📰 India hit by 34 ransomware attacks, Minister Chaudhary tells Lok Sabha
CERT-In has advised remedial steps to contain damage
•A total of 34 incidents of infections from the two global ransomware attacks, WannaCry and Petya, were reported to the Indian Computer Emergency Response Team (CERT-In) by organisations and individuals, Parliament was informed on Wednesday.
•“Remedial measures to contain the damage and prevent such incidents have been advised by CERT-In,” Minister of State for Electronics and IT, P.P. Chaudhary, said in a written reply to the Lok Sabha.
•WannaCry and Petya infected thousands of computers worldwide in May and June, respectively.
•The attackers in both cases had sought about $300 in Bitcoin as ransom. Ransomware is a type of malicious software that infects a computer and restricts users’ access to affected files by encrypting them until a ransom is paid to unlock it.
•Asked if the government planned to amend the existing regulations for promotion of cybersecurity, the Minister replied in the negative. “At present, there is no proposal with the government to amend the Information Technology Act, 2000,” he said.
•In a separate reply, Mr. Chaudhary said the IT Act provided a legal framework to deal with cybersecurity breaches.
•Further, Parliament was informed that “as per the information reported to and tracked by CERT-In,” a total of 44,679, 49,455, 50,362 and 27,482 cybersecurity incidents “were observed” during the years 2014, 2015, 2016 and 2017 (till June), respectively. These included phishing, scanning/probing, website intrusions and defacements, virus/malicious code, ransomware, and denial of service attacks.
📰 World’s first child hand transplant a success
Brain scans show that Zion Harvey is adapting to the limbs, developing new pathways to control movement and feel sensation
•The first child in the world to undergo a double hand transplant is now able to write, feed and dress himself, doctors have said, declaring the ground-breaking operation a success after 18 months.
•The report in The Lancet Child & Adolescent Health provides the first official medical update on 10-year old Zion Harvey, who underwent surgery to replace both hands in July 2015.
•“Eighteen months after the surgery, the child is more independent and able to complete day-to-day activities,” said Sandra Amaral, a doctor at Children’s Hospital of Philadelphia, where the operation took place.
•“He continues to improve as he undergoes daily therapy to increase his hand function, and psychosocial support to help deal with the ongoing demands of his surgery.” Harvey had his hands and feet amputated at the age of two, following a sepsis infection. He also had a kidney transplant.
•Harvey was already receiving drugs to suppress any immune reaction to his kidney, which was a key factor in his selection for the 10-plus hour hand transplant surgery.
Complicated procedure
•Immunosuppressive drugs must be taken continuously to prevent a patient’s body from rejecting the transplant. These drugs carry risks, including diabetes, cancer and infections.
•Doctors reviewed both the successes and challenges Harvey and his family have faced, noting that a large team of specialists was hard at work supporting them through all the ups and downs.
•The child has “undergone eight rejections of the hands, including serious episodes during the fourth and seventh months of his transplant,” said the report. “All of these were reversed with immunosuppression drugs without impacting the function of the child’s hands.”
•Harvey continues to take four immunosuppression drugs and a steroid.
•“While functional outcomes are positive and the boy is benefitting from his transplant, this surgery has been very demanding for this child and his family,” said Dr. Amaral.
•Before the double hand transplant, Harvey had “limited ability to dress, feed and wash himself through adapted processes, using his residual limbs or specialist equipment,” said the report.
Learning on his own
•His mother hoped he would one day be able to dress himself, brush his teeth, and cut up his own food. Harvey, for his part, wanted to climb monkey bars and grip a baseball bat. The donor hands became available in July 2015 from a deceased child.
•Within days of the surgery, Harvey discovered he could move his fingers, using the ligaments from his residual limbs.
•“Regrowth of the nerves meant that he could move the transplanted hand muscles and feel touch within around six months, when he also became able to feed himself and grasp a pen to write,” said the report.
