Connect with us

Economy

The Indian Economy 2010 to 2017: A study of the Spectacular Jig-Saw

Published

on

Authors: Krishna Raghav Chaturvedi & Vikas

Economics is a strange subject. There are many ways to define economics. The father of Economics Adam Smith characterized Economics as “An inquiry into the nature and cause of wealth of nations”. However, there is no concrete definition as no single definition is globally accepted.

So it’s prudent to have an idea about what Economics is rather than looking for a definition. The stretch of economics is vast. It may talk about some rare yet valuable source like diamond and also vastly abundant resources like air. By virtue of its scarcity, a diamond is priced high and as air is abundant so it has no price. But while we can live without diamonds, can we live without air? No doubt, this is why air is priceless and people are yet to put a price on air. Adam Smith’s studies showed that “the things which have greater value in exchange has almost negligible value in use and vice versa”. Another example water, it has great value for us. We can’t live without it, but hardly can we buy anything by bartering it. But as the human tendency is to care for scarce more so Economics and by extension, economists talk about scarcity more often than not. This is where sometimes, even a learned Economist falters in his quest to understand “real economics” and finds the need to go back to his books. At other times, even a less literate chai-walla comes up with the most ingenious of the solutions to the most typical of challenges. This may be because we tend to see “Economics” as a subject, like Physics, Chemistry or Biology with some rigid laws and theorems. However, even the laws of Physics seem to change in certain cases. Economics, on the other hand, can and should never be seen in isolation. There is caste economics, political economics, regional economics, behavioral economics, national economics, sub-divisional economics and much more. This is where many economists fail and this is where some from the real grass roots really shine.

There has been a lot of buzz about the recent slowdown in the Indian GDP growth. While the GDP growth slowdown can certainly be linked to the twin shocks of Demonetization and the implementation of the Goods & Services tax (GST), critics of the present dispensation are presenting it as an Armageddon. Yes, Economy is Economics at play in a certain region, the certain region here in question being India. Demonetization was a behavioral change and the GST, a structural change. Such radical and far reaching changes are going to have an impact on the economy and yes, they have had their pound of the flesh. But to decry the entire process and denounce the present ruling dispensation as inept requires a special kind of narrow mindedness and selective criticism, a behavioral trait that is common with the critics of the ruling political party of India, the Bhartiya Janta Party (BJP) and its leader, Shri Narendra Modi.

True, as the critics claim, the economic growth has slowed. True, jobs are been created at an abysmal rate. True, present government measure’s aimed at boosting manufacturing (Make in India) and promoting job creation (Start-up India, MUDRA etc.) have failed, some quite spectacularly. True, these signs do not bode well for the Indian economy, nor in the short term and certainly never will in the long run. Yes, the ruling National Democratic Alliance (NDA) is at fault here. But not for making a mess of the economy, for which their predecessor, the United Progressive Alliance (UPA) deserves full credit but for failing to bring out a white paper on the state of the economy when they took the reins of the Indian Government in 2014. For failing to show the public the true grim picture of which the UPA government left us in and the hell hole we had dug for ourselves with continuous tax evasion, black marketing and numerous scams which had dominated the public discourse (2G, Coalgate etc.) before 2014. And this is why, their defense of this lag in growth is being questioned and this is why, the present ruling dispensation and the prime minister, Shri Narendra Modi and his finance Minister, Shri Arun Jaitley must provide answers.

While this article can be far from a white paper on the state of the Indian economy in 2014 at time of the transition from the UPA to the NDA, it will no doubt portray the truth of the times and endeavor to expose the fallacies of both for the time period 2010-2017.

While GDP growth has often and more often, wrongly, cited as the criteria for growth of a country, such a calculation is far from perfect and there is a pertinent need to align growth with human parameters like living Indexes, Education, Distribution of Wealth rather than only the gross domestic value of all products and services in a country. Recently, a quarterly GDP “Growth rate” of 5.7% is cited as a slowdown (true, it a slowdown but only temporary) or a “crash landing” recession (though I doubt the critics claiming this even know the meaning of a recession).  Such irrational and biased thinking is uncalled for and while, there is truth that the GDP growth has slowed, it is nowhere near the Armageddon being projected by the critics, prominent among which is the former Prime Minister of India and a very noted economist, Dr. Manmohan Singh-ji. He claimed and quoted that the GDP will suffer a contraction by atleast 2% points in wake of the Demonetization exercise. The Demonetization, an exercise in which the current Indian Prime Minister, Shri Narendra Modi-ji effectively made approx. 85% of the Indian currency redundant in a bid to attack black money hoarders, formalize the economy, cripple naxalism & terrorism, promote a cash-less economy, a digital economy and send out a strong message to the common people of India that the present ruling dispensation is serious in its bid to curb corruption.   

