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Subject: International Stories of Key Importance

  • Bhutan no longer a ‘Least Developed Country’

    bhutan

    Central idea: Bhutan will become the seventh country to graduate from the United Nations’ list of Least Developed Countries (LDC) on December 13, 2023.

    What is a Least Developed Country (LDC)?

    • The LDCs are developing countries listed by the UN that exhibit the lowest indicators of socioeconomic development.
    • The concept first originated in the late 1960s and was codified under UN resolution 2768 passed in November 1971.
    • According to the UN, an LDC is defined as “a country that exhibits the lowest indicators of socioeconomic development, with-
    1. Low levels of income, human capital and economic diversification,
    2. High levels of economic vulnerability, and
    3. A population that is disproportionately reliant on agriculture, natural resources, and primary commodities.

    Criteria for LDCs

    • The UN identifies three criteria for a country to be classified as an LDC:
    1. It must have a gross national income (GNI) per capita below the threshold of USD 1,230 over a three-year average.
    2. It must perform poorly on a composite human assets index based on indicators including nutrition, health and education.
    3. It must demonstrate economic vulnerability such as being prone to natural disasters and possessing structural economic constraints.
    • Countries must meet a selection from all three criteria simultaneously and are reviewed on a three-year basis by the UN.

    How many countries are LDCs?

    • Currently, the UN lists 46 countries that qualify as LDCs.
    • Of those, 33 are from Africa, nine from Asia, three from the Pacific and one from the Caribbean.
    • At the UN 2021 triennial review of LDC countries, the organisation recommended that Bangladesh, Laos, and Nepal be removed from the list.

    How does a country get off the LDC list?

    • To graduate from the LDC list, a country must meet certain criteria in the three areas stated before namely, income, human assets, and economic vulnerability.
    • A nation must have a GNI per capita of at least USD 1,242 for two consecutive triennial reviews in order to meet the income requirement.
    • The nation must also show that this level of income can be sustained over the long term.
    • A nation also must show that it has improved its ability to withstand external economic shocks like natural catastrophes or shifts in commodity prices in order to pass the economic vulnerability test.

    How did Bhutan get off the LDC list?

    • Bhutan was included in the first group of LDCs in 1971. It fulfilled the requirements for graduation in 2015 and 2018.
    • Bhutan’s economy grew more than eight times in the last 20 years, from under USD 300 million in 2000 to USD 2.53 billion in 2017.
    • The percentage of people living in poverty decreased from 17.8 per cent in 2003 to 1.5 per cent in 2017.
    • The percentage of people living below the national poverty line decreased from 23.2 per cent in 2007 to 8.2 per cent in 2017.

    What economic measures did it take?

    • Hydropower exports: Bhutan increased exports of hydropower to India, which now accounts for 20 per cent of its economy.
    • Brand Bhutan: Bhutan established Brand Bhutan to diversify exports and target high-end markets with specialised exports of high-value, low-volume Bhutanese goods from sectors including textiles, tourism, handicrafts, culture, and natural resources.
    • Tourism promotion: It emerged out to be an all-season tourist destination in South Asia.

    Advantages of being an LDC

    • LDCs enjoy duty-free and quota-free (DFQF) access to the markets of developed countries.
    • LDCs are also eligible for loans with special terms for development, which include loans with a lower interest rate and a longer repayment time than those given to other nations.
    • The term “Official Development Assistance” (ODA) or “aid” is frequently used to describe this form of support.

    Way forward for Bhutan

    • As such, advancing out of the list is often only the first step in overall development.
    • Graduation from LDC status is not the end of the road, but the beginning of a new journey.
    • It is a time when a country needs to redouble its efforts to build its productive capacities, diversify its economy, and create new opportunities for employment and income generation.

    Back2Basics: Defining a country’s ‘Development’

    • There are no WTO definitions of “developed” or “developing” countries.
    • Developing countries in the WTO are designated on the basis of self-selection although this is not necessarily automatically accepted in all WTO bodies.
    • The WTO however recognizes as least-developed countries (LDCs) those countries which have been designated as such by the United Nations.

