📰 The bilateral transformation
India and Bangladesh must seize the opportunity to further enhance connectivity and trade ties
•The spectacular victory of the Grand Alliance led by the Awami League (AL), headed by incumbent Prime Minister Sheikh Hasina, in Bangladesh’s 11th general election, has delighted her supporters. This election is also a milestone for the coming of age of a new generation which is avowedly aspirational and is tired of the old political discourse that had deeply divided politics in Bangladesh. They have voted for economic progress and a secular polity.
•The margin of victory has shocked and dismayed the Opposition parties that had coalesced into the National Unity Front (NUF), a coalition at whose core is the Bangladesh Nationalist Party (BNP), the AL’s bitter political rival. Former AL stalwart and famous jurist Kamal Hossain provided the leadership glue for the Opposition coalition. Nominally led by its Chairperson, former Prime Minister Khaleda Zia, currently in jail for corruption, the BNP’s guiding force is U.K.-based acting-Chairman Tarique Rahman, her controversial son who fled from the country in 2008 and lives in exile. He is convicted of money laundering and conspiracy to murder.
Brute majority
•The AL has obtained a brute majority of 288 seats in a unicameral Parliament which has 300 directly-elected seats and 50 seats reserved for women. The latter are elected by the electoral college of directly-elected MPs, with proportional representation to parties elected to the Parliament.
•Mr. Hossain’s monumental failure to deliver has left him and other Opposition leaders hurling allegations that the elections were “farcical” and asking that new elections be held under a non-partisan caretaker administration. The NUF managed to win just seven seats. The Election Commission, while taking note of some electoral malpractices and promising investigation, has declared the results valid and rejected the demand for new elections.
•The margin of victory has lent some traction to persistent allegations of electoral malpractices, hounding of the Opposition, large-scale arrests of Opposition workers and intimidation of voters. Election-related violence on polling day claimed 17 lives. Several Opposition candidates withdrew from the fray, citing violent obstruction by AL workers, kidnapping of their election agents and voters being obstructed from casting their votes. Yet international observers have concluded that the elections were largely peaceful, fair and credible.
•Though dogged by two consecutive controversial elections and increasing perceptions of authoritarian behaviour, Ms. Hasina is set for another five-year term in office. She has an enviable record of delivering record economic growth. Bangladesh’s GDP grew at a rate of 7.6% in the last quarter, making it one of the fastest growing economies in the world.
A bipartisan consensus
•During the last decade of Ms. Hasina’s tenure as Prime Minister, high-level Bangladesh-India engagement has intensified. There is an irrevocable and irreversible bipartisan political consensus in India for upgrading relations across a comprehensive interface of ties. India’s ‘neighbourhood policy’ has focussed on Bangladesh, which has emerged as a key interlocutor in India’s ‘Act East Policy’ and sub-regional groupings like BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) and the BBIN (Bangladesh, Bhutan, India, Nepal) Initiative. In Bangladesh too, a growing domestic political consensus, overriding fractious politics, has emerged in favour of close ties with India. Denial of support to Indian insurgent groups, with insurgent leaders handed over to India, has progressively built trust and confidence between the two countries. Bangladesh is India’s largest trading partner in South Asia with an annual turnover of around $9 billion plus an estimated informal trade of around $8-9 billion, across the 4,100-km-long porous border. Cooperation in connectivity, energy, security and intelligence matters has intensified. The Padma multipurpose bridge and the Akhaura-Agartala rail link will dramatically change connectivity within Bangladesh and with India. Waterways are also being revived to reduce the cost of trade.
•Improvement in bilateral ties has led to newer areas of cooperation such as cyberspace. Bangladesh has provided cyber connectivity between the international gateway at Cox’s Bazar to Agartala for faster Internet connectivity in India’s northeastern States. India has also become a partner in Bangladesh’s nuclear power programme, with the beginning of construction at the Rooppur nuclear power plant. India is poised to export around 1100 MW of power to meet the energy deficit in Bangladesh. Power projects totalling more than 3600 MW are under implementation by Indian companies.
