frontline oct 1st half

8/10/2019 Frontline Oct 1st Half

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Notes by vineetpunnoose on www.kiwipaper.com

Content

Fighting for policy space 1

Business as usual 2

Lawless in Libya 4

Closer to democracy 6

Signs of peace 8

Justice as Governor? 9

Earth Overshoot Day 11

Passing the buck 12

The fight for equity 13

Tenuous truce 17


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Notes by vineetpunnoose on www.kiwipaper.com Page 1

Fighting for policy space Sat, Oct 11, 2014Frontline, economics,

One sees this as both a necessary and a virtuous outcome of global integration, which

forces governments to do what is "ultimately best" for them and for others, notwithstanding

possible short-term pain. The second view not only contests the notion of one-size-fits-all

policy direction but sees it as a significant loss of sovereignty and flexibility and an

unfortunate reduction in the ability of governments to identify and pursue the most

appropriate mix of economic and social policies to achieve equitable and sustainable

development in their own national contexts, even as they remain part of an interdependent

global economy.

The Bretton Woods architecture that was developed in the 1940s, therefore, explicitly

sought to support the policy goals of raising incomes, full employment and social

security in the developed economies; some also struggled to place development issues

on this multilateral agenda, specifically by expanding the policy space for state-ledindustrialisation and ensuring more financial support for this.

The report notes that today's developed countries and the more successful emerging

economies did not depend solely on "market forces" for their structural transformation;

rather, they adopted various country-specific forms of government intervention to

mitigate the destructive tendencies of market operations and to guide private agents

into more socially desired forms of investment and economic activity.

But the era of globalisation has brought with it a combination of more intense multilateral

commitments by governments and less power to deal with other cross-border flows,

particularly of finance and investment.

Consider just some of the constraints faced by developing countries today that prevent

them from using strategies that were important tools for structural transformation in

the past. Subsidies were a preferred instrument to incentivise certain types of investment

and production but are now circumscribed by the WTO's Agreement on Subsidies and

Countervailing Measures (SCM). Performance requirements on foreign investors for

exports, domestic content and technology transfer that were important to create linkages

between foreign investors and local manufacturers are limited by the Agreement on

Trade-Related Investment Measures (TRIMs). The Agreement on Trade-Related Aspects

of Intellectual Property Rights (TRIPS) prevents countries from encouraging reverse

engineering and imitation which were critical in all previous cases of successful

industrialisation.

Surprisingly, WTO restrictions are often less onerous than those demanded by regional

trade agreements (RTAs) and economic partnership agreements, which have become

ever more comprehensive in recent times. Similarly, bilateral investment treaties and

investment chapters in RTAs play at best an ambiguous role in attracting more FDI.


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But the lack of transparency and the perceived pro-investor bias of the tribunals associated

with some of these agreements have made many countries wary of their implications.

So why are developing countries still seeking to sign agreements that severely constrain

national policy autonomy? The desire for greater market access into developed markets

and the fear of exclusion when other developing countries are signing them are potent

reasons, along with the hope of becoming more attractive destinations for foreign

investment.

Fiscal space has clearly been hit by globalisation, which has affected the ability of

governments to mobilise domestic revenues. Trade tax collections have come down

because of trade liberalisation, while greater capital mobility has generated tax competition

between countries, leading to reduced direct taxation.

At the same time, there has been more blatant use of tax havens by multinational firms

and wealthy individuals. Further, trade mispricing, including through transfer pricing

(involving cross-border transactions by various constituents of multinational companies),

has become the evasion mechanism of choice for many companies. In addition to this,

"thin capitalisation" allows a company to mix and match intra-group debts and interest

payments across its subsidiaries to minimise tax payments and generate higher overall

profits.

The report notes that the major providers of financial secrecy are to be found in some

of the world's biggest and wealthiest countries, or in specific areas within these countries.

In fact, offshore financial centres and the secrecy jurisdictions that they host are not

just small outlaws (like the frequently mentioned island states) but are fully integrated

into the global financial system and responsible for handling substantial shares of globaltrade and capital movements, including FDI.

Further, because these initiatives are mostly led by the developed economies (which

are also the main homes of transnational corporations and some secrecy jurisdictions),

the debate has not fully taken into account the needs and views of developing and

transition economies.

Business as usual Sat, Oct 11, 2014japan, Frontline, international,

PRIME MINISTER Narendra Modi's recent five-day visit to Japan was heralded as

path-breaking, signalling the beginning of a really close relationship between India and

Japan that would redraw the power configuration of Asia. The visit was seen to mark

the beginning, as one hopeful commentator remarked, of an Asia that was not China-centred.

The major focus was on infrastructural projects. Japan pledged $500 million towards


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Japan has begun to break the long-established taboo against exporting defence-related

equipment. As part of the Abe government's strategy to allow Japan to act as a "normal"

country, that is, enter into alliances, send troops abroad, etc., the government has been

trying to increase defence exports. Defence equipment produced in Japan has very high

per unit cost because it only supplies its own limited needs. Defence export has becomea new area for a struggling economy and an important arrow in Abe's quiver of economic

policies.

