IASbaba’s Daily Current Affairs – 13th August, 2016

IASbaba's Daily Current Affairs Analysis, IASbaba's Daily Current Affairs Aug 2016, National, UPSC

IASbaba’s Daily Current Affairs – 13th August, 2016

ECONOMY

TOPIC: General Studies 3

Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Investment models

Important International institutions, agencies and fora- their structure, mandate.

Bilateral, regional and global groupings and agreements involving India and/or affecting India’s economic interests

AIIB to act as an “ASIAN TOOL” to several Asian economies

About AIIB

Asian Infrastructure Investment Bank (AIIB) is an international financial institution that aims to support the building of infrastructure in the Asia-Pacific region.
The bank has 30 member states (all “Founding Members”) and was proposed as an initiative by the government of China.
AIIB is a multilateral development bank (MDB) conceived for the 21st century. Through a participatory process, its founding members are developing its core philosophy, principles, policies, value system and operating platform.
The Bank’s foundation is built on the lessons of experience of existing MDBs and the private sector.
The AIIB will complement and cooperate with the existing MDBs to jointly address the daunting infrastructure needs in Asia.
The Bank’s openness and inclusiveness reflect its multilateral nature. AIIB welcomes all regional and non-regional countries, developing and developed countries, that seek to contribute to Asian infrastructure development and regional connectivity.

The United Nations has addressed the launch of AIIB as having potential for “scaling up financing for sustainable development” for the concern of global economic governance. The capital of the bank is $100 billion, equivalent to 2?3 of the capital of the Asian Development Bank and about half that of the World Bank.

The bank was proposed by China in 2013 and the initiative was launched at a ceremony in Beijing in October 2014.

Asia and AIIB

Lack of infrastructure, poor intra-regional and regional connectivity and poor basic amenities in urban spaces – are some of the major challenges afflicting several countries of Asia.
The Asian Infrastructure Investment Bank (AIIB) has been projected as an “Asian tool” to deal with such challenges that have stunted the growth prospects of several Asian economies.
Recently, in late June 2016, first-ever annual meeting of the board of governors of AIIB was held in Beijing. (AIIB Headquarters – Beijing, China)
Outcome of June 2016 AIIB annual meet – approved first four AIIB-funded projects.

First four AIIB-funded projects:

Bangladesh’s Power Distribution System Upgrade and Expansion Project;
Indonesia’s National Slum Upgrading Project (co-financed with the World Bank);
Pakistan’s National Motorway M-4 (Shorkot-Khanewal Section) Project (co-financed with the ADB) and;
Tajikistan’s Dushanbe-Uzbekistan Border Road Improvement Project (co-financed with the European Bank for Reconstruction and Development).

Together, these projects are worth US$ 509 million.

The benefits of AIIB:

First, with the current Asian economy under mounting downward pressure, strong infrastructure spending will help to create demand, increase jobs and bring about a smoother and more effective production, circulation, and consumption environment for the overall economic operation. It will also contribute to an enhanced regional infrastructure connectivity, which will then facilitate regional economic cooperation and integration. Therefore, as the driver of sustainable growth and regional economic integration, infrastructure investment will empower economic expansion in Asia.

Second, Asia is now facing a dilemma of “a gap between great demand and severe capital supply,” especially in developing countries. On the one hand, the current infrastructure of Asian economies falls far short of meeting the needs for sustainable economic development. On the other hand, most Asian countries suffer from a capital bottleneck in infrastructure investment, which seriously restricts their infrastructure development and construction. The Asian Development Bank (ADB) estimates that developing countries need to invest US$8 trillion from 2010 to 2020, just to keep pace with expected infrastructure needs.

Third, what Asia lacks is not really capital, but the capability to channel it. There is a comparably massive accumulation of savings, which see China and ASEAN countries respectively controlling $US3.99 trillion and $US700 billion in reserves, not to mention other Asian countries. The supply of savings, much of which is generated in Asia, is more than adequate to begin to fill some of the demand for infrastructure. The capital bottleneck therefore does not refer to a capital shortage, but the lack of a practical financing platform and business mode, which are both essential to effectively turn the huge capital potential inside and outside Asia into investment in infrastructure.

Fourth, the World Bank and the ADB and other well-established institutions have the expertise to lend a lot more for infrastructure, but have prioritized more on poverty reduction and moved in a different direction. Net lending by multilateral development banks on commercial terms has been negative in five of the last ten years, including 2011 and 2012. The World Bank and the ADB are now focusing on concessional lending and knowledge sharing with low-income countries, leaving an important niche to be filled by a new financial institution.

And here comes the AIIB. As a financial catalyst of the region, it plans to start with $50 billion from governments and at least another $50 billion from financial institutions and private capital. Its mandate is to focus on financing in infrastructure development that helps Asia at both the national and regional levels.