•Eight months after the operation, Harvey was using scissors and drawing with crayons. Within a year, he could swing a baseball bat using both hands. He also threw out the first pitch at a Baltimore Orioles game last August. Regular meetings with a psychologist and a social worker were part of the recovery process, aimed at helping him cope with his new hands.
•Scans have shown his brain is adapting to the new hands, developing new pathways to control movement and feel sensations. Researchers cautioned that more study is needed before hand transplants in children become widespread.
•“The world’s first double hand transplant in a child has been successful under carefully considered circumstances,” said the report.
•The first successful hand transplant in an adult was completed in 1998.
📰 SC wonders whether privacy could be an absolute right
•Right to privacy is not absolute and cannot prevent the state from making laws imposing reasonable restrictions on citizens, the Supreme Court observed on Wednesday.
•The court said ‘right to privacy’ is in fact too ‘amorphous’ a term. To recognise privacy as a definite right, it has to first define it. But this would be nearly impossible as an element of privacy pervades all the fundamental rights enshrined in the Constitution.
•“How do we define privacy? What are its contents... Its contours? How can the state regulate privacy? What obligations do the state have to protect a person’s privacy?” Justice Chandrachud asked the petitioners, who have challenged the Aadhaar law on the ground that it affects the privacy of citizens.
More harm
•The court said that an attempt to define the right to privacy may cause more harm than good.
•An exhaustive cataloguing by the court of what all constitutes privacy may limit the right itself, Justice Chandrachud observed.
•Justice Chandrachud is part of a nine-judge Constitution Bench led by Chief Justice of India J.S. Khehar examining a reference on the question whether privacy is sacred, fundamental and an inviolable right under the Constitution.
‘A common law’
•Attorney-General K.K. Venugopal has already submitted in the Supreme Court that right to privacy is merely a common law right and the Constitution makers “consciously avoided” making it a part of the fundamental rights.
•The decision of the nine-judge Bench on whether privacy is a fundamental right or not will be pivotal to the petitioners’ challenge that Aadhaar, which mandates citizens to part with their biometrics, is unconstitutional.
•In the day-long hearing before a packed courtroom, the Bench questioned the petitioners’ plea that right to privacy is non-negotiable. “If people have put themselves in the public realm using technology, is that not a surrender of their right to privacy?” Justice Chandrachud asked.
•The court’s questions came even as petitioners banked on Union Finance Minister Arun Jaitley’s statement in Parliament that privacy is ‘probably’ a fundamental right and ‘part of individual liberty’. The statement was made on March 16, 2016 during the presentation of the Aadhaar Bill. Senior advocate Shyam Divan, for the petitioners, along with advocates Vipin Nair and P.B. Suresh, submitted that a person should have the right to ‘informational self-determination’. “In the Internet age, a person should have control on how much he should put forward and not be compelled,” Mr. Divan submitted. He said there is hardly any data protection in this digital age, leading to a compromise in privacy.
•But Justice Chandrachud observed that right to privacy cannot be linked to data protection. He said this is the age of ‘big data’, and instead of focussing on privacy, steps need to be taken to give statutory recognition to data protection.
•Senior advocate Gopal Subramanium, who opened the arguments for the petitioners, responded that the constitutional right to privacy does not mean mere protection from the state’s ingress.
📰 New social security net planned
Scheme will provide universal coverage to workers in formal, informal sectors
•The Union government plans to introduce a universal social security network for workers in both the informal and formal sectors. The scheme will be rolled out in a phased manner, Labour Minister Bandaru Dattatreya said in the Rajya Sabha on Wednesday.
Amnesty scheme
•To a question, Mr. Dattatreya said that after demonetisation, the Ministry had started an enrolment campaign, and from January 1 to June 30, the government brought in an amnesty scheme for employers who were earlier not part of the Provident Fund regime.