Japan's entry as an exporter of weapons has benefits for the Japanese economy, but

these exports to India and other countries in the region are based on the idea that China

is a growing military threat and can only be countered by strengthening defence.

Smart cities promise the use of technology to provide a more rational, efficient and

environment-friendly way to manage large urban conglomerations. But as critics have

begun to note, the way these ideas are transforming cities is much the way car travel

did in an earlier time. The urban landscape was transformed by the construction ofhighways and roads. Equally, though not so obviously, technology will have a strong

impact that needs to be publicly debated. Increasingly, private companies build and

operate the public services. The huge amount of data that are gathered can be used to

reduce energy consumption or track crime, but it can also be used for unregulated

surveillance. For instance, sensors can gather data about how you travel through

automated licence recognition.

Urban designers have warned that the smart city model fits well with authoritarian

ideas. The problems faced in our cities, of poverty, social inequality, inadequate public

educational facilities and environmental pollution, cannot be solved from a single

command centre but need the active engagement of the citizenry.

India has also agreed to the export of rare earths, which Japan has imported from China,

a country that has some 85 per cent of the world's rare earths. But in 2010, China

restricted exports. The extraction of rare earths is done using chemicals that seriously

damage the area and harm the people, and in China, because of lax environmental

regulations, this has adversely affected the health of people and the environment.

Lawless in Libya Sat, Oct 11, 2014

Frontline, international, Libya,

After the fall of the Muammar Qaddafi government in 2011, the al-Qa'qa and al-Sawai'q

militias from the mountain city of Zintan had taken control of this airport. The coastal

town of Misrata had fashioned itself as the heart of the 2011 uprising.

The recent war in Tripoli demonstrated Libya's fragility. Western embassies fled the

city, with the United States chancellery turned over into a playground for fighters ( The


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Libyan parliament also abandoned the capital for the provincial town of Tobruk, near

the Egyptian border.

The political and military chaos in Libya did not begin in July, when Salah Badi moved

his fighters towards Tripoli. Libya has been in this state since 2011, when the NATO

attacks precipitated the collapse of the state and the new rulers of the country failed to

create any central authority for the country.

The fractured political landscape, awash with guns, meant that violence would be

inevitable. All political disputes quickly took the form of gunfire. The parliament, since

its first sitting, has been secondary to the gunmen. Several times over the past few years,

angry militias have stormed into parliament--even kidnapping the former Prime Minister

Ali Zeitan (who has now gone into exile in Germany). Fear of assassination was so

great that the lawmakers hired a cruise ship for their residence during the parliamentary

session.

Not only did the Western embassies close shop, but also since mid-July, the United

Nation's Support Mission in Libya has vacated its Tripoli office. U.N. agencies have

been hard-pressed to do any kind of humanitarian work, including the basic accumulation

of data on the social costs of this crisis. The United Nations High Commissioner for

Refugees (UNHCR) says that at least 1,600 people have died trying to cross the

Mediterranean since June. Displaced Libyans, such as the people of Tawergha, find

themselves on the move again--this time from the neighbourhoods around the international

airport in Tripoli. There are no refugee camps run by the UNHCR for them. All of

Libya has become a battlefield.

Operation Dignity General Khalifa Haftar, who had been a senior military officer inQaddafi's army before he defected to the U.S. in 1987, returned to Libya in the middle

of the uprising of 2011. He had tried to take control of the ground war then but failed.

The militias were too powerful, and the political leadership--beholden to NATO--could

not deliver the fighters to his command.

The UAE, Saudi Arabia, along with its Egyptian client, and the U.S. have been backing

General Haftar in his attempt to beat back the Muslim Brotherhood's advance. This

has been the Saudi game in North Africa since they backed General Abdel Fattah El-Sisi

against President Mohammed Morsi last year. On Libya's eastern border, Egyptian

troops sit idly. They are there to seal the border although there is every indication that

if the crisis escalates they will intervene. On Libya's western and southwestern border,

Algeria and Tunisia are equally concerned. France's Operation Serval in January 2013

into northern Mali sent jehadi fighters into the borderlands of Tunisia, Algeria and

Libya. Taking refuge in Jabal Ash-Sha'nabi, these fighters have seriously troubled the

three countries.

The NATO war destroyed Libyan institutions, and produced in a flash a failed state.


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The repercussions have been severe for the Libyan people. There is no silver lining

here. The West has washed its hands of the disaster that it contributed to create--and

has refused at all costs to allow a U.N. investigation into the war itself. Regional actors

have no political path for stability. They have turned to their armies. The only outcome

of an Algerian-Egyptian-Tunisian intervention is a divided Libya with an Algerian-Tunisiansphere of influence in the west and with an Egyptian sphere in the east. This is a bad

outcome. It will result in greater war and suffering.

