A route to sell (debt)?

While the world is busy with Islamic terrorism, rising pockets of right wing political confluence, reactions to lopsided economic policies (Trumpism), rising carbon dioxide, green house gases, population pressure on nature and infrastructure, we are hardly realizing the emerging imperialism that will drive the next few decades and the struggle of mankind understanding and dismantling the effect of these economic aggression. This should not be considered as a plunder by any outsider, a third country. These are our own dilemmas that are subjugating us to emerging exploitation. Hambanbtota, CPEC, Africa are all examples of such crisis in making.

Hambantota – A White Elephant on Sri Lanka’s Backyards

NYT Ship Cargo

Sometimes in childhood, our parents always insisted to remain contained within our means. I never realized the importance of this in the context of nation and its economies, until I analyzed the huge infrastructure investments and its negative impact on the economies of Sri Lanka, Kenya, Pakistan and many African nations. The build huge airports, docks, railways etc. that were costlier beyond the business value they provided. Let me take two examples – Sri Lank built their Hambantota ports despite the feasibility studies indicating to the contrary. Only 32 ships docked in an entire year. Such hugely expensive infrastructure became a classic example of a white elephant for not Sri Lanka and all economically poor countries. Sri Lanka was unable to service the debt for this project and the terms of the lease also meant, Sri Lanka to lose the lease to this 15, 000 acre of land for 99 years.

https://www.nytimes.com/2018/06/25/world/asia/china-sri-lanka-port.html

Nairobi Mombasa Railway – Can Kenya service the loans for a lavish railroad?

Obviously a cash strapped economy such as Kenya has to rely on outside assistance for financing and technology to build this 300 mile long rail line. Does this mean this infrastructure was not required? Time and again, countries have been taking recluse to Keynesian philosophy and fiscal policies. Over the last more than 9 decades, it has provided a solid foundation for decision making in infrastructure investment. However, that does not mean a cash deprived country like Kenya should built one of the most sophisticated railway to breed communication and economy. It simply cannot sustain the financing. A simpler economic model would have been feasible.

https://www.theguardian.com/world/2018/mar/01/kenyan-conservationists-protest-as-chinese-company-starts-work-on-railway

China Pakistan Economic Corridor – A classic case of Conflict of Interest

At least, China should utilize this route through Pakistan built with Chinese financial assistance and with the aid of Chinese companies and man power. It deprived $62 Billion dollars of Pakistan’s precious foreign currency in building this economic passage that passes through complex land and even more complex political corridors.

https://en.wikipedia.org/wiki/China%E2%80%93Pakistan_Economic_Corridor

From Djibouti, Sierra Leone, Ethiopia, Senegal, Rwanda Mauritian, Morocco, Zimbabwe – No shortage of underperforming deals

Consulting firm, McKinsey computed that, Chinese loans accounted for about a third of new debt by African governments. These are not lone countries, the list runs long. Gullible minds were only aware of China as a power house of cheap obsolescent products. However, these infrastructure projects turn out to be not just imperialism but ravaging the countries and its people. In Sierra Leone, the presidential elections are heavily influenced by China. Djibouti has an official military Chinese base. Scores of examples are coming out into the open from such investment decisions that will influence the fate of nations and its people. It isn’t economic imperialism, it is neocolonialism

https://foreignpolicy.com/2018/08/31/chinese-aid-and-investment-are-good-for-africa/

https://thediplomat.com/tag/chinese-investment-in-africa/

https://thediplomat.com/2017/07/china-officially-sets-up-its-first-overseas-base-in-djibouti/

While we resent the devaluation of currency, these are currency raiders. While the West plundered the East, these are times of economic poaching and Neo Colonialism of the poor nations.

Johns Hopkins School of International Studies

Rail roads, ports or expresses way all infrastructure to support China to expand it’s market and sell its products? Or else, China should help build these African nations with factories and manufacturing units that will financially enable these countries to be on their own.

Should the World be worried about China’s Belt and Road Initiative (BRI)?

