28 August 2013


The nexus between politics and big business

By  K.P. Nayar

A bright, enterprising Indian, who recently turned down an offer to run one of India’s leading industry organizations, summed up the rejection so succinctly as to make sense of the gathering gloom about the country’s economy. This individual, whose access to American leaders short of the president and the vice president has been witnessed firsthand by this columnist, said that the decision to turn down the offer was because industry organizations had lost their relevance in the current lay of governance.

This person of choice who must remain anonymous has several decades of experience of dealing with industry and has had a ringside view of momentous changes affecting India’s economy, including the downs of the 1900s and ups of the early part of the previous decade. When this individual talks of representative organizations of industry and commerce losing relevance it is a story that runs somewhat as follows.

Even when Manmohan Singh, as finance minister in the P.V. Narasimha Rao government, decided to shed the albatrosses that weighed the economy down, the perceived taint about businessmen lingered for long afterwards and politicians would not be seen rubbing shoulders with individual industrialists, at least in public. Under no circumstances would they engage in any open display of bonhomie, such as accepting rides on private planes owned by captains of industry, as they do nowadays; nor did these captains own such manifestations of opulence.

Representative organizations of business continued to be necessary as vehicles of institutional access to the government. Many ministers, of course, had industry connections and vice versa, often more than mere ‘connections’, but these were almost never touted in public.

This columnist has peeped, as a younger journalist, into the daily schedules of prime ministers to find certain slots without names, merely carrying the legend, “reserved”. No one other than the prime minister, his trusted private secretary and the visitor in question knew whom those slots were reserved for, and such meetings were inevitably held at 7, Race Course Road, the prime ministerial residence, and never at the South Block office.

During the National Democratic Alliance government, with the rising importance of men like Pramod Mahajan, things began to change. Even then, such were the reservations about associating oneself with business that before Jaswant Singh joined Atal Bihari Vajpayee’s 13-day government on May 16, 1996, as finance minister, he initiated steps to sell off all his stocks and shares lest there was any appearance of a conflict of interest.

But industrialists gained unfettered access to all levels of government during the United Progressive Alliance rule when fraternizing with the private sector was not only no longer considered unsavoury, but it became a badge of a minister’s progressive and development-oriented thinking. Only few ministers, like A.K. Antony, remained exceptions to this new rule. Such ‘unfashionable’ ministers were mocked by journalists whose media houses had no qualms about deputing half a dozen correspondents to the annual international business jamboree in Davos even as they showed nowhere near such professional interest in villages where the country’s farmers were committing suicide in desperation. Many captains of industry now simply call up ministers on their cell-phones and fix up appointments. The more savvy among the cabinet members meet up with businessmen in the exclusive, members-only reserves of the capital’s five star hotels or similar ones in Mumbai, something that would have been unthinkable at one time.

Naturally, the industry organizations that once represented the collective wisdom — and wealth — of Indian entrepreneurship are ghosts of their former selves. What would have been my role, wondered the individual who turned down the offer to lead such an organization, had I accepted the offer, other than to give out an occasional sound-bite to a television channel, issue a press release, moderate an inconsequential meeting or host a cocktail party for, say, the visiting foreign minister of Tuvalu or Estonia?

Once upon a food bill

Aug 28 2013, 

Congress has a story around the welfare state. What's BJP's response?

The passage of the food security bill in the Lok Sabha is a political victory for the UPA. Its passage reveals much about the character of Indian politics. The bill will not ensure a favourable electoral outcome for the UPA. That is still an open question and will depend on lots of things. But it is a political victory in three respects: it reasserted the fact that the Congress, for good or for ill, can still get things done; it exposed the BJP's spectacular ineptness; and it showed the ideological incapacity of those looking for an economic framework beyond the Congress.

Whatever one thinks of the bill, the fact that the UPA could get Parliament to debate and pass a bill of this magnitude is something of an achievement. Parliament has been in perpetual logjam. The government's word carried no weight and credibility. At one stroke, both of these impressions have been dispelled. Whether the UPA appealed to the good conscience of legislators or arm-twisted them is beside the point. The BJP's trump card was to say that the government is dysfunctional in a major way and has no authority. That trump card is gone.

The BJP's political ungainliness was revealed at every turn. The illusion that the party has an alternative economic vision for the poor has been dispelled. If anything, this passage underscores how much more economic consensus than contestation there is in Indian politics. It has punctured, for the moment, Narendra Modi's leadership claims in a very subtle way. He cannot even seem to keep his own party together on a single message. By contrast, Sonia Gandhi's unchallenged authority came across very powerfully. It is a pity that she has used it seldom and not always for the right cause. But there is no doubt who is in charge. It is a fact that she remains a greater political asset to the UPA than anyone else. Despite some wonderful interventions, it was the BJP that looked leaderless and confused. It gives the impression of a party that now has no core convictions and therefore works at cross purposes. It even voted against the clause in the bill that would have given some flexibility on direct benefit transfer. One powerful objection to the bill was its implications for federalism. But a so-called coalition of chief ministers and ex-chief ministers could not take a stand that matched their rhetoric. Sharad Pawar, who had cogent objections about the implications of the bill for agriculture, went along. In politics, standing for what you promised counts for a lot, and on this one the Congress scored.