•During the exercise, the workers employed from April 2009 to December 2016 were also included. More than 1.3 crore new workers were brought under the Employees’ Provident Fund (EPF) regime.
•Mr. Dattatreya said 20 lakh new employees were included as part of the amnesty scheme and 80 lakh contract labourers, including construction workers and those engaged by the public sector units at the Centre and the States, were also registered. The Labour Minister said the EPF security network currently covered 4.8 crore contributory members and had a corpus of over Rs. 10.43 lakh crore.
•However, some members including Sanjay Seth and Naresh Agarwal (SP) were not satisfied with the Minister’s reply to a question about a proposal to lower the employee’s and the employer’s contribution from the present 12% to 10%. It was opposed in the 218th meeting and therefore, the government could not make any decision on that, Anil Desai said.
IT sector
•Ananda Bhaskar Rapolu raised the issue of IT sector employees, stating that there was no superannuation fund in the country and EPF alone was the support for the employees who were retiring or getting terminated.
•“Take any cosmopolitan city, services of thousands of IT employees are being terminated. As the Labour Ministry is not having any control over IT companies and multinational corporates, what is the measure that the Labour Ministry is intending to do to the Employees’ Provident Fund to protect the IT sector employees..,” he asked.
•Mr. Dattatreya said the law might confine to wages of those who had got a ceiling of Rs. 15,000, for that EPFO eligibility would be there. Apart from that, the government would provide social security to IT workers and also IT employers. Loan, PF, Pension, everything would be protected under wages’ safeguards.
📰 U.S. blames Pakistan for going soft on Lashkar and Jaish
But says it was an important counter-terrorism partner last year
•Counter-terrorism cooperation between India and the U.S. deepened in 2016, the State Department’s annual ‘Country Reports on Terrorism’ released on Wednesday said.
•The report said the “Indian leadership expressed resolve to redouble efforts, in cooperation with the United States and other like-minded countries, to bring to justice the perpetrators of terrorism.”
•It said Pakistan remained “an important counter-terrorism partner” last year, but it did not take sufficient action against groups that target India and Afghanistan.
•“The Pakistani military and security forces undertook operations against groups that conducted attacks within Pakistan such as Tehrik-e-Taliban Pakistan. Pakistan did not take substantial action against the Afghan Taliban or Haqqani Network, or substantially limit their ability to threaten U.S. interests in Afghanistan, although Pakistan supported efforts to bring both groups into an Afghan-led peace process,” the report said.
Pakistan’s inaction
•“Pakistan did not take sufficient action against other externally focused groups, such as Lashkar-e-Taiba and Jaish-e-Mohammad in 2016, which continued to operate, train, organize, and fundraise in Pakistan.”
•The report said India and the U.S. pledged to strengthen cooperation against terrorist threats from groups including al-Qaeda, the ISIS, the Jaish, the Lashkar and D-Company, including through greater collaboration on designations at the UN. The report said in 2016, U.S. and Indian officials exchanged terrorist threat information. The Department of Justice officials worked with Indian officials, including at the National Investigation Agency.
•The report said New Delhi has publicly recognised the serious threat posed by the ISIS.
📰 Buffalo meat exports fall 4.35% in April-May
Centre has been trying to ban cattle sale for slaughter
•India’s buffalo exports fell 4.35% in the April-May period of this year to $530 million compared with the same period last year, according to a written answer by Commerce Minister Nirmala Sitharaman in the Rajya Sabha.
Put on hold
•The answer comes at a time when the Centre has been trying to ban the sale of cattle for slaughter.
•The notification by the Ministry of Environment, Forest and Climate Change has since been put on hold by the Supreme Court but reported violence against cattle traders and transporters has been on the rise across the country.
•“While no complaint was received in this Ministry with regard to prevention in the production of meat and leather, as per the DGCI&S (Directorate General of Commercial Intelligence and Statistics) data, the export of buffalo meat has declined by 4.35% as compared to the same period in the previous year,” the reply said.