Policy makers and politician across the World are stunned and watching with consternation, the massive ‘Belt and Road Initiative’ undertaken by China. Is this infrastructure investment project centered on China? Is this similar to nation building foundational utilities for a nation similar to building freeways, electricity and other amenities? Keynesian theory has been underpinning the development of several countries across the world. It has consistently shown results and it is this formulation that scares the policy makers across the world. Should the world not be worried?  https://wp.me/p7XEWW-14k

BRI China

Fundamentally this infrastructure investment cannot be based on flawed interpretation of the vision for the future. However, it assumes a unipolar work wherein, they are extrapolating the analysis of the last 25 – 40 years of fulfilling the global demand for products, especially in Europe and North America. This intelligence is based on few fundamental assumptions that the world will forever be a unipolar manufacturing house, wherein the customers are perpetually based in Europe and North America. As long as the status quo remains, i.e., China is the manufacturing hub and the consumers are the developed world, this assumption provides a competitive advantage by investing in Belt and Road Initiative (BRI). Somewhere, this model emulates how the US-UK controls the Suez or Panama Canal and its impact of the global economic flow. Let us understand the situation other than the happy path.

Increasing competition:

First, in the last few decades, the world has grown more multipolar. There is significant competition amongst the nations for capturing the marketplace. Especially those nations, which were at the precipice, are gradually bouncing back to garner their share in global economy. After their chaotic transition, these nations are gradually stabilizing and as the maturity proceeds, they will enter the fray and be competitive.

Dwindling Customer Base in First World:

Last decade has been a testimony to how several Western European countries are gradually receding economic footprint or into recession. This will eventually erode the customer base from Europe. Overall, the population growth is stabilizing and the median age is rising. That does not mean, the customer base will vanish altogether. However, even a modest erosion of customer base from Europe would wipe the profits to make it uncompetitive.

Does that mean the global demand for consumption will decrease? The answer is obviously no. Where is the consumer base moving? First, the consumption will not decrease; instead, it will increase, as is indicated by several policy planners. This will follow phasic manner – the initial burst and the sustained period. The immediate burst will be centered on China, India and South East Asia and the sustained phase will be around the growing economies from African Nations and Latin America along with the traditional customer base in North America and Europe. South East Asia, China and the Indian peninsula will has a potential future growth due to dual factors – rising income levels and incremental recruitment of the expanding population base to propel the consumer market. The sustainment phase will be due to two major pockets – the traditional consumer base in Europe and North America and the expanding base in rising economies. Irrespective, the consumer base will move and be multipolar.

Transition of Blue Collar to White Collar Workforce in China:

As the population is China evolves makes a transition from blue collar to white collar, it will also see an increase in consumption. This can be very well corroborated with the Maslow’s phases of self-actualization. This transition will not support the earlier model of cheap low cost labor required to support a manufacturing economy. In fact, the white collar will propel consumption and China will move towards a net consumer economy.

Collaborative rather than pugilistic policies:

In the last decade, China has been increasingly assertive, lean heavily towards currency manipulation, disrespect world order and hegemonist in its approach. All these would deter the business environment and move the fulcrum towards unfriendly business environment, not realizing the impact of its short sighted policies at the detriment of its national cause.

Simply following Keynesian theory and investing in infrastructure in unlikely to propel the country in eschewing the benefits of it investment policy. China knows that and it will not be a surprise to see either the partner nations pulling out of such collaborations or China itself pulling out of such investment execution with the resultant fall in those ‘Belt and Road Initiative’ bridges.

The Economist | Planet China

https://www.economist.com/news/leaders/21746901-project-century-may-help-some-economies-political-cost-chinas-belt-and-road?frsc=dg%7Ce

https://www.rand.org/blog/2018/03/one-belt-one-road-one-ruler-china-term-limits-ban-imperils.html

 

GDP Post Demonetization

The impact of demonetization in day to day life are well discussed and evident. Select state elections will reflect people’s verdict as well.