The Congress has something of a narrative around the welfare state. It can run the story that, at least in formal terms, it has secured the basics: guaranteed employment, housing, food and education. It is trying to keep one part of the social contract. Its problem is that it faltered on the other part: creating the conditions for deeper participation and sustained growth in the economy. And no matter what high decibel critics might say, it is a welfare story whose appeal is hard to resist. The problem with much of the right-of-centre economic discourse in India is three-fold. First, it does not have much of a sense of history. Has any modern society evolved without robust welfare protection? It is not an accident that even so-called rightwing politicians, from Bismarck to Churchill and Nixon, have supported an efficient and humane basic income guaranteed by the state. Second, the right was caught in its own bad faith. On one hand, it wanted to critique entitlements and rights per se, on the other hand, it wanted to embrace direct cash transfers as an alternative. So in the end its arguments against redistribution ended up sounding more like lawyerly bad faith than a principled position. There are some things that may not matter for pure intellectual argument. But for building public credibility they do. The fact of the matter is "right"-of-centre economists, for various reasons, tend to fritter away their public credibility rather swiftly. This is not just because the left is intellectually better organised; it is because the right has not managed to link its purely economic arguments with an effective moral framework. Third, there was a spectacularly self-defeating political language that smacked of elitism. And the BJP walked right into the trap. It is cute to call the bill a vote security bill. It is easy to reduce it, as every newspaper will, to a pure calculus of votes. But what are we saying in saying this? That politicians responding to what they think voters will go for is a bad thing? Implicitly, this sends the message that we either think voters are stupid or we don't care for democracy. Arguments would dignify the voter more if they concentrated on the substance. If the left can be accused of sometimes doing the poor harm in the name of speaking for them, the right can match it by its subtle show of contempt for the ordinary voter. The right will need to change its game considerably.

India's economy

How India got its funk

India’s economy is in its tightest spot since 1991. Now, as then, the answer is to be bold

Aug 24th 2013 

IN MAY America’s Federal Reserve hinted that it would soon start to reduce its vast purchases of Treasury bonds. As global investors adjusted to a world without ultra-cheap money, there has been a great sucking of funds from emerging markets. Currencies and shares have tumbled, from Brazil to Indonesia, but one country has been particularly badly hit.

Not so long ago India was celebrated as an economic miracle. In 2008 Manmohan Singh, the prime minister, said growth of 8-9% was India’s new cruising speed. He even predicted the end of the “chronic poverty, ignorance and disease, which has been the fate of millions of our countrymen for centuries”. Today he admits the outlook is difficult. The rupee has tumbled by 13% in three months. The stockmarket is down by a quarter in dollar terms. Borrowing rates are at levels last seen after Lehman Brothers’ demise. Bank shares have sunk.

On August 14th jumpy officials tightened capital controls in an attempt to stop locals taking money out of the country (see article). That scared foreign investors, who worry that India may freeze their funds too. The risk now is of a credit crunch and a self-fulfilling panic that pushes the rupee down much further, fuelling inflation. Policymakers recognise that the country is in its tightest spot since the balance-of-payments crisis of 1991.

How to lose friends and alienate people

India’s troubles are caused partly by global forces beyond its control. But they are also the consequence of a deadly complacency that has led the country to miss a great opportunity.

During the 2003-08 boom, when reforms would have been relatively easy to introduce, the government failed to liberalise markets for labour, energy and land. Infrastructure was not improved enough. Graft and red tape got worse.

Private companies have slashed investment. Growth has slowed to 4-5%, half the rate during the boom. Inflation, at 10%, is worse than in any other big economy. Tycoons who used to cheer India’s rise as a superpower now warn of civil unrest.

As well as undermining 1.2 billion people’s hopes of prosperity, failure to reform dragged down the rupee. Restrictive labour laws and weak infrastructure make it hard for Indian firms to export. Inflation has led people to import gold to protect their savings. Both factors have swollen the current-account deficit, which must be financed by foreign capital. Add in the foreign debt that must be rolled over, and India needs to attract $250 billion in the next year, more than any other vulnerable emerging economy.

A year ago the new finance minister, Palaniappan Chidambaram, tried to kick-start the economy. He has attempted to push key reforms, clear bottlenecks and help foreign investors. But he has lukewarm support within his own party and faces obstructionist opposition. Obstacles to growth, such as fuel shortages for power plants, remain. Foreign firms find nothing has changed. Meanwhile, bad debts have risen at state-run banks: 10-12% of their loans are dud. With an election due by May 2014, some fear that the Congress-led government will now take a more populist tack. A costly plan to subsidise food hints at this.

India lost in Afghan endgame

 27 Aug , 2013

Prime Minister Manmohan Singh and the President of Afghanistan, Mr. Hamid Karzai exchanging the singed documents of an agreement on Strategic Partnership between the Republic of India and the Islamic Republic of Afghanistan

The situation in Afghanistan is full of uncertainties and the prospects of India’s neighbourhood becoming even more difficult for us are real. We have little control over the situation in Afghanistan, however popular we may be with its government and people. We have invested considerable political and financial capital in Afghanistan for protecting our longer term interests in the region, but adequate returns are not guaranteed.

India will be hard put to secure its interests in Afghanistan in the conditions under which the US intends to withdraw.

Afghanistan has been a conflict zone for over three decades now. To our misfortune it became a cold war battleground between the Soviet Union and the US, with the result that both an extremist version of Islam and Pakistan became powerful actors in shaping developments there under the US lead. Until then, Pakistan was not a dominant factor in Afghanistan internally and externally. Later, as US attention moved towards Iraq, Pakistan saw an opportunity to control Afghanistan strategically by using Islamic fanaticism embodied by the Taliban as a tool.

Hare & Hounds

The deliberate Islamisation of Pakistan by Zia-ul-Haq prepared a favourable ground for the creation of the Taliban under Benazir Bhutto’s civilian government. The nurturing of extremist religious groups by the Pakistan military for terrorist attacks against India was another facet of the growing Islamization of Pakistan’s society and the practical use of these forces for political ends, as in Afghanistan’s case.

Religious fanatics in our region gained further force with Al Qaida’s entry on the back of the Taliban. These forces overplayed their hand in attacking the US on September 11, inviting an American military riposte that ousted the Taliban from power. That Osama Laden got refuge in Pakistan for many years in different places points to the existence of an effective network of Islamist cells in Pakistan, which raises concerns for the future.

India's Nuclear Blunder

It’s fashionable in Western security circles to proclaim that nuclear weapons never make a state more secure. This is hogwash. Nuclear weapons, more so than any other single factor, are why Western Europeans doesn’t speak Russian. Similarly, it is inconceivable that India would not have responded militarily to the 2008 Mumbai attack if Pakistan did not have a nuclear arsenal, just as it is inconceivable that the United States would’ve invaded Iraq in 2003 if Saddam Hussein had built the bomb.

