Author: globestrategy
Oman’s Transition and the legitimacy of autocratic rule
Oman’s Transition and the legitimacy of autocratic rule
Last week, global media was fixated on a brief speech by the absolute ruler of the Sultanate of Oman, in which he acknowledged his illness and inability to attend the national day celebrations in the country. For a low-key player within the international system, this speech was subject to extraordinary attention, particularly as the US and Iran were planning to negotiate mutual engagement terms in its capital city, Muscat. Oman was a key player in bringing both states together.
The Sultanate of Oman is considered to be one of the most stable states in the Persian Gulf and has a key role in stabilising the straits of Hormuz along with Iran. An absolute monarchy, it has emerged resilient from the Arab spring of 2011. Oman has had its share of protests and rebellion starting with the Dhofar rebellion in the 1970s to the more recent outbreaks in 2011 and 2012. The former started as the rebuilding to the previous Sultan . The latter revolved around corruption by the political and economic elite actors in the country, as well as a call for political and constitutional reforms to the absolute monarchy. As expected, an iron fist approach by the regime, crushed most of these protests.
What emerged, was a unique dichotomy of the key drivers of the protest itself. The main grievance of the hundreds of protesters (this included students, journalist, lawyers, intellectuals and human rights activists) became channelled into apathy at the process through which the security apparatus managed dissidence against the regime, while the Sultan himself became insulated from the focus and emerged stronger in his personal legitimacy as the monarch. Many political commentators have attributed this to the persona of the Sultan himself.
Perhaps, it was his personal aura of legitimacy in the region that enabled Oman to escape any further disruptions. Protesters carried portraits of the Sultan in the midst of the protests, asking him to intervene. The Sultan responded by sacking corrupt ministers and widening the remit of the consultative Council or the Majlis Al Shura. Some have argued that this was a mere window dressing and all the Sultan did was to move around people within the power structure.
To understand, how an autocratic dictatorial monarch (by Western standards) continues to preserve legitimacy of rule after almost 4 decades in power is in itself is an anachronism. To analyse this, one needs to embed the thought within its unique national context.
The Sultan seized power in a palace coup in 1970 from his father, an absolute autocrat who wanted to keep the state underdeveloped and isolated. Once in power, Sultan Qaboos quickly moved to abolish many of the restrictions on the society as well as suppress a Communist inspired internal rebellion within the southern Dhofar region. The swift intervention of British forces and their use of a ‘heart and mind’ strategy enabled the Sultan quickly reintegrate most of the belligerents within the country’s new Armed Forces. The Shah of Iran and Jordan also sent troops to bolster Omani combatants.
This was the beginning of creating a national identity for the Sultanate of Oman, revolving around the person of the monarch. Qaboos’s use of a non-aligned foreign policy supported by his domestic legitimacy help to further this image over the next four decades. Alongside the creation of a national identity, the Sultan ruled with absolute concentration of power in his hands; he is the Prime Minister , minister of defence, minister of foreign affairs, chief of staff of the Armed Forces. He is considered to be the font of the governance structure and his person is inviolable. In order to stabilise the country, the Sultan has extensively relied on the Armed Forces and by extension the creation of the police state to maintain stability internally. But unlike other autocratic monarchs, Qaboos has successfully managed to keep the Armed Forces from any visible interference the governments of the country. Governance of day-to-day activities has been left to the executive.The executive branch is free to manage the country, subject to control from the monarchy.
The state has developed economically as well as nascent steps towards political representation. In 1996, a bicameral legislature (the Council of Oman )consisting of an upper chamber, the State Council or Majlis al Dawla and a lower chamber, the consultative Council or Majlis al shura was created. Although still inadequate by democratic standards, the consultative Council is elected by universal suffrage. The consultative Council cannot address key issues that national security, oil revenues of the structure of the political system. Strategic ministries are also not subject to any discussion. Some reports suggest that candidates are subject to vetting by the security apparatus.
With the perceived frailty of the Sultan and perhaps a possible transition of power, if the worst were to happen, the Omani state faces uncertainty in transition of power. Key to this element of uncertainty is the succession process.
The Sultan has no official heirs, is a confirmed bachelor, with no brothers and has not revealed any personal favourites. Succession will have to be determined by the Defence Council of Oman within 3 days. In the absence of any clear successor within 72 hours, Qaboos has indicated the defence council should open the sealed envelope with his choice of Candidate.