GDP is the barometer and an objective evaluation of the impact. Recent reports on the fourth quarter economic parameters point towards economic compression directly related with demonetization. Despite demonetization being a fundamentally appropriate policy towards containing the unaccounted money within the system, it floundered. It is not a political question – it was a national initiative and a unique opportunity. What went wrong? This is a prelude to an upcoming blog on how change could have been managed properly.

Sometimes, those seating at far off can see things better than those who are seating at the epicenter. This is the case with GDP. I had already prognosticated, that the GDP would suffer setback from 0.5 to 1.25. I also opined that demonetization is good in the long term, GDP effect is a short term disability. Of course, the way demonetization was carried and the way the system defaulted to earlier state, it proved no value overall. In the absence of mid – long term value, we can only focus on the short term impact.

Though arguable, it impacted the GDP. True, it removed all soiled Rs.500 currency from the market, possibly from some black marketers and terrorists. That’s the sum total of Demonetization. Here is my question – Did Modi lacked resources in envisioning, (impact and scenario) analysis, planning and executing or did he not trust folks around him or did he do this in haste? I trust, it was a combination of the first and the last reason.

India is too heterogenous country. A system wide change needs a vision, deep rooted trust in people, a sound understanding of the ground level constraints and a thorough evaluation and impact analysis capturing those into the execution plan. In hindsight – Can we think of how this could have been done better, more surgical? Less traumatic? Possibly, therein lies the solution for Second Generation Demonetization.

‘I have not failed, I have just found 10,000 ways that won’t work’ – Thomas Edison.

That which does not kill us makes us more stronger.


Citations:

Despite demonetisation, India’s GDP growth stays 7 per cent: Govt data

https://www.forbes.com/sites/timworstall/2017/03/07/as-fitch-says-that-7-gdp-growth-for-india-looks-odd-given-demonetisation/#3ac3c61c48ed

http://economictimes.indiatimes.com/news/economy/policy/modis-victory-has-made-a-mockery-of-the-criticism-that-demonetisation-got-christopher-wood/articleshow/57627263.cms

 

Chinese (ill) Competition

China’s state protection for their enterprise is equivalent to parents holding their kids in their arms and running the race for the kids.

Almost daily, I see messages to boycott Chinese products. How often have we thought of investing more and buying a costly product made by our local industry? How often do you really research (at the store) about the origin of the product?

Buying locally promotes local economy and consequently, helps a local ecosystem. If one wants to willfully subject our community to despair, we should stay away from contributing to our local economy. We also lose a lot of foreign currency perpetually, when we buy substandard products again and again, it affects the Macroeconomy of the country.

Despite, we all buy cheap products from China. What drives this ambivalence? Or is it that we are only as active as forwarding some messages? What would drive us to actively change our behavior?

Bloomberg published a very interesting story on how Chinese Airlines are flooding the market with cheap ticket airlines and creating an unhealthy competition of killing other national airlines. The Link is here, http://bloom.bg/2hmk28x. Below is generally and most commonly felt reaction to this Chinese Imperialism.

We need to protect our customers, our market and our ecosystem of supply chain and customers. Why? The consequences are grave. Yesterday, it was Imperialist England, tomorrow, it will be Imperialist China. We need to break this vicious cycle, somewhere. What about the protections offered through WTO?

China is circumventing WTO approved competition

Article 20 of the General Agreement on Tariffs and Trade (GATT) allows governments to act on trade in order to protect human, animal or plant life or health, provided they do not discriminate or use this as disguised protectionism. However, WTO is still lopsided with built-in obsolescence and China have found a way to circumvent competition with State Protection.

Ambivalence or Apathy?

Almost daily, I see messages to boycott Chinese products. Mostly, we all agree that we should not buy or abandon Chinese products, either for their substandard component or built in obsolescence.  How often have we thought of investing more and buying a costly product made by our local industry? How often do you see really investigating yourself at the store about the origin of the product? Despite, we all buy cheap products from China.

