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The Yuan effect: Pursuing economic reform or global leadership ambition?

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By Gaurav Sharma

On Wednesday, Yuan–the Chinese currency fell to a four year low, sparking global panic in the financial markets. World currencies including the Indonesian rupiah, Singapore dollar, Taiwan dollar, Philippine peso and the Indian rupee declined under the cascading effect of the fall in Yuan.

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www.hkchcc.org

The devaluation of the Yuan was part of China’s response to its tepid growth rate and slowing exports and was favored by the International Monetary Fund (IMF) as a “welcome move”. Meanwhile, the Indian markets, like its international counterparts tumbled down sharply in the aftermath. The BSE Sensex, the Indian benchmark index plunged 354 points to close at 27,512, its lowest point in two weeks. The rupee shed 59 points to nearly touch its two-year low of 64.78.

In contrast to IMF’s findings, the devaluation has raised concerns over a brewing global currency war, with accusations being hurled at China for “unfairly” supporting its exporters.

The valuation of currency is determined vis-a-vis the US dollar and all emerging market currencies have nosedived against the global currency standard.

“The rupee is facing competitive devaluation pressure due to devaluation of Chinese Yuan. At a time when the Asian and other global majors are depreciating their currencies to safeguard the export market and the economy, India, with a strong currency is at an economic disadvantage”, says Anindya Banerjee, Vice-President at Kotak Securities.

China is India’s largest trading partner and accounts for a huge chunk of its trade deficit ($48.5 billion). As such price fluctuations in currency rates do not have a direct bearing on the exports, but the loss in competitiveness along with the surge in hedging costs definitely dents overall export scenario.

China contends that the devaluation is only a one-time affair intended to make yuan more responsive to market forces. However, most market players are apprehensive as to the Chinese claims. Exporters fear more measures might be under the works.

According to Ajay Sahai, director general of Federation of Indian Export Organizations (FIEO) estimates that each percentage fall in the rupee negatively impacts exports by 0.3 per cent.

However, economists believe that there has been little or no co-relation between export growth and rupee depreciation. Global demand is thought to be a more credible factor in driving export growth while currency movement plays only a small part.

“The exports have lost competitive edge due to non-price factors such as competitiveness, logistics and infrastructure”, says DK Joshi, chief economist at Crisil.

Still other feels that the decision has more to do with the recent crash in Chinese stock markets, which had sparked suspicions on its fundamental resilience. Some believe that the liberalization of the Chinese currency is in line with its long-term plan to cement its place as the global reserve currency, either with the US dollar or as its replacement.

However, as per official data from the Bank for International Settlements suggest that the Yuan was indeed overvalued. Last year in June, it was up 14 per cent. A year earlier, the figure was up by 20 per cent.

In light of the weakness witnessed by China in the past few weeks, it is but natural for China to take corrective measures. The long-term implications of the steps are also clear, to give Yuan a global face-lift. A bold move indeed by Beijing.

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69 Years a Slave? Balochistan’s Struggle for Freedom : A Detailed Report

Baloch nationalists assert that theirs is a freedom struggle; they were occupied by Pakistan in 1948 and have been fighting since to free themselves.

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Balochistan
Baloch people address their protests as a freedom struggle to liberate and unify their people and land from control of Pakistan, Iran and Afghanistan. Wikimedia
  • Even after 70 years of Pakistan’s creation, Balochistan refuses to associate itself as a part of the country
  • Pakistan’s military occupation of Balochistan began in 1948 before which the province had existed as an independent state
  • The insurgency in Balochistan traces its roots in ethnic nationalism along with feelings of political and economic exclusion

Balochistan, August 31, 2017 : Located in the South West of Pakistan, the Balochistan province of Pakistan constitutes nearly 45 per cent of the country’s territory. However, even after 70 years of Pakistan’s creation, the people of the province refuse to associate themselves with Pakistan or its framework of a nation state. They believe they have been Balochis for over three thousand years, who have now been invaded.

“It is freedom struggle,” believes activist Naela Quadri Baloch like many other Baloch nationalists. According to her, Balochistan had been occupied by Pakistan in 1948 and “ever since we have been fighting against Pakistan to free ourselves”, she believes.

In 2016 during an interview with The Times of India, the women’s leader and activist Naela Quadri Baloch had asserted that Pakistan is not interested in Kashmiris but specifically in the territory of Jammu and Kashmir for its desire to control the Indus river system. Similarly, it is also not interested in the Balochis, but the land of the state for its strategic location and mineral reserves.

