugees in Tamil Nadu are predominantly from the Easteren Province---- poor, form the economically deprived classes, not well-educated, not accepted by the northerners and the diaspora in the West as their social and intellectual equals. More sympathetic to Karuna and Pillaiyan. There are hardly any supporters for Devananda either in the West or in India.
( 9). Post-Prabakaran, President Rajapaksa will implement at least some of his promises to the Tamils. He will try to have elections in the Northern Province and appoint a Tamil as the Chief Minister. He will not merge the Northern and Eastern Provinces and will not change the present unitary status of the country into a genuine federal state. He will keep certain important powers relating to Defence, internal security, the police, communications and taxation in the hands of the central government and devolve other powers to the constituent States. He will seek to make Sri Lanka a union of equally empowered States, but not a federation. The constituent States will be equally empowered among themselves, but not vis-Ã -vis the centre, which will occupy the commanding heights. These measures should be acceptable to the Tamils even though they will fall short of their expectations.
( 10). In addition, he will be under pressure from the Army to take two more steps. Firstly, re-settle the internally displaced Tamils in the Sinhalese majority areas and not to allow them to re-settle in the Tamil areas. Secondly, re-settle the Sinhalese soldiers, who will be retrenched from the army now that the fight against the LTTE is over, in the Northern and Eastern provinces by giving them land or by recruiting them to the police. The Army calculates that these measures are necessary to prevent a recrudescence of insurgency and terrorism. He will be similarly under pressure from Pakistan, which had helped the Armed Forces in their operations against the LTTE, to divide the Eastern Province in order to create a separate Muslim majority province.
( 11). The Govt. and the Army had given considerable importance to Karuna, Pillaiyan and Devananda and the Eastern deserters. They played an important role in helping the Army against the LTTE. Now that the war is over, there will be a temptation in the Government and the Armed Forces to downgrade their importance. In the event of Rajapaksa taking the steps discussed in sub-paras 10 and 11, the divide between the Sinhalese and Tamils will get aggravated. This could give rise to a fresh spell of insurgency. The insurgency-cum-terrorism under Prabakaran started in the North and spread to the East. If there is a fresh insurgency, it will most probably start in the East.
( 12 ).How successful will be such insurgency? Will it have the support of the diaspora in the West and Australia? Without such support, it cannot gain momentum. For the moment, the diaspora is not inclined to support a fresh insurgency. It feels disappointed by the attitude of India. Many leaders of the diaspora are voicing the view that the Tamil cause can succeed only with the support of the West. The West will not support any resort to a fresh insurgency, but will be prepared to keep pressure on the SL Government to meet the political aspirations of the Tamils. It will use SL’s difficult economic situation as a pressure point. It will also use threats of an international enquiry into the deaths of a large number of civilians during the counter-insurgency and counter-terrorism operations. India has mishandled the Sri Lanka situation so badly that it finds itself without any pressure point or stick. (20-5-09)
( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: seventyone2@gmail.com )
( To be read in continuation of my earlier note on the LTTE at http://www.southasiaanalysis.org/papers33/paper3204.html )
THE GROUND SITUATION:
(1). No reason to doubt the statement of the Sri Lankan Army about the death of Prabakaran, the leader of the Liberation Tigers of Tamil Eelam ( LTTE), and other leaders of the LTTE. Doubts about the circumstances relating to their death will remain. These doubts will have no impact on the ground situation. Pointless wasting time and space analyzing the doubts.
( 2 ). Almost the entire Northern component of the LTTE, including the leadership and a large number of cadres, wiped out. The Northern component specialized in terrorism and in air and naval action. Its capability for conventional military operations on land was low.
(3).The Eastern component of the LTTE, which had the largest number of well-trained conventional fighters, led by Karuna split from the LTTE leadership in March 2004. They accused Prabakaran of looking down upon the Eastern Tamils and discriminating against them. About 5,000 well-trained and competent conventional fighters from the Eastern Province under Karuna deserted from the LTTE and helped the SLA in re-capturing the territory controlled by the LTTE in the Eastern Province.
(4). Differences developed in the Eastern component itself between a group of conventional fighters led by Karuna and another led by Sivanesathurai Chandrakanthan alias Pillaiyan. Without taking sides, the Government kept both the groups on its side. It made Pillaiyan the Chief Minister of the Eastern Province and Karuna a member of the Central Cabinet in Colombo. Pillaiyan and Karuna don’t get along well with each other.