We all know, buying locally promotes local economy and consequently, helps a local ecosystem. If one wants to willfully subject our community to despair, we should stay away from contributing to our local economy. Now, these are not unknown dynamics, despite, we all show apathy in actively changing our behavior. Some little facts not thought off generally, we lose a lot of foreign currency, it affects the Macroeconomy of the country too.

What drives this ambivalence? Or is it that we are only as active as forwarding some messages? What would drive us to actively change our behavior?

Value for Money

My father bought a ceiling fan from Usha in 1965 and except for occasional repairs or change of coil, as of 2016, that ceiling fan is still working. I knew a Professor, who worked as a fellow around at a US University at around the same time. While going back, he bought a refrigerator and barring occasional change of Freon, that is still working. That ceiling fan or that refrigerator, both hold a value despite fifty years of it continuous work. These are examples of Value to Money.

The Supply Chain – Willful Omission

In 2003, I bought a pedestal fan to withstand the summer heat of Texas. It was $39.99 plus taxes. I was so excited for the savings on that pedestal fan. Within three years, the legs broke and I had to discard that pedestal fan. Obviously, it was made it China. However, China is not to be blamed alone.

It is a completely well oiled machinery that is destroying the value of the customer. I bought that fan from one of the biggest retail outlet. This retail outlet, as is usual in the industry, has several vendors that procure for them from China. The manufacturers, the vendors, the retailers all know that the fan will last beyond the three months of warranty period. Despite, they promoted the product. This is not an act of omission, this is an act of willful commission in promoting a product that destroys the money of your customer. Why would an entire chain do that? Why would others keep watching? Obviously, their business model runs on these cyclic purchases occurring every so many years.

Lack of collective thinking is organized society

Almost daily, I see messages to boycott Chinese products. Almost all agree that we should ban or abandon Chinese products, either for their substandard component or built in obsolescence. Despite, we all proceed and buy cheap products from China. How often have we thought of investing more and buying a costly product made by our local industry? How often do you see really investigating yourself at the store about the origin of the product?

This is primarily dictated by individual interests which overrides our norms of collective living, how can we change this behavior?

We should boycott Chinese products, including Chinese services. This is slowly going towards economic imperialism. First, low cost products with built in obsolescence and state funded manufacturing with substandard material flooding the market to kill competitive industry built on true enterprise. Now, State sponsored services killing competitive industries.

This sounds similar to a competition at school where parents are (cheating) to help their kids win the game. It is fair to drop kids to school, it is fair to be with them while they are studying, but it is not fair to do their homework. Here, China is actually holding these enterprises in their arms and running for them.

Chinese State funded Enterprise a Threat to Global Economy at Local Scale.

State funded subsidized industry with gross mismanagement of labor and environmental laws. The model is reminiscent of a philosophy adopted from vexed state machinery. If we think, this is specifically affecting only one country, we are wrong. This is almost universal. Chinese state sponsored protectionism is a threat across the globe. Almost all local economies, irrespective of the countries are likely to to affected, to a greater or lesser degree.

If a vendor has apathy towards his customer and their sentiments, if a customer lacks that collective social thinking and the Government lacks the oversight, can we really get rid of these substandard products built with obsolescence from China?

Cognitive dissonance or Collective Apathy 

Samuel Beckett famously said in his Novel Waiting for Godot, “Nothing happens. Nobody comes, nobody goes. It’s awful.” Or is it…“Let’s go.” “We can’t.” “Why not?” “We’re waiting for Godot.”

I believe, only a collective responsible thinking will drive this change. Who would do that?

(Wow, don’t get me wrong – Be careful; let’s differentiate Chinese man from China. Yes, it has always been challenging for us to differentiate between Pakistan and Pakistani. So, let us not repeat that).

http://bloom.bg/2hmk28x

Demonetization – A Class Divide?

Demonetization – A Class Divide?

