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GS Paper: GS2-19.Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

  • EU unveils Global Gateway Project

    The European Union has unveiled a project called ”Global Gateway” that is worth 300 billion euros ($340 billion). The project is being seen as a response to China’s Belt and Road strategy.

    Global Gateway Project

    • It is the initiative Build Back Better World and the European Global Gateway that are reinforcing each other.
    • The bloc will mobilize the financial aid in public and private infrastructure investment around the world.
    • It is an offshoot of a plan by G7 countries to offer developing countries an alternative to Belt and Road.
    • The project will probably extend the remit of the European Fund for Strategic Investment, or create a similar institution, which can act as a guarantor for riskier investments in the ‘Global South’.
    • The EU has indicated it especially wants to compete for infrastructure development projects in Africa.

    About Belt and Road Initiative

    • The Belt and Road is a flagship project of Chinese President Xi Jinping that was launched in 2013.
    • Beijing has invested $139.8 billion in the project which is the centerpiece of Chinese foreign policy.
    • BRI aims to develop land and sea infrastructure to better connect China to Asia, Europe and Africa for trade and development, and it has found many partners around the world.

     

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  • India-Central Asia relations

    In his speech at the Shanghai Cooperation Organization (SCO) meet last month, PM Modi stressed on commitment for increasing its connectivity with land-locked Central Asia.

    What is the Central Asia Region?

    • Central Asia is a region in Asia which stretches from the Caspian Sea in the west to China and Mongolia in the east, and from Afghanistan and Iran in the south to Russia in the north.
    • It includes the former Soviet republics of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.

    India-Central Asia Ties

    • India has decades-old wish to connect with the resource and fuel-rich Central Asian nations.
    • Since the emergence of the Central Asian Republics as independent countries in the early 1990s, New Delhi has been trying to establish ties with them.

    Trade and collaboration

    • India’s trade with the five Central Asian Republics—Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan and Tajikistan—was below $ 2 billion in 2018.
    • The potential areas for collaboration include construction, sericulture and pharmaceuticals to IT and tourism.
    • Much of this trade was routed through Iran, Russia or the United Arab Emirates (UAE).

    Efforts for connectivity

     

    1. Turkmenistan–Afghanistan–Pakistan–India (TAPI) Gas Pipeline
    2. Development of Iran’s Chabahar Port
    3. Zaranj-Delaram Highway
    4. International North-South (Transit) Corridor (INSTC)

    About INSTC

    • In 2000, India, Iran and Russia agreed on a new route for trade that later came to be known as INSTC.
    • It was aimed at cutting the costs and time in moving cargo between Russia and India.
    • The pact was ratified in 2002 and the original multi-modal route linked Mumbai in India to Bandar Abbas and Bandar-e-Anzali in Iran, then across the Caspian Sea to Astrakhan, Moscow and St. Petersburg in Russia.
    • Over the years, more countries joined the INSTC.
    • In 2003, India and Iran announced the development of the Chabahar port in the Sistan-Balochistan province.

    China’s opportunism: Based on proximity

    • China’s trade with Central Asia was $50 billion-$60 billion in the same period.
    • The obvious advantage in China’s favour is geographical proximity.

    Hurdles for India

    • Lack of mutual trust: Unfortunately, many connectivity options are not open to them today due to the lack of mutual trust.
    • Pakistan factor: Tensions with Pakistan mean there is no viable land route towards Central Asia.
    • Iran and the US sanctions: Efforts to look for a circuitous route via Iran (and Afghanistan) have stalled due to US sanctions on Iran.

    Issues in Iran-Afghanistan bypass route

    Recent events acquire broader geopolitical relevance for India in this route:

    • Taliban takeover of Afghanistan: The takeover of Afghanistan by the Pakistan-backed Taliban has severely set back India’s plans in Central Asia.
    • Iran’s bypassing of India: Iran’s overtures has been clearly visible after itself allocating Farzad-B Gas exploration contract to another company bypassing India.

    Central Asia’s importance for India

    • Fossil fuels: While Central Asia is seen as fuel-rich and, hence, important for an energy-starved India.
    • Mineral richness: Central Asian states are also mineral-rich, and Kazakhstan, for one, has been a source of uranium for India’s nuclear power plants.
    • Market for India: A country like India which is seen as a major economy has to have a presence in these markets. INSTC also offers a safe and cost-effective route to the EU (European Union) market.
    • Convergence against Terrorism: India can forge a common position on terrorism and radicalization, which is a matter of concern to the region as much as it is to India.

