17 June 2019

Modi govt must be cajoled, nudged & criticised into giving us a national security doctrine

NITIN PAI

If there has ever been a government that can transform India’s national security by undertaking long-pending reforms, it is this one. National security was the first subject in the BJP manifesto, which listed over a dozen measures that the Modi government would implement if it was re-elected.

The Prime Minister has appointed professional and political heavyweights to the defence, external affairs and home ministries, and upgraded the office of the NSA to cabinet level. After the Balakot strikes, there is considerable enthusiasm for defence in the public discourse (even if there is an increasing risk that television and social media will channelise this into dangerous jingoism and fetishisation of the armed forces).

I would say that a window of opportunity has opened for us to push for serious reforms and modernisation of our national security system. In the late 1990s, after Pokhran-2 and Kargil, a forward momentum started building up within the New Delhi establishment, ably led by Brajesh Mishra at the Vajpayee PMO, Jaswant Singh in the defence and external affairs ministries, and K. Subrahmanyam in the capital’s intellectual circle. After some initial successes — the publication of the Kargil Review Committee report, rapprochement with the United States and the announcement of a nuclear doctrine, for instance — the process slowed down before substantive structural reforms could be implemented.

Narendra Modi's new outreach to China is bigger than just foreign policy and may hold keys to Asia's future

Praveen Swami 

His words were spoken in the shadow of the gold statue that guards the throne of Bhutan’s Dragon King. King Jigme Khesar Namgyel Wangchuck’s message for his visitor, India’s External Affairs Minister Subrahmanyam Jaishankar, was to have no witness but the Buddha. Bhutan remained India’s most loyal ally, the king said. But he warned: there was growing pressure from a new generation to keep the kingdom out of India’s conflicts with China. In future crises, Bhutan’s support might not be a given.

King Jigme’s message — delivered earlier this month during Jaishankar’s first-ever foreign visit as minister — will, almost certainly, have been on Prime Minister Narendra Modi’s mind as he begins his second-term effort to engage Beijing.

China’s economic might is reshaping India’s neighbourhood, raising fears that allies like Bangladesh, Sri Lanka, Maldives, Nepal and Bhutan could one day, like Pakistan, end up orbiting Beijing.

The prime minister’s meeting with China’s president Xi Jinping in Bishkek on Thursday comes at a time when the two countries are facing shared challenges. The United States is threatening to overthrow the global trade order on which the Asian powers’ prosperity has been built, and its confrontation with Iran threatens their energy security.

India's Focus Shift From SAARC to BIMSTEC Is Strategic, but Underused

Suyash Desai

While India has tactfully used the platform to diplomatically isolate Pakistan, it must also tap into BIMSTEC's immense potential for development, connectivity and trade in the region.

Leaders of the BIMSTEC countries attended Prime Minister Narendra Modi’s swearing-in ceremony last Thursday. This is an opportunity for India to leverage the grouping for better regional economic integration, rather than merely as a diplomatic tool to isolate Pakistan.

BIMSTEC comprises India, Bangladesh, Bhutan, Myanmar, Nepal, Sri Lanka and Thailand. In other words, it is SAARC minus Pakistan and Afghanistan, plus Thailand and Myanmar. In 2014, Modi had invited leaders of the SAARC countries for his swearing-in ceremony.

However, since then, tensions between India and Pakistan have led to New Delhi shifting focus from SAARC to BIMSTEC. Since its formation in 1997, we have only witnessed BIMSTEC coming to life during periods of tensions between India and Pakistan. During Modi’s first term, India began focusing on BIMSTEC after a series of terrorist attacks on Indian defence establishments in Uri and Pathankot.

Global trade is important for India’s prosperity


The international, rules-based, multilateral trading system enshrined through the World Trade Organization (WTO) faces an existential threat. WTO accession played a major role in China’s rise to prosperity. China’s foreign trade rose 10-fold from $475 billion on WTO accession in 2001 to about $4.5 trillion today. India’s total foreign trade in goods and services of approximately $1 trillion in 2018 is roughly the same as China’s in 2003.

Can the multilateral trading system play a similar role for India as it did for China, but under very different global circumstances?