Although the process of electing a new ruler is known, a lot of ambiguity will come from not knowing if the new ruler will have the legitimacy to rule.
By keeping out key members of the Royal family from the power structure, the Sultan has managed to a wide any possible threats to his authority and his legitimacy. His successor will need balance the transition with his legitimacy, overcome a possible power struggle within the Royal family, be acceptable to key actors within the military and economic elite who may have an agenda of their own.
Possible threats to succession from the economic elite and the military have been managed in the past by the Regime. Some have pointed to an accident in in the northern city of Salalah in 1995 in in which the Sultan escaped as an example. The powerful adviser to the Sultan, Omar Zawawi was the scion of Oman’s most prominent business house and was rumoured to have political ambitions of his own till he was killed in the accident. Another business house, Assarain group, has had its chairman placed under house arrest, in spite of being close to the Sultan. A chief of staff of the Armed Forces had also died in a car accident in 2003 leading to several ambiguous reports on the nature of the accident. The military and economic actors may contribute to the uncertainty of the transition scenarios.
One scenario that has been discussed is that the Royal family would meet and appoint a candidate from within who can meet the criteria’s that Sultan Qaboos has laid out: Be a male descendant of the lineage of Turki Bin Said, sound of mind, of Pure Omani blood and be acceptable to the Royal family as well as the defence council. This would mean, business as usual.
However there are concerns with the broad field of possible candidates from the Royal family. Key front-runners will be Qaboos’s three cousins: Assad bin Tariq, Shihab bin Tariq and Haitham bin Tariq. Each one of this potential successors have had experiences within government. Assad is a Sultan’s personal representative and as such, may have been privy to his style of functioning. Shihab like the Sultan and a strong military background, having been the commander of the Navy till 2004. He could emerge as an acceptable candidate for the army. The third person , Haitham is a minister responsible for heritage and culture and also infamous for promoting his business interests through real estate developments. None of this front-runners possess the experience of the incumbent in managing the tribal society of oman, nor do they have any visible elements of legitimacy gained from being in the public eye. Qaboos has always tried to minimise the perceived involvement of any actor from the Royal family.
However, the current deputy prime minister, Fahd Bin Mahood has been in the public limelight, deputising for the Sultan in both domestic and international fora and seems to be the most qualified candidate. His weakness lies in his age(at 66) and marriage to a foreigner. Given his experience, he could emerge as a favourite interim Sultan, while a more clear succession strategy is worked out.
The second scenario that would play out in the absence of any successor from the Royal family would be the dominance of the Armed Forces. The army would take control of the state if no successor is named within 72 hours. Given the current Sultan is an army man and is constantly stresses the importance of the Armed Forces (even in his brief speech on November 5) the army could emerge as strategic player. Being synonymous with the font of power(Sultan Qaboos) as well as being the only state institution that can coherently hold the country together, we could see it acting in an interim capacity or promoting on of its own candidates. But it will face opposition from having been apolitical till now, resistance from the existing power structure around the Al Busaid dynasty and from a patriarchal society. Perhaps the military will enforce the Sultan’s choice on the state as well as guarantee law and order during the transition process.
A third scenario that can be disruptive in itself is that, Oman will transform into a constitutional monarchy or a republic. Given that the Arab spring has saw the seeds of discontent against absolute rule in the region and that a large percentage of its population is young , this could be a possibility. However the presence of neighbouring regimes that could see this as a threat to the continuity may prevent this from happening. Another factor would be the tribal factions that have benefited from the existing power structure and the resistance to any change. Ministers and key officials have been selected from various tribes and business families so far. Given that many have benefited from proximity to power, they could leave the largest resistance to becoming a republic.
This then leads us to the fourth scenario, the creation of an imamate and the shift of power from the ruling Al Busaid dynasty to an elected Imam. The Sultanate of Oman has had a previous history of an elected Imam ruling over the interior parts of the state till 1950. A majority of the population practice the ibadhi form of Islam. Ibadhism at its core revolves around consensus and the election of an acceptable candidate to rule . Oman had been as two separate entities(one, a monarchy and the other an imamate) till 1970.
