Thursday, November 12, 2015

FDI reforms: Sensible, even if incremental

The easing of foreign direct investment (FDI) rules across 15 sectors — ranging from construction, single-brand retail and banking, to defence, broadcasting and airlines —is welcome.
Irrational rules must go as India needs inflow of capital that comes with technology and expertise. The fund-starved construction sector sees extensive liberalisation.
Removing minimum thresholds for floor area and capital investment could encourage small projects and reduce the risk of delays. Making entry and exit for foreign investors easier is also welcome.
However, removing the lock-in-period stipulation in a few sectors, special economic zones and investments by NRIs could lead to speculation. The RBI must be in the loop on shortterm capital inflows. In parallel, India also needs a robust policy to release land for urbanisation.
Simpler rules in single-brand retail — removing the condition on mandatory local procurement for hi-tech companies and letting mass brands comply with the 30% local sourcing rule from the day their first store opens, not from when the first tranche of investment is made — will help retailers grow their operations.
However, concerns on arbitrariness in case-to-case approvals are not entirely misplaced. To prevent this, the sourcing rule should go for all retailers. Allowing single-brand retailers to undertake e-commerce activities is also in order. It is welcome to see the BJP in power shed the apprehensions the BJP in Opposition had about FDI in retail.
In the banking sector, full fungibility in FDI and FII makes it simpler for private banks to raise capital.
Making defence production FDI automatic is meaningless: defence procurement depends on government approval. Allowing 100% FDI in direct-to-home distribution of broadcast signals is welcome, but genuine liberalisation requires allowing interoperability of set-top boxes.
Ideally, the government must allow unlimited overseas capital in all sectors save those on a short negative list. However, FDI is not a magic wand. To grow, India should also have the ability to make use of capital.

Source:Times of India

Magnificent election in Myanmar

Bursting firecrackers over elections in a neighbouring country may sound controversial these days. But in the case of Myanmar, it would not be out of place if India celebrated the successful conclusion of elections there. The fact that the elections were conducted peacefully within a day, and that counting has taken place without a hitch, is a big moment in Myanmar. The massive turnout of 80 per cent of the eligible 30 million voters was truly remarkable. Given that this was the first truly free general election in 25 years and much of the vast countryside had never voted before this, it is to the credit of the election commission as well as voter awareness groups across the country that managed to ensure heavy polling even in the most remote areas. The numbers were robust: more than 6,000 candidates from 90 parties stood for elections to the 664-seat Parliament. With counting in progress and Aung San Suu Kyi’s National League for Democracy (NLD) inching towards a likely landslide victory, Myanmar is indeed poised for great change at many levels, each of which must be rejoiced. To begin with, the elections will see the first non-junta backed government in Myanmar’s history. Ms. Suu Kyi will still face the twin hurdles of the 664-seat Parliament including 25 per cent of the military or Tatmadaw’s nominees, and constitutional restrictions on her own nomination as President. Even so, with her popularity strong nationwide, and worldwide support for democracy in Myanmar, Ms. Suu Kyi, or Mother Suu as she is called, will carry much goodwill to aid her government.

The road ahead has many challenges too. Myanmar is amongst Asia’s poorest countries, where government schemes reach less than 3 per cent of the population. It is a country rife with armed ethnic groups, and despite a ceasefire accord signed by the President last month, major guerrilla groups from the Wa and Kachin states haven’t yet signed on. Adding to that are religious tensions, as the increasingly vocal Buddhist groups adopt majoritarian and often brutal methods with religious minorities, including the Rohingya Muslims. In this election, several Rohingya who were eligible to vote in the last elections were deprived of their vote, and not allowed to stand. Finally, Myanmar faces the challenges of development, to ensure that the rush of big corporations it has invited to fuel an economic boom does not deplete its natural resources. Owing to the growth of construction, mining and manufacturing industries in the past few years, Myanmar has the third-highest rate of deforestation in the world. These are all challenges the new government will have to tackle quickly. India too must seize the opportunity to launch a new partnership with a much-neglected neighbour, that is also its only link and gateway to the East.

Source:The Hindu

The Maldives needs democracy

While the Maldives government’s decision to lift a state of emergency after less than a week is indeed a welcome move, it is yet to convincingly explain why it took the extreme step in the first place. The Abdulla Yameen administration’s claim that the emergency was meant to “protect the people” in the wake of security challenges seems to be a convenient excuse, given the political crisis that is brewing in the Indian Ocean nation. The declaration of emergency was not an isolated incident, but the latest in a series of steps the government has taken over the past few months to bolster President Yameen’s authority. Recently, the government sacked the Defence Minister and police chiefs. It also arrested the Vice-President, Ahmed Adeeb, in connection with a blast on the presidential boat on September 28. According to the government, the blast was an attempt on the President’s life, a claim that international investigators have rejected. The U.S. Federal Bureau of Investigation probed the blast and said it found no evidence that it was caused by a bomb. But the government sticks to its narrative, and says the emergency was lifted after investigators made “important progress” in an inquiry into the blast. And it shows no inclination to stop the purge. One of the immediate decisions the ruling party took was to vote out the Prosecutor General, Muhthaz Muhsin, without explaining why he was sacked.

Ever since Mr. Yameen became President through a controversial election in 2013, the country’s democracy has faced tough challenges. President Yameen, half-brother of former dictator Maumoon Abdul Gayoom, has adopted a confrontational approach towards the opposition and showed little respect to the right to dissent. The imprisonment of Mohamed Nasheed, the country’s first democratically elected President, after a controversial trial has created fissures in the country’s polity which are actually weakening the state. Despite widespread international condemnation and a ruling by a UN panel that Mr. Nasheed’s arrest was illegal, the government showed no readiness to ease its stand. But in the case of the emergency, maybe in a sign of weakness, the government bowed to international pressure and domestic resistance. It is worth noting that the decision to lift the emergency came two days before a planned protest by the country’s main opposition, the Maldivian Democratic Party. President Yameen should use this opportunity to reach out to the opposition. Instead of the confrontationist approach, the government should adopt a consensus-building policy, engage the political opposition and act like a healthy democratic administration. Such a move would only strengthen institutions in the Maldives, putting it in a better position to address the security challenges. Otherwise, the complex mix of a divided society, a fractured polity and an authoritarian state will further destabilise the archipelago nation.

Source:The Hindu