POPULIST POLICIES IN INDIA

POPULISM MAY TRUMP REFORMS IN INDIA

Rajesh Kumar Singh and Manoj Kumar

Reuters, March 7, 2012

NEW DELHI (Reuters) - The Congress party's drubbing in assembly elections proved beyond doubt that its populist politics failed to resonate with voters, and yet investors and consumers alike are bracing for more of the same from the besieged ruling party.

Hemmed in by maverick allies and the fallout from a slew of corruption scandals, the Congress party-led central government has failed to carry out any meaningful structural reforms since it was re-elected in 2009.

Investors had hoped a strong performance in the elections would ease political constraints on Prime Minister Manmohan Singh, giving him room to revisit politically contentious reforms.

"As things stand now, they won't be able to bring any reforms. Their own allies will oppose everything," said D. H. Pai Panandiker, who heads Mumbai-based think-tank RPG Foundation.

Some reforms, such as to land acquisition and foreign investment rules, and the sensitive issue of subsidies on fuel, are crucial to lifting investment and spending in an economy headed for its slowest growth in three years.

Tuesday's poll results, showing Congress fared badly in four of five states, altered the odds of any such push for reforms in the budget.

Rather than becoming the catalyst for a renewed reform push, the state elections would provoke more populism, was the consensus view of analysts.

That is likely to mean more spending on social programmes, such as a pledge to provide universal food security that could bleed public finances but help Congress' general re-election bid in 2014. The budget for the fiscal year that begins April 1 will be unveiled on March 16.

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CHINA’S GRAND STRATEGY

THE STATE OF THE WORLD: ASSESSING CHINA'S STRATEGY

George Friedman

Stratfor, March 6, 2012

Simply put, China has three core strategic interests. 

Paramount among them is the maintenance of domestic security. Historically, when China involves itself in global trade, as it did in the 19th and early 20th century, the coastal region prospers, while the interior of China -- which begins about 100 miles from the coast and runs about 1,000 miles to the west -- languishes. Roughly 80 percent of all Chinese citizens currently have household incomes lower than the average household income in Bolivia.

Most of China's poor are located west of the richer coastal region; this disparity of wealth time and again has exposed tensions between the interests of the coast and those of the interior. After a failed rising in Shanghai in 1927, Mao Zedong exploited these tensions by undertaking the Long March into the interior, raising a peasant army and ultimately conquering the coastal region. He shut China off from the international trading system, leaving China more united and equal, but extremely poor.

The current government has sought a more wealth-friendly means of achieving stability: buying popular loyalty with mass employment. Plans for industrial expansion are implemented with little thought to markets or margins; instead, maximum employment is the driving goal. Private savings are harnessed to finance the industrial effort, leaving little domestic capital to purchase the output. China must export accordingly.

China's second strategic concern derives from the first. China's industrial base by design produces more than its domestic economy can consume, so China must export goods to the rest of the world while importing raw materials. The Chinese therefore must do everything possible to ensure international demand for their exports. This includes a range of activities, from investing money in the economies of consumer countries to establishing unfettered access to global sea-lanes.

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FROM 8% TO 7.5%

CHINA TARGETS SLOWER GROWTH FOR FIRST TIME IN 8 YEARS

David Pierson

Los Angeles Times, March 5, 2012

In a sweeping symbolic gesture, China lowered its growth target for this year, sending its clearest message yet that the world’s second-largest economy could no longer expand at its steroid-charged pace.

Speaking to about 3,000 delegates at the annual meeting of the National People's Congress in Beijing on Monday, Premier Wen Jiabao said China would cut its growth target for the first time in eight years, from 8% to 7.5%, to make the country’s economy more "sustainable and efficient."

Half a percentage point may not seem like much. But in China, it broadcasts a signal to policymakers, both national and local, that development will have to strike a better balance.

Swaths of empty luxury apartment blocks, environmental degradation and violent rural protests over land seizures are just some of the ways ordinary Chinese can point to vast inequities generated by no-holds-barred development.

"The announcement today means China will not simply chase after high-speed growth," said Hu Xingdou, an economist at the Beijing Institute of Technology. "Instead, it will seek high-quality growth."

How much of that scaling-back will be of China’s choosing remains to be seen. A reduced growth rate could owe just as much to deteriorating trade with Europe and investment constraints brought on by rising public debt and inflation.

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CHINA’S MILITARY SPENDING

CHINA BOOSTS DEFENSE BUDGET 11 PERCENT AFTER U.S. "PIVOT"

Chris Buckley

Reuters, March 4, 2012

China will boost military spending by 11.2 percent this year, the government said on Sunday, unveiling Beijing's first defense budget since President Barack Obama launched a policy "pivot" to reinforce U.S. influence across the Asia-Pacific.

The increase announced by parliament spokesman Li Zhaoxing will bring official outlays on the People's Liberation Army to 670.3 billion yuan ($110 billion) for 2012, after a 12.7 percent increase last year and a near-unbroken string of double-digit rises across two decades .

Beijing's public budget is widely thought by foreign experts to undercount its real spending on military modernization, which has unnerved Asian neighbors and drawn repeated calls from Washington for China to share more about its intentions.

Li said the world has nothing to fear, and the money spent on the PLA paled in comparison with the Pentagon's outlays.