Sultan Qaboos while defeating the insurgency in Dhofar managed integrate both parts of the country and create national identity. He has also benefited from being half a northerner(His mother was from the dhofari Al Mashani tribe) as well as being from the ruling clan.
In his absence and the non-emergence of a consensus candidate, an Imamate could be the answer to continuing Oman’s stability. Given that Qaboos had managed to assimilate tribal affiliations in the governance structure, the key tribes could perhaps raise this as an option to securing the support for the new successor. The election of an Imam based on his personal qualification for the post could also imbue him with a greater sense of legitimacy than any of the existing candidates.
Whichever one of the scenarios plays out, the importance of stability in the country would be crucial to keeping the balance of power in the region as well as control of key sea lanes of communication open. Losing Oman could open a multiple front for disruptive elements in the region.
The Sultan is known for beating to a different beat while maintaining his country’s independence and uniqueness. A silent player in the international arena, he has been credited with bringing coherence to understanding the country. He still holds the last card, one that may offer a more radical scenario.
The Indian Avatar of Democracy
I must start this post by recanting a bit of history.
In Athena, circa BC 508, Cleisthenes , an aristocrat and grand son of a tryant is credited with creating demokratia – ‘government of the people by the people for the people. Although, some research claim that democracy had been around in an earlier practice in 1500 BC. Democracy as a form of government in Athena would survive for another 150 years until the Roman Invasion subdued it. Revolutions would reawaken democracy in 18th century France and US.
In the modern world, we celebrate the spread of democracy and its core concepts, linking it with concepts of personal freedom, free trade, liberty and freedom of expression. We are conditioned to believe that representative democracy is the best form of government for all states. While true in most cases, the process of electing representatives in many states have had its inherent flaws.
In Athena, representatives were elected by lots, as this was considered to be the most democratic process, not by election. The argument was that election would favour the rich and powerful over ordinary citizens. Another practice was the practice of ‘ostracism’, where citizens could vote to exile politicians for up to 10 years. True representative power!
Consider now case of India, celebrated as the largest democracy with over 814 million voters and having survived as a democracy in a region synonymous with dictatorships, military rule and single party states. A true poster for democracy with over 6 national political parties, 36 state parties, 324 regional parties and 24 new parties awaiting approval for the 2014 election. The electoral college of 814 million voters choose 543 representatives to represent them in parliament. The people power of 1.2 billion citizens.
A closer look at this election, reveals the flaws with India’s brand of democracy.
In Athena, circa BC 508, Cleisthenes , an aristocrat and grand son of a tryant is credited with creating demokratia – ‘government of the people by the people for the people. Although, some research claim that democracy had been around in an earlier practice in 1500 BC. Democracy as a form of government in Athena would survive for another 150 years until the Roman Invasion subdued it. Revolutions would reawaken democracy in 18th century France and US.
In the modern world, we celebrate the spread of democracy and its core concepts, linking it with concepts of personal freedom, free trade, liberty and freedom of expression. We are conditioned to believe that representative democracy is the best form of government for all states. While true in most cases, the process of electing representatives in many states have had its inherent flaws.
In Athena, representatives were elected by lots, as this was considered to be the most democratic process, not by election. The argument was that election would favour the rich and powerful over ordinary citizens. Another practice was the practice of ‘ostracism’, where citizens could vote to exile politicians for up to 10 years. True representative power!
Consider now case of India, celebrated as the largest democracy with over 814 million voters and having survived as a democracy in a region synonymous with dictatorships, military rule and single party states. A true poster for democracy with over 6 national political parties, 36 state parties, 324 regional parties and 24 new parties awaiting approval for the 2014 election. The electoral college of 814 million voters choose 543 representatives to represent them in parliament. The people power of 1.2 billion citizens.
A closer look at this election, reveals the flaws with India’s brand of democracy.
- Identity politics based on caste, religion and family ties, dominate the selection of candidates and their winning of seats.
- Bigotry and hate speeches are often used to mobilize vote banks. One potential MP has 19 cases registered against him on account of inciting violence.
- Politicians use ‘ dummy’ candidates having similar names to confuse/fool voters and thus split voting patterns.
- 18% of the 1492 candidates have criminal cases registered against them.
- A candidate of the new anti corruption party, AAP has over 300 criminal cases against him and the police still treat him as an absconder from justice.