     

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  • Windsor Framework: The deal between UK and EU

    windsor

    The ‘Windsor Framework’ will replace the Northern Ireland Protocol, which had proved to be among the thorniest of Brexit fall-outs, creating problems both economic and political.

    You must know!

    England is a country in its own right and forms part of Great Britain, along with Scotland and Wales. Great Britain is a geographical term that refers to the island that contains England, Scotland, and Wales.

    On the other hand, the United Kingdom (UK) is a sovereign state that includes England, Scotland, Wales, and Northern Ireland.

    Hence, England is a part of Great Britain, and Great Britain is a part of the UK.

    What is the Northern Ireland Protocol?

    • After the UK left the European Union, Northern Ireland remained its only constituent that shared a land border with an EU-member, the Republic of Ireland.
    • Since the EU and the UK have different product standards, border checks would be necessary before goods could move from Northern Ireland to Ireland.
    • However, the two Irelands have had a long history of conflict, with a hard-fought peace secured only in 1998 under the Belfast Agreement, also called the Good Friday agreement.
    • Fiddling with this border was thus considered too dangerous, and it was decided the checks would be conducted between Great Britain and Northern Ireland.
    • This was called the Northern Ireland Protocol.

    Why was it contentious?

    • Under the protocol, Northern Ireland remained in the EU single market, and trade-and-customs inspections of goods coming from Great Britain took place at its ports along the Irish Sea.
    • The checks made trade between Great Britain and Northern Ireland cumbersome, with food products, especially, losing out on shelf life while they waited for clearance.
    • Some taxation and spending policies of the UK government could not be implemented in Northern Ireland because of EU rules.
    • The sale of medicines, too, was caught between different British and EU rules.

    What does the Windsor Framework proposes?

    • The Windsor Framework Deal proposes two crucial aspects. The first aspect is the introduction of a green lane and red lane system for goods.
    1. The green lane system will be for goods that will stay in Northern Ireland.
    2. The red lane system will be for goods that will go to the EU.
    • The second aspect is the ‘Stormont Brake’.
    1. It allows Northern Ireland lawmakers and London to veto any EU regulation.
    2. The veto is applicable if they believe that the regulation affects the region adversely.

     

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  • Russia officially ‘suspends’ New START Treaty

    Central idea: The article provides an overview of the New START treaty, which was signed by Russia and the United States in 2010. It highlights how the treaty limits the number of nuclear weapons that the two countries can possess and deploy.

    The New START, INF and the Open Skies …. Be clear about the differences of these treaties. For example- to check if their inception was during cold war era etc.

    New START Treaty

    • The New Strategic Arms Reduction Treaty (New START) pact limits the number of deployed nuclear warheads, missiles and bombers and is due to expire in 2021 unless renewed.
    • The treaty limits the US and Russia to a maximum of 1,550 deployed nuclear warheads and 700 deployed missiles and bombers, well below Cold War caps.
    • It was signed in 2010 by former US President Barack Obama and then-Russian President Dmitry Medvedev.
    • It is one of the key controls on the superpower deployment of nuclear weapons.

    Background of US-Russia Nuclear Relations

    • The US formally QUIT the Intermediate-Range Nuclear Forces (INF)
    • The agreement obliged the two countries to eliminate all ground-based missiles of ranges between 500 and 5,500 km.

    When did nuclear disarmament begin?

    • In 1985, the two countries entered into arms control negotiations on three tracks.
    • The first dealt with strategic weapons with ranges of over 5,500 km, leading to the START agreement in 1991.
    • It limited both sides to 1,600 strategic delivery vehicles and 6,000 warheads.
    • A second track dealt with intermediate-range missiles and this led to the INF Treaty in 1987.
    • A third track, Nuclear, and Space Talks was intended to address Soviet concerns regarding the U.S.’s Strategic Defence Initiative (SDI) but this did not yield any outcome.

    Success of INF

    • The INF Treaty was hailed as a great disarmament pact even though no nuclear warheads were dismantled.
    • As it is a bilateral agreement, it did not restrict other countries.
    • By 1991, the INF was implemented. USSR destroyed 1,846 and the US destroyed 846 Pershing and cruise missiles. 
    • Associated production facilities were also closed down.
    • INF Treaty was the first pact to include intensive verification measures, including on-site inspections.