"You can see that we have 1.3 billion people with a large land areas and a long coastline, but our outlays on defense are quite low compared to other major countries," Li told a news conference before the annual full session of the National People's Congress, the Communist Party-controlled legislature that will approve the budget.

"China's limited military power is for the sake of preserving national sovereignty, security, and territorial integrity," said Li, a former foreign minister. "Fundamentally, it constitutes no threat to other countries."

Asian neighbors, however, have been nervous about Beijing's expanding military, and this latest double-digit rise could reinforce disquiet in Japan, India, Southeast Asia and self-ruled Taiwan, which China considers part of its territory.

Obama has sought to reassure Asian allies that the United States will stay a key player in the area, and the Pentagon has said it will "rebalance toward the Asia-Pacific region".

"Eleven percent, for a Chinese defense budget, is what I would characterize as a reasonably sizeable increase," said C. Uday Bhaskar, a former director of India's Institute for Defense Studies and Analyses in New Delhi.

"It also, I would say, goes beyond the normal pegging we do for inflation, and it would be noted with great interest and concern by China's principal interlocutors," he said.

Obama's proposed budget for the fiscal year of 2013 calls for a Pentagon base budget of $525.4 billion, about $5.1 billion less than approved for 2012.

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CAN WE UNDERSTAND NORTH KOREA?

TEA LEAVES

Winnipeg Free Press, March 3, 2012

The effort to understand North Korea is something like reading tea leaves. Even the skeptical look for signs of hope, despite the knowledge that the arrangement of personalities (or leaves) may mean nothing at all.

The latest round of speculation was sparked by the encouraging news the Hermit Kingdom has agreed to suspend nuclear weapons tests and uranium enrichment, as well as allow inspectors from the International Atomic Energy Agency into the country.

In return, the United States has agreed to deliver food and to improve relations with North Korea.

The Communist dictatorship has made similar gestures of goodwill in the past, only to retreat to its hostile, anti-Western default position. The country test-fired a nuclear weapon six years ago.

The latest goodwill gesture has stirred the teapot with readings that perhaps North Korea wants a new relationship with the West following the death of Kim Jong Il, who was replaced by his son Kim Jong Un. The new Supreme Leader was educated in Switzerland and exposed to other Western influences, leading to speculation the country may be headed on a new path.

In fact, however, the terms of the current agreement were being hammered out before the new leader assumed the throne.

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THE NORTH KOREAN DEAL

POSSIBLE FRESH START WITH NORTH KOREA?

Dale McFeatters

The Korea Times, March 2, 2012

The cartoon strip "Peanuts" left an enduring leitmotif: Lucy would tee up a football and cajole Charlie Brown into kicking it, only to snatch the ball away at the last minute.

That inevitable and predictable outcome could serve as a metaphor for negotiations with North Korea. Desperate for aid, Pyongyang agrees to compromises on its nuclear-weapons program and, once it has the aid, reneges on its promise.

Once again, the U.S. has reached an agreement, very promising on paper, with North Korea. It will suspend major portions of its nuclear-weapons programs, forgo further nuclear tests and long-range-missile tests and allow the return of Western inspectors to verify compliance.

The North Koreans are believed to be capable of producing six to 12 nuclear warheads and to have tested nuclear devices in 2006 and 2009.
Included in the inspections is access to a secretly built nuclear-enrichment facility at Yongbyon that the outside world only found out about in 2010 when the North Koreans unexpectedly revealed its existence.

In return, the U.S. made an initial commitment of 265,000 tons of food aid to North Korea and a pledge of "no hostile intent." Somewhat surprisingly, the North Koreans seem to have agreed to allow monitors to ensure that the aid reaches starving common people, especially women and children, instead of the party elite and military.

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NORTH KOREA’S MORATORIUM

NORTH KOREA AGREES TO HALT NUCLEAR TESTS, MISSILE LAUNCHES

Roxana Tiron and Nicole Gaouette

Bloomberg, March 1, 2012

North Korea agreed to a moratorium on nuclear tests and long-range missile launches in an accord with the U.S. that Secretary of State Hillary Clinton called a “modest step in the right direction.”

The government in Pyongyang will also halt uranium enrichment at its facility in Yongbyon and permit verification by international inspectors, according to statements released yesterday by both countries. Further talks will be held on implementing the terms, which also call for the U.S. to provide food aid to North Korea.

The accord came out of talks between the U.S. and North Korea in Beijing on Feb. 23 and Feb. 24, the first since dictator Kim Jong Il died in December and his son, Kim Jong Un, inherited leadership of the impoverished, nuclear-armed country.

The new leader is following the “exact playbook” of alternating confrontations and negotiations established by his father and his grandfather, Kim Il Sung, according to David Maxwell, associate director of the Center for Peace and Security Studies at Georgetown University in Washington.

“I do not see this as any kind of change or breakthrough,” Maxwell said yesterday in an interview, adding that North Korea was angling for food aid.

The U.S. agreed to make final plans to provide an initial 240,000 metric tons of food aid, to be provided in 20,000-ton increments every month for a year, with the “prospect of additional assistance based on continued need,” according to a State Department statement.

North Korea’s Foreign Ministry said yesterday in an e- mailed statement that the talks “offered a venue for sincere and in-depth discussion” of measures to build confidence and improve relations.

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