While complete picture of the after-effects of the exercise is yet to be revealed, one thing is clear. Dr Manmohan Singh-ji was wrong. NO, the economy did not decline. No, it is neither prudent nor good economics to declare Demonetization a failure. But yes, as per the IT returns data, more taxpayers are now part of the formal economy. Certain news (unverified) emerged that poor people hired as mules to convert ill-gotten cash of some corrupt folk defrauded them of their wealth. Some mules completely decamped with the money of the corrupt. In my hometown, the state capital of India’s most populous sub-division, for the entire 50 day duration of cash exchange, not a single laborer was found in want of work. All had been hired to exchange cash from multiple banks in lieu of a daily wage. Shri Arun Shourie-ji, a noted economist and a past supporter of PM Modi has called the demonetization as the world’s biggest money-laundering scheme, I have no qualms in saying that it is indeed the world’s biggest public redistribution of wealth. While there is no reliable parameter to gauge corruption, one thing is for certain, the wrong doers will now have to think twice before thinking about stashing away their ill-gotten cash.

Inflation is an important parameter in a country’s economic growth. While the word may ring some negative connotations in our mind when heard of, it is not all bad. Like everything, too much of inflation is bad. It retards growth as buyers defer or cancel purchases as the products are too expensive, strangling the manufacturing and slowing the economy. Too little of inflation or negative inflation (Deflation) is also bad, as purchasers for various goods and services are hit by complacency, postponing purchases in hopes of more fall in prices, further constraining the demand and causing more fall in prices. Lower-than-expected inflation furthers the actual burden of debts. The lenders may benefit. However as they are more likely to save than borrowers, demand is overall reduced. It also increases rigidity in the human resources market. Workers are resistant to wage cuts in their wages, but inflation lets firms cut real wages by freezing pay in nominal terms. Deflation, by contrast, makes this problem worse (The Economist, Jan 2015).  Hence, there is a need to hit the sweet spot, the right value of inflation that will ensure not only growth but also, cost less of the citizens of the state.

It is evident here from the presented data that the inflation under the UPA government was high (at least twice and possible more in the double digits). This is a cause of concern. Here this is why it is cause of concern. Suppose you earn a hundred rupee per month (GDP). Your expenses are also a hundred rupees. Now, if in the next your wage registers a growth of 8% (GDP Growth) i.e. it becomes a 108 rupees, is it a cause of jubilation? Certainly yes but then you realize that your expenses have risen by 10% (inflation). Simply said, nominal growth reduced to the base year is the real growth. This is where the current critics, especially, the former Finance Minister, Shri P. Chidambaram are wrong. In his time under UPA, the growth rate of April-June quarter of 2014 (the transition from UPA to NDA), the existent gap between real and nominal GDP was as high (by some calculations, as high as 6.5% (Jagannathan, Jun 2015, Firstpost)). Simply put, half the growth under UPA was pure inflation. This gap started to narrow every quarter after the NDA took charge, falling to 5.2 percent in Q2, 1.5 percent in Q3 and finally to a minuscule 0.2 percent in Q4 of 2015. This Narrowing of the gap between the real and the nominal growth rates tells us exactly two stories – a positive one about the NDA’s and Modi’s big success in killing inflation even when the monsoons were weak and a comparatively less positive one on the industry’s inability to raise prices – which is good for consumers, but bad for profitability, investment and market wealth creation.