First, the background. The first wave of globalization spanned 1870-1914. This wave, triggered by the industrial revolution, was facilitated by the movement of goods on steamships and railways with financial intermediation centred in London. Exports as a percentage of global output rose to about 15% from single-digit numbers during this period. This phase was interrupted by World War I, the Wall-Street crash of 1929 and the economic depression that followed. In 1940-42, legendary economist John Maynard Keynes proposed a new global trade system based on a “reserve currency" called the bancor and a settlement system that would require an International Clearing Union. Neither of these were established since the dollar became the de-facto reserve currency under a pegged exchange rate system that the Bretton Woods Conference accepted after World War II.

One South Asia


Home to Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, South Asia is one of the most dynamic regions in the world, with a population of 1.67 billion people and economic growth of 7.1 percent over the last decade. But despite recent shifts, historical political tensions, trust deficit, cross-border conflicts and security concerns contribute to a low-level equilibrium.

At present, South Asia is one of the least integrated regions. Intra-regional trade accounts for only 5 percent of South Asia’s total trade, compared to 25 percent in ASEAN. Intra-regional investment is smaller than 1 percent of overall investment. 

Huawei executive becomes unlikely social media star as Chinese rally to tech giant’s defense

By Jeanne Whalen

BEIJING — Chinese netizens posting to the social media site Weibo this week threw their support behind an unlikely Internet sensation: a bespectacled British Huawei executive who defended the Chinese telecom giant before the British Parliament.

Among Weibo’s trending topics Wednesday, alongside a South Korean pop idol and a difficult-to-summarize story involving two frogs, was John Suffolk, Huawei’s global cybersecurity chief, who parried parliamentarians’ questions this week about whether Huawei posed a security threat.

His defense of the company, reported by China’s Global Times newspaper, quickly went viral, drawing praise from Chinese Weibo users far and wide.

“A lovely old man. Let’s go, Huawei!” one proclaimed.

“Frankly speaking, I knew Huawei was amazing, but now I know it’s freaking amazing,” said another.

A third Weibo poster pronounced Suffolk “chill.”

Chinese citizens have robustly supported their government in its months-long trade war with the United States, but recent U.S. action to counter Huawei has propelled Chinese passions to new levels.

Bolton Wants to Fight Iran, But the Pentagon Has Its Eye on China

By Michael Klare

The recent White House decision to speed the deployment of an aircraft carrier battle group and other military assets to the Persian Gulf has led many in Washington and elsewhere to assume that the U.S. is gearing up for war with Iran.

As in the lead-up to the 2003 invasion of Iraq, U.S. officials have cited suspect intelligence data to justify elaborate war preparations. On May 13th, acting Secretary of Defense Patrick Shanahan even presented top White House officials with plans to send as many as 120,000 troops to the Middle East for possible future combat with Iran and its proxies. Later reports indicated that the Pentagon might be making plans to send even more soldiers than that.

Hawks in the White House, led by National Security Advisor John Bolton, see a war aimed at eliminating Iran’s clerical leadership as a potentially big win for Washington. Many top officials in the U.S. military, however, see the matter quite differently — as potentially a giant step backward into exactly the kind of low-tech ground war they’ve been unsuccessfully enmeshed in across the Greater Middle East and northern Africa for years and would prefer to leave behind.

How US Allies Can Keep An Electronic Eye On China

By BRYAN CLARK and TIMOTHY WALTON


As it seeks to contain a rising China, America’s great advantage is its larger network of Asian friends and allies. Not all of these nations have the combat power to deter Chinese aggression, let alone fight alongside the US in the nightmare scenario of war. But even our smaller allies can play a vital role as what President Kennedy called “watchmen on the walls of world freedom” by using radar, drones and long-range networks to monitor Chinese moves.

What China Is Saying About the Hong Kong Protests

By Shannon Tiezzi

In the upside world of Chinese state media, the extradition bill is actually supported by most Hong Kongers.

On Sunday and again on Wednesday, Hong Kong saw mass protests against what is widely known as the extradition bill — proposed amendments to the Chinese special administration region’s (SAR’s) laws designed to allow the case-by-case extradition of wanted fugitives to countries with which Hong Kong has no extradition treaty. Mostly controversially, that would for the first time allow extraditions to mainland China. A wide swath of Hong Kongers, from legal scholars to grandparents and college students, fear that would allow authorities in Beijing to demand the arrest and extradition of activists based in Hong Kong on nebulous national security charges. The massive protests aimed at preventing the bill’s passage are this week’s major news story not only in Hong Kong media, but in newspapers around the world.