Baloch nationalists assert that Pakistan’s economy is dependent on loans from the IMF, World Bank and the Western countries that are allegedly taken on the pretext of Balochistan’s rich mineral resources. They further claim that Pakistan’s strategic importance is also due to Balochistan coast. Pakistan would not be able to survive, which is why it does not want Balochistan to emerge as an independent state.

Balochistan
Balochistan comprises of about 45 per cent of Pakistan’s territory. Wikimedia

While the world views it as an insurgency movement, Balochis address their protests as a freedom struggle to liberate and unify their people and land from control of Pakistan, Iran and Afghanistan.

They maintain that Balochistan was never a part of India or Pakistan and it had always been an independent country.

Balochistan At The Time Of Partition

Balochistan comprises of four erstwhile princely states – Kalat, Kharan, Lasbela and Makran, that had been unified by Naseer Khan, the Khan of Kalat.

During the British rule, the province was divided into British Balochistan (25 per cent) and Native Balochistan, occupying 75 per cent of the total territory with people pledging adherence to Naseer Khan.

Immediately following partition and the creation of Pakistan, Khan’s descendant, Mir Ahmed Yaar Khan was faced with three options – independence, or accession to either India or Pakistan. He decided upon independence, following which a communiqué was released on August 11, 1947 giving independent sovereign status to Kalat.

However, by October 1947, Mohammad Ali Jinnah mooted Kalat to formally join the state of Pakistan. The Khan of Kalat did not agree to the accession which was followed by a standstill between the two leaders upon the status of present-day Balochistan.

Becoming A Part Of Pakistan

By April 1948, the Pakistan army moved into the province and captured Kalat. The Khans’ attempts of an armed campaign against the Pakistan army went futile and the province was merged with Pakistan by June 1948.

At the center of Balochistan’s forced accession was Mohammad Ali Jinnah, who had previously been hired by the Khans for his legal services to negotiate Kalat’s independent status with the Britishers.

Before partition, Jinnah had successfully mooted an ‘Independent Status’ of Kalat for which he was graciously awarded with gold. But, Balochistan breathed as a free country only from August 1947 to March 1948, after which Jinnah breached trust and betrayed the Khan, forcing the Pakistani invasion and eventual accession of Kalat.

ALSO READ Violence surges yet again in Balochistan

Surprisingly, during the struggle and annexation of present-day Balochistan, the Indian Congressmen, Mahatma Gandhi or the then-Governor General Lord Mountbatten made no attempts to hinder in the remonstration. This indifference can be attributed to the Indian leaders’ failure to realize the strategic implication of a sovereign Balochistan at the time.

A Growing Ethnic Nationalism

Following the formation of Pakistan, distorted power relations existed among different Muslim ethnicities. Additionally, unchallenged power was exercised by Punjabis who comprised of about 56 per cent population of the state.

In 1954, the One Unit scheme was launched by the federal government of Pakistan to merge the four existing provinces of West Pakistan (Khyber-Pakhtunkawa, Sindh, Balochistan and Punjab) to form a homogeneous, united political entity in an attempt to,

  • Forge national unity on basis of Islam and geography
  • Reduce gross expenditure
  • Help eliminate ethnic prejudices.

The move triggered violence throughout the country and especially in Balochistan, wherein this was interpreted as a strategy to establish Punjabi domination.

Balochistan rose against the move, which came to an end in 1970 with the overthrow of the One Unit scheme.

However, following the rebellion, a strong sense of nationalism, propounding larger political autonomy and a separate state for Balochistan broke a full-fledged insurgency from 1973 to 1977; over 80,000 personnel were deployed to quell the rebellion.    

Armed struggle to achieve separation from Pakistan lasted throughout the 1970s, in which 3,300 army personnel and 5,300 Balochis were killed. However, the Pakistani government successfully compressed the movement.

Economic Alienation

Baloch nationalists have repeatedly argued that they are yet to receive any benefit from the development projects that have been initiated by the government in Balochistan.

  1. Reportedly, the Sui Gas Field in Balochistan caters to most urban households in the country. Despite producing about 45 per cent of gas for Pakistan, the province gets to consume a mere 17 per cent. Additionally, the Balochis get a nominal amount of Pakistani Rupees 6 for a 24-hour supply.
  2. The Pakistani government, in collaboration with China, initiated the development of the Gwadar port in the province, with an aim to better trade ties with Asia, Europe, and US. However, a large number of Punjabis and non-Baloch people were hired for the project, leaving an increasing population of Baloch engineers and technicians unemployed.
  3. Balochistan has one of the world’s richest reserves of copper and gold. However, as much as 16 kgs of gold is seized everyday by the Chinese under an arrangement with the government, which robs the Balochis of major economic benefits.
  4. Despite being one of the country’s key providing areas,
    • 80 per cent population of Balochistan continue to live in the absence of safe drinking water
    • 80 per cent people do not have access to electricity
    • 70 per cent children have never been to school
    • 63 per cent of Balochis live below the poverty line

While ethnic nationalist interests continue to worry Balochistan, a primary demand has also been about better control over the economic resources of the region.