- 41% of the opposition BJP party’s MPs face criminal charges, compared to 24% of the ruling congress party’s MPs
- 30% of the current representatives in parliament have criminal records of some sort.
- The supreme court of India tried a form of ostracism by ordering convicted politicians to be banned from politics. This was opposed by the ruling party and has now been withdrawn.
- Over 30 candidates have been charged with rape.
- Corruption dominates Indian elections, and the state has slipped down 15 places to be ranked as the 95th most corrupt country.
- 3 Cabinet ministers have been sentenced to imprisonment whilst holding offices
- One MP has won 4 sucessive elections whilst being jailed for life. He still continue to discharge his duties from jail.
- A single family dynasty (Nehru-Gandhi) has dominated politics for most of India’s 64 years of democracy and we still call it a representative democracy!
- Parliamentary seats have inherited by political families including the Gandhis and many former kings who have traded thrones for seats in the peoples parliament.
- Every Indian MP under the age of 30 is hereditary and two-thirds of Indian MPs under the age of 40 are from political families.
- The ruling dynasty has been charged with manipulating real estate prices and secreting billions of dollars gained from dubious deals involving guns, helicopters and ‘cows’, in overseas tax havens.
- A Key prime ministerial candidate, Narendra Modi has been accused of engineering violence against minorities, whilst the current PM has had the dubious distinction of presiding over the most corrupt government, whilst remaining personally untainted.
Perhaps, we need to reclassify India as a Dynastic democracy ( a termed made famous by Tavleen Singh) instead of celebrating it as the world’s largest democracy. Athenians would cringe at the state of democracy in India, if we could bring them back to today. Another apt definition could be of India being called a ‘cunning state’ that ‘capitalises on its perceived weakness in order to render itself unaccountable to its citizens‘.
On a closing note, i would still prefer to have India’s experiment with democracy than be a subject of any other alternative forms of government. Perhaps, democracy in its Indian avatar was meant have its flaws. Or is this avatar, truly representative of the people of India?
Putin, the EU and the return of the Black Sea spring
Another one bites the dust! Viktor Yanukovych of the Ukraine flees to his stronghold in the eastern part of the country or perhaps has left to Russia as I write this. The people’s revolution has momentarily triumphed and we wait for the trumpets to proclaim a new constitution. The political prisoners are out too including a former PM.
Unlike other dictators , Viktor Yanukovych was an elected leader. But one who may paid for bending backwards to appease big brother Russia whist the people it seems now favoured a more southern approach to the EU zone much like Moldova.
And pray, what are the key issues that keep Ukrainian people outdoors in bad weather and see him out of the presidential palace? It seems our good friend of Russia wants to go one step and ‘manage democracy’ like Putin. He has already jailed opposition politicians like Yulia Tymoshenko, muzzled free press and introduced censorship.
But was Yanukovych that so bad that the EU and the world should take notice? After all, the people have had no love for Tymoshenko too if recent media reports are true. We also need to remember,Yanukovych almost signed a deal with the EU before swinging completely over to the Russians. Why do we care for another wannabe tinpot dictator when we accept and do business with the Mugabes, the Kims, the Musevenis and the Burmese Generals?
The answer, lies in Ukraine’s geostrategic value to the EU and the grand Russian dream of Mr. Putin.
Ukraine is Russia’s access to the black sea through its Black Sea fleet and possibly to Mediterranean if needed. Currently, with NATO’s Turkey controlling the Bosphorus end of this sea route, the fall of Ukraine is vital to the EU. Ukraine also controls Russia’s gas terminals to Europe. Yanukovych had already supported Russia interests by allowing Russia to lease its Sevastopol bases till 2042. He has also agreed to increase the size of the Russian fleet.
On the other hand, Yulia Tymoshenko wants the Russian influence to diminish and for the fleet to leave, Perhaps, that is why, Mr Putin might have suggested that Yanukovych ‘manage’ her. Russia badly needs Ukraine’s ports for both export of goods and oil resources.
The EU through its European Neighbourhood Policy would like to see the Ukraine in its embrace, partly due allowing it ‘values of democracy, rule of law and respect of human rights‘. It will also benefit trade worth over $230 billion in the region. The EU through its eastern partnership strategy with Armenia, Azerbaijan, Georgia, Moldova and BelarusIt has stepped in with an economic deal and lifeline that may counteract the $15 billion from Russia that Ukraine was dependent on.