On mainland China, however, coverage is harder to find. Headlines on Thursday focused instead on President Xi Jinping’s trip to Kyrgyzstan. Meanwhile, censors were hard at work scrubbing any mention of the turmoil in Hong Kong from Chinese social media platforms. Many WeChat users reported they were unable to send pictures or videos of the protests; Sina Weibo was blocking search terms related to the protests. Telegram, a popular messaging app being used to help organize the protests, reported a “state actor-sized DDoS” attack using “IP addresses coming mostly from China.”

China Is Courting Disaster in Hong Kong

MINXIN PEI

The likely passage of Hong Kong's controversial extradition law will irrevocably tarnish the city's rule of law and its attractiveness as an international commercial hub. Unless China’s leaders are prepared to accept these disastrous consequences, they should withdraw the bill before it is too late.

WASHINGTON, DC – The world has been riveted by the protestsraging in Hong Kong against the city government’s proposed law to allow the extradition of criminal suspects to mainland China. About one million people – roughly one-seventh of the former British colony’s population – took to the streets on June 9 to denounce the draft law, and another large protest on June 12 resulted in violent clashes between demonstrators and police.

Yet, despite the massive protests, the Chinese government is determined to get its way. Instead of withdrawing the proposed law, Hong Kong’s Beijing-controlled leaders have fast-tracked the bill and scheduled it for a vote in the city’s Legislative Council at the end of this month. Its adoption would be a calamity not only for Hong Kong, but also for China.

Tracking African Swine Fever


African swine fever is an infectious disease that has already spread from Africa to Europe and Asia. The current outbreak has led to more than 1 million pigs being culled in China.


Despite Historic Rapprochement With Ethiopia, ‘Nothing Has Changed’ in Eritrea

Tanja Müller

ASMARA, Eritrea—The streets of Eritrea’s capital in the runup to this year’s Independence Day celebrations on May 24 were unusually quiet. But cafes and restaurants were full of many Eritreans from the diaspora who had traveled back to mark 28 years of national independence. “I come every year on this occasion,” an Eritrean living in Germany told me, “to celebrate my country.”

Most of the people I know who put up with life in Eritrea the whole year, however, do not feel like celebrating. For them, the holiday is a day off work that they will spend at home, in part because security tightens, with soldiers or police on every street corner. In the past few months, arbitrary arrests have apparently increased, so everyone is cautious and seems to avoid the center of the city. It is impossible to verify these stories, or other rumors of splits within the ruling party and increasing forms of dissent, given how opaque politics are in Eritrea. The only visible sign I encountered last month was anti-government graffiti inside a building, profanely calling out the ruling party, the People’s Front for Democracy and Justice. Photos of other anti-government graffiti have recently circulated on Eritrean social media. ...

Hezbollah Isn’t Just in Beirut. It’s in New York, Too.

By Matthew Levitt

In recent years, Hezbollah has stepped up its activities beyond Lebanon’s borders. This uptick has been clearest in the Middle East—in Iraq, Yemen, and especially Syria—but plots have also been thwarted in South America, Asia, Europe, and now, possibly, the United States.

Reports of Hezbollah activity in North America are not new, though such reporting tends to focus on the group’s fundraising, money laundering, procurement, or other logistical activities from Vancouver to Miami. But last month, the criminal prosecution and conviction in New York of the Hezbollah operative Ali Kourani revealed disturbing new information about the extent of Hezbollah’s operations and activities in the United States and Canada.

Taken together, the arrests in 2017 of Kourani and another Hezbollah operative, Samer el-Debek, led the U.S. intelligence community to revisit its longstanding assessment that Hezbollah would be unlikely to attack the U.S. homeland unless the group perceived Washington to be taking action threatening its existence or that of its patron—Iran. Following Kourani and Debek’s arrests, the director of the U.S. National Counterterrorism Center said in October 2017, “It’s our assessment that Hezbollah is determined to give itself a potential homeland option as a critical component of its terrorism playbook.”

