Modi-Abe Camaradarie - Getting Down to Brasstacks

Prime Minister Abe in India now, and its time, once again, for the media to make hay while sun shines.

The Indian Express has come out with a special RED 'advertorial' initiative (pages 6-7) to mark the ocassion. It has the usual (unattributed) writeups on the history of investment, trade and social cooperation between Indian and Japan, as well as fillers to mark spaces where the expected advt revenue did not turn up. One of these is a "Fact File" box right below a message from the new ambassador designate, Mr. Kenji Hiramatsu, and the first point here states: "Japan is the world's largest consumer of Amazon rainfalls"!

Indian Express Fact File: Really?

What was that again?? Japan is the world's largest consumer of rainforest wood, but where on earth did the IE staffer get this absurd "fact"?

Not to be left behind, the HT Mint marketing media initiative carries a marketing initiative titled "India-Japan Deepens Ties". Here too the only advertisement is from Maruti Suzuki and the set pieces toss around numbers that make little sense. During Modi's visit last year, the title article claims, "Abe had set a target of 3.5 trillion yen $33.5 billion of public and private investment.." . There is no mention of how much of this has actually fructified over the past one year, since November 2014. The only data point at hand is a 2013 FDI figure of $1.7 billion!

Perhaps journalists working on advertorials can be excused for putting out shoddy data. However, the loss of credibility in the color-pages is not balanced out in the editorials or oped pages. In the opinons section there is one piece from Harsh V Pant who makes one pointed comment - "Thought there has been significant movement on these issues over the past year, these initiative still remain highly contested between the bureaucracies of the two nations."

Therein lies the rub. The Dedicated Freight Corridor project agreed a decade ago continues to be a snailpaced work-in-progress. And now we have the new promise of a $14.7 billion (₹ 98,000 Cr) bullet train project linking Mumbai and Ahmedabad.

While there has been a lot of hype around the Modi-Abe camradarie, substantial progress on India-Japan linkages is still bogged down in the red-tape, both in New Delhi and in Tokyo.

What exactly does it take to get the babu's cracking on both the sides?


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LINKS and REFERENCES:

* 11Dec15 - Reuters - Japan's bid for bullet train gets cabinet nod -- http://in.reuters.com/article/india-japan-train-idINKBN0TT0PI20151210
- Cabinet approval for $14.7 billion Japanese proposal...Mumbai-Ahmedabad - 503 km...Japan had offered to finance 80 percent of the cost ...at an interest rate of less than 1 percent.

* Pant, Harsh - 11Dec15 - The Abe-Modi Connect - http://www.livemint.com/Opinion/yoDbATculxoLxfwhlzSL8N/The-AbeModi-connect.html
- US-2 amphibious aircraft - submarines - nuclear plants
- Earlier this year Japan lost out to China is a bid for a high-speed railway in Indonesia

* Mint marketing media initiative
- 2014 Abe set a target of Yen 3.5 trillion $33.5 billion of public and private investment and financing from Japan including ODA to be made over a period of 5 years
- JETRO - number of Jap companies operating in India has grown from 267 in 2006, to over 1800 in 2013.

* 11Dec15 -- IE -- http://indianexpress.com/article/india/india-news-india/japanese-pm-shinzo-abe-to-arrive-today-number-of-pacts-on-table/

FDI and the Export of Polluting Industries

An interesting article was posted on Academia today - "Japan's Global Environmentalism: Rhetoric and Reality".

It was a bit dated (1998) but the topic dealt with a time-period when I worked with Japanese ODA, and of how Japan deliberately advocating high-tech solutions to environmental problems in developing countries simply in order to maximize purchases of capital-intensive technology and high-tech production services from Japan.