However, the Pakistani government blames the nationalist struggle in the region for impeding the developmental process.

Political Subjugation By Islamabad

Balochistan makes up nearly 45 per cent of Pakistan’s territory but the Balochs comprise only 5 per cent of the total population, making them a minority in Pakistan.

Their representation in the National Assembly of Pakistan is also negligible (17 out of 342) which reveals that the Balochis have lost their say in policy formulations and are forced to adhere to laws that have been put in place for them by power honchos sitting in Islamabad.

Additionally, the Pakistan government centered in Islamabad has eradicated most of the Baloch activists and nationalists, calling them ‘foreign agents against the state’. This can be supplemented with the murder of Nawab Akbar Khan Bugti who was an ex chief minister of Balochistan.

ALSO READ Akbar Bugti: Remembering the Balochistan Hero on his 11th Martyrdom Anniversary

Pakistan And Its inherent Demand of Balochistan

Ever since the creation of Pakistan, it has been evident that the Pakistan government is more concerned with occupying the physical territory of Balochistan, with meager interest in its indigenous population.

The Pakistan army, on command of the government has employed every possible armory against its own people of Balochistan, in an attempt to contain the province within its seizure. Furthermore, army cantonments have been established at Dera, Gwadar, Bugti and Kohlu to gauge activity and movement of the Baloch people.

Additionally, despite occupying 45 per cent of Pakistan’s territory, the budget allocated to Balochistan is minuscule in comparison to its vast landmass.

In 2002, General Pervez Musharraf had striked a deal with China over the Gwadar port development as part of China Pakistan Economic Corridor (CPEC). Baloch people condemned the allocation of land to the rich businessmen of Punjab and Karachi and further lamented the unemployment stemming from the project. The move also instigated further violence in the region.

Balochistan
Gwadar port in Balochistan. Wikimedia

As of now, according to report, all 22 districts of Balochistan continue to suffer at the hands of the enduring insurgency with the tally of displaced people now crossing over 2 lacs.

In more recent times, the Pakistan army took aid of suicide bombers to tackle the ongoing insurgency. On August 8, 2017, as many as 54 lawyers became victims of a suicide attack, which is being touted as a State-funded action as the group included several Baloch activists who had been vocal about Pakistan army’s interference in state affairs.

ALSO READ Balochistan Suicide Bombing: Provincial Government Falsely blames India for the Attack

According to a report published in Dawn,prince of the now redundant Kalat state, Prince Mohyuddin Baloch who is now the  Baloch Rabita Ittefaq Tehreek chief,  had said that Balochis are not looking to wage wars. Until now, Balochis have not once attacked Pakistan, but only defended themselves.

He said the objective of their protests has been to draw the government’s attention. However, regretfully, no one is paying any heed to their cries.

Dr. Aasim Sajjad Akhtar had rightly quoted in an article in the Economic and Political Weekly that the “ethnic difference remains the single biggest fault line in Pakistani politics.”

The Balochistan insurgency thus, traces its roots in a ripe ethnic nationalism along with feelings of political and economic exclusion. This animosity among the country will continue unless Pakistan accepts its non-Muslim history.


 

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A Machine Built By a Group of Egyptian Students can Produce Fuel from Worn-Out Vehicle Tires

Egypt raised fuel prices by up to 50 percent in June as a condition of a $12 billion International Monetary Fund program the country signed last year

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Fuel
Engineering student Mohamed Amr carries car tires to be used in extracting fuel in Cairo, Egypt, Aug. 23, 2017.
  • A group of 12 students worked on this machine as a graduation project
  • The machine first heats the tires until they reach evaporation point after which the vapor enters a condenser
  • The product created has similar properties to pure diesel

A group of Egyptian students has built a machine they say can produce fuel from worn-out vehicle tires.

The device heats the tires until they reach evaporation point. The vapor then enters a condenser. The result is a product “very similar in properties to pure diesel, and the carbon or black coal is just left inside the container,” said Mohamed Saeed Ali, one of 12 students who worked on the machine as a graduation project.