•“During the previous year 2016-17 (April to May), the buffalo export was $554 million whereas during the current year export was noticed to $530 million for the same period.”
Declining trend
•The data provided by Ms Sitharaman shows, however, that buffalo meat exports have been declining for some time now. The total amount of buffalo meat exported during 2016-17 was 1,330,753 million tonnes, down 11.5% from the amount exported two years previously.
•This trend of declining exports is consistent with what is seen for other meat as well. Sheep and goat meat exports fell from 23,612 million tonnes in 2014-15 to 22,049 million tonnes in 2016-17.
•Similarly, exports of ‘other meat’ declined to just 12 million tonnes in 2016-17 from 262 million tonnes two year previously.
📰 Ministry, NITI Aayog moot privatisation of select services in district hospitals
Under proposed PPP model, private players will get 30-year leases on space in district hospitals
•As a part of a radical ‘privatisation project’, the Health Ministry and the NITI Aayog have developed a framework to let private hospitals run select services within district hospitals, on a 30-year lease.
•In a 140-page document, prepared in consultation with the World Bank, the government will be allowing “a single private partner or a single consortium of private partners” to bid for space in district level hospitals, “especially in tier 2 & 3 cities.”
•Under this Public Private Partnership (PPP), care for only three non-communicable diseases — cardiac disease, pulmonary disease, and cancer care — will be provided.
•A model contract drawn up by NITI Aayog was sent out to State governments on June 5 by Amitabh Kant, Chief Executive Officer of NITI Aayog, giving the states a two-week window to furnish responses.
Draft document
•In a letter sent out last month, Mr. Kant adds that the draft document was prepared by a working group comprising representatives from the industry, Health Ministry and “representatives of a few states”.
•The policy document has come under sharp criticism for the Ministry’s failure to consult with key stakeholders from civil society and academia. Dr. Amit Sengupta, convener of the India chapter of the People’s Health Movement, said that the government was handing over critical public assets without gaining anything much in return.
•“NITI Aayog has no locus standi to make health policy, which is a state subject in India. The logic behind shutting down the Planning Commission was to ensure that policies are not centralised. NITI Aayog was to be an advisory body but here they are rushing through a policy that will essentially hand over public assets to the private sector, leading to a further dismantling of the public services available for free. If the government has to give seed money, share blood banks and other infrastructure, and still not be able to reserve beds for poor patients, it seems like we are not getting much in return,” said Dr. Sengupta.
•Mr. Kant, Health Minister JP Nadda and Health Secretary C.K. Mishra did not respond to emails and phone calls.
•According to the draft model contract, private hospitals will bid for 30-year leases over portions of district hospital buildings to set up 50- or 100-bed hospitals in smaller towns across the country. The State governments could lease up to five or six district hospitals within the State.
Viability gap funding
•Further, the State governments will give Viability Gap Funding (VGF), or one-time seed money, to private players to set up infrastructure within district hospitals. The private parties and State health departments will share ambulance services, blood banks, and mortuary services.
•A major concern about the policy is that under ‘principles’ of the financial structure, the document states that “there will be no reserved beds or no quota (sic) of beds for free services” in these facilities.
•“While it is clear that insured patients will receive free care, it is not at all clear what will happen to the vast majority of the population. In particular, how will these referral arrangements work? Whereas it says that states can, if they wish, refer 100% of patients for cashless care, it is a matter of concern that it also proposes that States can set a cap on this entitlement. How would this work? What happens when the cap is reached? Would people only be able to access services for half the year, or less,” said Robert Yates, a leading expert on universal health coverage (UHC) and Project Director of the UHC Policy Forum at Chatham House, London.
•“What is particularly disturbing is the suggestion that only Below Poverty Line (BPL) patients and those in insurance schemes will be able to access free care. This would effectively exclude hundreds of millions of the Indian population from vital hospital services.
