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IASbaba’s Daily Current Affairs – 5th Sep 2017

INTERNATIONAL

TOPIC: General Studies 2

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

Effect of policies and politics of developed and developing countries on India’s interests.

PM Modi’s visit to Myanmar- Part I

Background:

Prime Minister Narendra Modi embarks on an official bilateral visit to Myanmar from September 5. This follows upon his earlier ASEAN-related visit in November 2014 and former Prime Minister Manmohan Singh’s visit in May 2012.
The visit marks seven decades of diplomatic relations between India and Myanmar.

Political context:

Though overdue, taking into account Mr. Modi’s ‘Neighborhood First”, ‘Act East’ and diaspora policies, international and domestic developments since then have clarified the political context of the visit. These include

The impact of elections in Myanmar in November 2015 and in the U.S. in late 2016 that brought Aung San Suu Kyi’s National League for Democracy (NLD) to power in Myanmar and Donald Trump in the U.S.
The finalisation of China’s Belt and Road Initiative (BRI) and its assertiveness in the South China Sea.
The India-China border stand-off.
Myanmar’s travails over the peace process, the Rohingya issue and the economy.

Key elements of the visit could be:

Greater attention to emerging political forces, ethnic states and the peace process as part of our democratic political outreach.
Converting our investments in the Trilateral Highway and the Kaladan to fuller trade and investment corridors.
Use of Indian investment in the Greater Mekong Sub-region as an arm of our foreign policy with a focus on agriculture, agro-industries and light industry.
A broader development partnership reaching to the grassroots with the help of civil society.
Specific prongs in our ‘Act East’ policy through the Northeast and Bodh Gaya as a pilgrimage centre.
A new political approach to the IIG issue (Indian Insurgent Groups) beyond an intelligence-based approaches.
The objective should be to restore the balance in Myanmar’s relations between East and South Asia that has been lost with the eastward tilt in Myanmar’s external relations over 50 years of insular military rule during which the two countries have forgotten the habit of thinking of themselves psychologically as immediate neighbours

Key issues:

The Rohingya crisis

The visit is taking place amidst some of the worst violence involving Rohingya militants and the Myanmar security forces ever resulting in a full-fledged international crisis triggered by large-scale, coordinated attacks by Rohingya militants under a recently formed Arakan Rohingya Salvation Army (ARSA, now designated as ‘terrorists’) against government and security outposts in northern Rakhine state on August 25-26. The attacks and clearance operations against it have resulted in some 400 (and mounting) deaths, mostly Rohingya; widespread arson and burning of villages allegedly by both sides; displacement of thousands within Rakhine state and across the Naf river to Bangladesh; and severe disruption in food and humanitarian supplies.
The Modi government has unequivocally condemned the “terrorist” attacks at a time when the security forces and Ms. Suu Kyi herself face heightened international criticism on the handling of the issue. This is likely to resonate in Mr. Modi’s favour in Myanmar. If called upon, India can certainly help in improving the socio-economic conditions in the area and also create employment opportunities.

China factor:

The visit is also taking place against the backdrop of uncertainties in the future India-China relationship caused by the now defused Doklam stand-off and the BRICS summit.

Sensitive to its location between the two Asians giants, Myanmar is keen to leverage the growth potential of good relations with Asia’s two fastest growing economies.
It is also wary of its economic dependence on China, characterised by a largely extractive relationship focussed on natural resources and access to the Bay of Bengal where it already has an oil and gas terminal, concession to build a Special Economic Zone and seeks a possibly controlling stake in a natural deep sea harbour at Kyaukpyu that could form part of its ambitious BRI.

The shadow of China is thus looming large. However, Myanmar would welcome closer economic ties with India to balance and offset its domineering ties with China.

Bilateral issues that have the potential to transform the relationship between India and Myanmar:

Strengthening the development cooperation framework:
No other country has committed as much in grant-in-aid to Myanmar as India. These include four major connectivity projects running into hundreds of millions of dollars — the Kaladan multi-modal corridor, repair of 69 bridges on the Tamu-Kalewa road and the construction of the 120-km Kalewa-Yargyi corridor, both of which are part of the India-Myanmar-Thailand trilateral highway, and the Rhi-Tiddim road in the Chin state bordering Mizoram. Unfortunately, the projects have not been completed in time.

Way ahead:

It is essential that the two countries immediately start negotiating transit and other agreements for the smooth movement of goods and vehicles for optimal use of the infrastructure — even though such traffic may not flow before 2020.

Capacity building in Myanmar:

Six centres imparting training in diverse subjects, from English language to industrial skills, are running successfully in Myanmar.
The Myanmar Institute of Information Technology set up in Mandalay with the collaboration of IIIT Bangalore has been a success with all its graduates finding ready employment.
The Advanced Centre for Agriculture Research and Education set up in collaboration with India’s ICAR is a fine example of pooling research efforts on pulses and oilseeds.

Way ahead:

With Myanmar’s government emphasising higher education and vocational training, more Indian-assisted institutions can come up in the country.
Scholarships for undergraduates can work if a way is found to bridge the difference between the matriculation system of schooling in Myanmar and India’s 10+2 system.

Geater cooperation between Northeast India and Western Myanmar:

Four states in the Northeast share common borders with Myanmar’s Sagaing and Chin provinces. The Kaladan corridor also passes through the Rakhine state till it arrives at the Sittwe port developed by India.