    How has the nuclear behavior been?

    start

    • With the end of the Cold War and the break-up of the USSR in end-1991, former Soviet allies were joining NATO and becoming EU members.
    • The U.S. was investing in missile defense and conventional global precision strike capabilities to expand its technological lead.
    • In 2001, the U.S. announced its unilateral withdrawal from the 1972 Anti-Ballistic Missile Treaty (ABM Treaty).
    • The US also blamed Russia for not complying with the ‘zero-yield’ standard imposed by the Comprehensive Test Ban Treaty (CTBT). This may indicate the beginning of a new nuclear arms race.

    Implications of the New Start

    • The 2011 New START lapsed in 2021. It may meet the fate of the INF Treaty.
    • The 2018 NPR envisaged the development of new nuclear weapons, including low-yield weapons.
    • China is preparing to operate its test site year-round with its goals for its nuclear force.
    • CTBT requires ratification by U.S., China, and Iran, Israel and Egypt and adherence by India, Pakistan and North Korea. It is unlikely to ever enter into force.

    Conclusion

    • A new nuclear arms race could just be the beginning. It may be more complicated because of multiple countries being involved.
    • Technological changes are bringing cyber and space domains into contention. It raises the risks of escalation.

     

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  • What is Munich Security Conference?

    Central idea: The article is about the controversy surrounding billionaire philanthropist and political activist George Soros and his alleged statements on India and the Indian PM at the Munich Security Conference.

    Who is George Soros?

    • George Soros, the 92 YO billionaire philanthropist and political activist, has been at the center of several controversies over the years.
    • Some of the key controversies associated with Soros include:
    1. Currency manipulation: Soros became famous in the 1990s for his role in the “Black Wednesday” financial crisis in the UK, where he was accused of profiting from the devaluation of the pound sterling by short-selling it.
    2. Insider trading: Soros has also been accused of insider trading in several instances, including the case of the French bank Societe Generale.
    3. Political meddling: Soros has been accused of using his vast wealth to influence political campaigns and events around the world, including in countries like Hungary, Ukraine, and the United States.
    4. Anti-Semitic accusations: Soros has been the subject of numerous conspiracy theories and accusations of anti-Semitism, with some critics alleging that he is part of a secret globalist agenda to control world governments and economies.

    About Munich Security Conference (MSC)

    • The MSC was founded by a German official and publisher Ewald-Heinrich von Kleist at the peak of the Cold War (1947-1991).
    • Starting in 1963, the conference initially only focused on military issues and was mainly attended by western countries and their high-profile officials, who “came together to display a united front in their struggle with Soviet communism”.
    • After the end of the Cold War, the conference expanded its agenda that went beyond defense and security matters to include issues such as climate change and migration.
    • It also started to invite leaders from eastern nations, including Russia, India and China.

    What will be the focus of this year’s MSC?

    • This year’s edition might entail a refocus on its goal- the security order in Europe, in the backdrop of the Russia-Ukraine war that began just days after the MSC 2022 was concluded.
    • The conference might also serve as a platform for diffusing tensions between the United States and China, especially after the former shot down an alleged spy balloon.
    • Another theme on the agenda is to focus on diverse perspectives from the Global South, which included some of the poorest and least industrialized countries in the world.

     

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  • Central agencies gear up for FATF mutual evaluations

    Central agencies, including the Financial Intelligence Unit (FIU) and the Directorate of Revenue Intelligence (DRI), have begun preparations for the Financial Action Task Force’s (FATF) mutual evaluation process of India.

    What is the news?

    • India is due to undergo the mutual evaluation process in the second half of 2022, which will assess the country’s compliance with international anti-money laundering and counter-terror financing standards.

    What is FATF?

    • FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
    • The FATF Secretariat is housed at the OECD headquarters in Paris.
    • It holds three Plenary meetings in the course of each of its 12-month rotating presidencies.
    • As of 2019, FATF consisted of 37 member jurisdictions.

    India’s say in FATF

    • India became an Observer at FATF in 2006. Since then, it had been working towards full-fledged membership.
    • On June 25, 2010, India was taken in as the 34th country member of FATF.

    What is FATF’s mutual evaluation process?