The UTC-Raytheon deal highlights the changing nature of war


With a deep voice and physique of a former American-football player, Greg Hayes, boss of United Technologies Corp (utc), does not seem like the soft sort. But the ego is delicate. As he told Schumpeter in February while explaining his decision to carve utc, a conglomerate dating back to the 1920s, into three parts, it was hard for him emotionally to accept that he may end up in charge of a smaller slice of the pie. Shed no tears, though. As he said those words, he was probably plotting a megamerger that could make him one of America’s biggest military-industrialists.

On June 9th utc, which is big in jet engines, and Raytheon, a prominent missile-maker, said they would join together to create America’s second-largest aerospace and defence company after Boeing, with a combined market value of $166bn. utc shareholders will get 57% of the combined company, to be called Raytheon Technologies. The merger reflects two trends sweeping America: the reshaping of defence because of fears about China and the streamlining of industry because of shareholder activism.

A Tanker War in the Middle East—Again?

By Robin Wright

U.S. Navy ships in the Middle East heard the first distress signal at 6:12 a.m. Thursday. The Kokuka Courageous, a tanker owned by Japan and bound from Saudi Arabia to Singapore, had been damaged by an explosive device. A fire raged in its engine room. The crew was abandoning ship. A second distress signal came in at 7 a.m. The Front Altair, a Norwegian-owned tanker bound from the United Arab Emirates to Taiwan, had also been hit. It, too, was ablaze. The fallout was fast—and furious. Within hours, oil prices rose four per cent. The U.S. Navy went to provide aid and investigate the attacks. The U.N. Security Council called for immediate consultations to prevent yet another Middle East conflict. Two tanker companies suspended new bookings to the oil-producing states in the Persian Gulf. And, amid already escalating tensions between the United States and Iran, the blame game began.

In Washington, the Trump Administration charged that Iran was responsible for the two attacks on Thursday, and also attacks on four other tankers, on May 12th. All six ships were struck in the Gulf of Oman, the body of water between Oman and Iran, just beyond the Strait of Hormuz. “This assessment is based on intelligence, the weapons used, the level of expertise needed to execute the operation, recent similar Iranian attacks on shipping, and the fact that no proxy group operating in the area has the resources and proficiency to act with such a high degree of sophistication,” Secretary of State Mike Pompeo told reporters at the State Department.

Could A Weakening US Economy Imperil Trump's Trade War Against China?


President Donald Trump’s trade war with China is based on two basic and complementary assumptions: the U.S. economy is strong and, perhaps more importantly, stronger than the Chinese economy.

Last summer when the war began heating up, both assumptions were certainly true. The American economy was booming, while China’s was slowing. Hence, the U.S. was in a better position to withstand any pain in a tariff war of attrition.

But the first of those assumptions, at least, is beginning to falter as signs grow of economic weakness in the U.S.

As an economist who conducts research in international trade, I believe that a weaker U.S. economy would likely affect Trump’s ability to engage in a prolonged trade war with China - no matter how much he might want to.
Signs of weakness

The U.S. economy has been expanding for a decade now, and no economy can continue to grow indefinitely. The May jobs report was the latest indicator that the party may be coming to an end.

The report showed that the U.S. economy added only 75,000 jobs that month, a significantly lower number than the 224,000 jobs added in April. Even though the unemployment rate stayed at the extremely low figure of 3.6%, worryingly, there was virtually no wage growth. In addition, another key metric, the so-called ISM Manufacturing Index, fell to its lowest level in Trump’s presidency in May.

Intelligence agency could be used for 'offensive cyber' operations in Australia

By David Wroe

Australia's electronic intelligence agency could smash the computer networks of criminals domestically using "offensive cyber" operations presently confined to overseas targets under proposals being discussed among national security officials.

The Australian Signals Directorate (ASD) could also sit within the networks of major Australian power, water, telecommunications and other critical infrastructure companies to help defend them against foreign cyber attacks.

The Sydney Morning Herald and The Age can reveal that a greater domestic role for the ASD remains a live consideration for the Morrison government despite the political firestorm that has erupted since police raided a journalist's home to investigate a top-secret leak of the ASD proposals.

Senior officials have repeatedly stated that the proposal never amounted to spying on Australians - a position strenuously underscored by multiple sources in recent days.