•The adverse balance of trade has been a bilateral issue. The asymmetry in the economies of India and Bangladesh is the major factor. To enable more Bangladeshi exports to flow into India, duty free entry was granted in 2011 under the South Asian Free Trade Area. This has led to an increase in exports from Bangladesh from around $350 million to the current level of around $900 million. Bangladeshi exports have plateaued because of demand constraints in India and also because of limited items in the Bangladeshi export basket. An SEZ in Bangladesh for Indian manufacturing companies has been mooted and notified. When operational it will encourage Indian companies to manufacture there and export to India. Indian investment in Bangladesh has reached $3 billion. In 2017, 13 agreements worth around $10 billion were signed in the power and energy sectors.
•To offset the economic asymmetry, India has granted Bangladesh generous lines of credit (LOCs) and grants, with commitments reaching $8 billion. While LOCs mainly cover infrastructure and connectivity projects, grants flow into social sector development. Capacity building under the Indian Technical and Economic Cooperation programme is an important strand in bilateral ties and people-to-people interaction. Bangladeshis are among the largest groups of tourists into India. The visa regime has been liberalised and over a million visas are issued to Bangladeshi citizens annually.
•With the rise of religious radicalism and terrorism, defence and security issues will require greater cooperation. Bangladesh has taken strong and effective steps against those who have been inspired by the Islamic State and involved in terrorist strikes. Islamist organisations have been breeding grounds for religious radicals and extremist views. These forces will pose a considerable challenge for governance in Bangladesh in the future. With the massive loss, the NUF is likely to boycott the Parliament and take to street agitation, sullying Bangladesh’s reputation as a democracy.
Challenges ahead
•There will be setbacks in India-Bangladesh ties, like the current Rohingya issue, which has imposed a huge economic and security burden on Bangladesh. Bilaterally, the issue of the illegal migration has already acquired a high profile in India with the publication of the draft National Register of Citizens in Assam. This will require deft handling of bilateral ties. Sharing of river waters will remain a challenge, but not an insurmountable one.
•China’s security and economic footprint has grown in South Asia and managing this will remain a challenge for both countries. While Bangladesh is overwhelmingly dependent on military hardware from China, India has provided a $500 million LOC for procurement of defence-related goods from India. This momentum must be maintained and intensified.
•India has welcomed the election results and Prime Minister Narendra Modi was the first leader to telephone and congratulate Ms. Hasina. Bangladesh-India relations have reached a stage of maturity and with further upgrading and integration of infrastructure, bilateral ties can be expected to grow stronger in the future.
📰 Strange bedfellows in West Asia
Tel Aviv believes that improved relations with Riyadh will serve many major strategic goals
•Increasing intimacy between Saudi Arabia, the so-called bastion of Islamic orthodoxy, and Israel, the Jewish state carved out by the colonial powers in Arab Palestine, appears astonishing at first sight. The growing relationship, even if surreptitious, between the two states can be explained in large part with reference to the old adage, “my enemy’s enemy is my friend”.
Complex reasons
•The enemy is Iran, which both countries perceive as the primary threat to their strategic interests in West Asia. Saudi Arabia is engaged in a fierce competition with Iran for influence in the Persian Gulf and wider West Asia. Riyadh seems to be losing this competition as demonstrated by recent events in Syria, Lebanon and Iraq as well as tiny Qatar’s defiant attitude.
•The reasons for Israel’s overtures towards Saudi Arabia are more complex. A common front against Iran is, of course, a major factor determining Israeli policy. Iran is a potential challenger to Israel’s nuclear monopoly in West Asia and uses its influence in the Levant to impede Israeli dominance of the region. But equally important, the Israeli government believes that improved relations with Riyadh will serve other major goals.
•First, Saudi Arabia’s lead in establishing relations with Israel, even if covert, is likely to induce other Arab states, especially the oil rich monarchies of the Gulf, to open their economies to Israeli investment and technical expertise, thus bringing Israel substantial economic benefits. Israel’s success in achieving this objective is critically dependent upon developing a significant, even if unacknowledged, relationship with Saudi Arabia.
•Second, the Israeli government estimates that improved relations with the Saudi regime, the “guardian” of Islam’s two holiest sites, will help resolve the Israeli-Palestinian conflict to Tel Aviv’s satisfaction. This means Israel continuing to control the entire territory between the River Jordan and the Mediterranean Sea without giving the Palestinians any civil or political rights. Israel feels that with Saudi help, the status quo could be made acceptable to other Arab and Muslim countries as well since several of them, such as Egypt and Pakistan, are heavily dependent upon Saudi largesse.