Closer to democracy Sat, Oct 11, 2014Fiji, Frontline, international,

FIJI will elect a democratic government on September 17, eight years after its last

elected government was overthrown in a bloodless military coup in 2006. The long-awaited

election is taking place under a new Constitution, with a new scheme of voting under

a proportional representation system for the 50-member National Assembly. It will beheld on the basis of "one person, one vote, one value", according to the Fijian Elections

Office (FEO).

Frank Bainimarama, the military commander, seized power in 2006 following differences

with the elected Prime Minister, Laisenia Qarase, and abrogated the Constitution. The

military regime initiated the process of drafting a new Constitution by forming a

committee of experts and initiating a long exercise of public consultations. It rejected

the draft Constitution and promulgated a slightly changed version in September 2013.

The 2013 Constitution did away with Fiji's race-based electoral system which was part

of the Constitution adopted in 1970 when Fiji gained independence from British rule.

The county's multiracial population comprises indigenous Fijians (56 per cent), people

with Indian ancestry (37 per cent; they are descendents of Indian workers brought to

Fiji over a century ago), people of European descent, and other Pacific islanders.

Under the new Constitution, there will be no race-based seats or geographically delineated

constituencies. People will vote on a single ballot listing the names of all candidates.

The new Constitution gives equal rights to indigenous Fijians and Indians and terms

all Fiji nationals as Fijians instead of identifying them by race.

Fiji's move towards the September elections gained an impetus after Bainimarama

stepped down as the commander of the Fiji Armed Forces in March this year, while

remaining the head of the interim government. He set up a political party called Fiji

First and announced his intention to contest the elections. He has been campaigning

vigorously since then, showcasing his various achievements, and even travelling to

Australia and New Zealand to address the Fijian diaspora, with mixed results.

Civil society organisations and student activists have not been allowed to set up election


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observer groups, and human rights groups have not been allowed to campaign in the

elections. However, the government has invited election observers from a select group

of countries. It has signed an agreement for a Multinational Observer Group which will

be co-led by Australia, India, Papua New Guinea and Indonesia and will include 10

other countries: Israel, South Africa, Brazil, Russia, Turkey, Japan, South Korea, Iran,the United Kingdom and New Zealand.

Despite the fears expressed by some sections, there is great interest in Fiji in the elections,

which can be gauged by the success of the voter enrolment programme. Over 580,000

persons registered as voters: this constitutes almost 90 per cent of all those eligible to

vote.

The most significant aspect of the election is that votes will be cast in favour of

individuals, without any party affiliations. The election to the 50-member House will

be on a single-constituency, open-list proportional representation system depending on

the total votes received by a party. There is a 5 per cent threshold for each party to bepart of the proportional representational list.

There will be a single ballot paper for all the 50 seats in the National Assembly. It will

be a large sheet of paper with 249 randomly mixed numbers printed on a grid without

any names or party symbols to identify them. A board outside the polling station will

list the names of the candidates and the numbers assigned to them. Voters will need to

consult the board and memorise the number assigned to their candidates, as they will

not be allowed to take any aide-memoires inside the polling booths. Those who cannot

read will be assisted by polling officers to ascertain the number of the candidate they

wish to vote for.

Seven approved political parties are contesting the election.

Two former Prime Ministers, Mahendra Chaudhry, Fiji's first Premier of Indian origin

who was deposed in 2000, and Laisenia Qarase, who replaced him and was ousted in

the 2006 coup, have been barred from contesting the election as a result of convictions

in two cases.

Four of the seven political parties are headed by women: the People's Democratic

Party, the Fiji First Party, the National Federation Party and the Fiji Labour Party. Out

of the 249 approved candidates, 44 are women; this is a sharp increase compared with

the last election in 2006, when there were only 30 women in a total 338 candidates.

Fiji's Army chief, Brigadier General Mosese Tikoitoga, has said that the military will

accept the outcome of the election, adding that it does not favour any individual or

political party. Advising those who had not read the Constitution to familiarise themselves

with it, he said: "We will take our role in the Constitution seriously and we will continue

to uphold that role for the sake of upholding stability and maintaining law and order in


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our nation."

Interim Prime Minister Bainimarama has declared that he will accept the outcome of

the election. With Fiji's history of coups, there is apprehension whether the election

can throw up a stable government. But the people clearly desire an end to the authoritarian

regime and want an elected government.

Signs of peace Sat, Oct 11, 2014Ukraine, Frontline, international, Russia,

THE CEASEFIRE agreement signed by representatives of the Ukrainian government

and the eastern rebel forces in Minsk, the capital of Belarus, on September 5, is viewed

by the governments in Moscow and Kiev as a definitive step forward in ending the

five-month-old civil war in the east European country.

The 14-point peace plan includes pledges to return areas under rebel control to the

government and exchange prisoners. Militias on both sides will be disbanded and a

10-kilometre buffer zone will be established along Ukraine's border with Russia.

the agreement states that power will be decentralised and the status of Russian as an

official language will be guaranteed.