But just because nuclear weapons can solve some security problems, doesn’t mean that a nuclear-armed state enjoys total security. Like any other military capability, nuclear weapons are particularly well suited for some contingencies, and particularly ill-suited for others.

Not surprisingly, given the amount of time and resources involved in building a nuclear weapon, most states that have acquired them had compelling reasons to do so. There are exceptions to this, however. One particularly obvious example is South Africa, which—under the apartheid government—built a small nuclear arsenal in an apparent attempt to coerce its former Western allies to intervene on its behalf against a security threat it struggled to define.

But South Africa is just the most bizarre example. Indeed, it has become exceedingly clear that India’s decision to acquire nuclear weapons was a strategic blunder. Unlike their South African counterparts, Indian leaders built the bomb with a very specific security threat in mind. Unfortunately, nuclear weapons have proven ill-suited for addressing that security threat, while India’s pursuit of atomic weaponry has opened up new challenges that wouldn’t have existed otherwise.

Although a number of domestic and ideational factors were essential to India’s success in building nuclear weapons, China was the initial impetus behind the decision to pursue them.

Specifically, it was the PLA’s swift rout of Indian military forces in the 1962 border war and its nuclear test two years later that provided the initial rationale for India’s decision to militarize its nuclear program. Little had changed over three decades later when India carried out its first “nonpeaceful” nuclear tests in 1998. In explaining his decision to order those tests in a letter to Bill Clinton, Indian prime minister Atal Bihari Vajpayee wrote just days after the tests:

I have been deeply concerned at the deteriorating security environment, specially the nuclear environment, faced by India for some years past. We have an overt nuclear weapon state on our borders, a state which committed armed aggression against India in 1962. Although our relations with that country have improved in the last decade or so, an atmosphere of distrust persists mainly due to the unresolved border problem.

Indeed, the 1962 border war fundamentally changed India’s approach to foreign policy. Before the war, India under Jawaharlal Nehru pursued an idealistic foreign policy that prioritized the non-aligned movement and third-world solidarity. Nehru’s China policy was especially friendly, as summed up by the slogan “Hindi-Chini bhai-bhai” or “Indians and Chinese are brothers.” These were not empty words; Nehru took a number of notable actions to win over Maoist China. For example, Delhi boycotted the San Francisco Peace Treaty in 1951 in protest of the decision to not give Taiwan back to China. Nehru also acquiesced to China asserting its dominance over Tibet in the first half of the 1950s.

India’s Companies Act: Legally Enforced Corporate Social Responsibility

By Shreyasi Singh
August 27, 2013 

It’s painfully common knowledge that doing business in India is probably one of the toughest jobs in the world. India routinely finds itself at the bottom of the pack when it comes to ease of doing business, from incorporating a company and dealing with permits to getting credit and navigating through a crumbling (often non-existent) infrastructure. In fact, according to The World Bank, India comes in at 132nd place on their annual Doing Business survey of 185 countries.

Many of these challenges have been a consequence of outdated, out-of-context laws in the Companies Act, 1956. A new law to replace the old one has been in the works for nearly 20 years now, even as the existing legislation has been amended 25 times in six decades. It seems reasonable to hope that a new law will finally be enacted, now that the Rajya Sabha (Upper House) of Parliament has passed it, seven months after the Lok Sabha (elected Lower House) gave it the green light. The bill makes several sweeping changes in the way companies in India are defined, operated and are regulated. Most significantly, the new law is expected to bring greater transparency, free companies of excessive regulation and institute new ways of self-reporting and disclosure.

Many of the bill’s features have been debated, especially the stipulation that companies with a net worth of Rs 500 crore ($100 million) or more, or turnover of Rs 1,000 crore ($200 million) or more, or a net profit of Rs 5 crore ($1 million) or more during the past three financial years must spend at least 2 percent of their average net profits from the three preceding years on CSR, or corporate social responsibility initiatives. According to Union Minister of State for Corporate Affairs Sachin Pilot, this stipulation makes India the first country in the world to legally mandate corporate spending on social welfare.

Considering the social and development milestones that India needs to pass, few companies have come out in vociferous opposition of the clause – doing so would amount to bad PR. Several eloquent CEOs I spoke with admitted as much. Some of them said that the definition and scope of CSR was vague and unspecified; others said that maybe ploughing back each penny of profit into expanding and building the business was their biggest dharma (a Hindhu term roughly meaning “duty”), and the most powerful way to make an impact. The managing director of a Delhi-based construction chemicals company summarized it well when she echoed much of what I have heard from many of her peers.

“I think it's a very positive move as the parameters are clearly defined so companies which are making net profit of more than Rs 5 crores in the three preceding years are being asked to contribute to the improvement of our society,” she said. “Also the fact that it is those with a turnover of more than Rs 1000 crores clearly sends a signal that it is asking those in a financially strong position to share. This is clearly the need of the hour in India.”

India: Where Are All the Girls?

August 27, 2013

The state of Haryana is ground zero for a social issue with growing repercussions for India: gender imbalance.

The silence is revealing. Rajju is baking bread for her son Rajesh. She serves him without word. Thirty minutes later, mother and son finish their lunch with only the barest minimum of utterances. This is life for the Hooda family of three—Rajju and her two sons. The tension within the household has been mounting for six years, ever since 52-year-old Rajju advertised for a bride for her elder son.

In the Sanghi village, located in the Rohtak district in the northern Indian state of Haryana, like most places in this region and indeed throughout India, the majority of marriages are arranged by the parents. Most marriage alliances are made within the same caste or ethnic group. The marriage age seen as ideal here has traditionally been between 20 to 25 for both men and women, but with growing urbanization and increasing education men have recently preferred to wait until they are 28 or 29. The majority of women are still not able to make marriage decisions for themselves.

Rajesh is now 35 and despite being well settled in his job as a computer professional near his village he has not had any good marriage proposals. In fact, in six years he has received just one proposal, which fell through.