The International Politics of Energy and Resource Extraction


Despite concerns over the environmental impact of industrial mining and the contribution that fossil fuels make to global warming, resource extraction continues to be a major source of revenue for both developing countries and wealthier nations alike. In fact, new data show that the amount of resources being pulled from the earth has tripled since 1970, though the global population has only doubled in that time. 

Despite global efforts to reduce carbon emissions as part of climate change diplomacy, fossil fuels remain among the most prized extractives, for a simple reason: Global demand combined with the wealth they generate continues to give some countries, including members of the Organization of the Petroleum Exporting Countries, outsized global influence. 

The lucrative contracts associated with the extractive sector help to explain why resource extraction remains central to many developing countries’ strategy to grow their economies. But the windfalls don’t come without risks, most prominent among them being the “resource curse” that can plague countries that fail to diversify their economies to generate alternate sources of revenue. Corruption can also thrive, especially when government institutions are weak. And when the wealth generated from resource extraction isn’t fairly distributed, it can entrench a permanent elite, as in Saudi Arabia, or fuel persistent conflicts, as in the Democratic Republic of Congo. 

Inside the Cultish Dreamworld of Augusta National

By Nick Paumgarten

The home of the Masters Tournament is a prelapsarian golf paradise, combining good manners and Southern delights with exclusion and self-satisfaction.

Beneath Augusta National, the world’s most exclusive golf club and most venerated domain of cultivated grass, there is a vast network of pipes and mechanical blowers, which help drain and ventilate the putting greens. The SubAir System was developed in the nineteen-nineties, by the aptly named course superintendent Marsh Benson, in an effort to mitigate the effects of nature on this precious facsimile of it. When the system’s fans blow one way, they provide air to the densely seeded bent grass of the putting surface. This promotes growth. When the fans are reversed, they create a suction effect, and leach water from the greens. This promotes firmness. The professionals who arrive at Augusta every April to compete in the Masters Tournament, the event for which the club is known, expect to be tested by greens that are hard and fast. Amid all the other immodesties and peculiarities of Augusta, the greens, ultimately, are the thing. Herbert Warren Wind, who for decades covered the sport at this magazine and at Sports Illustrated, once asked a colleague, on arriving in Augusta, “Are they firm?” The antecedent was understood. In 1994, Gary McCord, a golf commentator for CBS, the network that has televised the tournament for sixty-three years, said on the air, “They don’t cut the greens here at Augusta, they use bikini wax.” He was banned from the broadcast.

Common Ground: Finding Transatlantic Solutions For Data Security


In the United States, navigating the issues of data privacy and security is a walk through a political, social and economic minefield. America’s stalwart commitment to capitalism and personal freedoms makes any regulation in that arena likely to face a fierce fight. Meanwhile, the European Union last year began enforcing its General Data Protection Regulation, or GDPR, widely seen as one of the most progressive set of laws regarding data. The clash continues, but the battles are less pitched as more groups partner to find global solutions for data security. A new book, Of Privacy and Power: The Transatlantic Struggle Over Freedom and Security, looks at how the EU and the U.S. are evolving in their common need to protect citizens and data. The authors are Abraham Newman, a government professor at Georgetown University’s Walsh School of Foreign Service, and Henry Farrell, a political science and international affairs professor at Georgetown. Newman joined the Knowledge@Wharton radio show on Sirius XM to talk about the topic. (Listen to the podcast at the top of this page.)

Why We Need a People-first AI Strategy


With more access to data and growing computing power, artificial intelligence (AI) is becoming increasingly powerful. But for it to be effective and meaningful, we must embrace people-first artificial intelligence strategies, according to Soumitra Dutta, professor of operations, technology, and information management at the Cornell SC Johnson College of Business. “There has to be a human agency-first kind of principle that lets people feel empowered about how to make decisions and how to use AI systems to support their decision-making,” notes Dutta. Knowledge@Wharton interviewed him at a recent conference on artificial intelligence and machine learning in the financial industry, organized in New York City by the SWIFT Institute in collaboration with Cornell’s SC Johnson College of Business.

In this conversation, Dutta discusses some myths around AI, what it means to have a people-first artificial intelligence strategy, why it is important, and how we can overcome the challenges in realizing this vision.