The step taken by Poroshenko to bring about a negotiated end to the conflict is already

being undermined by the forces that triggered the crisis in the first place by engineering

the illegal ouster of the elected government early this year. long-standing demand of

eastern Ukrainians for the "decentralisation of power" and the creation of a "specialautonomous zone" in the east. rewriting the Constitution to guarantee the "neutral

military political status" of Ukraine and to turn the country into a federation. The new

government, which mainly represents the Ukrainian-speaking parts of the country, is

also speeding up moves to integrate with the West, economically as well as militarily.

The North Atlantic Treaty Organisation (NATO) has been itching to officially move

into Ukraine since the country became independent and install its missile defence

systems along Ukraine's border with Russia.

The continued expansion of NATO along the Russian border is a red rag for the Kremlin.

member-states would jointly contribute EU15 million in direct military aid to Ukraine.NATO also approved a "comprehensive and tailored package of measures" to assist

the Ukrainian military in the improvement of logistics, command and control,

communications and other services.

The latest decision is in contravention of the 1997 Founding Act of the NATO-Russian

council under which NATO had agreed that it would not base its troops permanently

in eastern European countries that had become its members.


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The Western media have been saying that Poroshenko has blindly accepted a ceasefire

plan drafted in the Kremlin, glossing over the fact that he had submitted a similar plan

soon after he was elected to power in June. It was the rebel leadership that rejected the

proposal at that time.

Politicians in the pro-Western part of the country, who now hold the reins of power,

want to appeal to anti-Russian nationalistic sentiments. Sections within the security

and political establishments are working overtime to upset the truce.

The longevity and permanence of the ceasefire will, of course, depend on the negotiations

that will take place between the warring sides.

Despite the positive developments, the West has announced plans to slap more punitive

sanctions on Russia, which will include a ban on arms exports and additional sanctions

on the banking and energy sectors. The U.S. and the E.U. had imposed stiff sanctions

on Russia in late July after the crash of the Malaysian passenger airliner MH17 overeastern Ukraine. The sanctions on the energy sector could hurt Russia the most, affecting

production as well as revenues. Half of Russia's budget is dependent on oil revenues.

Russia, however, is not taking things lying down. It responded to an earlier round of

Western sanctions by banning the import of poultry, vegetable and dairy products from

E.U. countries. This has had a negative impact on the farming and dairy sectors of many

E.U. countries. Countries such as Finland have already been hit hard by Russia's

countermeasures. Germany, the economic engine of Europe, is heavily dependent on

Russian energy supplies. Slovakia, an E.U. member, has argued against the logic of

imposing sanctions against Russia at a time when many European economies arestruggling to emerge from recession.

Justice as Governor? Sat, Oct 11, 2014Frontline, polity, judiciary, supreme court,

It is the first time that a former CJI has been appointed the Governor of a State by the

President on the recommendation of the Central government. It has led to legitimate

apprehensions that a post which has so far been considered inappropriate for a retired

CJI by both the executive and the judiciary might become a handy tool for the executive

to woo those members of the judiciary who are close to retirement.

That the judiciary has to be free from the executive's pulls and pressures in order to

deal with the cases before it with absolute fairness and objectivity is sacrosanct. This

principle is vindicated at a time when governments--both Central and State--are the

largest litigants in the courts.

The Bill and the accompanying Constitution 121st Amendment Bill 2014, which has


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to be ratified by half of the State Legislative Assemblies before it secures the President's

assent, were challenged as unconstitutional in the Supreme Court by several petitioners,

including the eminent jurist Fali S. Nariman. But the court found the challenge premature

and refused to hear the matter before the Bill became an Act of Parliament.

The NJAC will consist of six members, namely, the CJI, the two senior-most judges

of the Supreme Court, the Union Law Minister, and two eminent members to be chosen

by a committee comprising the Prime Minister, the CJI and the Leader of the Opposition

(where there is no designated Leader of the Opposition, the leader of the largest opposition

party), with one of the two eminent members being from the Scheduled Castes/Scheduled

Tribes/Other Backward Classes/Minorities/Women. Despite these safeguards, the Bill's

provision that any two members of the NJAC could exercise a veto over the commission's

recommendations is looked at with suspicion by those who fear that the primacy of the

judiciary in the appointment process may be compromised so as to threaten the

independence of the judiciary.

Justice Sathasivam's acceptance of the post of Governor exposes the doublespeak of

those who are critical of the NJAC on the grounds that it compromises the independence

of the judiciary. Those who defend the collegium system appear to have no compunction

in accepting post-retirement jobs offered by the executive.

Indeed, it is perfectly legitimate for former CJIs to be considered for the post of the

Chairperson of the National Human Rights Commission (NHRC), which is a statutory

body, with a provision in the Act creating it reserving the post to former CJIs. Former

judges are also eligible for a number of other posts, such as chairmanships of various

tribunals and commissions of inquiry.