•Furthermore, Israel and Saudi Arabia have a common interest in preventing the democratisation of Arab countries. Authoritarian governments in the Arab world allow Israel to parade itself as the only democracy in West Asia. Saudi Arabia is mortally afraid of a democratic wave in the Arab world since it would further highlight the despotic nature of its regime. This apprehension drove its opposition to the democracy movements, especially in Egypt and Bahrain, during the short-lived Arab Spring.
U.S. nod
•The Saudi-Israeli rapprochement has been actively supported by the Trump administration. The United States is extremely interested in the formation of a joint front between Saudi Arabia and Israel against Iran, America’s principal adversary in West Asia. Jared Kushner, the U.S. President’s son-in-law and the administration’s point man on West Asia, has developed a special relationship with Saudi Crown Prince Muhammad Bin Salman (MBS) in order to achieve this and other ends. He had used his leverage with MBS to prod the latter to accept Israel’s point of view on the Palestine issue before the Jamal Khashoggi murder stalled the expansion of the Saudi-Israeli relationship.
•The rapprochement between Riyadh and Tel Aviv was moving apace until October 2, 2018, when Khashoggi, a Saudi dissident journalist, was murdered at the behest of the Saudi regime in the Saudi Consulate in Istanbul, Turkey. Senior officials of the two governments, including Mossad head Yossi Cohen, had clandestinely met several times. On the Saudi side, former senior aide to the Crown Prince, Saud al-Qahtani, and former deputy intelligence chief, Major General Ahmed al-Assiri, had played important roles in the secret negotiations with Israel.
Khashoggi murder
•However, the Khashoggi murder has thrown a spanner in the works for several reasons. First, the two principal Saudi interlocutors have been dismissed from their crucial positions in order to demonstrate to the international community that the Saudi regime is genuinely interested in bringing Khashoggi’s murderers to justice.
•Second, MBS, who many believe ordered the killing, has been the focus of intense criticism, including by leading Senators and Congressmen in the U.S., following the brutal murder and dismemberment of Khashoggi’s body. He is also held responsible for the Yemeni misadventure, which has left thousands of civilians dead and millions on the verge of starvation. He cannot, therefore, afford to take greater political risks at this moment by continuing the parleys with Israel.
•This does not mean that the Saudi-Israeli relationship will return to the level of hostility that had once existed between the two states. Rapprochement has been an ongoing process for close to two decades. It was dramatically expedited with the appointment of MBS as Crown Prince and the de facto ruler of Saudi Arabia.
•One can, therefore, conclude that their common hostility towards Iran and their close security relationship with the U.S. will eventually prompt Saudi Arabia and Israel to resume their covert relationship and eventually make it public. However, their contacts are likely to remain frozen for some time until the Khashoggi murder recedes from public memory. Yet the Saudi-Israeli rapprochement could be accelerated if MBS, who has been the driving force behind the Saudi policy of engagement with Israel, ascends to the Saudi throne in the near future.
📰 Parliamentary committee irked by States’ insensitivity to Western Ghats
•Mumbai: Over 56,000 kilometres of ecologically sensitive areas (ESA) in the Western Ghats could not be earmarked as ‘no-go’ zones due to State governments’ ‘insensitivity’, a parliamentary committee has said. The panel has urged the Ministry of Environment, Forest and Climate Change to constitute a committee to address the issues and grievances of local people.
•The recent monsoon floods in Kerala and parts of Karnataka should serve as alarm bells for the administrations in the States of Goa, Gujarat, Maharashtra, Kerala, Tamil Nadu and Karnataka, which have failed to mark ESA in the Western Ghats, the Committee on Government Assurances in the Rajya Sabha has said.
•The panel, which keeps track of assurances given by ministers on the floor of the Upper House, presented its latest report on Monday. The panel had examined issues regarding the categorisation of the Western Ghats as ESA as per the recommendations of two committees led by Madhav Gadgil and K. Kasturirangan.