    • The mutual evaluation process is a review of a country’s legal and institutional framework to combat money laundering and terrorist financing, as well as its implementation of measures to prevent these crimes.
    • During the process, the FATF assesses a country’s compliance with its 40 recommendations on anti-money laundering and counter-terror financing, as well as the level of effectiveness of these measures in practice.
    • The outcome of the mutual evaluation is a report that highlights a country’s strengths, weaknesses, and areas for improvement, and assigns a rating based on the level of compliance and effectiveness.

    How will FATF evaluate India?

    • The FATF’s evaluation will cover a wide range of areas, including India’s legal framework, regulatory system, law enforcement efforts, and international cooperation.
    • Central agencies have been working to ensure that India’s anti-money laundering and counter-terror financing laws are in line with international standards, and that their implementation is effective.

    Significance of this evaluation

    • The outcome of the evaluation will be a report that highlights India’s strengths, weaknesses, and areas for improvement, and assigns a rating based on the level of compliance and effectiveness.
    • The mutual evaluation process is an important tool in the global fight against money laundering and terrorist financing.
    • Its outcome can have significant implications for a country’s access to international financial markets and its reputation in the global community.

     

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  • US bombed Nord Stream Gas Pipeline

    nord

    An American investigative journalist has claimed that the September 2022 bombing of the undersea Nord Stream gas pipelines was carried out by the US Central Intelligence Agency (CIA).

    What is Nord Stream Pipeline?

    (1) Nord Stream 1:

    • Nord Stream 1 is the biggest pipeline transporting natural gas between Russia and Europe via Germany.
    • It is a system of offshore natural gas pipelines running under the Baltic Sea from Russia to Germany.
    • Nord Stream 1 is a 1,224 km underwater gas pipeline that runs from Vyborg in northwest Russia to Lubmin in northeastern Germany via the Baltic Sea.

    (2) Nord Stream 2:

    • Russian threats to choke this gas supply to Europe present an economic threat to Germany.
    • To expand options and double the supply from Russia, Germany decided to build Nord Stream 2.
    • The construction of the $11 billion-worth Nord Stream 2 was completed in 2021 but never began commercial operations.

    Why the Nord Stream pipeline is so much in news?

    • For Germany: Energy prices in Germany, Europe’s largest economy, are among the lowest in the continent because of the cheap gas supplies via Nord Stream 1. This also makes German manufactured goods more competitive in the international market.
    • For European Union: In 2021, Russia supplied nearly 40 per cent of the EU’s natural gas needs through this pipeline. The flows through Nord Stream play a vital role in filling up the national storage tanks of EU. It is crucial to provide the required heating in the upcoming winter.
    • For Russia: Russia is using the supplies via the crucial pipeline as a bargain to navigate its economy through sanctions from the western countries.

    What is the current status of Nord Stream Pipeline?

    • Nord stream pipeline is the largest single supply route for Russian gas to Europe. The Russian state owned gas company Gazprom has a majority ownership in the pipeline.
    • While it was running at just 20% of its capacity since the Russia-Ukraine conflict began, the company, in early September fully cut gas flows from the pipeline on the pretext of maintenance.
    • According to Bloomberg, while 40% of Europe’s pipeline gas came from Russia before Russia Ukraine the war, the number now stands at just 9%.
    • Even though both pipelines were not running commercially, they had millions of cubic metres of gas stored in them.

     

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  • Israel-Palestinian violence on West Bank soars

    west bank

    US has urged Israel and the Palestinians to ease tensions amid a spike in violence that has put the West Bank region on edge.

    Where is West Bank?

    • The West Bank is a landlocked territory near the coast of the Mediterranean in Western Asia that forms the main bulk of the Palestinian territories.
    • It is bordered by Jordan and the Dead Sea to the east and by Israel to the south, west, and north.

    Point of discussion: Anti-Semitism

    • Anti-Semitism (hatred against Jews) is an officially stated policy of many theocratic countries (created by divine orders of religion).
    • This includes entire Arab world, the self-proclaimed caliphate ‘Turkiye’ and even Pakistan.
    • Jews, the micro-minority religion of the world were denied access to their homeland.

    What is the Israel-Palestine Conflict?