In contrast, the appointment of a Governor of a State is completely in the hands of the

Central government, which has always considered it a patronage to be distributed among

its senior party members in recognition of their services to the party.

If the intention of the Modi government is to appoint eminent persons to non-political

posts such as Governors, it is not reflected in the choice of the other Governors it has

appointed, all of whom have been associated with the Bharatiya Janata Party (BJP)

over the years.

Therefore, the insinuation that Justice Sathasivam has been singled out and rewarded

with the post of Governor, when there were other former CJIs who could have beenconsidered for the post has to be looked at carefully.

But this does not detract from the fact that Justice Sathasivam's acceptance of the

Governor's post sets a wrong precedent. True, there is no express legal bar on a former

judge accepting such a post. However, the issue must not be reduced to technicalities

but be judged on the basis of people's perceptions of the credibility of a judge.


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But there is a fundamental difference between these precedents and Justice Sathasivam's

appointment. Justice Fathima Beevi was just a judge of the Supreme Court, and even

her appointment was criticised for lack of propriety. As Chairman of the Law Commission

Justice A.P. Shah said in an interview to a daily: "The post of the CJI is too revered an

office to be exposed to doubts and aspersions on account of such an appointment."

Appointing retired judges to a government position within a year of their retirement

creates incentives for sitting judges to curry favour with the government with a view

to getting a post-retirement job, Justice Shah said. The Law Commission, in its 232nd

report, has said that sitting judges "seek consideration for such appointments either on

the eve of their retirement or after their retirement". Contesting an elected office after

retirement is different from accepting an offer of appointment from the executive, soon

after retirement from the Bench.

Earth Overshoot Day Sat, Oct 11, 2014Earth Overshoot Day, environment, Frontline,

AUGUST 19 was Earth Overshoot Day: an estimate of the moment in a 12-month

period when humans have consumed more natural resources than the biosphere can

replace and created more waste than it can absorb. This means that humanity is already

living off next year's supplies, which in turn means that next year's supplies will end

even sooner than this year's. No wonder Earth Overshoot Day is also called Ecological

Debt Day.

Earth Overshoot Day does not follow the standard practice of having a fixed commemorativeday and is more of a countdown. It was first commemorated on December 19, 1987,

when humanity was 11 days in debt. Since then, the ecological debt has been accelerating.

In 2000, Earth Overshoot Day occurred in October. In 2014, it has advanced by two

months.

Conceived in 1990 by Mathis Wackernagel and William Rees at the University of

British Columbia, the Ecological Footprint is now in wide use by groups as diverse as

scientists, businesses, governments, agencies and institutions. The website explains the

Footprint as representing "two sides of a balance sheet. On the asset side, biocapacity

represents the planet's biologically productive land areas, including our forests, pastures,

cropland and fisheries. These areas, especially if left unharvested, can also absorb much

of the waste we generate, especially our carbon emissions. Biocapacity can then be

compared with humanity's demand on nature: our Ecological Footprint. The Ecological

Footprint represents the productive area required to provide the renewable resources

humanity is using and to absorb its waste. The productive area currently occupied by

human infrastructure is also included in this calculation, since built-up land is not

available for resource regeneration." In simple terms, the Footprint "addresses whether


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the planet is large enough to keep up [with] the demands of humanity".

The obvious conclusion is that the planet certainly does not have the capacity to keep

on satisfying the current rate of human demand. Using the Footprint to explain the

extent of humanity's "overshoot", the GFN draws the attention of governments, investors

and opinion leaders and demonstrates to "the advantages of making ecological limits

central to decision-making".

It is no secret that the planet has a finite quantity of resources that are being used up

faster than they are being replaced. Fifty years ago, most areas of the globe had more

resources than were consumed. But now, 86 per cent of the people in the world live in

countries with a huge ecological footprint, where the demands literally strip the country

of its resources at a rate faster than they can be replenished.

Passing the buck Sat, Oct 11, 2014Frontline, economics, QE policy,

Reserve Bank of India Governor Raghuram Rajan has been railing against the monetary

authorities in the developed economies for some time now. Initially, his complaint was

that they unilaterally decide on infusing liquidity or withdrawing it through their

"quantitative easing" and "taper" policies, even though this move affects "emerging

markets" such as India.

To start with, all developed country policymakers who, like Rajan, see much virtue in

financial markets argue that financial institutions on the verge of insolvency had to be

bailed out, even though it was their errant behaviour that had led to their near-failureand the financial crisis.

Further, despite initial talk of providing a stimulus to stall and reverse the real economy

decline that the financial crisis triggered, conservative opinion, again of the kind that

Rajan is known to favour, soon turned against the tendency to enlarge the fiscal deficit

on government budgets to finance the stimulus. With an emphasis on austerity in

economies performing both moderately well and poorly, monetary policy had to replace

fiscal policy as the principal means to address the crisis. This required more liquidity

infusion into the system, over and above what is needed to save the banks and return

them to profitability. What became clear over time was that a little bit of money did

not go far enough in addressing the crisis--the system had to be flooded with cash.