Numerous I-wish-I-knew-that-before points turned up, for instance -

• The disastrous and ultimately aborted Narmada Dam project of theWorld Bank was closely linked to hydroelectric facilities funded by Japanese ODA (Kuroda, 1992).
• Japanese environmental problems have been transferred along with FDI in mining and manufacturing operations to developing countries like Malaysia and the Philippines (Harada, 1991; Kojima, 1994;Nester, 1990; Ofreneo, 1993; Ui, 1989).
• Kawasaki’s transfer of its iron ore sintering plant to the Philippines after environmental lawsuits were filed by local citizens near the original location in ChibaCity, Japan (Yokoyama, 1992).
• Japanese-made pollution filters do not work because the energy inputs are from low-grade coal, instead of the higher-quality fuels domestic Japanese corporations use. Therefore, dirty industries have been transferred overseas without the environmentally cleaner—but more expensive—technology which would be used if these industries were located within Japan (Harada, 1991). 
• Japanese practice of dumping of hazardous waste in the oceans, and exports of waste to Korea, Taiwan, and Thailand (Kumamoto, 1994). 
• Japan is the only OECD country not to adopt the decision on the Control of Trans-frontier Movements of Wastes Destined for Recovery Operations (Hopp and Olson,1994). 
• 15% of Japan’s landmass has been slated for resort development as a consequence of the 1987 Resort Act (Beasley, 1992), and much of this land has been used for golf courses. Recently, high land prices in Japan have fueled the expansion of golf courses across Southeast Asia and the Pacific.
• In the early 1990s some of the world’s highest rates of deforestation occurred in Sarawak, Malaysia, where over 66% of logs were being exported to Japan to fuel demand for logs and pulp(Thompson, 1993).
• In fact Japan leads the world in the importation of tropical hardwoods by a large margin (ITTO, 1995). Japan also has extensive FDI in wood chip and pulp production in Chile, Australia, Indonesia, Malaysia, and the USA.
• Instead of banning tropical hardwood imports or urging its Southeast Asian neighbors to ban exports, Japan’s solution instead has been to offer environmental aid for reforestation. Reforestation, however, usually consists of particular species of imported trees (primarily eucalyptus) which are most profitable for export (Ui, 1989: 396).
• In the Philippines, Japanese aid has modernized the fishing port and market facilities and most of the large commercial fishing operations are Japanese owned (Ofreneo, 1993). As a result of over-fishing and ocean pollution,small-scale Filipino fishermen’s annual catch has been reduced dramatically (Broadand Cavanagh, 1993).
• Mitsubishi was a major contributor to Indonesian deforestation (Hurst,1990) and currently owns large shares of interests in logging companies, saw mills,and dangerously polluting industries in Malaysia (Karan and Jasparro, 1998).

The complete paper, published in Political Grography is available here.

> Taylor, Jonathan (1998): Japan's Global Environmentalism: Rhetoric and Reality, Pergamon Political Geography, 18, 1999

China`s Official Development Assistance

Q - How much is China spending in terms of `development aid` to Asia, Africa and Latin America?

A - Nobody knows – except the Chinese politburo.

If there is one million (or billion) dollar question that worries the Bretton-Woods Institutions (IMF, WB, UN), this must be it. Worrying, because nobody except the Chinese bureaucracy really knows how much money is really going towards propping up unstable regimes in Africa; how much aid is tied to extraction of oil & minerals for the Chinese market, and how much aid is actually going for building institutions and teaching poor countries `how to fish`.

Over the past half-century, development aid had become a cozy little game for politicians in the `developed` world. Set aside a small portion of the national budget for 'helping poor countries', get them to sanction projects in sectors where your own companies are competent; ‘persuade’ them to sanction projects and contracts to these companies, and everybody does home feeling happy – except, of course, the bewildered poor in the recipient countries.

Now, when the so-called ‘developing countries’ try to play the same game, they are called `neo-colonists`.

Last month (22 Feb.), we had a rare opportunity to interact with Prof. Jiang Shixue from the Chinese Academy of Social Sciences at a workshop titled, Comparative research of Chinese International Assistance to Asia, Africa and Latin America.

Here are some Q& A’s from the session:

Why is China so secretive about its aid programs?

There are two reasons for this - first of all, China continues to be a recipient of foreign aid so, for the time being, it wants to play down the numbers and keep an low profile. Secondly, it wants to avoid competitive comparison between its aid-recipients, and the diplomatic tussles that might follow.