    • The land to which Jews and Palestinians lay claim to was under the Ottoman Empire and then the British Empire in early 20th century.
    • Palestinian people —the Arab people from the same area— want to have a state by the name of Palestine in that area.
    • The conflict between Israelis and Palestinians is over who gets what land and how it’s controlled.
    • Jews fleeing the persecution in Europe at the time wanted to establish a Jewish state on the land which they believe to be their ancient homeland.
    • The Arab at the time resisted, saying the land was theirs. The land at the time was called Palestine.
    • In 1917’s Balfour Declaration, the United Kingdom declared its support for the establishment of a “national home for the Jewish people” in Palestine.
    • Arabs resisted it which led to violence.

    Jews into West Bank: Arab hinterland in Israel

    • Some 75,000 Jews migrated to Palestine from 1922-26 and some 60,000 Jews emigrated in 1935, according to a history published by the University of Central Arkansas.
    • It adds that Palestinian Arabs demanded the UK to halt Jewish emigration, but the UK ignored such calls. There were violent incidents, leading to deaths of some 500 people.
    • In 1923, the British Mandate for Palestine came into effect.
    • The document was issued by the League of Nations, the failed predecessor of the United Nations (UN).
    • The mandate gave the UK the responsibility for creating a Jewish national homeland in the region.
    • In 1936, the UK government recommended the partition of Palestine into Jewish and Arab states.

    How did the issue escalate?

    • In 1947, Britain referred the issue of Palestine to the UN, which came up with a partition plan.
    • It put up two proposals. One, two separate states joined economically —the majority proposal— and, two, a single bi-national state made up of autonomous Jewish and Palestinian areas, the minority proposal.
    • The Jewish community approved of the first of these proposals, while the Arabs opposed them both.

    Israel’s independence

    • In May 1948, Israel declared its independence. This was eye-pricking development for Arabs.
    • The Arab countries of Lebanon, Syria, Iraq, and Egypt invaded the newly-declared country immediately.
    • When the war ended, Israel gained some territory formerly granted to Palestinian Arabs under the UN resolution in 1947.
    • It also retained control over the Gaza Strip and the West Bank respectively.

    Resolving the conflict

    Ans. Two-state solution

    • The two-state solution refers to an arrangement where Israeli and Palestinian states co-exist in the region.
    • However, such a solution has not materialised over the decades.
    • As outlined in the beginning and in the briefly explained roots of the conflict, the two-state solution means two separate states for Israelis and Palestinians.

    Why it hasn’t worked out?

    There are four main reasons why the two-state solution has not materialized by now:

    [1] Borders

    • There is no consensus as to how to draw the lines dividing the two proposed states.
    • Many people say borders should have pre-1967 lines.
    • In 1967 Israeli-Arab war, Israel captured Sinai Peninsula, Gaza Strip, West Bank, Old City of Jerusalem, and Golan Heights.
    • Israel is not willing to give up these gains. It returned Sinai to Egypt in 1982.
    • Moreover, there is the question of Israeli settlements in West Bank.

    [2] Question of Jerusalem

    • Both Israel and Palestinians claim Jerusalem as their capital and call it central to their religion and culture.
    • The two-state solution typically calls for dividing it into an Israeli West and a Palestinian East, but it is not easy to draw the line — Jewish, Muslim and Christian holy sites are on top of one another.
    • Israel has declared Jerusalem its ‘undivided capital’, effectively annexing its eastern half, and has built up construction that entrenches Israeli control of the city.

    [3] Refugees

    • A large number of Palestinians had to flee in the 1948 War.
    • They and their descendants —numbering at 5 million— demand a right to return. Israel rejects this.
    • The return of these people would end the demographic majority of Jews, ending the idea of Israel that’s both democratic and Jewish.

    [4] Security

    • Security concerns are also central to Israel as it’s constantly harassed by terrorist group Hamas that controls Gaza Strip.
    • Hamas and other Islamist group in Gaza launch rockets into Israel time-to-time.
    • Moreover, there are also concerns of Palestinians’ attack inside Israel.
    • This year in March-April, at least 18 Israelis were killed in Palestinian attacks inside Israel.
    • A total of 27 Palestinians were also killed in the period, including those who carried out attacks inside Israel. Palestinians too have their concerns.
    • For Palestinians, security means an end to foreign military occupation.