The result was the decision to pump large volumes of liquidity into the system through

versions of the quantitative easing (QE) policy. QE essentially involves purchase of

bonds, normally from banks but also from other agents. The consequences of such

purchases are threefold. First, it infuses liquidity into the system, allowing banks to

lend more because they have accumulated reserves and because they have transferred


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risk off their balance sheets by the sale of securities. Secondly, it raises the price of

assets because of the increased demand for securities in the "market". Thirdly, since

the corollary of a rise in asset prices is a fall in yield, the move results in a decline in

interest rates. The resulting cheapening of credit, it is expected, would spur demand

and combat the recession.

Starting with the Troubled Asset Relief Programme in 2008, and then through QE II,

which injected around $600 billion over eight months, and finally QE III, which involved

purchases of $85 billion a month for several months, the balance sheet of the Federal

Reserve or the assets it held through purchases ballooned from $800 billion in 2008 to

more than $4 trillion recently.

with households and businesses already heavily in debt, they were (and are) not willing

to borrow more even at lower interest rates, and banks were cautious about lending to

over-indebted clients. The expectation that increased liquidity in the system would

translate into increased consumer, housing and investment credit proved misplaced.But the absence of inflation encouraged staying with the QE policy.

So where did the money go? Part of it remained in the books of the banks, which were

happy to have got rid of the excessive volumes of risky assets they held. But another

part was flowing into assets like equity, bonds and gold, both within the U.S. and abroad.

The result has been huge asset price inflation.

Stock markets globally are at record highs (witness the movements in the Sensex). As

financial analyst Michael Hieise puts it: "The collateral damage from ultra-loose

monetary policy is accumulating. Risks to financial stability are growing as investors

are piling into riskier assets in search of higher returns. Already, some assets such asjunk bonds are trading at what look like inflated prices."

While it is true that the U.S. Federal Reserve, encouraged by positive growth numbers,

has decided to taper out its bond purchase policy, that process is slow. And precisely

when that is occurring, the normally conservative European Central Bank under Mario

Draghi startled analysts in early September by reducing interest rates to record lows

and announcing a policy to buy private-sector bonds worth hundreds of billions of euros

as a measure to stall a deflationary crisis. For Draghi, this was unavoidable also because

the weak dollar that liquidity infusion by the U.S. results in forecloses any effort at

using the depreciation of the euro to revive export demand and growth.

The fight for equity Sat, Oct 11, 2014Copenhagen , BRICS, environment, Frontline, climate change,

IN December 2015, the world will know which way it is headed in terms of climate

change and what the fate of the earth will be, particularly humanity, in the years beyond


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2050. The year marks the deadline that was set in 2011 at the 17th climate summit in

Durban, under what is known as the Durban Platform, for the world community to

arrive at a binding international agreement on limiting carbon emissions so that the

average global surface temperature does not overshoot the "guard rail" of 2deg Celsius--or

even a more ambitious limit of 1.5deg C--above pre-industrial levels. The annual climatesummits are called the Conference of the Parties (COP) to the United Nations Framework

Convention on Climate Change (UNFCCC), which was negotiated in 1992 at the Earth

Summit in Rio de Janeiro. The convention's stated objective (Article 2) is "stabilisation

of greenhouse gas (GHG) concentrations in the atmosphere at a level that would stop

dangerous anthropogenic interference with the climate system".

Equity is an important principle, indeed the cornerstone, of the UNFCCC, which is

articulated (Article 3.1) as: "The parties should protect the climate system for the benefit

of present and future generations of humankind, on the basis of equity and in accordance

with their common but differentiated responsibilities (CBDR) and respective capabilities"

(emphasis added).

Every country has an additional common climate obligation towards emission reductions

individually, but these responsibilities would be differentiated according to their historical

actions, respective current capacities and capabilities.

According to the latest (Fifth) Assessment Report (AR5) of the Intergovernmental Panel

on Climate Change (IPCC), the increase in temperature between 1880 and 2012 is

already 0.85deg C

At COP-15 in Copenhagen in 2009, the participating countries, after failing to conclude

a legally binding treaty in accordance with the UNFCCC principles, pledged to worktowards an agreement that would prevent global warming from exceeding 2deg C. The

crucial COP-21, expected to herald the making or breaking of a climate resilient world,

will be held in Paris. At COP-20, to be held in Lima in December 2014, it is widely

expected that the nature of the emergent universal agreement should become clear. A

draft text is expected to be tabled for discussions at the summit.

The nature of the legal agreement was left pretty much vague at the Durban summit.

The Durban decision was that it could be a protocol, another legal instrument or "an

agreed outcome with legal force". The phrase "an agreed outcome with legal force",

whose meaning is not quite clear, was incorporated after prolonged wrangling as a

compromise to India for which the use of the words "legally binding" in the earlier

formulation was anathema to its negotiating position. In the past 22 years of climate

negotiations, two approaches to address the impending climate crisis have emerged.

