Thursday, March 29, 2012

A development bank of the BRICS

In the latest BRICS summit head in New Delhi, Prime Minister Manmohan Singh, Chinese President Hu Jintao, Russian President Dmitry Medvedev, Brazilian President Dilma Rousseff and South African President Jacob Zuma decided to move on setting up a development bank to mobilize "resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development".

We have considered the possibility of setting up a new Development Bank for mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development. We direct our Finance Ministers to examine the feasibility and viability of such an initiative, set up a joint working group for further study, and report back to us by the next Summit.

On trade:

We will continue our efforts for the successful conclusion of the Doha Round, based on the progress made and in keeping with its mandate. Towards this end, we will explore outcomes in specific areas where progress is possible while preserving the centrality of development and within the overall framework of the single undertaking. We do not support plurilateral initiatives that go against the fundamental principles of transparency, inclusiveness and multilateralism. We believe that such initiatives not only distract members from striving for a collective outcome but also fail to address the development deficit inherited from previous negotiating rounds. Once the ratification process is completed, Russia intends to participate in an active and constructive manner for a balanced outcome of the Doha Round that will help strengthen and develop the multilateral trade system.

We agree to build upon our synergies and to work together to intensify trade and investment flows among our countries to advance our respective industrial development and employment objectives.We welcome the outcomes of the second Meeting of BRICS Trade Ministers held in New Delhi on 28 March 2012. We support the regular consultations amongst our Trade Ministers and consider taking suitable measures to facilitate further consolidation of our trade and economic ties. We welcome the conclusion of the Master Agreement on Extending Credit Facility in Local Currency under BRICS Interbank Cooperation Mechanism and the Multilateral Letter of Credit Confirmation Facility Agreement between our EXIM/Development Banks. We believe that these Agreements will serve as useful enabling instruments for enhancing intra-BRICS trade in coming years.

Also this excerpt from The Economic Times:

The development banks of the five countries signed a master agreement on extending credit facilities in the local currency and the BRICS multilateral letter of credit confirmation facility agreement in the presence of their leaders at the Taj Palace Hotel here.

The participating banks include the Export Import Bank of India, Banco Nacional de Desenvolimento Economico e Social (BNDES) of Brazil, State Corporation Bank for Development and Foreign Economic Affairs of Russia, China Development Bank and Development Bank of South Africa.

The master agreement is aimed at reducing the demand for fully convertible currencies for transactions among BRICS nations, and thereby help reducing the transaction costs of intra-BRICS trade.

The confirmation facility pact envisages confirmation of lines of credit on receipt of a request from the exporter, the exporter's bank or the importer's bank.

The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28 per cent over the last few years, but at $230 billion, it remains much below the potential of the five economic powerhouses. BRICS has set a target of $500 billion by 2015.

Reasons why Nepal should not ban Gurkha recruitment in foreign armies

It was published in Republica, March 28, 2012, p.6.

Un-feathered cap

Due to the dearth of job opportunities and low wages, thousands of people, mostly youths, seek employment abroad each year. Historically, people sought employment in the Indian and British armies and the Indian states close to the border. Lately, the government is trying to ban Nepalis from joining foreign armies. Their reason for doing so is as ludicrous as it can get and it reeks of a populist agenda trying to capitalize on the fluidity of the current popular sentiment and political and institutional foundation.

Without a credible backup plan, banning recruitment of Gurkhas in foreign armies on baseless grounds will hurt the economy, foster discontent among particular ethic groups, and erode one of the widely known and admired identities of Nepal. Apart from the Mount Everest, Gautam Buddha and mystic mountains, the Gurkhas have been one of the major entities giving Nepalis a reason to hold their heads high even though time and again the corrupt and whimsical acts of political leaders have tarnished that very identity.

Recently, the Office of Prime Minister and Council of Ministers directed the Ministry of Foreign Affairs and other line ministries to implement recommendations of Nepal’s Foreign Policy in Changed Context: 2068, which among others argued for the eventual ban on recruitment in foreign armies. On December 26, 2011, the Parliamentary Committee on International Relations and Human Rights (PCIRHR) had unanimously endorsed the report. The reason for this nonsensical recommendation is that the political leaders think employment in foreign armies has barred the country from holding its head high.

Furthermore, the report states that the recent decision of the British government to provide citizenship to Gurkha soldiers has put the country at a loss. Note that following a popular campaign led by Gurkhas and actress Joanna Lumley, the British government agreed to let Gurkha veterans who retired before 1997 settle in the UK. Earlier, the High Court in London delivered a verdict in favor of providing an automatic right of residency in the UK for Gurkhas who left the army before 1997. Nepalis have served (and are still serving in some of them) in armed forces of India, Hong Kong, Brunei, Singapore, Malaysia and the US, among other countries. They are also employed as private security personnel of renowned personalities in the world. For the record, there are around 3,800 Gurkhas in the British force and 30,000 in the Indian Army.