Barely 100 meters away from Rajesh’s house lives Shayam. He’s been looking for a bride for four years, also without success. The absence of marriage partners is creating tensions within many families. The stress and frustration has aged Rajju beyond her years.

Rajesh and Shayam are not alone. Haryana, which borders Delhi, has long had a gender imbalance, and some reports say it has the worst sex ratio in India.

According to the 2011 census, the number of females per 1000 males in Haryana stands at 879, far below the national average of 943 and the lowest among all twenty-eight states in India. The number falls to 836 in certain districts, and the state-wide figure is even more alarming in the 0-6 age group, where there are just 834 girls for every 1000 boys.

As a result of this disparity, men like Rajesh are unable to marry, and face an increasingly dire situation. His mother laments, “There are so few girls in Haryana. No-one wants a daughter. If you don't have any daughter how will you have a bride?”

She adds, “It is common for pregnant women to have a prenatal test and if the fetus is a girl, they often abort them.”

The gender imbalance in the Haryana society has forced many young men to look for girls outside the state from different cultural, socioeconomic and linguistic backgrounds. Men are bringing brides in from other states, like Tripura, West Bengal, Orissa, and Bihar and even—in some cases—Bangladesh.

“I have started looking for girls outside my state and very soon I expect to have a wife. For that I will have to spend some money. The situation is really bad. Even a well qualified person remains unmarried because of the paucity of girls,” rues Rajesh.

China: Mao or Markets?.

August 27, 2013

Why is Chinese president Xi Jinping embracing his inner Mao at a moment when China’s new leaders are on the verge of launching a new wave of reforms to retool China’s economy based on strengthening market forces?

Hint: it may have something to do with the regime’s efforts to bring down the former Chongqing Communist Party leader and darling of the “new left”, Bo Xilai. China’s politics, like its policy decision-making tends to be rather opaque. But Xi sent a clear political message in July when he visited Mao Zedong’s landmark lakeside mansion and declared, “our nation will never change color.”

Blast from the Past

As if to make the point, a secret memo called “Document No. 9,” issued by the Communist Party Central Committee General Office, was recently leaked to the New York Times issuing a directive to party cadres listing “seven perils” not to be tolerated. These included “Western constitutional democracy”, constitutionalism, civil society, an independent judiciary, press freedom, human rights and market “neo-liberalism.” The memo, according to the NY Times, says that “Western forces hostile to China and dissidents within the country are still constantly infiltrating the ideological sphere.”

There is far more at play here than, as one interpretation has it, a bit of political symbolism to placate the left while the regime attacks Bo Xilai, leading icon of the left. This old-school Communist “rectification” campaign may be in part about consolidating party control, and certainly underscores how terrified Chinese leaders are of their own people. But most intriguingly, this posturing raises questions about China’s political trajectory, and more immediately, how Beijing will implement a wave of market-oriented economic reforms needed to advance China’s $7+ trillion economy.

In recent months, Chinese state-run media have attacked Western ideas, most prominently the notion of constitutionalism—a debate that goes back to the latter days of the Qing dynasty. The idea, articulated in Article 5 of China’s current constitution, is that “No organization or individual has the privilege to overstep the constitution and the law.” Only last December, on the thirtieth anniversary of the 1982 constitution, President Xi defended the constitution.

No more. The official media has been trashing the idea. One of a series of recent People’s Daily editorials said that constitutionalism is absurd, “like climbing trees to catch fish.”

In practice, China has tended to be governed more according to rule by law than of law, with the Communist political elite largely exempted. With burgeoning concerns over corruption and inequality, reformers have focused on the need for constitutionalism—rule of law. Some in China may fear that is a slippery slope leading to political reform as well. Earlier this year the virulence of the debate has seen one reform-minded journal’s website taken offline, and a journalists going on strike after a liberal-leaning newspaper, Southern Weekend, was censored. These have been part of a wider trend of crackdowns on dissent, including on some prominent human-rights activists.

Mao in the Information Age

The Plight of China’s Petitioners

By Tyler Roney
August 27, 2013

"You detain me illegally and you say I am illegal? Why don't you just give me a bullet and let me die?"

Petitioning takes many forms in China – sometimes there are harmless forms of protest, such as the petitioner who pulled down his pants at the Bo Xilai trial last week. Other times, petitioning can be tragic; earlier this month, twenty-one activists attempted mass suicide at the Beijing West Railway station after their petitions went ignored.

Few incidents garnered more support or pity recently than the case of wheelchair-bound Ji Zhongxing, who attempted to blow himself up in the Beijing airport in late July. Support poured in from all around the internet. At the cost of his hand and possibly his freedom, his case was reopened, a dangerous precedent for the thousands in Beijing who brave security thugs and the elements just to be heard. China is no stranger to violent attacks by angry citizens, and recent events—including the government’s march on corruption—have put the nation’s most vulnerable people in the spotlight.

Wang Lanying (an alias) grabbed attention by thrusting her ID card into the hands of a Diplomat photographer, saying, "Take it! I don't need it! Take it!" Black hair with gray streaks, sun-worn skin, and sincerely afraid, 53-year-old Wang agreed to meet for an interview, after, of course, making sure that it wasn't a trick and that she wouldn't be arrested upon arrival.

In 2010, Wang lost a court case to a wealthy man in her village in Hebei Province, who then proceeded to burn down her trees and build on her land. The alleged culprit still has control of the land. In March, she came to Beijing as a petitioner.

In the last three years she has been trucked back to her hometown, beaten, and unlawfully imprisoned for over a week on several occasions. Her son's wife left him due to the constant harassment and intimidation in their town. While Wang was detained once, a representative from the court allegedly asked her to sign an agreement to effectively squash her case, telling her that, if she didn't sign, she'd be breaking the law. She said, "You detain me illegally and you say I am illegal? Why don't you just give me a bullet and let me die?"