    India’s recent engagement

    • Defence collaboration: In recent years, New Delhi has engaged with Central Asian Republics in the defence sphere through military exercises (say Ex Kazind).
    • Engagement at UN: Political and economic engagement is also important, given the imperatives of working together at a body such as the United Nations (UN).
    • Technological ties: India has set up universities there—Sharda and Amity are examples.

    Scope for expansion

    • Dairy Sector: There is scope for collaboration in the dairy sector.
    • Pharma: Indian firms have been setting up pharmaceutical units in Russia that can serve these countries as well.
    • Info Technology: IT and IT-enabled services are two other areas.
    • Cultural connect: Bollywood movies are quite famous in these countries.

    Way forward

    • India needs to develop into stronger bonds of trade and commercial bonds which will be possible once the INSTC crystallizes.

    Conclusion

    • The road ahead in the short term is difficult as India doesn’t seem to have any real leverage to get the connectivity projects with Central Asia going.
    • India has been negotiating with individual bilateral partners though.

     

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    Also read:

    [Burning Issue] Ashgabat Agreement

  • A ‘Taiwan flashpoint’ in the Indo-Pacific

    Context

    If the rising confrontation between the United States and China erupts into a clash of arms, the likely arena may well be the Taiwan Strait.

    Historical background of the Taiwan issue

    • The Guomindang (KMT) forces under Chiang Kai-shek lost the 1945-49 civil war to the Chinese Communist Party (CCP) in 1949. forces under Mao Zedong.
    • Chiang retreated to the island of Taiwan and set up a regime that claimed authority over the whole of China and pledged to recover the mainland eventually.
    • The CCP in turn pledged to reclaim what it regarded as a “renegade” province and achieve the final reunification of China.
    • Role of the U.S.: Taiwan could not be occupied militarily by the newly established People’s Republic of China (PRC) as it became a military ally of the United States during the Korean War of 1950-53.
    • This phase came to an end with the U.S. recognising the PRC as the legitimate government of China in 1979, ending its official relationship with Taiwan and abrogating its mutual defence treaty with the island.
    • Strategic ambiguity policy of the US: Nevertheless, the U.S. has declared that it will “maintain the ability to come to Taiwan’s defence” while not committing itself to do so.
    • This is the policy of “strategic ambiguity”.
    • The PRC has pursued a typical carrot and stick policy to achieve the reunification of Taiwan with the mainland.
    • It has held out the prospect, indeed preference for peaceful reunification, through promising a high degree of autonomy to the island under the “one country two systems”.
    • The “one country two systems” formula first applied to Hong Kong after its reversion to Chinese sovereignty in 1997.

    China-Taiwan economic links

    • Taiwan business entities have invested heavily in mainland China and the two economies have become increasingly integrated.
    • Between 1991 and 2020, the stock of Taiwanese capital invested in China reached U.S. $188.5 billion and bilateral trade in 2019 was U.S. $150 billion, about 15% of Taiwan’s GDP.
    • By the same token, China is capable of inflicting acute economic pain on Taiwan through coercive policies if the island is seen to drift towards an independent status.

    Prospects for peaceful reunification

    • Taiwan has two major political parties.
    • The KMT, dominated by the descendants of the mainlanders remains committed to a one-China policy.
    • The Democratic Progressive Party (DPP), on the other hand, is more representative of the indigenous population of the island, and favours independence.
    • Faced with aggressive threats from China and lack of international support, the demand for independence has been muted.
    • Ever since the DPP under Tsai Ing-wen won the presidential elections in 2016, China has resorted to a series of hostile actions against the island, which include economic pressures and military threats.
    • One important implication of this development is that prospects for peaceful unification have diminished.
    • Sentiment in Taiwan in favour of independent status has increased.

    Role of the US

    • While the U.S. does not support a declaration of independence by Taiwan, it has gradually reversed the policy of avoiding official-level engagements with the Taiwan government
    • The first breach occurred during the Donald Trump presidency.
    • The Joe Biden officials have continued this policy.
    • The Taiwanese representative in Washington was invited to attend the presidential inauguration ceremony (Biden), again a first since 1979.
    • Reports have now emerged that U.S. defence personnel have been, unannounced, training with their Taiwanese counterparts for sometime.