The AIIB, as a multilateral development institution, will be a highly professional and efficient platform of infrastructure financing. It will tap into the expertise of experienced MDBs to build the capacity to assess and implement projects successfully.

The AIIB is an open and inclusive platform that welcomes not just countries from Asia but others as well, including the United States and European countries in accordance with the principle of first Asian countries and then non-Asian countries.

India can gain by being active in the Asian Infrastructure Investment Bank

Enhancing investments: India is expected to gain directly if its investment proposals get approved.
Enhancing connectivity and infrastructure: Connectivity and infrastructure within the country and with countries in the neighbourhood is critical.

AIIB may prove instrumental in developing Sub-regional infrastructure projects such as Bangladesh-Bhutan-India-Nepal (BBIN) corridor and inter-regional projects such as India-ASEAN rail and road connectivity projects need huge funding.

India is seeking US$ 2-3 billion from AIIB for urban development, railways, and energy sectors.

To develop its north-eastern region: Develop north-east region is a goal which can be swiftly achieved through greater regional cooperation and the support of multilateral funding agencies.

For this purpose, India may consider pushing BBIN and the Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation (BIMSTEC) corridors under its AIIB proposals.

Linking BIMSTEC countries with North-East India: BIMSTEC countries are way below the global connectivity and infrastructure standards and are in need of huge and speedy investments.
Linking India’s eastern ports with south-east Asia
India’s comprehensive maritime engagement: Investments from AIIB can also plug gaps in India’s comprehensive maritime engagement with the east and south-east Asian countries under the Act East policy.

Will China-led AIIB help India’s projects?

The chances that AIIB will approve projects put forth by India are high.

China wants India to be a part of the OBOR. Most of the projects funded by AIIB are likely to be linked to OBOR in the long-run as stated by the Chinese vice-Premier Zhang Gaoli. Thus, AIIB cannot be seen in isolation.
Though India is a member of AIIB, it has not shown a willingness to be a part of the OBOR.
Apprehensions vis-à-vis the transparency of the OBOR agenda, challenges related to equitable benefits for all, the proposed China-Pakistan economic corridor which would pass through Pakistan-occupied Kashmir, and China’s repeated incursions into Indian Territory are major factors shaping India’s stand on OBOR.

It is vital for China to prove to the other members that it will not attempt to dominate the AIIB and that AIIB will not follow China’s “no strings attached” approach in funding projects.

Given that China is the largest shareholder with 26.06 per cent voting shares, members’ apprehensions are not baseless. India and Russia are the second and third largest shareholders with 7.5 and 5.92 percent voting shares respectively.

The gap between the first and second shareholder might tempt China to use its veto power on a particular project. Clearly, the member countries have to adhere to the rigorous project selection criteria following international best practices and show caution in approving territorially sensitive projects.

Conclusion

In short, by initiating the AIIB, China demonstrates its willingness and capability to provide more public goods to the international community. Rather than a rivalry to challenge existing MDBs such as the World Bank and the ADB, the AIIB will be a partner to work together with its counterparts for economic development and prosperity in Asia.

India is likely to gain by being an active member of the AIIB. Its presence is not only crucial in making the bank a success but is also vital in improving infrastructure in the Indian subcontinent and beyond. In order to make full use of the opportunities provided by the AIIB, New Delhi needs to come up with realistic and economically viable projects.

Connecting the dots:

Can joining the China-led Asian Infrastructure Investment Bank (AIIB) improve the Indian economy? Describe.
India has recently signed to become founding member of New Development Bank (NDB) and also the Asian Infrastructure Investment Bank (AIIB). How will the role of the two Banks be different? Discuss the significance of these two Banks for India.
The Asian Infrastructure Investment Bank (AIIB) has been projected as an “Asian tool” to deal with challenges that have stunted the growth prospects of several Asian economies. Do you agree? Critically comment.

NATIONAL

TOPIC: General Studies 2

Parliament and State Legislatures – structure, functioning, conduct of business, powers & privileges and issues arising out of these

Structure, organization and functioning of the Executive and the Judiciary Ministries and Departments of the Government

Towards directly elected and empowered mayors

Political ladder of becoming a Mayor in urban administration is considered as a stepping stone to state or national level politics.

However, the urban mess in which India finds itself today is due to lackadaisical approach to urban administration and city-level institutions

Why in news?

A Thiruvananthapuram MP has recently introduced a private member’s bill
To: provide for direct election, and empowerment of the office, of mayors in large Indian cities

The need for an independent Mayor

An empowered office of a directly elected mayor is desirable.