Of course, the media is not a courtroom, and though Wang boasts an impressive list of witnesses and evidence, they mean nothing outside the court of public opinion. But when Wang came to the city to stand on the streets with papers in her hand—begging for attention from any high level official or media outlet—she joined the lowly class of the petitioner. Since the only court that matters for petitioners is the court of public opinion, the point of her petitioning is to gain attention.

Petitioning higher authorities in such a manner may be unique to China, but the lack of an independent judiciary or free press makes the situation extremely difficult and a thorny issue for the public. Technically, these sorts of issues are meant to be handled by the State Bureau of Letters and Visits.

The Dalai Lama’s Ancestral Home Gets a Makeover from Beijing

By Jonathan DeHart
August 27, 2013 

In a symbolic move, the Chinese government would appear to have made their conquest of Tibet nearly complete. Hongai village, the exiled Dalai Lama’s ancestral home that rests on a mountain peak, is receiving a 2.5 million yuan makeover in the form of redevelopment. The house where Tibet’s spiritual leader grew up is not to be spared. The structure is now surrounded by a three-meter high wall and is being watched by security cameras. The Dalai Lama’s boyhood home is the final physical spot in the mainland dedicated to the man whom Beijing calls a “wolf in monk’s robes.”

“This is not modernization but Sinofication,” Tibetan poet and activist Tsering Woeser told AFP.

Sinofication or not, Hongai (or Taktser as it is called in Tibetan) has been radically transformed by the project. The village is in Qinghai province, several hundred kilometers from the border of the Tibetan Special Administrative Region (SAR). The region has been regarded as culturally Tibetan for hundreds of years, although it lies outside the borders of the SAR.

When a spiritual search party of Buddhists arrived to identify the toddler Lhamo Dhondup as the reincarnated Dalai Lama in the 1930s, the building – now flanked by the wall and rigged with surveillance equipment – was a simple farmer’s home. While Tibetans may interpret the “goodwill gesture to visiting pilgrims” differently, the Chinese government included the radical makeover in its 1.5 billion yuan ($244 million) effort to breathe economic life into the remote region. The nearby Pingan district is set to become a center for new energy and information technology companies.

“Today, the once bleak, underdeveloped county is closer to a boom town,” local official Sun Xiuzong told Xinhua. This transition from outpost to boom town represents the loss of tradition for Tibetans. The loss was literal in the 1960s and 1970s when marauding Red Guards demolished the original home, which was rebuilt in the 1980s.

State-run Xinhua was reportedly the only media outfit allowed to explore the renovated premises. According to a report run by the government-backed source, the restored home looks as it once did, but has been freshly paved, given reinforced beams, with repainted murals. Video footage of the compound can be seen here.

Readjustments in China’s Diplomatic Practice

By Bhaskar Roy

It is very important for Indian foreign policy makers to pay serious attention to a lengthy article written recently (August 16, 2013) by Chinese State Councillor Yang Jiechi on China’s foreign policy. The article titled - “Innovations in China’s Diplomatic Theory and Practice under New Conditions” hints at a few things, gives clarity in very few areas and leaves much to the acumen of the interlocutors to decipher.

Yang Jiechi who heads China’s foreign policy establishment in the government, is also the director of the Central Leading group for Foreign Affairs of the Communist Party of China. This is the supreme body of China’s diplomatic and foreign policy brain, headed by President and Party General Secretary Xi Jinping who is also the Chairman of the Central Military Commission (CMC). The deputy head is Li Yuanchao, Vice President of the country and a Politburo Standing Committee (PBSC) member. Foreign Minister Wang Yi is also a member of this group. Significantly, others who are ex-officio members of the group include the Commerce Ministry, Ministry of Public Security and the Deputy Chief of General Staff Headquarters. There would be other important ministries, agencies and think tanks who are co-opted. The total membership of the group is not public and hence, outsiders have to make out by collating stray reports in the Chinese media.

This reflects the width and depth of consultations that the Chinese establishment goes through when formulating diplomacy and foreign policy on the ground. In contrast, India’s foreign policy is generally reactive and personality driven. Less than a handful of people are involved in taking decisions. In fact, more acute, important and sensitive the issue, the fewer the number of officials involved in India. This is the contrast between India and Chinese foreign policy making, and the reason why India has failed to construct the base of a long term foreign policy. 

Yet, Yang Jiechi’s article suggests that Xi Jinping is still fighting to establish his primacy in foreign policy making, and he has in his mind certain adjustments in approach within the established strategy. Almost all paragraphs of Yang’s article, which is an officially backed declaration, extols Xi Jiping and his leadership of the Party’s Central Committee. Published also in English, Yang sends out the message that it is Xi who will take the decisions. Internally, it appears to be a message to others pushing for a stake not to disturb his line, which is not soft but critically designed in tune with the emerging global environment and trends at home.

Obviously, this strategic foreign policy is evolving. It is, however, predicated by “diplomatic theory with Chinese characteristics”. The significance of this statement does not simply mean “a good policy is that which serves China’s interests”. It goes much further to emphasise what China demands is right and everything else is wrong. This should worry China’s neighbours who have territorial disputes with China, and such disputes are likely to grow as Beijing expands claims in consonance with its military and economic power.

The word “innovation” reveals that Xi Jinping and his colleagues are beginning to recognize that while protecting its interests China has the responsibility to contribute to the world. This would call for a huge change in the mindset of the Party’s Central Committee where members are from a wide spectrum of ideological shades. Currently, an ideological and political debate has engrossed the nation- how much liberalism and how much conservatism. The internal developments will certainly force Xi Jinping to shape foreign policy, especially diplomacy, accordingly.

It would need to be seen how China behaves diplomatically, especially in the use of language, when dealing with territorial disputes.

How to Wage War Against Assad

The U.S. has hard choices to make in Syria. Even if the U.S. does intervene militarily, the time window for its best option has already passed. President Obama may have had reason to be cautious and play King Log to President Bush's King Stork, but the U.S. did not intervene when the rebels were strongest, the Assad regime most fragile, and limited U.S. support to the then dominant moderate rebel factions might well have pushed Assad out of power without dividing Syria along sectarian and ethnic lines.