•“If implemented, these proposals could threaten to take India away from UHC, a key sustainable development goal, rather than towards it,” Mr. Yates said.
📰 ‘Banks may need to forgo Rs. 2.4 lakh crore’
60% haircut needed to settle 50 large stressed assets with Rs. 4 lakh cr. debt: Crisil
•Ratings agency Crisil on Wednesday said that banks may have to take a haircut of 60%, worth Rs. 2.4 lakh crore, to settle 50 large stressed assets with debt of Rs. 4 lakh crore.
•These 50 companies are from the metals (30% of total debt), construction (25%) and power (15%) sectors, and account for half of the Rs. 8 lakh crore non-performing assets (NPAs) in the banking system as on March 31, 2017.
•The agency also estimated banks have provisioned for about 40% of this exposure. “We used the economic value approach to assess the haircuts,” said Pawan Agrawal, chief analytical officer, Crisil Ratings in a statement.
•“This is a combination of market-value multiples and cash-flow estimation. The final haircut, however, will also be influenced by the expectation of lenders, valuation of subsidiaries, and the price outlook for commodity-linked sectors.” The sources of stress are policy or demand (power plants), lower capacity utilisation (steel plants), and overleveraged balance sheets (construction companies).
‘Tools didn’t help’
•However, Crisil said that the restructuring tools facilitated by the Reserve Bank of India that indebted firms had availed of earlier did not help because of very high debt levels that underscore the magnitude of stress.
•The government recently promulgated an ordinance empowering the RBI to issue directives for faster and optimum resolution of stressed assets to make them viable.
•The focus now is on optimum debt reduction including through potential transfer of assets to a different management that can bring in resources needed to scale up cash flows.
•A quarter of the debt analysed needed marginal or moderate haircuts, while a third needs aggressive, and nearly 40% deep haircuts. “Companies from the power sector would require moderate haircuts, while those from the metals and construction sectors would need aggressive ones,” Mr. Agrawal said.
•Majority of the debt requiring deep haircuts belong to companies with unsustainable businesses so asset sales are necessary to recover monies. Firms needing moderate or aggressive haircuts had gone for debt-funded capex. As demand slumped, or as projects ran into regulatory issues, significant time and cost overruns made them unviable.
•Firms needing a marginal haircut are those facing temporary setbacks, which could be corrected over time. “Some of these assets offer M&A opportunities for companies with strong credit profiles. Also, potential synergies could allow for a significant reduction in haircut — an aspect that has not been considered in our analysis,” said Ramesh Karunakaran, director, Crisil Ratings.
📰 Think beyond loan waivers'
Strengthening the repayment capacity of farmers by improving and stabilising their income is the only way to keep them out of distress
•Indian agriculture is characterised by low scale and low productivity. About 85% of the operational landholdings in the country are below 5 acres and 67% farm households survive on an average landholding of one acre. More than half of the area under cultivation does not have access to irrigation. Agriculture income generated at average size of landholding is not adequate to meet farmers’ needs.
•The problem is exacerbated by weather and market risks. According to the latest National Sample Survey on Situation Assessment Survey of Agricultural Households (NSS-SAS), 13.9% farm households experienced negative return from crop production during 2012-13. Non-farm income comprised 40% of the income of farm households, but access to non-farm sources of income is highly skewed as about 40% of farm households reported zero income from such sources.
Increasing debt burden
•Modern agriculture requires investment in farm machinery and use of purchased inputs like seed, fertiliser, agri-chemicals, diesel and hired labour. Most often, savings generated from unremunerative crop enterprise are inadequate for such investments. Rising expenses on health, education, social ceremonies and non-food items put additional financial demand on farm families. Consequently, majority of the farmers have to take loans from institutional or non-institutional sources or both. The share of institutional loans disbursed during a year to agriculture and allied sectors has risen from 8.9% of the value of output in 2000-01 to 31.4% in 2015-16.