What are the forms of Chinese Aid?

Grant Aid (free lunch), Zero or low-interest loans, technical assistance, training (over 100,000 trainees at present), disaster relief, debt relief (374 packages for 49 countries in 2007), medical aid (20,000 doctors in 65 countries), language-courses in Confucius Institutes (200 teachers in 10 countries)

According to the Chinese Ministry of Commerce (2008), over 2000 projects are being implemented in 160 countries worldwide.

What are the principles underlying China’s aid programmes? 

• Since 1964, Eight Principles underlie Chinese assitance to other countries - mutual benefit, no political pre-conditions, equal treatment for loal & Chinese experts, supply of quality equipment, etc.,
• From the 1980 onwards there have been some additions and amendments - there are fewer large-scale projects; Africa focus (Mao - `China was carried to UN on the back of African countries); emphasis on ‘south-south’ cooperation and in `teaching how to fish` (capacity building) rather than ‘gifting fishes’ (grant-aid)
• Countering Taiwan – Opposing Taiwan`s `dollar diplomacy` - especially in Africa and Latin America (12 or 24 countries which recognize Taiwan are in South America). Eg – In an African country China preempted Taiwan by providing ‘aid-money’ for paying salary for army personnel and a raise for its bureaucrats.
• Avoiding `Slapping own face to look fat` - avoid harming oneself by giving aid to other countries
• Not feeding the `white-eyed wolves` (reference to Vietnam which allegedly used Chinese armaments against the Chinese themselves!)

Landmark Projects?

• Public buildings in Barbados (GDP percap $12,000)
• National stadium in Bahamas (GDP pc $24000) with a capacity to seat 30,000 people (1/10 total population)
• Africa – The Tanzania-Zambia railway built using 56,000 Chinese technicians of whom 70 died.

The presentations and discussions that followed were unfortunately clouded by the mix-up between FDI and ODA.

Prof. Seifudein Adem (Binghamton Univ), in his paper, `China`s dual diplomacy in Africa and its consequences: Preliminary Assessment`, alleged that Chinese aid for the ICT sector is used by Zimbabwe to suppress information. He also noted that China is only No.4 in terms of FDI to Africa (After Singapore, India and Malaysia), and that only 3% of Chinese FDI goes to Africa - as opposed to 37% to Latin America. He pointed out that Africa suffers a huge infrastructure deficit (needs $22b) so any Chinese input gets magnified. In 2006, China provided $7b to Africa (France $11b)

Dr. Claude Sumata (University of Sussex), presented a paper titled, ‘The Challenges of Chinese-DRC Economic Cooperation: Is it a win-win partnership?`. He noted that in the Democratic Republic of Congo – one of the biggest recipients of Chinese aid - between 1980-1990 the GDP climbed by an average of 1.2% a year; from 1990-1994, it has been declining at the rate of 9.5% a year. Chinese FDI goes mainly to extractive sectors - oil and mining (Eg. In 2007, a JV Socomin signed a deal for 10mT of copper & cobalt)

At the end of the day it is the numbers that speak for themselves. China has the largest foreign exchange reserves in the world - over $ 2 trillion. A fraction of this - $ 763 billion -  is deposited with the US Treasury, and helps in propping up the budget deficit in the American economy. 

So perhaps it is only logical for the Chinese to spread around the excess cash to butress their own safety and security in a world where the only certainty is that the dominance of WW2 victors' is on the wane.

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LINKS & REFERENCES 

• Yao Yang participates in The Economist debate on China´s presence in Africa, Peking University - http://en.ccer.edu.cn/ReadNews.asp?NewsID=6799
• Economist Debates - China & Africa (18 Feb 2010) - http://www.economist.com/debate/days/view/468
• Bloomberg - China's Forex Reserves Exceed $2 Trillion (20 March 2007) - http://www.bloomberg.com/apps/news?pid=20601087&sid=alZgI4B1lt3s 

IN THE NEWS

• MPs clash over British aid to China (The Guardian, 12 March 2009) - http://www.guardian.co.uk/politics/2009/mar/12/mps-clash-over-uk-aid-to-china