    Why the two-state solution is needed?

    • Besides fulfilling the basic desire of both Jews and Arabs of their own states, supporters of two-state solutions say it must be backed because its alternatives are simply not workable.
    • A single state merging Israel, West Bank, and Gaza would reduce Jews to a minority.
    • At the same time, in such a state, Jews would be a significant minority which would mean that the Arab majority would be miffed.

    Moral reasoning for a two-state solution

    • It says that the aspirations of one person should not be overridden for others’ aspirations.
    • It’s a struggle for collective rights between two distinct groups of people.
    • Jews are the global micro-minority with a very small piece of land to exist.
    • Depriving Israeli Jews of a Jewish state or Palestinians of a Palestinian state would represent a subordination of one group’s aspirations to someone else’s vision.

    Way forward

    • India opines that long-term peace in Israel and Palestine can be achieved only through a negotiated two-State solution leading.
    • This can be done with the establishment of a sovereign, independent and viable State of Palestine living within secure and recognized borders.

     

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  • Lay-off Indian techies scrambling for options to stay in US

    Thousands of Indian IT professionals in the US, who have lost their jobs due to the series of recent layoffs at companies like Google, Microsoft and Amazon, are now struggling to find new employment within the stipulated period under their work visas.

    Recent layoff is US

    • Nearly 200,000 IT workers have been laid off since November last year, including some record numbers in companies like Google, Microsoft, Facebook and Amazon.
    • As per some industry insiders, between 30 to 40 per cent of them are Indian IT professionals, a significant number of whom are on H-1B and L1 visas.

    What one means by Lay-Off?

    • A layoff is the temporary or permanent termination of employment by an employer for reasons unrelated to the employee’s performance.
    • Employees may be laid off when companies aim to cut costs, due to a decline in demand for their products or services, seasonal closure, or during an economic downturn.
    • When laid off, employees lose all wages and company benefits but qualify for unemployment insurance or compensation (typically in USA).

    Why do companies resort to layoffs?

    • Cost reduction: One of the main reasons why workers get laid off is because the company decides to cut back on costs in some way. The need can arise from the fact that the company is not making enough profits to cover its expenses or because it needs substantial extra cash to address paying off debt.
    • Staffing redundancies: Layoffs also occur when a company needs to eliminate some positions due to over-staffing, outsourcing, or a modification to the roles.  A company may want to eliminate redundant positions in order to make its operations more efficient.
    • Relocation: Moving the company’s operations from one area to another can also bring about the need to let go of some workers. Shutting down the initial location will not only affect the workers who get laid off but the surrounding community’s economy as well.
    • Merger or buyout: If a business is bought out or decides to merge with another, the change might lead to a change in the company’s leadership and corporate direction. If there’s new management, the chances are that they’ll come up with new goals and plans, and this can lead to layoffs.

    Immediate triggers of Lay-Off

    • Pandemic Boom: During the pandemic, there was a surge in demand as people were in lockdown and they were spending a lot of time on the internet. The overall consumption saw an upsurge following which the companies went to increase their output to meet the market requirements.
    • Over hiring during pandemic: In order to meet the demands, many tech companies went on a hiring spree anticipating the boom to continue even after the pandemic. However, as the curbs were eased and people started stepping out of their homes, consumption fell, resulting in heavy losses to these big tech companies. Some of these resources were hired at a higher cost because of the sudden upsurge in demand.
    • Fear of recession: As the demand is coming back to pre-Covid levels and seeing the debt bubble almost about to burst and fearing recession, these companies are cutting down their costs by closing down low-performing projects and laying off the excess and high-cost resources they hired to accelerate growth.
    • Russia-Ukraine War: The war has also contributed to these layoffs as it has made the market more volatile. This is clearly visible from stock market volatility.
    • Inflation: Rising inflation has also impacted several world economies severely leading to a crisis in the job market as well. The world is currently hitting a reset button to overcome all these ups and downs.