•The amount of short-term institutional loans for agriculture exceeds the total cost of inputs including hired labour at an all-India level and in many States. This indicates that a part of crop loans is likely spent on non-agricultural purposes. A more worrisome fact out of NSS surveys on Investment and Debt (NSS-I&D) is that the loans taken by cultivators from non-institutional sources, which involve high interest rate, is rising faster than from institutional sources. These indicators point to a worrying development — much of the growth in household demand in rural India has been debt-ridden and not supported by growth in income.
•Recently a few States like Uttar Pradesh, Maharashtra, Punjab and Karnataka have responded to farm distress by rolling out farm loan waiver schemes as a measure of immediate relief to those farmers who qualify certain criteria. The demand for such measures is spreading to other States too.
•The ultimate goal of farm loan waiver is to lessen the debt burden of distressed and vulnerable farmers and help them qualify for fresh loans. The success of the loan waiver lies on the extent to which the benefits reach the needy farmers. Loan waivers suffer from several drawbacks in this respect. First, it covers only a tiny fraction of farmers. According to 2012-13 NSS-SAS, 48% of the agricultural households did not have any outstanding loan.
•Further, out of the indebted agricultural households, about 39% borrowed only from non-institutional sources. The farmers investing from their own savings and those borrowing from non-institutional sources are equally vulnerable to weather and market risks. But all such households are outside the purview of loan waiver.
•Second, it provides only a partial relief to the indebted farmers as about half of the institutional borrowing of a cultivator is for non-farm purposes. Third, in many cases, one household has multiple loans either from different sources or in the name of different family members, which entitles it to multiple loan waiving. Fourth, loan waiving excludes agricultural labourers who are even weaker than cultivators in bearing the consequences of economic distress. Fifth, it severely erodes the credit culture, with dire long-run consequences to the banking business. Sixth, the scheme is prone to serious exclusion and inclusion errors, as evidenced by the Comptroller and Auditor General’s (CAG) findings in the Agricultural Debt Waiver and Debt Relief Scheme, 2008.
•According to the CAG report, 13.46% of the accounts which were actually eligible for the benefits under the scheme were not considered by the lending institutes while preparing the list of eligible farmers. On the other hand, in 8.5% of the cases, the beneficiaries were not eligible for either debt waiver or debt relief but were granted the benefits. Further, 34.28% of the beneficiaries were not issued debt relief certificates which would have entitled them to fresh loans. Beside these errors in implementation, the loan waiver as a concept excludes most of the farm households in dire need of relief and includes some who do not deserve such relief on economic grounds.
•Apart from above drawbacks, such schemes have serious implications for other developmental expenditure, having a much larger multiplier effect on the economy. For instance, loan waiver may cost Uttar Pradesh at least Rs. 36,000 crore, which is 4.4 times the State’s capital expenditure of Rs. 8,191 crore (Budget estimate) in agriculture, including irrigation and flood management, in 2016-17. A similar amount spent on improvement of agriculture infrastructure and other developmental activities would create a base for future growth and development of the sector.
•It appears that loan waiving can provide a short-term relief to a limited section of farmers; it has a meagre chance of bringing farmers out of the vicious cycle of indebtedness. There is no concrete evidence on reduction in agrarian distress following the first spell of all-India farm loan waiver in 2008. In the longer run, strengthening the repayment capacity of the farmers by improving and stabilising their income is the only way to keep them out of distress.
Sustainable solutions
•For providing immediate relief to the needy farmers, a more inclusive alternative approach is to identify the vulnerable farmers’ based on certain criteria and give an equal amount as financial relief to the vulnerable and distressed families. For instance, in Uttar Pradesh 23.2% (41.87 lakh) agricultural households (180.49 lakh) are estimated to have income below poverty line. With Rs. 36,000 crore, each of these households can be given Rs. 85,980. This looks to be a more inclusive approach and provides farmers flexibility to spend this money.