Historically, it may have a point as some parts of the country were created from Poland and Austria by the USSR. But the size of the economy in Ukraine with its subsidized gas and state control of key industries may not be attractive to the EU as new market economy.
And what is the business angle?
Sea Trade and politics
The total seaborne trade is the region is minimal about 2.5% of global trade. But Russia and the Ukraine alone handle over 75% of this trade. The Ukraine is clearly the largest country with its ports at
The shift to the EU can provide Ukraine with more access to modernizing its industries as well as preferential tariffs to the EU which is potentially a larger market than Russian and its Eurasian allies.The EU is Ukraine’s second largest trading partner.EU-Ukraine trade in goods reached €36.6 billion in 2011. The full report is here
The game
The EU wants to limit Russian influence in the EU by making a stand in Ukraine and also to reassure its allies in Moldova and Georgia that it can still roar. On the other hand, we see Putin’s a grand dream of Mother Russia exerting influence on all satellite regions and the creation of a EURASIA union. Putin would also like to limit the EU’s ingress into his territory too.
At the end of this game, who ever gets Ukraine as prize will find it uneasy as a conquest in both economic and geostrategic terms.
The Global business of keeping America solvent
Will Rogers, the american satirist once remarked ‘ All I know is just what I read in the papers, and that’s an alibi for my ignorance’
It sums up the media frenzy today on the US government going broke!
Do you really think the world’s largest economy will do that ? How hard is it for congress to raise the debt ceiling by a few more trillions when US debt ceiling has no limits? How gut wrenching is this decision for its lawmakers? Remember we went through all of this as congress raised the ceiling 10 times from 2001 with no moral qualms about the level of debt. After does it matter, if you owe 17 or 20 trillions if you are reconciled to never bothering to pay this debt in the foreseeable future?
The soothsayers are out already debating the US sovereign default in almost of of the world’s media. But will America default?
Historically, barring 1979, when a technical glitch caused the Treasury to default on $120 million of notes, there has been no defaults of US sovereign debt. After all how can you default when you own and manage the global economy’s currency of choice (US$) and your debts are also denominated in your own currency?. The worst case scenario would be printing more US$ bills to repay debts as Alan Greenspan once claimed.
If this is not the frenzy is all about, let us look at a few reasons:
The first reason is political. The BBC’s Linda Yueh has touched on the adverse effects of tightening US outward FDI on the emerging economies of Indonesia, South Africa, Brazil, Turkey and India. She calls the ‘Fragile five’. Linda argues that ‘these states have the most to lose when the US Govt restricts capital, since all of them run current account deficits and rely on capital inflow to service their repayments’ You can read the full article by Linda Yueh here.
These states have growing economies, are emerging out of their cocoons and most importantly are ‘gateways’ to geopolitical focus regions. All of these five states are facing elections in 2014. Restricting capital could strangle these economies even for a few hours and this act coupled with political instability in the states could lead to even worse effects.
The second reason is fairly straight forward. The shadow financial institutions of the global economy stand to gain the most if there is a period of uncertainty. Gold has already peaked in many regions and is unstable as we wait. Oil prices are also on the roller coaster as we wait for the Fed and Syria to make up their minds on which is the better evil. Chemical warfare or more debt.
Amid all of this chaos, the financial world makes its money and when the debt ceiling is raised, rests till another day
I could be wrong of course and we could see the largest economy default.
It sums up the media frenzy today on the US government going broke!
Do you really think the world’s largest economy will do that ? How hard is it for congress to raise the debt ceiling by a few more trillions when US debt ceiling has no limits? How gut wrenching is this decision for its lawmakers? Remember we went through all of this as congress raised the ceiling 10 times from 2001 with no moral qualms about the level of debt. After does it matter, if you owe 17 or 20 trillions if you are reconciled to never bothering to pay this debt in the foreseeable future?
The soothsayers are out already debating the US sovereign default in almost of of the world’s media. But will America default?
Historically, barring 1979, when a technical glitch caused the Treasury to default on $120 million of notes, there has been no defaults of US sovereign debt. After all how can you default when you own and manage the global economy’s currency of choice (US$) and your debts are also denominated in your own currency?. The worst case scenario would be printing more US$ bills to repay debts as Alan Greenspan once claimed.
