Global Economies

Politically speaking, it is cherry blossom time in India-Japan relations. For the first time in history, the Emperor and Empress of Japan visited India December last. That visit had great symbolic significance. Now Prime Minister Shinzo Abe visits India as chief guest at our Republic Day celebrations — the first Japanese leader to be so honoured. This event too has notable symbolic importance.

If political relations between India and Japan have been tepid all these years it is largely because Japan’s vision of its priorities in Asia has long excluded India. Other factors that have played their part in preventing India and Japan from drawing closer are — the weight of the United States influence on Japan’s policies, India’s nonaligned foreign policy during the Cold War, the non-proliferation issue on which Japan’s posture has been rigid, the closed Indian economy prior to 1991, Japan’s reluctance to over-extend itself by going beyond South-East Asia, and Japan’s massive focus on China in the wake of the US opening towards China.

India, on the other hand, has always admired Japan’s success as an Asian country, especially its technological prowess, even though Japan has seen itself belonging to a league beyond Asia. Now that Japan is reaching out to India, it faces no negative attitudes. India continues to think of Japan with a generosity of spirit that objectively lacks a solid basis. Japan’s generous development assistance to India even could be a factor, but other countries that have assisted us have not benefitted from this kind of positive feeling.

In recent years India-Japan relations have acquired political and economic substance. India’s integration with the global economy, its high growth rates in recent years, its success in certain sectors of the knowledge economy, the remarkable improvement of its ties with the US, its nuclear deal with the US and the exemption obtained from the Nuclear Suppliers Group, its desire to strengthen its Asian ties through its Look East policy, its participation in the Asean Regional Forum, the East Asia Summit, etc, have all created more convergence in India’s and Japan’s interests.

India and Japan have now established a strategic and global partnership for which various supportive mechanisms have been created, such as annual summits between leaders that India has only with Russia and a combined foreign affairs and defence ‘two plus two’ dialogue that India has with no other country. The relationship is being upgraded even in the sensitive defence field in which Japan still suffers from various inhibitions derived from its constitution and a strong public sentiment against militarism since 1945. Joint naval exercises have been held and air exercises have been agreed to during the visit of the Japanese defence minister to India earlier this month. Japan has offered to sell its amphibious US-2 aircraft to India — the first country to which it has offered a military sale.

Japan has gone through almost two decades of economic stagnation that has cost it considerable loss of national prestige too. Japan has been traditionally considered an economic giant but a political dwarf because of its subservience to the US foreign policy. With its economy caught in a trough, its international profile had got badly dented. As Japan slid into a slump, China has risen inexorably, altering their bilateral equations. They say that never in history have China and Japan risen together. This gives Abe’s determination to put Japan on the road to economic recovery and restore Japan’s international role a geopolitical meaning that will become clearer ahead.

Already China has begun to challenge Japan’s interests. Its trumped up quarrel with Japan over the Senkaku Islands, its nibbling tactics in questioning Japanese sovereignty over these islands as part of a wider strategy to assert its vast territorial claims in the South China Sea, its declaration of an Air Defence Identification Zone that covers the Senkakus, its campaign against the rise of Japanese militarism under Abe, the periodic regurgitation of its historical grievances against atrocities inflicted on China by Japan during the war years, its strident protests when Japanese leaders visit the Yasukuni Shrine, are all part of a strategy to browbeat Japan, obstruct its resurgence as that will pose a challenge to the Asian hegemony that China seeks, and, beyond that, to test the US-Japan relationship by making it appear that Abe is politically adventurous and can disturb the US-China equilibrium in the making. The real target of Chinese muscle-flexing is the American forward presence in the western Pacific as that prevents China from wielding untrammelled power in its neighbourhood and constrains China’s naval ambitions. China needs a strong navy to protect the lines of communication of its far flung energy and trade interests.

Japan’s economic stakes in China are huge; our own political and economic stakes in China are high, given China’s contiguity with us and our direct exposure to its power. Neither Japan nor India seek a confrontation with China, but both have a responsibility to build lines of defence against any disruptive exercise of power by a rising China.

Today, no other leader of a great power has such positive ideas about strengthening strategic ties with India as Abe. We have, therefore, a vested interest in his success in restoring Japan economically and politically, more so as almost no other country has the resources and technology to assist in modernising India’s physical and industrial infrastructure through flagship projects like the Delhi-Mumbai industrial and rail corridors and the Chennai-Bangalore industrial corridor.

The cherry blossoms will be in full bloom when Japan ends its foot-dragging on its nuclear agreement with India, a reticence on its part that is difficult to justify strategically and, therefore, needs overcoming expeditiously.

Photo Credit: Jason Karsh (2010)

This is Davos week, the annual summit of the World Economic Forum (WEF). My first visit to Davos was in January 1993 as part of the delegation accompanying the then prime minister, Mian Nawaz Sharif. The WEF was then not that strict about allowing non-members to take part in its events.

This year the Pakistani PM was to grace the Pakistan Lunch, now counted as a significant traditional event in the Davos calendar. Unfortunately the Davos trip was cancelled at the last minute due to the vicious terrorist attack at Bannu. The disappointment notwithstanding, the prime intention being to project Pakistan, the traditional Pakistan Lunch at Davos will take place as scheduled.

Almost 50 Pakistanis will join the record 200 WEF members in the Steigenberger Belvedere. A panel of eminent experts, including Dr Ishrat Husain, will debate ‘Pakistan Vision 2025’.