Every option today comes up against the reality that Assad is now far stronger, the country is increasingly being split into Assad and rebel controlled sections, the rebels are fractured and rebel forces have strong Sunni Islamist extremist elements, and the nation is increasingly polarizing into an Alawite and more secular Sunni and minority bloc, a Sunni Arab bloc, and a Syrian Kurdish bloc. In practice, this means there is no way the U.S. can quickly use any amount of force to destroy the Assad regime with any confidence that Syria will not come under Sunni Islamist extremist control, or divide into Alawite, Sunni, and Kurdish blocs in ways that prove to be even more violent and lasting than such sectarian and ethnic divisions have in Iraq.

The U.S. is also now faced with having chosen the wrong red line. No one has accurate estimates, but the key challenge in Syria is scarcely to end the use of chemical weapons. The real challenge is some 120,000 dead, another 200,000-plus wounded, and as many as 20% of its 22.5 million people have been displaced inside the country or are living outside it as refugees.The nation has lost some three years of economic development, become a country of polarized factions, and seen many - if not most - of its children lose much of their schooling and learn to live in fear and anger in a country where more than a third of the population is 14 years of age or younger.

Chemical weapons alone are not a reason to use force. Even the most successful cruise missile strikes would not destroy Syria's holdings. There is no credible chance the U.S. can locate or destroy Syria's entire holding without a massive air campaign and some kind of presence on the ground. Even if the Assad regime has not done the obvious, and used the last few months to covertly disperse a large portion of its weapons, cruise missiles simply don't have that kind of destructive power.

Even if the U.S. can somehow stop all future use of chemical weapons, the military impact will be marginal at best. Moreover, anyone who has actually seen wounds from conventional artillery -- or badly treated body wounds from small arms -- realizes that chemical weapons do not cause more horrible wounds. If anything, an agent like Sarin tends to either kill quickly or result in relative recovery. The case for intervening cannot be based on chemical weapons. It has to be based on two factors: Whether it serves American strategic interest and whether it meets the broader humanitarian needs of the Syrian people

Americans also need to remember that the U.S. has chosen bad options in Syria before, and the sheer pointlessness of largely symbolic U.S. strikes.The pointless use of battleships to shell Druze and Syrian forces in Syria in 1983 led to the Marine Corps barracks bombing and a similar attack on French forces on October 23, 1983.U.S. mistakes and debates within the Pentagon then led the U.S. to suddenly halt its part of what might have been a meaningful, large-scale U.S.-French strike plan, have the U.S. halt its strikes without telling its French ally, and result in a totally ineffective French bombing of Syrian targets on November 16, 1983. On December 4, 1983, the U.S. finally did launch 28 airstrikes because of Syrian air defense attacks on U.S. F-14s flying reconnaissance missions. The end result, however, was a pointless attack on Syrian air defense targets, the loss of two U.S. aircraft, one pilot dead, and another held prisoner until he was rescued by the Reverend Jesse Jackson.

If the U.S. is to intervene in Syria, its options must have some strategic meaning and a chance of producing lasting success. They must have a reasonable chance of bringing stability to Syria, of limiting the growth of Iranian and Hezbollah influence, of halting the spillover of the Syrian struggle into nearby states, and helping to deal with the broader humanitarian crisis.

The Best Case Scenario in Syria

August 26, 2013

The Obama Administration Should Use Strikes to Get Talks

U.S. Secretary of State John Kerry accusing the Syrian government of using chemical weapons, August 26, 2013 (Courtesy Reuters)

It has been one year since U.S. President Barack Obama commented that the use of chemical weapons in Syria would constitute the crossing of a red line, one that would “change my calculus; that would change my equation.” His resolve was first tested this spring, when, after Syrian President Bashar al-Assad allegedly unleashed chemical weapons on his opponents, the White House announced that it would provide small arms to the rebels. A reluctant Congress held up the weapons’ delivery, which seemed to put an end to the matter. But now, the Obama administration is being tested once more. As evidence mounts that the Assad regime launched a massive chemical weapons attack last week, Obama can either make a full commitment to get involved in the bloody conflict or decide to stay out of it once and for all. By all appearances, the second option is off the table. Just how far the United States might venture, though, is still up in the air.

Over the last few days, the president’s national security team has huddled to consider possible military responses to the chemical attack. On Friday, the Pentagon confirmed that U.S. Navy forces are already moving nearer to Syria’s shores should the White House decide to strike at the Assad regime with Tomahawk cruise missiles. And on Monday, Secretary of State John Kerry called the “indiscriminate slaughter of civilians” a “moral obscenity” and cautioned that “Obama believes there must be accountability for those who would use the world’s most heinous weapons against the world’s most vulnerable people.” Moments later, White House spokesman Jay Carney noted that the administration is “considering responses” to the chemical attack, which is a “distinct problem that requires a response.”

At this point, of course, the pros and cons of military intervention are already well known: On the one hand, as the State Department and others have argued, U.S. involvement could prevent the rebels’ defeat, support moderate allies, avert the collapse of the state, and help stem a refugee crisis. On the other, as U.S. military leaders have hinted in letters to Congress, intervention would be costly, potentially bloody, and likely futile -- a replay, some might say, of Iraq and Afghanistan, which to date have yielded neither victory for the United States nor stability for the region.

Up until now, of course, the Pentagon’s view -- that getting too involved in the conflict would spell trouble for the United States -- has won out. But the balance started to shift for Obama when chemical weapons came in to play. In March, allegations surfaced that the Syrian government had used such weapons in an attack near the Syrian city of Aleppo. In April, the White House wrote a letter to Congress stating that “our intelligence community does assess with varying degrees of confidence that the Syrian regime has used chemical weapons on a small scale in Syria.” The White House waited a bit longer, citing a need for greater proof, but eventually approved sending weapons to the rebels. This piece of policy triangulation satisfied neither side. For those supporting greater intervention, or at least a more muscular U.S. response, it was another sign that America was taking a leisurely dip in the policy water against an Assad regime and its Iranian allies that are in at all costs.