•The report said, “The committee has observed that despite three draft notifications issued over four years for earmarking ESA, the six States could not be brought on board for action. Resultantly, over 56,000 square km of ESA could not be earmarked as ‘no-go’ zones for polluting activities and deforestation, and large-scale deforestation, mining, and construction are continuing unabated, hurting the ecology of the Western Ghats.”
•“Insensitivity towards ecology of the Western Ghats is making the six States vulnerable to floods and landslides,” the report said.
•“The committee is of the view that implementation of the recommendations of the Kasturirangan report is only possible with active support of local population. It also requires consultation with the State government at micro level to achieve the objectives of saving the Western Ghats,” the report said.
•The panel examined 62 assurances during its deliberations with various State governments and other organisations, and had visited Pune, Mumbai, Chennai and Bengaluru, before preparing its report.
📰 Cinereous vulture sighted in Jharkhand
Birdwatchers call it a rare sighting
•It is usually during the winter that a distinctly dark large bird – the Cinereous vulture, with a blacked-tipped pink beak – migrates from the mountainous regions of Europe and Asia to warmer places, including India.
•While earlier records of this migratory bird have revealed that it comes to northern parts of India up to Rajasthan, bird watchers and researchers were baffled to find it in Hazaribagh in Jharkhand.
•Shib Shankar Goswami, a bird enthusiast, spotted the vulture in Hazaribagh on December 30. “I was doing a nature walk with a group of bird enthusiasts, called Bird’s Buddy, when I spotted the vulture perched on a tree. Interestingly, the Cinereous vulture (classified as Near Threatened under the IUCN Red List) was found with three other endangered species of vultures,” Mr. Goswami said.
•“Initially, I could not believe a sight where four rare vultures were seen in one frame, but the photographs taken at the spot revealed what can be a bird watcher’s delight,” he added. According to him, the three other vultures in the frame were the Himalyan Griffon, White-rumped vulture and the Long-billed vulture.
•Smitha Pankaj, Divisional Forest Officer (Hazaribag East), confirmed the presence of the visitor from far off countries to Jharkhand. “We have spotted the Cinerous vulture for the first time in the region,” the DFO said, adding that five species of vultures, including the Himalayan Griffon, were spotted in Hazaribagh recently.
•Underlining the concern over the decline in the population of vultures across the world, Sachin Ranade of Bombay Natural History Society welcomed the sighting.
•“It is good that there is increased awareness among people about vultures and they are reporting their sightings. From the conservation point of view it is interesting that there is enough food available for vultures to thrive on their own in Hazaribagh,” Mr. Ranade, who also looks after a vulture conservation and breeding centre in Assam, said.
•Experts said the Cinereous vulture (Aegypius monachus) draws its name from “monachus”, which means hooded (like a monk) in Latin. India is home to nine species of vultures and with the population of these birds dwindling, the country has launched a species-recovery plan through conservation breeding centres in different parts of the country.
📰 Ganga water quality has improved, govt. tells RS
Cleaner stretches recorded across all riverine States
•The water quality of the Ganga in 2018 has “improved over last year”, according to a written statement in the Rajya Sabha on Monday by junior Water Resources Minister Satyapal Singh.
•The statement said “dissolved oxygen” levels had improved at 39 locations, and “biological oxygen demand” (BOD) levels and faecal coliform had decreased at 42 and 47 locations respectively. These three parameters are a proxy for both the presence of aquatic life as well as microbes that may be harmful to these biota, and are conventionally used to assess the quality of the river.
•These improved stretches of the river included places such as Rishikesh, the Har-Ki-Pauri Ghat at Haridwar; Ranighat in Kanpur; Tarighat in Ghazipur; Narora in Bulandshahr; Kachhla Ghat in Badaun, Aligarh; Buxar, Mokama and Munger — all in Bihar; Uluberia, Dakshineshwar and Diamond Harbour in West Bengal.
Sewage treatment plants
•The government said ₹5,100 crore, of the ₹20,000 crore allotted to clean the Ganga, had been spent under the Namami Gange Programme from 2014-15 to 2018-19.
•Last year, ₹1,725.86 crore had been spent till December 26, taking the cumulative expenditure to ₹5,187.37 crore.