The first was the Kyoto Protocol of 2005, a top-down (prescriptive) solution whose

architecture reflected the CBDR. The Kyoto Protocol now stands virtually dismantled.

In accordance with the respective historical responsibilities, it required only the developed

or Annex 1 countries to take on assigned targets for emission reductions over their 1990


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levels based on the simple "polluter pays" principle. Their carbon emissions since

industrialisation began in the mid-19th century account for about 70 per cent of the

accumulated carbon in the atmosphere (stock), constituting the major cause for the

current global warming and climate change.

The First Commitment Period (FCP) of the Kyoto Protocol ended in December 2012.

After much acrimonious negotiations at Durban, the Second Commitment Period (SCP)

was agreed upon. This will expire in December 2020, when the new globally binding

post-2015 agreement will take effect. During the FCP, industrialised countries committed

to reducing GHG emissions by an average of 5 per cent below 1990 levels. During the

SCP, the commitment is to reduce emissions relative to 1990 levels by 18 per cent.

On the other hand, the non-Annex 1 countries, which account for about 80 per cent of

the world population, are not required to meet any assigned targets. This premise has

not been acceptable to some developed countries. The United States, for instance, opted

out of the Kyoto Protocol right from the start even though until recently it was thebiggest carbon emitter in the world. These countries want emerging economies such

as India and China, whose emissions are increasing as a result of the ongoing development

and economic growth, to take on binding commitments as well. Post-2012, Canada,

too, withdrew from the Kyoto process. Russia, Japan and New Zealand have not accepted

any reduction commitments for the SCP for the same reason. Effectively, therefore,

the SCP puts reduction targets only on 15 per cent of world emissions.

Thus, the Kyoto process today stands greatly undermined. The U.S. has all along

favoured a single framework ( Frontline , December 18, 2009) on the basis of a bottom-up

approach premised on unilateral emission reduction commitments by all countries which

would include India and China as well--commitments that are measurable, reportable

and verifiable (MRV)

quasi-formalisation of this process occurred at COP-16 in Cancun, Mexico, in 2010

when the Cancun agreements included a list of pledges by individual countries, with

nothing said about the "review" process that should go with it. "All countries must

accept binding commitments in some appropriate legal form," the then Indian Minister

of Environment and Forests, Jairam Ramesh, famously said at Cancun.

Arguing that India must be seen to be part of the solution and not part of the problem,

Ramesh overruled the negotiators and declared at Cancun that India would reduce its

emission intensity by 20-25 per cent of its gross domestic product (GDP) by 2020 from

the 2005 levels as the Indian pledge in the new globally binding bottom-up approach.

This target was the Nationally Appropriate Mitigation Action (NAMA) that it had

communicated to the UNFCCC in 2009 under the Bali Action Plan of COP-13 as a

voluntary measure and not as a binding target.

: "Towards 2015 COP at Paris, India has decided to strengthen its negotiating team, its


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negotiating efforts, taking other countries along with us... we have eight missions; we

may add one or two more.... The issue is that the world must recognise that India needs

to grow.... So we will seek a window up to say 2050. Then our scenario may plateau

and then come down...."

This is a throwback to the pre-Ramesh negotiating stance of India not being prepared

to undertake any binding emission cuts. Indeed, this was the burden of India's submission

to the UNFCCC on the work plan for the Durban Platform. It said: "The

responsibilities/obligations of developing countries in a post-2020 arrangement will

clearly need to be built on the principles of equity and CBDR. Irrespective of the legal

form of the final arrangements, the developing country targets under such arrangements

cannot be binding until the principle of differentiation based on equity is defined and

the conditions implicit in such definition of equity are met

One of the reasons for domestic policies not being predicated upon climate change

imperatives is a lack of detailed State or regional level impact assessments andvulnerability maps on factors such as agricultural productivity, monsoon variability

and sea-level rise, to appropriately tailor the State-level policies and the State Action

Plans on Climate Change (SAPCCs).

The Indian approach to equity in climate negotiations has always been premised on the

basis of per capita emissions (PCE) per year, which is about 1.7 tonnes (ranked 127th)

as compared to China's 6.2 tonnes (ranked 55th) and the U.S.' 16.4 tonnes (ranked

eighth). In terms of gross emissions, they account respectively for 6.41 per cent (the

fourth biggest emitter), 26.43 per cent (the biggest emitter) and 17.33 per cent (the

second biggest). The scientific basis for this approach is that atmosphere is a global

commons. But global warming restricts the available carbon space (the amount of GHG

that can be emitted without breaching the 2deg C ceiling or the "carbon budget") for

humanity as a whole. Equity in a climate change agreement implies right of equitable

access to this carbon space and operationalisation of these rights (at a national level).