If this is not the frenzy is all about, let us look at a few reasons:
The first reason is political. The BBC’s Linda Yueh has touched on the adverse effects of tightening US outward FDI on the emerging economies of Indonesia, South Africa, Brazil, Turkey and India. She calls the ‘Fragile five’. Linda argues that ‘these states have the most to lose when the US Govt restricts capital, since all of them run current account deficits and rely on capital inflow to service their repayments’ You can read the full article by Linda Yueh here.
These states have growing economies, are emerging out of their cocoons and most importantly are ‘gateways’ to geopolitical focus regions. All of these five states are facing elections in 2014. Restricting capital could strangle these economies even for a few hours and this act coupled with political instability in the states could lead to even worse effects.
The second reason is fairly straight forward. The shadow financial institutions of the global economy stand to gain the most if there is a period of uncertainty. Gold has already peaked in many regions and is unstable as we wait. Oil prices are also on the roller coaster as we wait for the Fed and Syria to make up their minds on which is the better evil. Chemical warfare or more debt.
Amid all of this chaos, the financial world makes its money and when the debt ceiling is raised, rests till another day
I could be wrong of course and we could see the largest economy default.
National Champions and the rise of new protectionism from the East
Jaguar Land Rover(JLR) is reported to need around $400mn for its expansion plans in 2013 and it turns once again to the city state of Singapore. TML holdings Pte, a wholly owned subsidiary of TATA motors has issued S$350Mn worth of notes at 4,25%. In addition, another TATA subsidiary, Abja Investment Co Pte, has raised S$300Mn at 4.95% there. Plans are on the anvil for a potential fund roadshow that will generate $ 1Bn for JLR.
What is about Singapore and the TATAs? The story begins in in 1972, when JRD Tata was asked by Lee Kuan Yew to set up a precision engineering unit and a training institute. In time, the Tatas would sit on the board of Temasek,the Singapore Economic Development Board and the board of the Monetary Authority of Singapore. Perhaps a common belief in mercantilism and the ‘state’ control of strategic industries was the key driver of the partnership. Tata would go one to invest in the state with the Indian government blessing.
The closeness of the TATAs to Singapore would prove beneficial in 2008 when Tata was bidding for JLR and this is where our story of eastern protectionism begins.
In February 2008, the Indian Army made a move towards seeking a replacement for the aging Czech owned TATRA platform for its Light Specialist Vehicle (LSV). TATA motors was pitted against Ford owned Land rover and it seemed that Land rover would be better placed to win the contract.The land rover offer was the multi-platform Defender which included a weapon platform for machine guns, a dedicated communications vehicle and optional ambulance operations. Although the TATAs were partners of the Indian Army from 1958 and a ‘national interest’ champion, the four military variants of the Defender—the backbone of the British Armed Forces was better placed to win the 55,000 vehicle deal.
But Land Rover was foreign owned . The Indian Army and by extension, t
he government wanted to reduce its dependence on imports, have
indigenous produced combat vehicles and own intellectual property rights for the source codes for any Vehicles, to prevent conflict of interest during any an insurgency.Automobile firms in private sector like the TATAs and Mahindras would now play a bigger role in the years ahead to spearhead the acquisition of assets,
The opportunity to have an Indian owned supplier to the Indian Army would come later in 2008.
As Ford began seeking suitors for Jaguar and Landrover, the TATAs would enter the race along with Mahindra. The business press had a field day reporting on the upstart from India trying to take over iconic British Brands.
Max Warburton, a leading global automotive analyst is reported to have termed it a ‘ romantic act’ on the part of an Anglophile. ”No one would make profits from Jaguar”. Ford knew that selling Jaguar would be difficult and insisted that both brands would be sold together.
TATA motors would go on to buy JLR using Singapore as the base for funds syndicated by a consortium led by the State Bank of India and using a SPV set up there. Funds would come in from Royal Bank of Scotland, the Governments of India and Singapore, HSBC, CITIBANK, other Indian State owned financial houses and of course , Singapore’s sovereign fund, TEMASEK.
Why would the TATAs buy a loss making car brand in the recession of 2008? There was no operational synergy with TATA motors. Sentiments aside, it made no sense unless the real target was Land Rover and the Indian Army’s need.
