Friday 31 March 2017

East Asia far ahead of South Asia (Pakistan Observer)

M D Nalapat | Geopolitical Notes From India

THERE are two geographically small territories that have made great progress, Kuwait and Taiwan. While still a sheikhdom administered by the Al Sabah family, Kuwait has made significant progress towards becoming a more complete democracy. Elections take place at frequent intervals, and very often candidates get elected who are not, to put it in understated language, admirers of the Al Sabah family. Indeed, very often senior ministers in the Kuwait government get “grilled” by parliamentarians and accused by them of corruption and such other misdeeds. This columnist has witnessed campaigning for elections in Kuwait, and in several of the gatherings addressed by candidates, there has been vociferous criticism of the country’s administration, including members of the royal family.
There is no equivalent to such happenings in other countries within the Gulf Cooperation Council, who must sometimes be aghast at the extent of freedoms seen in Kuwait as compared to other sheikhdoms barring Dubai, which in many respects is a cosmopolitan city. Democracy has, paradoxically, sometimes had the effect of rolling back rather than promoting liberalism in policy, an example being the fact that the sale of alchohol is banned in Kuwait, unlike in Dubai and Bahrain, where it is freely available. Even Kuwait Airways refuses to serve liquor on its flights, which may partly explain by Etihad Airlines and Emirates Airlines each carry annually many more times the passengers as Kuwait Airways does, although the cabin service of the latter is friendly and the aircraft are in good condition.
Given the conservative nature of significant sections of Kuwaiti, had the country been a republic instead of a sheikhdom, the chances are that the freedoms enjoyed by the citizen may have been curtailed rather than expanded. A large proportion of the royal families in the GCC are in reality modern people, many having spent several years abroad, including in school and university. However, they usually are unwilling to ensure that the freedoms they enjoyed in Europe or the US get extended to their own citizens, perhaps because they are wary of a backlash from conservative elements there. The Al Sabahs have gone further than most of their fellow royals in trying to ensure that at least a whiff of the 21st century is felt in Kuwait. Not coincidentally, the Kuwaitis are a confident people, much like those of another prosperous city-state, Singapore.
Given that President Donald John Trump is systematically freeing the energy industry in the United States from several of the restraints put in place by Barack Obama, the odds are high that oil prices will fall further rather than rise. Indeed, they may settle at around $ 30 a barrel, in contrast to the triple digit figures that were the norm when those champions of the oil industry, George W Bush and Richard Cheney, were in charge. Interestingly, the US even under Obama followed the disastrous path of France and the UK by creating chaos in Libya, even though the example of Iraq had shown what the consequences of such a militarily induced regime change were. If oil prices shot up to absurd levels just a few years ago, much of the blame lies in the way the US and its allies created conditions in Iraq and Libya that drastically reduced output from these two countries.
The imposition of sanctions on Russia, another major oil producing country, also had a like effect. Policies adopted by the Atlantic Alliance impacted the prices of commodities, sending them shooting up in a situation where traders based in Chicago and other commodity trading centres on both sides of the Atlantic derived the most benefit. Unlike his predecessors, thus far President Trump appears to be favouring policies that would reduce the price of oil at pumps across the world, except of course in India, where high taxes have ensured that the consumer has derived little benefit from the fall in global oil prices. What is unique in India is the fact that this situation has not led to any discernable unrest but has instead been accepted by the population, much the way demonetisation subsequently was.
The ability of Prime Minister Modi to explain away the impact of hardships is a quality that is evident in the way in which the public accepted high price of petrol and diesel in India as compared to developed countries or the withdrawal at less than four hours notice of the legal tender status of 86% of India’s currency. However, falling oil prices will necessitate the setting up of revenue streams other than oil in the GCC, and an effective way would be to promote the Knowledge Economy by encouraging a modernisation of the education system. For this to happen, however, there will need to be a much greater tolerance for individual rights and freedoms than is found even in Kuwait. Such a secular decline in oil prices will, however, benefit East Asia majorly, especially Taiwan, which is wholly dependent on the outside world for its oil.
The gap between South Asia and East Asia (PRC, RoC, Japan and South Korea) can be seen in the value of currencies. When this columnist first visited Taiwan in 1996, the Taiwan dollar was less in value than the Indian rupee. Today, the Taiwan dollar is worth more than double the rupee. Throughout South Asia, currencies have continued to fall relative to the US dollar and the euro. Of course,this works to the benefit of corrupt politicians and officials with substantial amounts of cash in foreign banks. For such individuals, it is essential that local currencies in South Asia continue to decline in value, so that their dollar and euro hoards generate more of their own currencies while being exchanged, as for example during election time or to pay a bribe.
If in the 1950s East Asia was as poor as South Asia, from the 1980s onwards the former has raced aheads, so that per capita incomes there are in some cases ten times and more than they are in South Asia. And because there is a steady downward drift of South Asian currencies, several investors hesitate to invest in the country. They would prefer a stable or a rising currency rather than paper that loses a part of its value almost every week, as is the case in some South Asian countries. The economic chasm between East Asia and South Asia stands as testimony to the incompetence or dishonesty of purpose of so many of South Asia’s leaders,who themselves became rich while their country remained poor.

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