Little did I know in 1993 that in a few months momentous changes would start taking place in Pakistan, most crises man-made. Terrorists are holding governance hostage, and the PM’s cancellation of the Davos trip has thrown this up. Rip Van Winkle woke up 20 years later to find the world to be a better place, but Pakistan is worse off than it was in 1993.

The tragedy is that the country was then set to break the shackles of nationalisation and emerge as a potent economic force. The most important thing for us today is not to let the future of our children become hostage to the vicious mindset of the terrorists.

Only a handful of Pakistani businessmen visit Davos regularly. In contrast over 125 Indian businessmen come as WEF members. In keeping with its exclusive nature the WEF only caters to the top companies of the world; the fee for being a corporate member is high. Husain Dawood, Atif Bukhari, Sultan Allana, Nauman Dar, and Arif Naqvi – Mian Mansha having dropped out—cannot shoulder the burden of projecting Pakistan by themselves. Emulating their Indian counterparts, our elite Pakistani community must use this unique opportunity in greater numbers. What one gets in networking in a week at Davos may not be possible in several years. The government may like to give tax rebates amounting to 50 percent of the WEF membership, annual summit and regional summit fees as an incentive.

The programme pillars for this year’s annual summit are: (1) achieving inclusive growth; (2) embracing disruptive innovation; (3) meeting society’s new expectations; and most importantly (4) sustaining a world of nine billion people. The WEF ‘Global Risks 2014 Report’ highlights these risks and seeks to understand how these are interconnected.

The gap between the incomes of the richest and the poorest needs to be tackled and the disparities in income and wealth have to be addressed. That is the risk most likely to cause global damage in the coming decade.

Compiled by contributions from 700 global experts, the report details ten risks that are “global risks of highest concern” for 2014: (1) fiscal crises in key economies; (2) structurally high unemployment/underemployment; (3) water crises; (4) severe income disparity; (5) failure of climate change mitigation and adaptation; (6) greater incidence of extreme weather events; (7) global governance failure; (8) food crises; (9) failure of a major financial mechanism/institution; and (10) profound political and social instability.

Before the recession, the buzzword was ‘globalisation’, which is now believed to be an unstable system prone to be disrupted by political tensions—leading to financial turmoil. Nations must not adopt a do-it-alone policy; coordinated policy responses were deemed essential. Environmental risks such as water crises, extreme weather events, natural catastrophes, man-made environmental catastrophes and climate change present another cluster in the interconnections map.

Among interlinked risks climate change is of pivotal importance. This displays by far the strongest linkages and is both a key economic risk in itself and a multiplier of other risks, such as extreme weather events, and water and food crises.

There is a dire warning of a ‘lost’ generation of young people coming of age in the 2000s lacking both jobs and, in some cases, adequate skills for work, thereby fuelling pent-up frustration. Unemployed youngsters also remain vulnerable to being sucked into criminal or extremist movements. The social upheaval could have catastrophic results as seen in some parts of the world recently.

Technology is a significant aspect of the employment landscape for young people—where the private sector can guide curriculum and training programme design by communicating about projected skills needs. Establishing partnerships with the education sector businesses can improve apprenticeship opportunities. Educational and civil society organisations can also prioritise entrepreneurship education, soft skills and earlier delivery of sector-relevant and professional skills in schools, all of which promote employability.

The increasing reliance on the internet to carry out essential tasks and the massive expansion of devices connected to it increases the risk of systematic failure even more. Recent revelations on government surveillance have dampened the international community’s willingness to work together to build governance models to address this weakness. The effect could be a ‘balkanisation’ of the internet, or ‘cybergeddon’ where hackers enjoy overwhelming superiority and massive disruption becomes an everyday occurrence.

While each risk holds potential for failure globally, their interconnected nature force-multiplies their catastrophic potential. To address and adapt to the ever-changing global ‘risks’, stakeholders must unite and take collaborative multi-stakeholder action. Businesses, governments and civil society can improve how they approach risk by taking steps such as opening lines of communication with each other to build trust, systematically learning from others’ experiences and finding ways to encourage long-term thinking.

President Hassan Rouhani of Iran is here in Davos and, though they will not meet, so is Israeli PM Benjamin Netanyahu. The presidents of half a dozen Latin American countries are joined by the Brazilian president. US Secretary of State John Kerry will represent the US. Davos highlights a wide range of disparate subjects, debated and discussed by eminent experts during the week. 

The Pakistani PM will miss a unique opportunity to clarify the world’s misconceptions about Pakistan. Actors Matt Damon and Goldie Hawn are chairing sessions on arts and culture. Other sessions concentrate on science, medicine, environment, etc. For me the ‘Partnering Against Corruption Initiative’ (PACI) panel organised by Elaine Dezenski was most important. We cannot fight terrorism without eliminating its nexus with corruption and organised crime. 

A number of geopolitical initiatives were launched during the WEF Summit in the 1990s, including the Israel-Palestine dialogue between Yasser Arafat and Shimon Peres. During the last decade participation from the private sector has increased in contrast to the public sector. The number of participant heads of state and government dropped from an average of over 60 to little more than a dozen, signalling a significant shift of emphasis of the WEF to its original economic mandate. 

Networking to create positive perceptions and taking advantage of it is, both as a country and commercially, is what the ‘Davos challenge’ is all about.

Photo Credit: World Economic Forum (2011)