(5). There is a fourth group led by Douglas Devananda, which has also been collaborating with the Government. It is alleged that Devananda himself was trained in the past by the Popular Front For the Liberation of Palestine (PFLP) of George Habash in the Lebanon. Devananda is also a member of the central Cabinet . He is reportedly hoping that President Mahinda Rajapaksa will make him the Chief Minister of the Northern Province.
(6).It is estimated that there are about 5,500 well-trained Tamil fighters in the Eastern Province--- 5,000 of them from the two groups supporting Karuna and Pillaiyan and about 500, who did not desert with Karuna and remained loyal to Prabakaran. When Prabakaran lost control of the Eastern Province, he asked these 500 Easterners loyal to him to stay behind in the Eastern Province to keep harassing the SLA and the followers of Karuna and Pillaiyan. One does not know how many followers Devananda has and from which province.
( 7). It is likely that some of the Northern cadres of the LTTE have evaded capture by the security forces and have merged with the population. Difficult to quantify them.
( 8). The Tamil diaspora in the West and Australia is predominantly from the Northern Province ---- affluent, intelligent, well-educated, articulate and good in networking. It was fiercely loyal to Prabakaran and hated Karuna, Pillaiyan and Devananda. The SL Tamil refugees in Tamil Nadu are predominantly from the Easteren Province---- poor, form the economically deprived classes, not well-educated, not accepted by the northerners and the diaspora in the West as their social and intellectual equals. More sympathetic to Karuna and Pillaiyan. There are hardly any supporters for Devananda either in the West or in India.
( 9). Post-Prabakaran, President Rajapaksa will implement at least some of his promises to the Tamils. He will try to have elections in the Northern Province and appoint a Tamil as the Chief Minister. He will not merge the Northern and Eastern Provinces and will not change the present unitary status of the country into a genuine federal state. He will keep certain important powers relating to Defence, internal security, the police, communications and taxation in the hands of the central government and devolve other powers to the constituent States. He will seek to make Sri Lanka a union of equally empowered States, but not a federation. The constituent States will be equally empowered among themselves, but not vis-Ã -vis the centre, which will occupy the commanding heights. These measures should be acceptable to the Tamils even though they will fall short of their expectations.
( 10). In addition, he will be under pressure from the Army to take two more steps. Firstly, re-settle the internally displaced Tamils in the Sinhalese majority areas and not to allow them to re-settle in the Tamil areas. Secondly, re-settle the Sinhalese soldiers, who will be retrenched from the army now that the fight against the LTTE is over, in the Northern and Eastern provinces by giving them land or by recruiting them to the police. The Army calculates that these measures are necessary to prevent a recrudescence of insurgency and terrorism. He will be similarly under pressure from Pakistan, which had helped the Armed Forces in their operations against the LTTE, to divide the Eastern Province in order to create a separate Muslim majority province.
( 11). The Govt. and the Army had given considerable importance to Karuna, Pillaiyan and Devananda and the Eastern deserters. They played an important role in helping the Army against the LTTE. Now that the war is over, there will be a temptation in the Government and the Armed Forces to downgrade their importance. In the event of Rajapaksa taking the steps discussed in sub-paras 10 and 11, the divide between the Sinhalese and Tamils will get aggravated. This could give rise to a fresh spell of insurgency. The insurgency-cum-terrorism under Prabakaran started in the North and spread to the East. If there is a fresh insurgency, it will most probably start in the East.
( 12 ).How successful will be such insurgency? Will it have the support of the diaspora in the West and Australia? Without such support, it cannot gain momentum. For the moment, the diaspora is not inclined to support a fresh insurgency. It feels disappointed by the attitude of India. Many leaders of the diaspora are voicing the view that the Tamil cause can succeed only with the support of the West. The West will not support any resort to a fresh insurgency, but will be prepared to keep pressure on the SL Government to meet the political aspirations of the Tamils. It will use SL’s difficult economic situation as a pressure point. It will also use threats of an international enquiry into the deaths of a large number of civilians during the counter-insurgency and counter-terrorism operations. India has mishandled the Sri Lanka situation so badly that it finds itself without any pressure point or stick. (20-5-09)
( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: seventyone2@gmail.com )
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