The new way security factors into acquisitions

By: Andrew Eversden

Despite conventional wisdom that may suggest otherwise, the Department of Defense is willing to pay extra for security measures in defense systems bought from contractors, Pentagon officials said at the Professional Services Council Federal Acquisition Conference June 13.

“Security is an allowable cost,” said Katie Arrington, special assistant to the assistant secretary of defense for acquisition for cyber. She emphasized that philosophy had the backing of her boss, Kevin Fahey, assistant secretary of defense for acquisition.

Fahey criticized those who say security should be a trade-off in an acquisition, which places the criteria on the same plane as cost, schedule and performance.

“That’s stupid as shit,” Fahey said. He added, “in our contracts in the future, cyber is going to be a requirement.”

The federal acquisition process is primarily driven by the need to meet cost, performance and scheduling goals, an emphasis that poses a major security risk, according to a 2019 report from the MITRE Corporation, a non-profit organization that does government research. Instead, the report said, the Defense Department needs to focus on security measures.

Organizations Investing More in ICS Cyber Security: SANS Study

By Eduard Kovacs

Organizations have been investing more in the cybersecurity of industrial control systems (ICS) and operational technology (OT), and the results are showing, but many still perceive the risk as severe or high, according to the SANS 2019 State of OT/ICS Cybersecurity Report published on Wednesday.

This year’s report was sponsored by Cisco, Forescout, Yokogawa, Radiflow, Owl Cyber Defense, and Nozomi Networks and it’s based on data collected from nearly 340 professionals, mostly from organizations with operations in the United States, Europe and Asia.

The previous report was published in 2017, when 69% of respondents rated their overall risk profile as severe (critical) or high. The percentage has now decreased to just over 50%.

People are seen as the greatest risk for compromise (62%), followed at a distance by technology (21%) and processes (14%). The risks posed by people include both internal and external actors, and malicious and accidental actions.

The Rise of Automated Hacking

Robert Krenn 

There is a shift in the way cyber-criminals are targeting organizations. The methods of mass phishing and hacking are making way for more directed and personalized attacks. They carefully select their targets and craft convincing messages. However, that takes much more time and preparation. To make up for that, they now use automated techniques to carry out attacks. How can you protect your organization from this emerging threat?

The New Kind of Hacker

The age of automation started over a century ago, offering many business opportunities for organizations. Unfortunately, the cybercrime world has now followed suit. In the past, hackers were highly-skilled enthusiasts, making for a small community. They did their own extensive research and wrote their own tools and code, taking days to implement a successful attack.

Nowadays, the entry barrier is lower, making the cyber-criminal community larger. Instead of each hacker creating their own tools, software and frameworks are now shared and (ab)used by more hackers.

A report from NATO’s front lines

Michael E. O’Hanlon

All is busy on NATO’s eastern front. That was our main conclusion during a recent study delegation to Lithuania sponsored by the Lithuanian Ministry of National Defense and organized by the Atlantic Council. A lot is happening on the defense preparation front, and the overall security situation is improving considerably compared with a few years ago. But problems remain and work still has to be done, if deterrence and stability are to be ensured, and a potentially devastating war with Russia prevented.

As many people will recall, the Baltic nations of Estonia, Latvia and Lithuania, with a combined population of some six million and combined military strength of some thirty thousand active-duty troops, joined NATO in 2004. All three border Russia, though in the case of Lithuania, that border is in the western part of the country (near Russia’s Kaliningrad pocket). Lithuania’s eastern frontier is shared with Belarus, a close ally of Moscow, at Vladimir Putin’s insistence. Its southern border touches Poland, along the famed “Suwalki gap,” the narrow land corridor through which NATO would likely send most of its tens of thousands of reinforcements during any major crisis or conflict with Russia over the Baltics. All three Baltic states, plus Poland, are now among the seven of NATO’s twenty-nine members that meet their obligations to spend at least 2 percent of gross domestic product on their militaries, however imperfect a metric of burden-sharing that formal NATO requirement may be. In Lithuania’s case, this represents a tripling of military spending since 2013.

16 June 2019

As India's Economy Cools, the Spotlight Hits Its Shadow Banks


Managing the shadow banking crisis will form one of the Reserve Bank of India's core challenges in the months ahead.