    Various US Visa Programs

    1) H-1B visa

    • What is it: The H-1B visa category covers individuals who “work in a speciality occupation, engage in cooperative research and development projects administered by the US Department of Defense or are fashion models that have national or international acclaim and recognition.”
    • Who’s covered: The H-1B is most well known as a visa for skilled tech workers, but other industries, like health care and the media, also use these visas.

    2) H-2B visa

    • What it is: According to USCIS, the H-2B program allows US employers or agents “to bring foreign nationals to the United States to fill temporary non-agricultural jobs.”
    • Who’s covered: They generally apply to seasonal workers in industries like landscaping, forestry, hospitality and construction.

    3) J-1 visa

    • What it is: The J-1 visa is an exchange visitor visa for individuals approved to participate in work-and-study-based exchange visitor programs in the United States.

      Who’s covered:       The impacted people include interns, trainees, teachers, camp counsellors, au pairs and participants in summer work travel programs.

    4) L-1 visa

    • What it is: The L1 Visa is reserved for managerial or executive professionals transferring to the US from within the same company, or a subsidiary of it. The L1 Visa can also be used for a foreign company opening up US operations.
    • Who’s covered: Within the L1 Visa, there are two subsidiary types of visas
    1. L1A visa for managers and executives.
    2. L1B visa for those with specialized knowledge.

    Why these matters?

    • A significantly large number of Indian IT professionals, who are on non-immigrant work visas like H-1B are L1.
    • They are now scrambling for options to stay in the US to find a new job in the stipulated few months’ time that they get under these foreign work visas after losing their jobs and change their visa status as well.

    Impacts of Lay-offs

    • Cut-throat market competition: Layoffs are a painful but expected fact of life in a market economy exposed to competition and trade.
    • Immense loss to the workers: Layoffs can be damaging psychologically as well as financially to the affected workers as well as their families, communities, colleagues, and other businesses.
    • Decreased customer loyalty: When a company lays off its employees it sends out a message to customers that it is undergoing some sort of crisis.
    • Emotional Distress: The person who is laid off suffers the most distress, but remaining employees suffer emotionally as well. The productivity level of employees who work in fear is likely to go down.

    Lessons for India

    • Indian startups grew at a notoriously faster pace than its neighboring regions.
    • But the layoffs are a sobering reminder that the bigger the startups became, the harder they fell.
    • Just because a startup had touched a sky-high valuation did not immediately mean its employees’ jobs were insured.

    Way forward

    • Voluntary retirement program: This enables individuals to transition to retirement smoothly.
    • Cut back on the extras: If a company is laying off workers to reduce costs, it can look for other avenues of saving money. For example, the company managers can freeze additional hiring, reduce or remove bonuses.
    • Consider a virtual office: Another way to cut down on costs is to keep only the most important staff onsite and send the rest of the workers home to work remotely.
    • Offer more unpaid time off: A company owner can also save money by offering more unpaid time off rather than eliminating workers’ positions.

     

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  • World Economic Forum (WEF) Summit at Davos

    davos

    The World Economic Forum has begun its annual summit in Davos, Switzerland,

    World Economic Forum (WEF)

    • Headquartered in Geneva, Switzerland, WEF is an international not-for-profit organization, focused on bringing the public and private sectors together to address the global political, social, and economic issues.
    • It was founded in 1971 by Swiss-German economist and Professor Klaus Schwab in a bid to promote the global cooperation on these most pressing problems.
    • The first meeting of WEF was held more than five decades ago in Davos, which has been the home of the annual gathering almost ever since, also becoming the shorthand for the event.

    Tap to read more about important reports published by the World Economic Forum (WEF).

    WEF partners

    • The WEF is largely funded by its partnering corporations.
    • These are generally global enterprises with an annual turnover greater than $ 5 billion.
    • For these corporations, the WEF provides a platform “to shape the future, accessing networks and experts to ensure strategic decision-making on the most pressing world issues.”
    • Partners range from Apollo Tyres to Apple – they can be from any industry, as long as they wish to engage using WEF’s platforms.
    • WEF also partners with public subsidies.

    Why are the summits held at Davos?