ALSO READIIT – Kharagpur Researchers develop Technology to make Biofuel manufacturing cheaper, quicker and free of Pollution

The students are searching for investors for their project.

“Instead of polluting the environment, we recycle them [the tires] properly in an eco-friendly manner,” Saeed said.

Egypt raised fuel prices by up to 50 percent in June as a condition of a $12 billion International Monetary Fund program the country signed last year. (VOA)

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Fiji Sugar industry faces bleak future

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Fiji
Image source: youtube.com

Auckland, New Zealand: The sugar industry of Fiji degrades due to damage from Cyclone Winston in February and an impending expiry of crucial low-tariff exports deal with the European Union.

Winston, one of the strongest cyclones ever in the South Pacific, slammed into Fiji on February 20. The storm claimed 44 lives in Fiji and caused damage valued at $226 million, including $48.4 million to the sugar industry, according to preliminary estimates by the Fiji National Disaster Management Office.

A village destroyed by Cyclone Winston on Fiji's Koro Island. Image source: asia.nikkei.com
A village destroyed by Cyclone Winston on Fiji’s Koro Island. Image source: asia.nikkei.com

The industry, the country’s largest employer, employs about 40,000 people, with up to 250,000 of the country’s 881,000 population relying on it when extended families are included. About 80% of the current crop was destroyed, and two of four crushing mills run by the state-owned Fiji Sugar Corporation were damaged.

Fiji Prime Minister Voreqe Bainimarama said the cyclone was a terrible blow, coming just after a glowing economic report on Fiji from the International Monetary Fund. “Now all of that may be in doubt,” he told diplomats.

The IMF report, released on February 5, said Fiji was “enjoying strong growth momentum, due to higher investment, robust tourism and strong remittances, supported by an improvement in the terms of trade.”

More presciently, the IMF noted that significant risks to growth were “largely related to external developments, including Fiji’s exposure to natural disasters.” The rains brought by Winston followed two years of drought.

Praveen Singh, the leader of a cane producers’ association, said the combination of the drought and Winston had created a bad situation ahead of the harvesting season between June and September. “We may have to forego the 2016 harvest and plan for a bigger harvest next year,” he said.

Last year’s crop of 1.84 million tons of cane produced 222,000 tons of raw sugar, one of the country’s lowest harvests. In 1996, a record 4.4 million tons of cane was crushed. Around 75% of Fiji’s arable land is planted with sugar cane and the crop is Fiji’s biggest export, valued at $52 million in 2015.

A sugar cane train in Fiji delivers the crop to the mill. Image source: asia.nikkei.com
A sugar cane train in Fiji delivers the crop to the mill. Image source: asia.nikkei.com

Most of Fiji’s sugar exports go to the UK, where it has preferential access to EU support measures, and prices are up to four times the global sugar price. The EU is due to scrap the measures next year, leaving Fiji to compete for head on with sugar producing giants such as Australia, Brazil, India, and Thailand.

EU-Pacific ambassador Andrew Jacobs has hinted that Brussels might develop proposals to help Fiji. “The EU recognizes that the sugar industry is very important to Fiji,” he said, without offering specific measures.

However, Fijians appear divided about whether the industry has a future, and what its long-term impact will be on the economy, relations between the country’s indigenous Fijian and ethnic Indian population groups, and stability in the coup-prone political system.

About 16,000 cane growers are Indian, according to the Fiji Bureau of Statistics.

Addressing the International Sugar Organization in November, Bainimarama said the future for Fiji sugar after the end of the EU deal would lie in extracting “the maximum sugar possible from every stick of cane.”

“We must extract every economic advantage we can from the sugar cane plant and the more productive and resilient varieties we continue to develop,” Bainimarama said. India has provided Fiji with a $70 million line of credit to build a co-generation plant, but a small pilot plant was affected by Winston.

Bainimarama said the industry was irreplaceable. “It cannot and must not be allowed to decline… [despite] the odds that are stacked against us; we do not intend to give up on sugar cane in Fiji,” he said.

Institutional analysts said the industry faced major structural problems. The IMF report also said that “modernization of the industry is urgently needed to improve international competitiveness.”

Padma Lal, an economist who has specialized in studying the Fiji sugar industry, said the damage to mills, irrigation and drainage systems, roads and rail links made it imperative for Fiji to diversify its rural economy away from sugar by increasing production of vegetables, poultry, ducks and goat meat.

“I would use this opportunity to rationalize the industry, however painful it may be,” said Lal.

(The article was first published in asia.nikkei.com)