This time around, the scale of the alleged attack and the reported attacks on the UN inspections team in Syria seem to have prompted Obama to act quicker and more decisively. It is telling that White House calls for an investigation into the attacks have been followed within days by a publicly acknowledged discussion of military options and the movement of Navy ships.

Long-Term Strategy Needed to End the War in Syria

August 27, 2013

Although I believe that President Barack Obama has taken too long to offer meaningful help to the Syrian opposition over the past two years, a policy that has permitted President Bashar Assad to remain in power too long while it facilitated the rise of extremist insurgent groups, I also sympathize with the White House’s apparent reluctance to engage in that country’s terrible civil war, even at this juncture.

On balance, the United States should retaliate against the Syrian regime. Presidential credibility is on the line, given that last year Obama called the possible use of chemical weapons a “red line” — meaning that if Assad crossed the line, his action would require a fundamentally different kind of American response.

More important than Obama’s personal credibility is the need to re-establish deterrence, so that the Syrian regime does not conclude that it has a green light to use chemical weapons even more widely. Beyond Syria itself, there is the matter of Iran, where the U.S. president has also established a red line: The Iranian regime will not be allowed to develop a nuclear weapon.

While Iran’s nuclear program is hardly within the bounds we would like, even Iran’s previous leader, President Mahmoud Ahmadenejad, did not cross that red line — perhaps out of conviction that doing so would prompt American military action. If deterrence is working even partially in Iran, we cannot afford to squander it by allowing Obama’s words on other issues to be proved hollow.

That said, Obama’s hesitancy is understandable. There is always a temptation in this kind of situation to “do something.” Cruise-missile strikes, with weapons fired from ships in the Mediterranean, perhaps, seem a popular option at present, just as cruise missiles were often the go-to policy option in the 1990s in Iraq and Afghanistan and Sudan. But with 100,000 already dead from conventional weapons in this war, responding to chemical weapons use that may account for 1 percent of all casualties to date would obviously achieve only limited effects in a broader sense. And finding the Syrian army units responsible for this action, or locating chemical weapons depots that might be struck by cruise missiles or other ordnance, too, are tasks that present major targeting challenges. Whatever our success might be in any such limited retaliation, moreover, the effects will probably be localized and tactical. The war will rage on.

What we really need is an integrated strategy for ending the war that envisions a future political settlement among the belligerents. Such a strategy will require time. It will not work immediately and may ultimately involve the deployment of 10,000 or more U.S. troops to help implement any peace deal that may be reached in the future, once battlefield dynamics have evolved to the point where such a deal is feasible. Absent such a strategy, limited military action today might help re-establish U.S. credibility and deterrence, but will likely not meaningfully affect the trajectory of the conflict.

Who’s Behind the “Biggest Cyberattack” in China’s History

By Tyler Roney
August 27, 2013 

In what is being called the "biggest cyberattack in its history", China’s internet was brought down by widespread distributed denial-of-service (DDoS) attacks on Sunday.

As The Wall Street Journal reported, no one is quite sure where the attacks came from, but the timing is certainly interesting from a number of standpoints. Furthermore, some reports are saying that the attack was so simple that it could have involved hundreds of hackers or a single individual with a really big botnet.

Regardless of whether it was angry "internet freedom" hackers or domestic showboaters, people will be keen to find out who took down the Middle Kingdom's Internet during the controversial Bo Xilai trial.

The damage was relatively minimal, with a number of .cn sites down. By very early Monday morning, China's Internet authorities had begun restoring the websites that were taken down in the attacks.

DDoS attacks usually inundate servers with high levels of activity from many computers–not necessarily many users. A botnet(s) enables hackers to send many requests at once, which, as CloudFare’s Chief Executive of Matthew Prince points out to The Wall Street Journal, could be the result of one very determined hacker.

In the midst of the Bo Xilai trial, the government is hoping to control the online chatter while Chinese netizens are seeking to be heard. Meanwhile, hackers around the world have protested China's recent crackdown on online dissent. As such, trying to pinpoint the origin of this unclaimed DDoS hack is a mind-boggling affair.

The China Internet Network Information Center (CNNIC), located in Beijing's Zhongguancun, announced the attack, adding that the Ministry of Industry and Information Technology launched the "Domain Name System Security Specific Contingency Plan." The attack, which resulted in a 32 percent drop in traffic, raised a number of eyebrows. The CNNIC has said it will update the public on who is responsible for the incident soon.

China has had the internet and media on lockdown for quite some time over the trial of its wayward party official. Search terms for Bo Xilai are heavily blocked on the country's Twitter-like microblogging platform, Weibo, and media have been led by the nose to what language they can use to report on Bo and the trial.

Indeed, no one in the equation lacks motive. CNN quoted one netizen as saying, "Saw this news and laughed. On every 'festive occasion' doesn't China's Internet become paralyzed?" 

Combat Identification in Cyberspace

August 25, 2013 

Cybersecurity threats represent one of the most serious national security, public safety, and economic challenges we face as a nation.

-2010 National Security Strategy

On June 19, 2013, Under Secretary of Defense Frank Kendall, in testimony before the Subcommittee on Defense of Senate Appropriations Committee, said that the F-35 Joint Strike Fighter had been hacked and the stolen data had been used by America’s adversaries.[1] This testimony merely confirmed earlier reports in The Washington Post that Chinese hackers had compromised more than two dozen major weapons systems.[2] Regrettably, these revelations are merely the latest in a long series of breaches.[3]

The pervasiveness of cyberspace was emphasized in the July 2011 Department of Defense Strategy for Operating in Cyberspace:

Along with the rest of the U.S. government, the Department of Defense (DoD) depends on cyberspace to function. It is difficult to overstate this reliance; DoD operates over 15,000 networks and seven million computing devices across hundreds of installations in dozens of countries around the globe. DoD uses cyberspace to enable its military, intelligence, and business operations, including the movement of personnel and material and the command and control of the full spectrum of military operations.[4]

Section 1 of this paper discusses the objectives of our cyber-adversaries and their infiltration methods. Section 2 discusses the divergence of the U.S. definition of the cyber threat from the real threat and how this divergence plays to the strengths of our adversaries. Section 3 is a discussion of the technical and human factors that our adversaries exploit. Section 4 concludes with a discussion of existing technical methods that can be adopted and extended which will increase the effectiveness of U.S. cyber defenses.