The per capita approach means that this available carbon space be apportioned equally

across all individuals of the world. This implies equity between nations as part of an

international agreement and equity within nations through domestic actions. The thrust

of the UNFCCC equity principle and the Indian approach to equity is that "historical

emissions" of industrialised nations have greatly shrunk the available sink capacity of

the atmosphere for future carbon emissions necessary for the growth of developingcountries. Thus, these historically accumulated stocks, and not flows, of carbon emissions

must form the basis for assigning equitable access to available carbon space. It is the

relative contribution of GHG emission stocks that would determine the used up carbon

space by various nations and how much of it remains for use by all nations in the future.

India used equity as a defensive mechanism in negotiations. While agreeing that equity

was being used as a negotiating tactic, Raghunandan favoured the per capita approach


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but with the caveat that it would be more effective internationally if India were to

address this issue domestically in its developmental policies, in terms of energy and

resources access, linked with environment and sustainability issues, which unfortunately

was not happening.

With available carbon space becoming highly constrained, from the perspective of

developing countries, equity should be non-negotiable and should form the basis of

any global agreement post-2015. However, the equity principle is yet to become central

to the negotiations despite there being several formulations of it. The problem is, as

Jayaraman pointed out, which among these different formulations, which appear similar

and comparable, should be picked.

The Indian negotiating team should, therefore, engage with as many countries as possible

to evolve a common strategy for advancing the idea of equity and arrive at a formulation

of equity that would be acceptable to as many countries as possible. It is becoming

increasingly clear that a "pledge-and-review" kind of agreement is likely to be theoutcome at Paris. The question then is: What kind of a structure should it have so that

equity could become an integral part of it?

Besides the BASIC group, India has also used the forum of Like-Minded Developing

Countries (LMDCs) to formulate a common stand on climate change. But, as Raghunandan

pointed out, India should try and win over countries of the Africa Group, the LDCs and

SISs as well to create a much larger common front to address questions such as "What

are the overarching terms that an agreement should have?",

Tenuous truce Sat, Oct 11, 2014Gaza, palestine, Frontline, international, Israel, Hamas,

There are no signs yet that Israel is serious about lifting the economic blockade on Gaza

or removing the travel restrictions that have turned Gaza into an open-air prison since

the withdrawal of Israeli troops from the territory in 2005.

The Prime Minister seems determined to continue with his expansionist policies. Soon

after the ceasefire agreement, the Israeli government announced the appropriation of

another 500 hectares of Palestinian land on the West Bank. Israel already occupies 61

per cent of the West Bank and controls most of its water resources. He recently emphasised

that there was no question of withdrawing the Israeli army from the West Bank. Defence

Minister Moshe Ya'alon has threatened to unleash another war on the hapless population

of Gaza.

The scale of destruction is much more this time than in the 2009 and 2012 attacks by

the Israeli forces. Billions of dollars was needed to repair the damage inflicted on Gaza's

infrastructure in those attacks. The Palestinian Authority (P.A.) has put the cost of


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reconstruction of Gaza now at $7.8 billion.

Human rights groups and international legal luminaries say that Israel should be held

responsible for committing war crimes in Gaza. During "Operation Cast Lead" in 2009,

despite documented evidence of war crimes, no Israeli leader or military officer was

held responsible. This time, the international community seems to be more serious

about making those responsible for the death of more than 500 children in Gaza

answerable for their crimes. Around 3,000 children were injured and more than 1,400

orphaned during the course of the Israeli assault.

by sending vast amounts of military aid to Israel, Congress and the Obama administration

have aided and abetted the commission of war crimes, genocide and crimes against

humanity by Israeli officials and commanders in Gaza.

The Obama administration rushed in additional arms to Israel when the civilian toll in

Gaza, following indiscriminate air and sea attacks, had crossed the 500 mark. Every

year, the U.S. provides around $3.1 billion in military aid to Israel. The U.S. has for

all practical purposes been aiding Israel's expansionist and apartheid polices.

At the launch of the new war, Netanyahu had promised to militarily defeat the armed

resistance groups and convert Gaza into a pacified and demilitarised zone. The Israeli

army even failed to decommission all the tunnels the resistance had built to militarily

combat the occupiers.

Hamas remains firmly in control of the Gaza Strip. A recent opinion poll taken among

Palestinians in the occupied territories revealed that the popularity of Hamas among

ordinary people had soared. The poll predicted that if elections were held in the occupiedterritories, Hamas would emerge the winner once again. Before the last Israeli onslaught

started, Hamas had become politically isolated.

Hamas' political fortunes were on a downslide after the removal of its parent organisation,

the Muslim Brotherhood, from power by the Egyptian military last year. Since then,

the Egyptian authorities have further intensified the blockade on Gaza.

It was obvious that the new Egyptian government wanted the demilitarisation of Gaza

and the political sidelining of Hamas from the Gaza Strip. But the latest Israeli

misadventure has bolstered the standing of Hamas, not only among Palestinians and

the Arab street but also internationally.

frontline oct 1st half

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