•In our view, the sustainable solution to indebtedness and agrarian distress is to raise income from agricultural activities and enhance access to non-farm sources of income. The low scale of farms necessitates that some cultivators move from agriculture to non-farm jobs. Improved technology, expansion of irrigation coverage, and crop diversification towards high-value crops are appropriate measures for raising productivity and farmers’ income. All these require more public funding and support and there is a danger of these getting adversely affected by resources diverted towards loan waiver. Another major source of increase in farmers’ income is remunerative prices for farm produce. This requires removal of old regulations and restrictions on agriculture to enable creation of a liberalised environment for investment, trading and marketing. Agrarian distress and farmers’ income will be addressed much better if States undertake and sincerely implement long-pending reforms in the agriculture sector with urgency.
📰 Target Tehran
The Trump administration’s new sanctionson Iran threaten stability in West Asia
•The U.S. administration’s decision to slap sanctions on 18 Iranian individuals and entities on Tuesday, only a day after it certified to Congress that Tehran was compliant with the conditions of the nuclear deal, sums up its strategic resolve in taking on the Islamic Republic and the tactical dilemma it faces while doing so. It is no secret that President Donald Trump has been critical of the Iran nuclear deal, which ended the international sanctions on Tehran in return for curbing its nuclear programme. During the campaign, Mr. Trump had vowed to either kill or renegotiate the agreement. But as President, his options are limited with Iran remaining compliant with the terms of the agreement. More important, it is not a bilateral pact. The nuclear deal was reached among seven entities, including the U.S., Russia, Germany and Iran. Any unilateral move to withdraw from the agreement would hurt American interests as European countries are keen on expanding economic ties with Iran. This explains why a reluctant Mr. Trump has re-certified the deal twice since his inauguration in January. But on both occasions, he slapped additional sanctions on Iran over its ballistic missile programme and “support for terrorism”, signalling that the Obama-era détente with Tehran was over. Administration officials are now saying Iran may be compliant with the terms but it is “unquestionably in default of the spirit” of the agreement.
•This is an overstretched argument, given that all international monitors say Iran remains committed to the deal. The logical next step of the nuclear agreement should have been an overall improvement in relations between the West and Tehran. Barack Obama had set the stage for such a policy overhaul and Iranian President Hassan Rouhani had responded to it, but Mr. Trump, in six months, has taken Washington’s Iran policy back to Republican neoconservatism. Besides sanctions, Mr. Trump has also endorsed the Saudi-led Sunni bloc’s attempts to isolate Iran. His policy priorities are now clear. The administration will align with Saudi Arabia and Israel, continue to target Iran through sanctions and even try to undermine the nuclear deal in the long term. This is a dangerous turn of events since the historic moment of April 2, 2015, when the framework for the nuclear pact was announced. But this policy of containing Iran could backfire as Iran has already established itself as a rising regional power with substantial geopolitical clout. To stabilise Iraq, the U.S. needs Iran’s help. And there won’t be a long-lasting peace deal in Syria without Iran’s participation and cooperation. If the U.S. is serious about working towards peace and stability in West Asia, it should reciprocate Iran’s compliance with the nuclear deal, not punish it through additional sanctions. It should also act as a mediator between Saudi Arabia and Iran, instead of taking sides in a destabilising cold war in West Asia.
📰 BITs and pieces of trade with Israel
An India-Israel investment treaty would have to reconcile investment protection with the state’s right to regulate
•Many pundits in India continue to gaze at the India-Israel relationship through the lens of Palestine. However, some argue that it is critical to de-hyphenate India’s relations with Israel and Palestine, a process that began in 1992 when New Delhi established diplomatic relations with Tel Aviv and which has gathered steam since then. Prime Minister Narendra Modi’s visit to Israel earlier this month made this de-hyphenation blatant and conspicuous.