    Implications for Quad and India

    • The recent crystallisation of the Quad, of which India is a part, and the announcement of the AUKUS, with Australia being graduated to a power with nuclear-powered submarines, may act as a deterrent against Chinese moves on Taiwan.
    • But they may equally propel China to advance the unification agenda before the balance changes against it in the Indo-Pacific.
    • For these reasons, Taiwan is emerging as a potential trigger point for a clash of arms between the U.S. and China.

    Consider the question “What are the implications of Taiwan issue and the US involvement in it for India?”

    Conclusion

    In pursuing its Indo-Pacific strategy, India would do well to keep these possible scenarios in mind.

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  • China-Myanmar New Passage

    The shipments on a newly-launched railway line under the China-Myanmar New Passage from the Myanmar border to the key commercial hub of Chengdu in western China have started.

    China-Myanmar New Passage

    • The passage provides China a new road-rail transportation channel to the Indian Ocean, were delivered last week, state media reported on Tuesday.
    • The transport corridor involves a sea-road-rail link.
    • It connects the logistics lines of Singapore, Myanmar, and China, and is currently the most convenient land and sea channel linking the Indian Ocean with southwest China.
    • Goods from Singapore reached Yangon Port, arriving by ship through the Andaman Sea of the northeastern Indian Ocean, and were then transported by road to Lincang on the Chinese side of the Myanmar-China border in Yunnan province.
    • The new railway line that runs from the border town of Lincang to Chengdu, a key trade hub in western China, completes the corridor.

    Why does India need to be watchful?

    • From the perspective of security, India’s border with Myanmar has historically presented serious security challenges.
    • Chinese troops had used the Myanmar route to threaten India’s North-eastern States prior to the 1962 war.
    • In the run-up to the India-China war of 1962, Chinese troops had commissioned local muleteers in Northern Myanmar to facilitate the movement of troops and war logistics to challenge India’s Northeast.

    Way forward

    • The work on infrastructure projects in India’s Northeastern States needs to be expedited to ensure speedy mobilization of India’s own troops to face different contingencies.
    • Monitoring of developments including deployment of space assets to ensure that India is not caught unaware would be desirable.
    • Most importantly, India on its part needs to substantially step up its own game in Myanmar and proactively engage Myanmar in the realm of the infrastructure upgrade.

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  • Close the vaccination gap, in global lockstep

    Why vaccination gap is cause of worry

    • By the end of May 2021, only 2.1% of Africans had received at least one dose of a COVID-19 vaccine.
    • A widely vaccinated world population is the only way to end the pandemic; otherwise, the multiplication of variants is likely to undermine the effectiveness of existing vaccines.
    • Vaccination is also a prerequisite for lifting the restrictions that are holding back our economies and freedoms.
    • If the vaccination gap persists, it risks reversing the trend in recent decades of declining poverty and global inequalities.
    • Such a negative dynamic would hold back economic activity and increase geopolitical tensions.
    • The cost of inaction would for sure be much higher for advanced economies than what we collectively would have to spend to help vaccinate the whole world.
    • The International Monetary Fund has proposed $50 billion plan in order to be able to vaccinate 40% of the world population in 2021 and 60% by mid-2022.

    Need to resist the vaccine nationalism

    • To achieve the goal set by IMF, we need closely coordinated multilateral action.
    • We must resist the threat posed by linking the provision of vaccines to political goals and vaccine nationalism.
    • The EU has been vaccinating its own population, while exporting large volumes of vaccines and contributing substantially to the vaccines roll-out in low-income countries.
    • The EU has also exported 240 million doses to 90 countries, which is about as much as used within the EU.
    • One-third of all COVAX doses delivered so far have been financed by the EU.
    • India’s Vaccine Maitri is another example of global solidarity.
    • However, this effort is still far from sufficient to prevent the vaccination gap from widening.

    Way forward

    • To fill widening vaccination gap, countries with the required knowledge and means should increase their production capacities, so that they can both vaccinate their own populations and export more vaccines.
    • All countries must avoid restrictive measures that affect vaccine supply chains.
    • We also need to facilitate the transfer of knowledge and technology, so that more countries can produce vaccines.
    • Voluntary licensing is the privileged way to ensure such transfer of technology and know-how.

    Conclusion

    The COVID-19 pandemic has reminded us that health is a global public good. Our common global COVID-19 vaccine action to close the vaccination gap must be the first step toward genuine global health cooperation, as foreseen by the Rome Declaration recently adopted at the Global Health Summit.