    • Sometimes described as Europe’s highest town, Davos has been the venue for the WEF’s annual meeting every year since its inception – with one exception.
    • Davos, a ski resort, and the annual host of WEF’s meeting is a quaint town located on the lap of the Swiss Alps.
    • In many ways, it is a surprising choice for a meeting of global economic giants and geopolitical leaders.
    • The meeting was held in New York in 2002 in a gesture of solidarity following the 9/11 attacks.

    Who are the attendees and what actually happens in Davos?

    • Typically, Davos attracts global business executives and policymakers – and it’s strictly invite-only.
    • Usually attending will be the sitting U.S. president, top EU and UN leaders, business leaders and entrepreneurs, academics, heads of NGOs and charities, the media, activists and even some celebrities.
    • Donald Trump, Jens Stoltenberg, Ursula von der Leyen, Greta Thunberg, Elton John and many other high-profile names have all previously attended Davos.
    • The conference includes hundreds of discussions, keynote speeches and panels, and all-important networking sessions, usually behind closed doors in five-star hotels.
    • CEOs and investors seize the opportunity for face-to-face deal-makings.

    Davos 2023: What’s on this year’s agenda?

    • This year’s annual meeting in Davos will take place January 16–20, 2023.
    • The theme is “cooperation in a fragmented world” and within that are five sub-themes, including the energy and food crises, inflation, technology for innovation, social vulnerabilities and geopolitical risks.

     

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  • Global Minimum Tax on big businesses

    tax

    Members of the EU last week agreed in principle to implement a global minimum tax of 15% on big businesses.

    Global Minimum Corporate Tax

    • Major economies are aiming to discourage multinational companies from shifting profits – and tax revenues – to low-tax countries regardless of where their sales are made.
    • Increasingly, income from intangible sources such as drug patents, software, and royalties on intellectual property has migrated to these jurisdictions.
    • This has allowed companies to avoid paying higher taxes in their traditional home countries.

    What is the recent EU agreement?

    • EU members have agreed to implement a minimum tax rate of 15% on big businesses in accordance with Pillar 2 of the global tax agreement framed by the OECD last year.
    • Under the OECD’s plan, governments will be equipped to impose additional taxes in case companies are found to be paying taxes that are considered too low.
    • This is to ensure that big businesses with global operations do not benefit by domiciling themselves in tax havens in order to save on taxes.

    Need for a global minimum tax

    • Corporate tax rates across the world have been dropping over the last few decades as a result of competition between governments to spur economic growth through greater private investments.
    • Large multinational companies have traditionally paid taxes in their home countries even though they did most of their business in foreign countries.
    • The OECD plan tries to give more taxing rights to the governments of countries where large businesses conduct a substantial amount of their business.
    • As a result, large US tech companies may have to pay more taxes to the governments of developing countries.

    History of such taxes

    • Global corporate tax rates have fallen from over 40% in the 1980s to under 25% in 2020.
    • The global tax competition was kick-started by former US President Ronald Reagan and former British PM Margaret Thatcher in the 1980s.
    • The OECD’s tax plan tries to put an end to this “race to the bottom” which has made it harder for governments to shore up the revenues required to fund their rising spending budgets.
    • The minimum tax proposal is particularly relevant at a time when the fiscal state of governments across the world has deteriorated as seen in the worsening of public debt metrics.

    Response to the EU move

    • Some governments, particularly those of traditional tax havens, are likely to disagree and stall the implementation of the OECD’s tax plan.
    • High tax jurisdictions like the EU are more likely to fully adopt the minimum tax plan as it saves them from having to compete against low tax jurisdictions.
    • Low tax jurisdictions, on the other hand, are likely to resist the OECD’s plan unless they are compensated sufficiently in other ways.

    Way forward

    • Supporters of the OECD’s tax plan believe that it will end the global “race to the bottom” and help governments collect the revenues required for social spending.
    • The plan will also help counter rising global inequality by making it tougher for large businesses to pay low taxes by availing the services of tax havens.
    • Critics of the OECD’s proposal, however, see the global minimum tax as a threat.
    • They argue that without tax competition between governments, the world would be taxed a lot more than it is today, thus adversely affecting global economic growth.
    • In other words, these critics believe that it is the threat of tax competition that keeps a check on governments that would otherwise tax their citizens heavily to fund profligate spending programs.

     

     

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