The central bank will balance its efforts at pumping cash into the economy with keeping a lid on inflation.

Avoiding a crisis in shadow banks will be key toward sustaining consumption amid an economic slowdown.

Editor's Note: This assessment is part of a series of analyses supporting Stratfor's upcoming 2019 Third-Quarter Forecast. These assessments are designed to provide more context and in-depth analysis of key developments over the next quarter. 

As growth in India's $2.6 trillion economy cools, the problems afflicting its shadow banking sector are increasingly coming to light. Shadow banks — also known as non-banking financial companies — are facing a cash crunch ever since a titan in the sector, Infrastructure Leasing & Financial Services, defaulted on its payments in September 2018. That event sparked fears of a contagion rippling through India's already sluggish corporate credit system. Traditional banks — saddled with a significant number of non-performing loans — are not as likely to extend credit to companies already swimming in red ink, the legacy of an infrastructure binge that accompanied roaring growth in the economy from a decade and a half ago.

20 years after Battle of Tololing, defence reforms & Kashmir policy are Modi’s key challenges

ANIT MUKHERJEE

The Kargil war discredited Islamabad – not just as a revisionist state, but one that was downright dishonest.

In retrospect, the Battle of Tololing, fought between India and Pakistan during the Kargil war in 1999, was not much of a battle. There were only around 20 casualties, on both sides, and by the morning of 13 June 1999, Indian troops had captured only a few bunkers. Nonetheless, many describe this as a turning point, which changed the course of the war, as the Indian troops thereafter began a month-long ‘ridge-hopping’ campaign.

On the 20th anniversary of this battle, it is worth asking what changed — and did not, in the subcontinent. Ironically, while there is much that India can be proud of but, as revealed by the India-Pakistan crisis earlier this year, it still has a long way to go.

The Rohingya Crisis

Eleanor Albert and Andrew Chatzky

Hundreds of thousands of Rohingya, a Muslim ethnic minority group, are fleeing persecution in Myanmar’s western Rakhine State, fueling a historic migration crisis.

Introduction

Discriminatory policies of Myanmar’s government since the late 1970s have compelled hundreds of thousands of Muslim Rohingya to flee their homes in the predominantly Buddhist country. Most have crossed by land into Bangladesh, while others have taken to the sea to reach Indonesia, Malaysia, and Thailand.

Beginning in 2017, renewed violence, including reported rape, murder, and arson, triggered an exodus of Rohingya amid charges of ethnic cleansing against Myanmar’s security forces. Those forces claim they are carrying out a campaign to reinstate stability in the western region of Myanmar, but international pressure on the country’s elected leaders to rein in violence continues to rise.

Who are the Rohingya?

The Rohingya are an ethnic Muslim minority who practice a Sufi-inflected variation of Sunni Islam. There are an estimated 3.5 million Rohingya dispersed worldwide. Before August 2017, the majority of the estimated one million Rohingya in Myanmar resided in Rakhine State, where they accounted for nearly a third of the population. They differ from Myanmar’s dominant Buddhist groups ethnically, linguistically, and religiously.

Trump Should Make a Deal with China Before It’s Too Late

by Peter Harris

Making a monster out of Beijing would make Americans poorer and less safe.

President Donald Trump’s threat to impose tariffs of 25 percent on all Chinese goods not currently subject to surcharges means that imports from China might soon become a lot more expensive. But the potential ramifications of a prolonged U.S.-China trade war go far beyond consumer prices. Trump has said that he will make his final decision on extra tariffs after the G20 summit in Osaka, scheduled for June 28–29. What he chooses to do could affect U.S.-China relations in a profound and enduring way.

For decades, deepening economic ties between the United States and China have served to keep this most important of bilateral relationships on an even keel. After the collapse of the Soviet Union in the early 1990s removed the original rationale for a U.S.-China strategic entente, a burgeoning (and lucrative) flow of trade and investment has been essential to convincing leaders in both countries that an antagonistic relationship was worth avoiding, despite the many points of disagreement that separate them.

A World Safe for Autocracy?


The Chinese people, President Xi Jinping proclaimed in 2016, “are fully confident in offering a China solution to humanity’s search for better social systems.” A year later, he declared that China was “blazing a new trail for other developing countries to achieve modernization.” Such claims come as the Chinese Communist Party (CCP) has been extending its reach overseas and reverting to a more repressive dictatorship under Xi after experimenting with a somewhat more pluralistic, responsive mode of authoritarianism.