     

  • US investigation into India’s Digital Services Tax (DST)

    The US government has announced the further suspension of punitive tariffs for six months on India, Austria, Italy, Spain, Turkey, and the UK while it continues to resolve the DST investigation amid the ongoing multilateral negotiations at the OECD and the G20.

    Do you remember?

    GAFA tax—named after Google, Apple, Facebook, Amazon—is a proposed digital tax to be levied on large technology and internet companies.

    What are the Digital Services Taxes in India?

    • The NDA government had moved an amendment in the Finance Bill 2020-21 imposing a 2 percent digital service tax on trade and services by non-resident e-commerce operators with a turnover of over Rs 2 crore.
    • The new levy has expanded the ambit of the equalization levy for non-resident e-commerce operators involved in the supply of services, including the online sale of goods and provision of services.
    • E-commerce operators are obligated to pay the tax at the end of each quarter.
    • Estimates by the USTR indicate that the value of the DST payable by US-based company groups to India will be up to approximately $55 million per year.

    Also read:

    What are Digital Services Taxes?

    What is the story?

    • The US is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes.
    • It is trying to reaching a consensus on international tax issues through the OECD and G20 processes.

    Investigation regarding DST

    • The US has conducted a year-long investigation into digital services taxes imposed by countries, stating that they are against tech companies like Apple, Amazon, Google, and Facebook.
    • It had determined that the digital services taxes adopted by Austria, India, Italy, Spain, Turkey, and the UK has discriminated against US digital companies and were inconsistent with principles of international taxation, and burdened US companies.

    What’s the case against India?

    • In the case of India, the USTR’s proposed course of action includes additional tariffs of up to 25 percent ad valorem on an aggregate level of trade.
    • Around 26 categories of goods are in the preliminary list of products that would be subject to the additional tariffs.
    • This includes shrimps, basmati rice, cigarette paper, cultured pearls, semi-precious stones, silver powder and silver articles of jewelry, gold mixed link necklaces, and neck chains, and certain furniture of bentwood.

    Why does India need DST?

    • The agenda to reform international tax law so that digital companies are taxed where economic activities are carried is still a work in progress.
    • Due to this, countries are worried that they might cede their right to tax incomes. Therefore, many countries have either proposed or implemented a digital services tax.
    • The proliferation of digital service taxes (DSTs) is a symptom of the changing international economic order.
    • Countries such as India which provides large markets for digital corporations seek a greater right to tax incomes.
    • The taxation of the digitalized economy turned out to be a relatively contentious issue because there is a huge asymmetry in digital service providers and consumers.
  • Israel and Palestine could take a leaf out of India’s book

    The article suggest the Indian model for peaceful coexistence as a possible solution to Israel-Palestine conflict.

    Brief history of the conflict

    • Britain renounced its Mandate over Palestine in 1948.
    • This paved the way for the United Nations to divide Palestine between the Jews and Arabs, giving them about 55% and 45% of the land, respectively.
    • The Jews, meanwhile, had declared the establishment of the state of Israel for which they had been working for long.
    • The Palestinians, who lacked the resources to conceive of a state, failed to form a state of their own in the land allotted to them.
    • Instead, a coalition of Arab countries invaded the nascent state of Israel to nip it in the bud.
    • Israel defeated the Arab armies.
    • Israel also destroyed about 600 Palestinian villages and expelled about 80% of Arabs from its territory.
    • In 1967, in the Six-Day War, Israel captured not just more Palestinian land but also Egypt’s Sinai Peninsula and Syria’s Golan Heights.
    • During the Yom Kippur War of 1973, the Arabs came to realise that Israel is here to stay.

    Need for realisation on both the sides

    • The Arab states failed to impress the realisation of permanency of Israel upon their Palestinian brethren, a sizeable number of whom remain committed to seeking a solution through counter-violence. 
    • Vicious cycle of violence is not going to end unless there is realism on both sides.
    • The Hamas should know that Israel will not give up on holding on to land it has held for years.
    • Israel should understand that total subjugation, expulsion or even decimation of Palestinians will not make it any safer.
    • A solution based on the common humanity of all stakeholders, one that is not riven by racial and religious schisms, needs to be explored.