Despite being a tool for fighting corruption, demonetization has polarized us as a society. How do we, as a society, think on a matter of vital national interest? Please see the opinion of the common man at the end of this blog. What should be done to make this a national initiative? Please read http://wp.me/p7XEWW-km

Background

The current demonetization drive for stopping corruption has either become a boon or a bane. Demonetization of currency has strongly opinionated Indian. At the core of our values, we all want corruption to be eradicated. We all differ in our perspective towards how this should be executed. Eradicating corruption is a fundamental initiative that has significant impact to our identity, polity and to the country’s Macroeconomy. Across sections of the society, many are doubtful and cynical. What makes us feel so? Why do we see a class divide and a strong polarization of opinion? What can be done to reduce this gap and drive this initiative as a national cause?

Is this stop gap? Or will it really stop?

Nefarious means are unlikely to change unless we see a substantial change in attitude towards way of living and transacting in our daily life. Whenever radical change is initiated, and if it is unaccompanied by fundamental change, the system is bound to go back to status quo. I already see those signs. So demonetisation will either stall or impede the flow of black money, temporarily but it won’t nix this at the bud.

Who likes or dislikes demonetization?

Service class and Expatriates for sure are supportive of this initiative. Their earnings are all white transactions. Business, Politician, Illegal (drugs, alcohol, nefarious political-business connections and terrorist), those using hawala, are unlikely to accept or adopt this change. Farming community will be neutral. Poor will be swayed by the noise rather than the voices they hear.

What an irony, we haven’t learnt for centuries

Earlier, the Englishman arrived in sixteenth century. They stayed, understood, conquered, consolidated, ruled and looted and deprived this golden land not just materially but made us defunct morally.

We still haven’t changed. We still think our cause above the country, prefer to be blind sighted to others perspective. Seems like, that is within our genome and our destiny or else, why can’t we listen to each other’s perspective, why should we not have a national inclusive dialog?

No, that inclusive dialog won’t happen because somewhere, we deeply trust that ‘My truth is superior than your truth’ and we go a step further, to engross all the credit for this achievement. Collectively, we have forgotten what is best for this country.

We know corruption is a national menace, it’s like an enemy within.  In the best interest of the nation, we should be unified for this national cause, we should come forward and adopt and accept, and provide constructive recommendations, rise above ourselves to let this happen. To some, this may sound hollow, but nations like Japan and several from European Union, have risen because, their constituent decided to adopt that pathway. It is not a utopian principle, it’s realty with pragmatism.

Should Prime Minister Modi be inclusive?

Yes, if this needs to succeed! Do we need to do more than withdrawing old currency and circulating new notes? Do we need this to be backed up with change in our attitude and fundamental way we think and work in our daily life?

Why Presidents Fail And How They Can Succeed Again

Kamarck, a Sr. Fellow at Brookings Institute Governance Studies, argues that presidents spend too little time investing on Governing. She explains the difficulties of governing in our modern political landscape, and offers examples and recommendations of how our next president can not only recreate faith in leadership but also run a competent, successful administration.’ I believe, we can easily extrapolate this to include our administrators as well.

A Kind request

This is a non-partisan exercise, not supported or aligned with any political group. Neither is this supported by any business or vested interest. To many, it is a matter of national importance and I would appreciate your motivation in spreading this message. By spreading this message, you may get to know the perspective of those within your community.

Please share your opinion when you visit the survey on the link below. As always, polls are anonymous. I have enabled single voting per device. If you have a question, kindly use the comment box to submit.

Note: I have disabled advertisements from this site. Despite if you see any advertisements, kindly report to me with a screenshot or time stamp the event. 


Additional Reading

  1. Demonetization and India’s Macroeconomy – Will Rupee Depreciate? Copy paste this link if the above won’t work http://wp.me/p7XEWW-jt
  2. Surgical Demonetization? What Is Good And What Needs To Be Fixed? Copy paste this link if the above won’t work http://wp.me/p7XEWW-eA
  3. Why Presidents Fail And How They Can Succeed Again