Trying to halt recruitment of unemployed Nepali citizens in foreign armies defies a sound understanding of historical and economic foundations of why such things happen in the first place. Impressed by the valor of Nepali fighters against the invading forces of British East India Company, the British government signed a peace pact with the Rana rulers and opened up avenues for recruitment of Nepali citizens in the British army in 1816. Since then the Gurkhas have earned an unparalleled prestige for Nepal. They have been honored with the best awards, including the coveted Victoria Cross, for their bravery in battlefield. Recently, Sargent Dip Prasad Pun of the Royal Gurkha Rifles was presented with Conspicuous Gallantry Cross for his outstanding bravery for single-handedly fighting off up to 30 Taliban insurgents in Afghanistan. As stories of Pun’s bravery were covered all over the world by mainstream and social media, Nepal’s name followed automatically. Isn’t that a reason to hold our heads high?

Furthermore, if the political leaders find it embarrassing that our unemployed citizens are getting gainful employment and stable source of high income by joining foreign armies, then why are they not feeling the same when a large number of Nepalis are flocking to the Gulf for employment under harsh conditions? Around two million migrants are currently working in foreign countries and over 20,000 legally leave the country each month for employment. They are working in horrendous condition and at much lower prices. Their plight, rights, and work conditions and work have been the subject of multiple media stories and documentaries. Aspiring migrants are forced to pay high fees to manpower agents here, and after reaching their work destination their passports are confiscated by employers, restricting their mobility and barring them from joining another company that would pay higher wages. Some of the Nepalis workers in the Gulf languish in prisons waiting for their country’s representative to show up to assist them in returning to their country. At times, relatives are seen crying their eyes out while waiting for delivery of dead bodies in coffins at Tribhuvan International Airport. Doesn’t this actually bar us from holding our heads high? We have never heard of such stories about the Gurkhas.

Economically, the income earned by Nepalis working in foreign armies has been a major source of foreign exchange income. Nepal gets around Rs10 billion each year in payment related to the British Gurkhas. The income received by Nepal related to Gurkhas in the Indian security forces is substantially higher. In comparison to the income from tourism and interest on investment abroad received by Nepal, the forex contribution by Gurkhas weighed substantially higher up until 1996, when migrants started going en masse to the Gulf as a result of the bloody Maoist insurgency. Since then though the direct contribution of remittances related to migrants in the Gulf and other employment destinations has been skyrocketing, the income contribution of Gurkhas is not insignificant. First, almost all the income and pension of Gurkhas come through formal channel, which is something the government is tirelessly trying to promote with respect to money sent from foreign employment destinations. Second, the indirect benefits received by districts from where most of the Gurkhas hail are tremendous.

The British and Indian governments have been investing a huge sum of money in social welfare of the relatives of Gurkhas and their hometown. They have invested in agriculture, healthcare, education, and infrastructure, among others. Additionally, the foreign policy and development assistance of the countries where Gurkhas are serving are one way or the other tied to the very fact that we have our men contributing towards the defense of their countries.

The government has recently prioritized foreign employment and has taken a slew of measures to both control illegal workers and promote legal workers heading to the Gulf. In terms of prestige, working condition, and income earned, the Gurkhas fare far better than the workers in the Gulf. If the government cannot promote employment in foreign armies as it is doing for employment in the Gulf, then it should not at least crush dreams of youths who want to become soldiers in foreign armies that guarantee a stable income and attractive facilities. Let the people choose what they want to do legally, i.e. non-promoted employment in foreign armies or promoted employment in the Gulf. Don’t get me wrong here. For the economy, the money sent by both Gurkhas and those working in the Gulf and India is equally important given our precarious macroeconomic situation. Any decline in growth of remittances will derail our economy as it nearly did in 2008/09 when the decline in growth of remittances put balance of payments in the red, busted the real estate and housing bubble, and triggered a liquidity crisis.

Overall, the recommendation by PCIRHR to restrict Gurkha—probably the earliest Non-Resident Nepalis (NRNs)—recruitment is wrongheaded, which also exhibits their ignorance and poor understanding of our history and economy. There is no doubt that Gurkhas have helped and are helping us to hold our heads high. Importantly, without ample job opportunities at home that can match income and other facilities that foreign jobs provide, people will always prefer the latter one. The parliamentary committee and the government should not try to restrict people’s choice of safe and gainful employment abroad if they cannot ensure one here.

[Published in Republica, March 28, 2012, p.6]