Way ahead:

Businesses on both sides, especially SMEs in contiguous provinces, and the governments need to come up with action plans for transforming the evolving corridors into development corridors.
Border trade through Tamu/Moreh and Rhi/Zhokhowthar needs to become more formalised with truly single-window clearances and easier currency arrangements. The border haats can energise exchange of local produce.
Cross- border bus services can promote people-to-people connectivity.
Cross-border trade in services can be boosted in sectors like medicine, diagnostics, or even education and training for which there is a large market.
There is also potential for cooperation on larger initiatives, such as the sale of refined petroleum products from the Numaligarh refinery in upper Myanmar. All this will mean that the Northeast will gain from the Act East policy.
Strengthening the border region cooperation project, implemented by India in Myanmar’s Chin and Naga areas, can help India in securing political — and other — support at the local-level in Myanmar.
Such development initiatives could also prompt Myanmar to collaborate more in tackling the insurgency issue in Nagaland — particularly in a post-Khaplang scenario.

Expanding bilateral trade and investment:

Bilateral trade between the two countries has, for long, remained at around $2 billion. India ranks fifth among Myanmar’s import sources and 10th among foreign investors. Barring a few outfits, large Indian business groups are conspicuous by their absence. Chinese, Singaporean, Korean, Japanese, Thai and Vietnamese businesses have actively seized business opportunities in Myanmar.
Commercial trade and investments:

Both stand on narrow bases, primary agricultural and forest products from Myanmar in the case of trade, and oil and gas in case of investments, underlining a strong need to expand, diversify and upgrade commercial ties in ways that also contribute to Myanmar’s development needs and meet India’s $3 billion trade target set in 2012.

Way ahead:

Indian businesses could invest in the power, steel, automobiles and even textile sectors in Myanmar. Some leveraging by the Indian delegation during PM Modi’s visit will be necessary here.
The issue of restrictions imposed by India limiting the import of pulses — following a steep fall in domestic prices in India needs to be resolved as pulses form the single largest item in Myanmar’s limited export basket. A bilateral agreement can be achieved on this. The two sides could also discuss basing this trade on letters of credit and direct shipment than having to go through Singapore.

Conclusion:

Modi’s visit to Myanmar can truly invigorate the ‘Act East’ agenda. It’s high time Indian and Myanmar realise the potential of their relationship and act accordingly.

Connecting the dots:

India and Myanmar are yet to realise full potential of their relationship. Discuss the key bilateral issues among the two nations and the way forward.

NATIONAL/ECONOMY

TOPIC:

General Studies 2

Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

General Studies 3

Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Inclusive growth and issues arising from it.

The problem of not-growing manufacturing enterprises

Background:

The recently released Ease Of Doing Business report by NITI Aayog and the IDFC Institute, based on an enterprise survey carried out in 2016, delineates the problem of not-growing enterprises sharply.
According to the sixth economic census conducted during 2013 and the first quarter of 2014, 131.29 million people are employed in 58.5 million establishments in industry and services. Only 21% of the enterprises employ 10 or more workers. Own account enterprises, meanwhile, which were managed entirely by their owners and didn’t employ any other workers, constituted almost 45% of the enterprises.

Growth problem:

Indian manufacturing enterprises have a growth problem, often turning out to be “dwarfs”. These dwarfs dominate the sector numbers-wise.
They suffer from low productivity given that their small size prevents them from achieving economies of scale, among other disadvantages.
However, they employ a huge chunk of the labour force.

Small firms dominate. The jobs they create are low-paying ones. The wage spread between small and large enterprises is a disquieting 80%.

Reasons behind:

The report shows that there are two reasons for this:

Large firms with larger workforces face a greater regulatory burden in this area. This diminishes their efficiency and provides an incentive for smaller firms to cap their workforce below the point where onerous regulations kick in, feeding into the size problem, or employ workers in an informal capacity.
The lower wage spread in China goes along with the domination of medium and large enterprises, which together account for over 75% of the workers. The report speculates that this domination of larger enterprises creates an ecosystem where small firms must perforce improve productivity—whether to compete or take advantage of the downstream opportunities created by larger firms. High productivity goes with higher wages.

The solutions:

Improving physical infrastructure is essential. This ranges from transport systems to the power sector.
The report also mentions the need to improve access to finance for smaller enterprises and making firm entry and exit easier, among other measures.
Enhancing the flexibility of labour regulations.
Out of the box measures might be of some use as well.
Case study: The report throws up some interesting facts. Most of the young enterprises are located in Maharashtra, Gujarat, Tamil Nadu, Andhra Pradesh and Telangana. Concurrently, unlike in other states, older manufacturing firms in Andhra Pradesh, Telangana, Maharashtra and Gujarat face a lower regulatory burden than younger firms. The latter are thus disadvantaged in the states where they are highly concentrated, creating a barrier to growth and productivity—perhaps a legacy of crony capitalism in states that have traditionally been more enterprise-oriented, with larger firms more effectively able to utilize these networks.
It’s time the government legitmize lobbying, a widely accepted practice in developed economies—by bringing in a law to legitimize it and regulate it in a transparent fashion. This could reduce corruption and give smaller enterprises that band together for advocacy and lobbying a means to have policy inputs.

Thus, the government of the day needs to bite the bullet if the problem of manufacturing enterprises not growing as expected needs to be solved.

Connecting the dots:

The recently released Ease Of Doing Business report by NITI Aayog and the IDFC Institute, based on an enterprise survey carried out in 2016, delineates the problem of not-growing enterprises sharply. Discuss the issue, the reasons behind and the way forward.