We now know that this was the reason. The Indian Army last week is reported to have completed field trials of the Defender and Discovery platforms. The company has released a media statement that it expects to get over two-thirds of the $10bn business. In other words, around 42,000 new land rovers or almost 30% of current production targets will be produced for one key customer.
Economic nationalism, supported by government institutions is the new trade objective. Move over, the US and the traditional concept of imperialistic entry modes.
The East has perfected the art of economic warfare, if one is to look critically at the many Chinese and Indian mega takeovers of strategic assets.
In the scheme of things, the Indians have been laughing all the way to the bank. Buying a strategic national interest resource for $2.3Bn using low cost global funds,then turning the car business into profits on the basis of demand from emerging markets, and now owning a game changing capability.
A example of the rise of new protectionism from the East!
Will the Egyptian sphinx smile or Cry?
The Egyptian street protests are now in their 7th day and there seems to be no logical end to it. With a protest of this magnitude, fuelled by pent up frustration, media coverage and unprecented coordination of people across cities, you would expected either a total suppression by the regime or a victory for the people. Instead, you see Mubarak ordering the Police to take charge of the situation without firing live ammunition.( some media reports have indicated that live rounds were indeed used). The police fail to take the streets back and then the army is deployed on the same rules. Witness here the spectacle of soldiers chatting with people almost as if they were on a day’s picnic. Why, one would ask, is there no move on the part of any of the belligerents to end this? As always, the answer has to be found in within a web, we call, foreign affairs. Big Brother USA has a vested interest in maintaining a status quo in Egypt, partly for strategic reasons (The Suez falling into wrong hands???) as well as in ensuring Israel’s military balance in the region remains unchallenged. Another could be a need to prop up monarchies/autocracies across a region which produces some much of world oil and in turn control them by manipulating regional rivalries. Egypt could be the breath that brings down the whole house of cards.The US has not publicly denounced Mubarak nor has it supported it. Sending a former ambassador, Frank G Wisner, as a private citizen is also a non- committal stance. Mubarak has tried to play his own set of moves, reshuffling a cabinet, creating a line of sucession outside the family, and raising the spectre of anarchy if he were to fall. All of which leads us to the third part of the web. The Egytian Army has been the backbone on which a post- King Farouk era was forged. It has been well regarded by the common man as a defender of its sovereignity.(How much of that is true or a myth depends on your interpretation of the Yom Kippur War). the army is also the fountain of power from which the pharoahs, ancient and contemporary derive their legitimacy to rule, unlike the monarchies which obtain the right to rule from divine grace. The army by its actions wants to present a Iron fist clad in a velvet glove as they walk a line between the people and Mubarak. Some reports have even gone to suggest that Mubarak is now being told what to do by the army. But why does the Army want to retain power? An entity that recieves over 1% of the country’s GDP as foreign aid from the US would not want to rock the boat, even if it needs to sacrifice some old pharaohs. Nor does it want to be subject to a greater power than its own after almost 50years of indirect rule.What do the protesters want? Nothing more than Mubarak quitting. No future plans are being discussed. The opposition groups are in opposition to each other and cannot unite. All one hears is the cacophony of ‘Go Mubarak!!!. Perhaps, the Army might graciously ask Mubarak to leave and with an estimated 20billion in , the Sphinx might attempt a wry smile as he savours life in the midst of plenty. For the people with their immediate need met, they might look forward to another sphinx ruling for 30 more years.
The economic implications of a Royal Wedding
Channel 4 reports that the either the government or Her majesty would foot the bill of Prince William’s wedding in either in 2011. Opinions are divided on the cost of the wedding. The guardian reports that the 1981 wedding including security could have cost around £30m which could be upto £100m in today’s terms. If the Queen is denied any increase in the civil list, her personal fortune would be hit. How much of that wealth is there, is itself ambigious, as the Queen holds much of this wealth in trust for the nation. The Times Rich estimates her fortune is £290m and a £100m deficit might be too much to stomach for Her Majesty? The government will have a lot of wrangling to do before parliament appproves this additional expenditure in times of uncertainity.Will this provide value for who ever foots the bill? I think it will.Ofcourse as this is my off the cuff assessment, it may be slightly off,the exact estimates. Prince william is still by far the most popular Royal with a credible public persona and his wedding will be a media frenzy that could draw the tourists to the UK. Government Statistics indicate that the UK earned over £4.3Bn last year. A mere 2.33% hike in tourist arrivals would pay for the wedding. What about the other parts of the economy? Souvenirs and other copies of royalMemorabilia would produce an economic boost -but only if it was manufactured in the UK and not in china or other lower production states! What about the value of its morale boost to a populace battered down by cuts and cuts? Remember the Churchill era and the value of good PR in times of crises. The wedding might do that now and spur all of us to create more value than we spend on it.