Enormous trade potential
•Growing trade and investment relations are a strong reason to study India-Israel relations on their own merit. Bilateral merchandise trade increased from $200 million in 1992 to around $4 billion in 2016, an increase of 2,000% in 25 years. Cumulative foreign direct investment (FDI) inflows from Israel, from April 2000 to March 2017, stood at $122 million. While these are low, constituting only 0.04% of total FDI inflows to India, there is enormous potential for Israeli investment in fields such as renewable energy and water management (drip irrigation and desalination). Defence production, which is at the heart of the ‘Make in India’ campaign, is another area with significant potential for Israeli investment, a move that will help India save billions of dollars it currently spends on importing weapons from Israel. Israel is the third largest supplier of arms to India after Russia and the U.S. Investment in defence production will also give a fillip to domestic manufacturing, reduce dependence on bureaucratic
state-owned ordnance factories and bring in new technology — an example being the recently set up plant in Madhya Pradesh, between India’s Punj Lloyd and Israel Weapon Industries, to manufacture small arms.
•Boosting trade and investment ties found explicit mention in the India-Israel joint statement during Mr. Modi’s visit. To encourage bilateral investments, Mr. Modi and his Israeli counterpart, Benjamin Netanyahu, also agreed to conduct negotiations on a bilateral investment treaty (BIT).
Negotiating a BIT
•Is an India-Israel BIT possible? In 1996, India and Israel signed a BIT. However, this was reportedly terminated by India when it unilaterally discontinued 58 BITs recently. For a new BIT to be negotiated, both sides will have to start afresh. However, there are challenges given the many fundamental differences Israel and India have on BITs, as outlined in their Model BITs of 2003 and 2016, respectively. The first is on the investor-state dispute settlement (ISDS) provision that allows foreign investors to bring claims against a host state for alleged treaty breaches at international arbitral forums. Foreign investors prefer international arbitration — which is faster and independent — over litigating in domestic courts. The Israeli model gives an investor the choice to submit any investment dispute with a state to international arbitration if not resolved within six months through negotiations. The Indian model imposes many procedural and jurisdictional restrictions on an investor’s right to bring an ISDS claim. These include a foreign investor having to litigate in domestic courts for five years before pursuing a claim under international law. These requirements make it very difficult for a foreign investor to make efficient use of the ISDS provision.
•Second, Israel’s model provides a broad asset-based definition of foreign investment that covers both FDI and portfolio investment. The Indian model of 2016 defines investment narrowly as an enterprise (with its assets) that has to possess certain characteristics of investment including the investment having ‘significance for the development’ — words not defined in the BIT — of the host country. Third, the Israeli model contains a broad most favoured nation (MFN) provision — a cornerstone of non-discrimination in international economic relations — which is missing in the Indian model. The absence of MFN, from Israel’s perspective, would mean that its businesses would have no remedy under international law if India were to discriminate against it, say, by offering greater incentives to another defence manufacturer over an Israeli one.
•Fourth, the Indian model excludes taxation altogether from the purview of the BIT. Thus, the foreign investor cannot bring an ISDS claim even if taxes imposed are confiscatory, discriminatory or unfair. However, in the Israeli model, taxation-related measures are recognised as an exception only to MFN and national treatment provisions. Foreign investors can still challenge taxation-related measures for violating other BIT provisions such as the fair and equitable treatment or expropriation. India’s recent record in administering its taxation laws has made foreign investors jittery. The World Investment Report 2017 issued by the United Nations Conference on Trade and Development also points out that tax-related concerns are a deterrent for some foreign investors to invest in India. Thus, Israeli investors will not be comfortable if taxation is completely outside BIT’s purview.
In a nutshell
•In sum, the Indian position on BITs is very pro-state, offering limited rights and protection to foreign investors. The Israeli position is the opposite. An India-Israel BIT looks difficult till both sides move away from their stated positions. Both sides should work towards having a BIT that reconciles investment protection with a state’s right to regulate.