Many Western politicians have watched this authoritarian turn at home and search for influence abroad and concluded that China is engaged in a life-and-death attempt to defeat democracy—a struggle it may even be winning. In Washington, the pendulum has swung from a consensus supporting engagement with China to one calling for competition or even containment in a new Cold War, driven in part by concerns that an emboldened China is seeking to spread its own model of domestic and international order. Last October, U.S. Vice President Mike Pence decried China’s “whole-of-government” effort to influence U.S. domestic politics and policy. In February, Christopher Wray, the director of the FBI, went further: the danger from China, he said, was “not just a whole-of-government threat but a whole-of-society threat.” Such warnings reflect a mounting fear that China represents a threat not just to specific U.S. interests but also to the very survival of democracy and the U.S.-led international order.

What to Watch for as the Hong Kong Protests Unfold


What Happened

On June 12, Hong Kong's legislature delayed debate on a controversial bill that would allow citizens to be extradited to mainland China for criminal trials. The delay comes shortly after hundreds of thousands of people in Hong Kong took to the streets to rally against the government's recent decision to bypass a standard committee review to accelerate the bill's passage, which would add mainland China, Macau and Taiwan to a 20-country extradition list. Solidarity protests were also held in cities across the world on June 9, including in the United States, Canada, United Kingdom, Germany and Australia.

Despite the backlash, however, the government is still expected to resume the debate period and hold a vote on the bill in the coming weeks. In the meantime, demonstrations will likely continue and potentially escalate as the government keeps pushing forward with the law, fueled by fears that it could open up Hong Kong's judicial system to Beijing's political interference.

Whither Hong Kong?

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This Perspective considers the future trajectory of the Special Administrative Region in light of the 2014 prodemocracy street protests and their aftermath. First, it examines economic and political trends in Hong Kong–China relations; second, it considers the issues triggering these recent protests; third, it considers the effect of the protests; fourth, it explores possible future scenarios; and lastly, it offers some concluding observations.

Key Findings

Hong Kong Remains Key to China's Economy and Is an Important Symbol of a Unified China

While Hong Kong has become far less important to China in absolute economic terms, the two entities are gradually developing an integrated economy, and Hong Kong remains key to China's international trade and investment.

Although Hong Kong has lost its status as a crucial economic intermediary between China and Taiwan, it has acquired great political importance as a concrete symbol of national unification.

Is China leading in global innovation?


Innovation is the process by which new knowledge and ideas are created. Global leaders in innovation produce the scientific discoveries and technological advances that shape the modern world, making it critical to national power. An economy’s capacity to innovate is dependent on a variety of factors, including its commitment to research and development, the quality of its workforce, and the effectiveness of government institutions. As China works to upgrade its economy, its innovative strengths and weaknesses will shape its long-term economic competitiveness and prospects for global leadership.

Global Innovation Index

The Global Innovation Index (GII) is an annual ranking of more than 120 economies by their innovation capabilities and output. The GII scores and ranks each economy based on its performance within seven different pillars of innovation. Use the below interactive to compare how different economies perform in the GII. Click the play button to animate change over time.

Reintegrating ISIS militants and families is a global problem

BY JAMES DURSO

With the defeat of the Islamic State (IS) in war-battered Iraq and Syria, governments around the world — including the United States — are struggling with a new challenge from the terrorist group: What to do about thousands of family members of dead or captured ISIS fighters?

Thousands of women from around the world — America, Western and Eastern Europe, Central Asia and beyond — traveled to Iraq and Syria at the height of ISIS's power, marrying into its ranks and bearing children. Others were taken as captives from Kurdish, Yazidi, Christian and other Iraqi and Syrian religious-minority communities overrun by IS and eventually absorbed into the terrorist organization, in one form or another. 

Many of those women want to return to their home countries, along with their children, since the IS "caliphate" is no more, and Iraq and Syria are not eager to accept them as citizens. Whether or how they can be reintegrated is an incredibly difficult issue, with enormous potential security implications, especially for Central Asia nations that face their own ethnic, religious, political and security issues.