The Obama Encirclement of China
Has anyone seen any geopolitical connections with the US presidents visit and China-US relations?.Obama starts with India,and moves on to Indonesia, South Korea and Japan. The main reasons are economic if the Guardian is to be believed. However, if you were to look at the countries he visits, Indonesia has a GDP growth rate of 6.2%, India has 8.4%, South Korea has 6.1% and Japan has 2.8% growth rates respectively. the importance of these markets to the US economy, only Japan and South Korea matter in the top 10 trading nations.China and Canada are the top nations. One can argue here that Obama is seeking to diversify trade perhaps by offering the world’s third largest economy sops and also seeking to engage Indonesia as an emerging market.What if you were to see beyond this to China-US issues and its trade spats with the US including the currency wars, dollar denominated bonds, huge chunks of Federal reserve gilts and try to correlate this with the issues China has had with Japan and South Korea over territorial incursions as well as its constant rivalry with India? Do you see an Obama administration wishing to flex a China containment strategy by cozing up to China rivals? The enemy of an enemy is a friend, eh?
On why Dubai wants a piece of India’s real estate
The $335M Smart city project in Kerala State has been in the news in recent times. Both partners- The Governments of the emirate of Dubai and the State of Kerala have engaged in mudslinging allegations . One of the major issues has been the demand from Dubai that that Kerala should hand over 12% of the 246 acre project as freehold land. Dubai claims that this would later be sold to investors once the project was completed, yielding a better return for them. Kerala has refused to release the land as freehold and wants Dubai to have it on a long lease basis.
In a state of India where high literacy has created more awareness of global issues and where public engagement with government policies is the norm, selling off Kerala’s sovereign land to another country will not go down easily. To make matters worse, the state is ruled by the communist government, which once initiated one of the most successful land reforms policy. Many of their previous policies have stirred controversy even though history would later prove the soundness of some of the policies. Of course, the man at the top of the government of Kerala, a communist of the old school does exhibit some idiosyncrasies like calling the CEO of SmartCity , a’ drunk’ Arab and he also suffers from a serious case of the foot-in- the mouth syndrome at press conferences.But let us leave that aside and ask why Dubai still persists in wanting the freehold land? 23 board meetings later, the issue still remains and now the emirate wants to go for legal action or arbitration. Why force a state to part with its land? Will Dubai allow the Indian government to have free hold land in Dubai? Why not go down the time honoured route of long term lease? Examples abound of the success of long term lease in protecting investments. Hong Kong is one!.
Several streams of strategic intent can be argued on why Dubai wants the land.
A. To diversify sources of its GDP and wealth creation by moving into a growing and powerful economy.Dubai GDP is Dh68.397 million with projected growth rate of 0.3% growth and strongly dependent on services.
B. The Traditional High ROI model of selling excess land once the project is successful.
C. Locking by investment into one of the fast growing cities in the India, KOCHI with the new found importance of its sea port and the new transshipment container port. Or is it the naval assets and the potential of India only mega ship building facilities.
D. Creating a media circus that would mask an EXIT strategy for the project. The recent sovereign debt rescheduling by the Emirate & over $18 billion sovereign and quasi-sovereign debt obligations in 2011 would add support for this.
E. A delaying tactic to wait for the congress party to come back to power in June and approve the sale of land. The party has already supported the demand.Many commentators have suggested this would then open up a huge stream of corruption for other vested interests like Indian Business men in the UAE and of course for the Congress Party, which in recent times has made a mockery of the rule of law with corrupt ministers and officials.
Whatever is the outcome of the project, it has once again proved that doing Business with India still defies normality, even as we strive to be counted amongst the World’s powerful states.