However there are challenges to reach there

Status Quo

The vested interests of state government.
The state governments are not in favour of delegating more powers to ULBs
The political honchos (Chief Ministers) winning from rural areas or political parties relying on rural voters wish to transfer the urban resources to rural areas for their political gains
In case of direct elections of Mayors, there are considerable chances of state government refusing to devolve more power and resources to Mayors.
This reduces the post of Mayor to a figurehead
If any bill is introduced in Parliament on local bodies, it cannot do much as the final authority rests with state government to delegate power to office of Mayor.
- The new bill accepts this fact when it says that the mayor “shall exercise such powers and discharge such duties of the Municipality as the Legislature of a State may, by law, confer upon him”.

Municipal Commissioner

Even if some powers are delegated to municipality, there exists a municipal commissioner to perform executive function.
Thus, there can be overlapping of functions and also reduce the power of mayor to take the administration of urban bodies completely
- The new bill makes the mayor the executive head of the municipality.
- Also, bill gives the mayor the power to “authorise the payment and repayment of money relating to the Municipality”.

Political differences

In Shimla, the BJP government of Himachal Pradesh had amended the Municipal Corporation Act in 2010 to introduce direct elections for the office of mayor and deputy-mayor.
Two national parties tried to cash in the important offices of Mayor and deputy Mayor in Shimla.
The seats were won by a leftist party [CPI (M)] in 2012 elections
The 26-member corporation is dominated by rival parties and hence the directly elected member is not able to work efficiently.
The Congress government has now scrapped the direct election amendment
- The bill empowers the mayor to veto a resolution passed by the municipality.
- Thus, the mayor is more ‘Presidential’ than ‘Prime Ministerial’

Conflicting interests

If a Mayor executes project, the local legislator will tend to lose his ground in popularity.
The legislator has to legislate and scrutinise the performance of executive.
Thereby, the directly elected and empowered mayor will be perceived as a potential rival to the legislator. Such legislator may command to undercut mayor’s authority.
Hence, separation of power between executive and legislator may arise.

Separation of powers is essential for good governance

Political parties nor the voters reward their MPs and MLAs for their parliamentary performance.
Hence, schemes like Members of Parliament Local Area Development (MPLAD) and Members of Legislative Assembly Local Area Development (MLALAD) have to exist to help MPs and MLAs prove their dedication to their constituency.
However, with such schemes, the voters get confused about the role of the legislator with the executive.
It also blurs the lines between the three tiers of government: the Union, the states and the local self-governments
Though, the MPLAD scheme has been upheld by SC in case of Bhim Singh vs Union of India (2006)
- Court argued that “in modern governance, a strict separation [of powers between the executive and the legislature] is neither possible, nor desirable.”
Because of such interpretations, Sansad Adarsh Gram Yojana came into foray once again with MPs adopt some villages and develop them into modern villages

Understanding role of MPs and MLAs

They are not elected to plan and implement schemes at the local level.
They are expected to fulfil constitutional functions like
- Making laws
- Formulating policies
- Overseeing the implementation of laws and policies by the government
- Making financial resource allocation through the budget process
- Holding the government accountable for spending the funds for the intended purposes
Schemes like SAGY and MPLADS distract them from their main roles
To support their constitutional mandate, there are other ways too
- Research support at individual and institutional levels to understand and execute the complexity of policy and law making and financial issues
- Meeting of Parliament for more than the 70 days it meets in an year. The average was 125 days in 1950s
- Strengthening of the Parliamentary Committees
- Anti-defection laws to be regularly revisited for debates

Conclusion

Key is the Voters’ awareness wherein the voter votes for

a legislator based on his performance in the state assembly or Parliament
mayor and councillors based on their executive performance

International examples

The current president of Indonesia Joko Widodo started his political journey by successfully contesting for the mayor of the city of Solo in 2005
Yuriko Koike, a former defence minister of Japan, was recently elected to the post of governor of Tokyo

Clear constitutional separation

The Union Government and state government is responsible to make and implement policies on topics that fall in the union list and state list respectively
Village level development is the responsibility of the state government, and can be delegated to the local level bodies such as the gram panchayats and intermediate-level panchayats
Hence, MPs not have a constitutional mandate for local level development nor do they have the authority to ensure proper implementation
Parliamentary constituencies are not congruent with administrative districts, and different parts of a constituency usually fall in two or three districts. This means that the MP will have to coordinate with two or three district collectors to get the schemes implemented.
These are cumbersome tasks which overlap the jurisdiction of local executives.

Thus, local level development should be best left to the local level bodies and local leadership

Connecting the dots:

Directly elected Mayors can change the face of local development in India. Critically analyse
Smart city project will need an able administrator in form of Mayor, who has executive powers and also has a political backing.