•More than half the funds had been directed towards making new sewage treatment plants (STP) and effluent treatment plants (ETP), as well as making sub-par plants work better. From April 2014 to March 2018, a total of 145 projects were sanctioned at an estimated cost of ₹15,074.76 crore.
•However, independent experts have said the cleaning efforts were half-hearted and there was little effort to ensure that the river’s voluminous flow in the upper stretches of Uttarakhand is maintained downstream.
📰 Global advertising meet in Kochi on February 20-22
•The International Advertising Association (IAA) will host the IAA World Congress at Kochi from February 20-22. The event, covering marketing, advertising and media, would be held at the Grand Hyatt Lulu International Convention Centre in that city.
•Pradeep Guha, chairman, steering committee, IAA World Congress, said: “This is being planned as the most significant event with talks by 35 speakers on marketing, advertising, communications, media and related technology areas across the globe. We have also planned three evenings of great entertainment. And we have special rates for academics and students so that they learn from this great line-up of speakers.”
•Srinivasan Swamy, chairman and world president, IAA, said: “The world congress is held every alternate year. We are expecting about 2,000 delegates from India and around the world to attend.”
•Reliance Industries Ltd. CMD Mukesh Ambani, Unilever CEO Paul Polman, Qualcomm CEO Steven Mollenkopf, non-executive Chairman of Infosys and former Chairman of UIDAI Nandan Nilekani, CEO of Softbank Investment Advisors Rajeev Misra and Sri Sri Ravi Shankar are scheduled to address the summit. Bollywood legend Amitabh Bachchan will also speak, as will social influencer Deepika Padukone.
•Some of the other speakers include tennis greats Andre Agassi, Vijay Amritraj, Alibaba Group chief marketing officer Chris Tung, Facebook vice-president of global marketing solutions Carolyn Everson. Co-founder of Skype Jonas Kjellberg, president and chief executive officer of BBDO Worldwide Andrew Robertson and chief creative officer of Ogilvy Worldwide Piyush Pandey are expected to participate. For details, log on to www.iaaworldcongress.org
📰 Signs of a turnaround: on RBI's Financial Stability Report
Regulatory vigil should not ease after the half-yearly decline in banks’ gross NPA ratio
•The fog of bad loans shrouding the banking sector appears to be lifting after a long period of sustained stress. The Reserve Bank of India’s Financial Stability Report reveals the first half-yearly decline in the ratio of gross non-performing assets (GNPA) to advances since September 2015. The ratio across all scheduled commercial banks has eased to 10.8% as of end-September 2018, from 11.5% in March, with both public sector and private sector lenders posting drops in the key indicator of bad loans. A stress test for credit risk at banks that models varying levels of macro-economic performance shows that for the baseline assumption, the GNPA ratio would narrow to 10.3% by March 2019. This prompted RBI Governor Shaktikanta Das to prognosticate that the sector “appears to be on course to recovery”. Still, state-owned banks continue to have higher levels of bad loans than their private sector peers and are projected to show slower improvements over the second half of the fiscal. The GNPA ratio for public sector banks (PSBs) is posited to only inch lower to 14.6% by March, from 14.8% in September. One reason is that PSBs have a disproportionately higher share of bad loans from among large borrowers, who accounted for almost 55% of loans advanced by all banks as of September. The GNPA ratio for this category at PSBs was 21.6%, compared with just 7% at private banks.
•Interestingly, the RBI’s Prompt Corrective Action (PCA) framework, which attracted criticism including from a government appointee on the central bank’s board, has significantly helped lower contagion risk to the banking system. A contagion analysis that assumes there would be no sovereign guarantee provided for the 11 PSBs placed under the PCA curbs, in the event of a simultaneous failure, projects that solvency losses due to such failure have more than halved over the four quarters ended September: to ₹34,200 crore (3.1% of total Tier-1 capital) from ₹73,500 crore (6.8% of total Tier-1 capital). Data on banking frauds are also a cause for concern. Close to 95% of the frauds reported in the six months ended September were credit-related, with PSBs again bearing the brunt of mala fide intent on the part of borrowers. The RBI’s report has justifiably spotlighted the urgent need to tighten the oversight framework for financial conglomerates in the wake of the IL&FS meltdown, which continues to ripple across the financial system, including at mutual funds and non-banking financial companies. As Mr. Das said in his foreword, “...the recent developments in NBFCs have underscored the need for greater prudence in risk-taking.” Regulators and policymakers need to work together to insulate the economy from the risks of similar fiascos.