    Viability of Indian model

    • The Indian model of democracy and secularism, which accommodates religious, ethnic, linguistic and other diversities, could be a viable model for the peaceful coexistence of formerly antagonistic groups.
    •  India evolved a unique model of accommodating the victors and the vanquished, without ever resorting to the latter’s decimation.
    • A modus vivendi has to evolve on the basis of hard realities, the first of which is that neither the Jews nor the Palestinians are going to vanish.
    • If the two-state solution is nowhere in the offing, a single state after the Indian model, i.e., a secular, democratic and pluralistic state, may be the only feasible option.
    • The Palestinian refugees have a right to return.
    • That the altered demographics would impinge on the religio-racial character of Israel is not an argument which behoves a modern democratic state.
    • It is true that a nation state belongs to the group which constituted itself into a nation.
    • A nation is an imagined community.
    • As imagination expands, the foundations of the nation become deeper.

    Consider the question “In the absence of two-state solution to the Israel-Palestine conflict, what lessons India could offer to the two parties for peaceful coexistence?”

    Conclusion

    Israel might not offer the right model of conflict resolution for India, but India presents a model of peaceful coexistence for Israel.

  • UAE’s Golden Visa Scheme

    A Bollywood actor has recently received a golden visa from the UAE government.

    What is the Golden Visa?

    • The Golden Visa system essentially offers long-term residency (5 and 10 years) to people belonging to the following groups: investors, entrepreneurs, individuals with outstanding talents the likes of researchers, medical professionals and those within the scientific and knowledge fields, and remarkable students.
    • The main benefit of the visa will be security.
    • The UAE government has made it clear that they are committed to providing expatriates, investors and essentially everyone looking to make the UAE their home an extra reason to feel secure about their future.

    Who are eligible to apply?

    • For the 10-year visa, investors having no less than AED (Dirham) 10 million worth of public investment, either in the form of an investment fund or a company, can apply.
    • However, at least 60 per cent of the total investment must not be in the form of real estate and the invested amount must not be loaned, or in case of assets, investors must assume full ownership.
    • The investor must be able to retain the investment for a minimum of three years as well.
    • The long-term visa can also include the holder’s spouse and children, as well as one executive director and one advisor.
    • In addition to the aforementioned, foreign nationals who are looking to set up their business in the UAE may also apply for permanent residency (5 years) through the Golden Business Visa scheme.

    Perks for the talent

    • Besides entrepreneurs, individuals with specialized talent can also apply for the visa. They include doctors, researchers, scientists, investors and artists.
    • These individuals may be granted a 10-year visa following accreditations granted by their respective departments and fields and the visa will also be extended to their spouses and children.
    • Exceptional high school and university students are eligible for a 5-year residency visa in the UAE.
  • Places in news: Paracel Islands

    A United States warship sailed through the Paracel Islands in the disputed South China Sea.

    Paracel Islands

    • The Paracel Islands, also known as the Xisha Islands are a disputed archipelago in the South China Sea.
    • The archipelago includes about 130 small coral islands and reefs, most grouped into the northeast Amphitrite Group or the western Crescent Group.
    • They are distributed over a maritime area of around 15,000 square kilometers with a land area of approximately 7.75 square kilometers.
    • The archipelago includes Dragon Hole, the deepest underwater sinkhole in the world.
    • It is surrounded by productive fishing grounds and a seabed with potential, but as yet unexplored, oil and gas reserves.
  • Russia’s Nord Stream 2 Pipeline

    The US government has decided to waive sanctions on the company behind Russia’s Nord Stream 2 pipeline to Europe.

    Nord Stream 2 Pipeline

    • It is a system of offshore natural gas pipelines running under the Baltic Sea from Russia to Germany.
    • It includes two active pipelines running from Vyborg to Lubmin near Greifswald forming the original Nord Stream, and two further pipelines under construction running from Ust-Luga to Lubmin termed Nord Stream 2.
    • In Lubmin the lines connect to the OPAL line to Olbernhau on the Czech border and to the NEL line to Rehden near Bremen.
    • The first line Nord Stream-1 was laid and inaugurated in 2011 and the second line in 2012.
    • At 1,222 km in length, Nord Stream is the longest sub-sea pipeline in the world, surpassing the Langeled pipeline.

    US sanctions

    • Nord Stream projects have been opposed by the United States as well as by several Central and Eastern European countries because of concerns that the pipelines would increase Russia’s influence in the region.
    • The US resistance to Nord Stream 2 is also influenced by the country’s increased production of natural gas, which gives the US economic incentive to resist the Russian supply of gas to the EU, in favour of US shale gas.