Section 1. The Objectives of Cyberattacks

In this paper the term cyberattack is used to encompass all forms of unauthorized access to computer networks. The objectives of cyberattacks vary widely and include:
  • Reconnaissance. The adversary can perform technical reconnaissance to test the victims’ defenses and possibly deploy malicious code that would lie dormant until activated at some future date.[5]
  • Disinformation. In the attack against the AP wire service, the attackers used the reach and credibility of the AP to disseminate misinformation that the President of the United States was injured in a bombing.[6] This misinformation resulted in a $140 billion loss of stock market value in a matter of a minutes.[7]
  • Disruption. Disruption is a diverse category. In cases such as the LulzSec attack on the CIA, the engagement was a Distributed Denial of Service (DDoS) attack, the objective of which appeared to be rendering the systems of the victim effectively off-line.[8] In cases such as the FBI website defacement, attackers used their access to deface websites as a means of embarrassing the victim.[9] Disruption also occurs as a consequence of attacks with other objectives as systems are taken off-line for remediation.[10]
  • Diversion. The objective of a cyberattack can be diversion of the victim’s cyber defenses.[11] Consistent with attacks in the physical world, a diversionary attack is an attack made to divert the defender’s resources away from the attacker’s primary objective.
  • Theft. Stealing money is a common objective of cyberattacks. Other theft motivations include stealing user data for that can be sold for money or used in subsequent attacks.
  • Espionage. Exfiltration of data is a common objective of cyber-engagements. Data exfiltration is a particularly effective form of espionage. Commercial espionage has compromised commercially valuable information and valuable intellectual property.[12] Recent reports indicate the Chinese have stolen system designs for the F-35, the V-22, the C-17, the Patriot Advanced Capability-3, the Global Hawk Drone and many other critical weapons systems.[13]
  • Sabotage. Data processing systems control real world processes. Compromised data processing systems can be used to create physical damage as was demonstrated with the Stuxnet virus which destroyed Iranian nuclear centrifuges.[14]
  • Combinations. Attackers sometimes coordinate objectives. For example, in September of 2012 the attackers conducted espionage to obtain bank operations manuals. Using knowledge of internal controls obtained from the stolen documents, the attacker mimicked bank procedures and initiated and authorized invalid wire transfers. The wire transfers went unnoticed as IT was busy dealing with the attacker’s simultaneous diversionary DDoS attack.[15]
The methods used to accomplish the objectives are dependent upon the desired objective. In selecting an attack method, a key distinction between objectives is the location of the attack surface. If the attack surface is exposed to the public on the internet - for example an online customer facing application - then access is gained by typing the application’s URL into the web browser and subjecting the website to direct attack.

Northern Sea Route: Humming with Activity

August 27, 2013

China and Japan are positioning themselves to take advantage of the opening of the Northern Sea Route (NSR). Presently, the Chinese shipping company COSCO’s container ship is transiting through the NSR carrying exports from a Chinese port to Europe. Earlier this year, a 66,000 tonne vessel carried iron ore to China. Given this trend, in the coming years China may emerge as a major user of Northern sea route.

Japan is also alive to the benefits from the NSR. Last year the Russian gas company GAZPROM delivered a consignment of liquefied natural gas to Japan using the NSR during November 9-18. The LNG ship Ob River travelled from Hammerfest in Norway to Tobata port in Japan safely in a matter of ten days. The ship was escorted by Russian nuclear-powered ice breakers. The tanker made two voyages through the NSR in a single navigation period, having travelled empty from Japan to Europe in October. These voyages have demonstrated the technical and commercial feasibility of the NSR.

The rapid melting of the Arctic Sea ice due to global warming has led to the opening of the NSR. The passage is open for ships during the summer season up to four months. This year transit may be possible even for up to six months. Some ships may be able to sail without the escorting icebreakers. From Rotterdam in Netherlands to Dalian in China, the time of passage will be about 35 days through the NSR as compared to 48 days through the Suez Canal. This will result in considerable saving of time and fuel costs.

The Arctic holds about 20 percent of global hydrocarbon resources. Several companies have plans to invest in the oil resources. Norway is increasingly shifting its oil production activity northwards as oil output from the fields in the North Sea declines. Russia is prospecting for oil in the Yamal peninsula. The NSR and its connectivity with the Russian hinterland will provide many new economic and business opportunities.

The Northern Sea Route runs along the northern coast of Russia from Bering Strait in the west to Novaya Zemlaya in the East for about five thousand kilometres and is described as follows:

“The aquatic space adjacent to the northern coast of the Russian Federation, covering internal waters, territorial sea, the contiguous zone and the exclusive economic zone of the Russian Federation and bounded by division lines across maritime areas with the United States and the parallel Cape Dezhnev in the Bering Strait, west meridian of the Cape of Desire to the Novaya Zemlya archipelago, eastern coastline of the Novaya Zemlya archipelago, and the western boundaries of the Matochkin, Kara, and Yugorsky Straits.”

The NSR is humming with activity this year. According to the information on the website of NSRA (www.NSRA.ru 25 August 2013), 454 vessels have been given permission by the Russian authorities to transit through the route. Of the permissions given an overwhelming are ships with Russian flags (83 percent) and the rest (17 percent ) belonging to various countries including France, UK, China, Poland, Germany, Liberia, Marshall Islands, Liberia, etc. In all 71 applications have been refused on technical grounds.

Russia has major plans to rejuvenate its north through the development of NSR. Arkhangelsk, a major Russian port on the White Sea adjacent to the NSR, will be connected to Perm in the mineral rich Urals through Belkomur railway line. Many cities of the north will be connected through the NSR.