📰 Boost to plain packaging
More countries are adopting the tough measure in order to curb tobacco consumption
•This year, Thailand and Saudi Arabia will join a growing club of nations introducing plain packaging of tobacco products. They are the first in the Asian and Arab regions, respectively, to adopt the tough measure in order to curb tobacco consumption — from September in Thailand, and May 1 in Saudi Arabia’s case
•In December 2012, Australia became the first country to introduce plain packaging following the WHO Framework Convention on Tobacco Control (FCTC) guidelines. It has also been implemented in France and the United Kingdom (both 2016), Norway and Ireland (both 2017) and New Zealand and Hungary (both 2018). It will be implemented in Uruguay (2019) and Slovenia (2020). The move is under process or being considered in 14 more countries.
•Plain packaging standardises the appearance of tobacco products. Other than brand and product names displayed in a standard colour and font style, it prohibits the use of logos, colours, brand images or promotional information. Besides increasing the effectiveness of health warnings, the idea is to reduce the attractiveness of tobacco products, with no scope for using packaging to advertise and promote consumption.
•Understandably, the tobacco industry was opposed to Australia’s plain packaging initiative. But the ruling by the World Trade Organisation (WTO), in June 2018, favouring plain packaging, has struck a blow against the tobacco industry. The WTO panel, while rejecting the notion that Australia had unjustifiably infringed tobacco trademarks and violated intellectual property rights, said the plain packaging law led to “improving public health by reducing use of and exposure to tobacco products”.
•With the legal hurdle to tobacco control being cleared, one is optimistic that countries, including India, which were undecided, can take steps to introduce similar legislation. In India, tobacco is the cause of about one million deaths annually.
•In April 2016, India increased the size of graphic pictorial warnings, by 85%, on the packaging of tobacco products (both front and back). The percentage of users in India who thought of quitting because of such warning labels increased sharply to 62% (cigarette), 54% (bidi) and 46% (smokeless tobacco users), according to the Global Adult Tobacco Survey 2016-2017, when compared with the survey results of 2009-2010. Likewise, tobacco use among those aged 15-24 years showed a six-percentage point reduction (18.4% in 2009-10 to 12.4% in 2016-17). The number of tobacco users dropped by eight million.
•Along with higher taxes and large pictorial warnings, plain packaging can serve as a tool to deter new users and prompt existing users to quit. Here is the proof: plain packaging along with other measures led to 0.55 percentage point reduction in smoking prevalence in Australia, translating into at least 1,18,000 fewer smokers.
📰 Reserve Bank relaxes debt recast norms for MSMEs
Loans of up to ₹25 crore eligible for relaxation of provision
•Following a demand from the government for a debt recast package for micro, small and medium enterprises (MSMEs), the Reserve Bank of India (RBI) has relaxed the provisioning norms for lenders for restructuring loans of up to ₹25 crore.
•According to the guidelines released on Tuesday, the RBI has allowed one-time restructuring of existing loans to MSMEs that are in default but ‘standard’ as on January 1, 2019. Banks have to make only 5% provisioning for restructuring the loans as compared to 15-20% earlier.
•The government has been asking for such a package for a long time for the MSME sector which was severely hit due to demonetisation exercise and implementation of the Goods and Services Tax (GST).
Enabling environment
•“Considering the importance of MSMEs in the Indian economy, it is considered necessary at this juncture to take certain measures for creating an enabling environment for the sector,” RBI said. The issue of restructuring of MSME accounts was discussed by the RBI board on November 19, 2018 . The issue also figured during RBI’s recent interactions with the lenders.
•“The above issue has been examined in RBI and a view has been taken to facilitate meaningful restructuring of MSME accounts that have become stressed,” RBI said.
•The restructuring has to be implemented by March 31, 2020, the RBI said.
•“A provision of 5%, in addition to the provisions already held, shall be made in respect of accounts restructured under this scheme,” the RBI said, adding that each bank or non-bank should formulate a policy for this scheme with the board’s approval.