Share markets are a virtual representation of growth of the top companies of the country. Seen here is a growth of the Indian Bombay Stock Exchange for the period of 2012-2017. It must be noted that fluctuations in the stock market can have a profound economic impact on the country’s economy and everyday lives of people. A collapse in the share prices has the potential to cause widespread economic disruption. Most famous of this all is the stock market crash of 1929 which triggered the great depression of the 1930s. In everyday terms, the stock market directly impacts the people’s wealth creation, pension funds, investor confidence and further critical investment. The Indian stock market has bloomed and touched new heights under the present ruling dispensation. The critics have been quick to point out that such a growth is meaningless until it is evident on the ground. Yes, exports have reduced. But unlike what the critics portray, exports have not been hit as hard by the twin shocks and while data for 2017 is yet to come, it is a general feeling that growth will observed as already, the numbers are too low to fall any further. There are reports that Indian exports have risen for the 12th straight month, touching just over USD 21 billion in the month of September (partially propelled by the phenomenal growth of Petroleum products and Chemical products export). Pessimists, however, in their bid to defame the ruling government would also like to point that our imports are increasing too. True, our imports have reached a near high of approx. USD 33 Billion (again a major chunk of the import is crude oil and gold). But on the bright side, our foreign exchange reserves have reached an all-time of USD 400 billion.

Such a huge cash pile is enough to cover for all imports for over 10 months and possibly more.  Also, while it is true that the current account deficit has widened in the past four months, it is nowhere near as severe as the royal mess we were in the past. Even in the recent months, the CAD anomaly is mainly due to a sharp uptick in Gold imports (thank you Indian Aunties, who allegedly own more gold than most sovereign nations).

Pessimists are also pointing towards a lack of private spending and need for investment from alternative sources. Private investment in the country is hampered by the twin balance sheet problem (courtesy the past regime) and ever worsening NPA crisis, which restricts a financial institution’s lending ability (again, Thank you UPA). Yes, merchandise exports have fallen a bit and lending has taken a minor hit but this is reaction of the system adjusting to the changes, nothing more.

As stated earlier, GST was a structural change, revamping and overhauling the entire Indian indirect tax system. Modi deserves full points for his efforts to get a country as politically and culturally diverse as India on a single table and pass a radical bill like GST. While he was a chief minister in Gujarat, he found the UPA proposed form of GST indigestible for his state, a major manufacturing powerhouse. As the Prime Minister, he has ensured that even after the implementation of GST, the states losing revenue will be compensated for a short-period to accrue additional sources of revenue. His critics call him a hypocrite but all he has shown is a true maturity. He took a radical idea, ironed out the rough edges. He made it practical for implementation and went out of his way to get his rivals onboard for the passing of the GST bill. The implementation, like all things rest, is full of glitches but the official mechanism is tackling the problem both reactively and proactively. The situation will only improve in the coming future. It’s hilarious how the critics of Modi and an army of online trolls venerate any and every source that speaks against the ruling dispensation but even calls a venerable organization like the World Bank “biased” because of its favorable outlook of the GST. Furthermore, the sales of two wheelers, certain cars has already been recorded higher than before and collections under GST are improving and meeting their targets. Yes, GST is working.

 The Demonetization was a necessary exercise. One can argue that the Indian economy was weak, or dead or hale & hearty but the timing was so perfect. With anyone even catching wind of his intentions and holding fast even when all seemed lost, in one stroke and by mere words, Modi had put the fear of law back into the corrupt. People were encouraged to come forward, report their ill-gotten cash, pay a stiff penalty and let bygones be bygones. Some did take this easy way out. This was a carrot. Now, it times for the stick. Shell corporations are identified. Action has already been taken against the directors of multiple shell companies established only to launder money. Any disproportionality of income and deposits if established, leads to a notice from the income tax department notice and further inquiry. It is painful. The Indian Income tax department like all its counterparts across the globe is despised and for good reason, it is a broadsword, not a scalpel. But we need a broadsword, now that corruption and tax evasion has become an everyday part in an Indian lives.

To conclude, while the Indian economy is slowed by the twin shocks, it is resilient and in capable hands. The pessimists may have their trends but things were bad, even worse before (in the UPA as evident by the data presented here) and now that things are finally starting to smoothen, we are bound to regain our top spot as the world’s fastest growing nation. The Indian economy is a jig-saw, complex pieces dominated by regions, cultures and festivals. It is a folly to see one in isolation or use the data of a 1-2 quarters and portend grim warnings. Diwali, the Indian festival of light is fast approaching. Let this occasion be the mark of a new India, an era of economic growth and prosperity for all. The UPA government, it too had its moments of glory and yes they were aplenty, had made a grand mess of the economy and its effects persist till this date. The lack of investment in roads and railways is costing us today in terms of time, lives and growth. Their numerous scams had bankrupted the country and virtually emptied our coffers. Modi is lucky. He only has to outperform a three legged donkey. It is up to him whether he will turn the Indian Economy into a prancing pony or a galloping steed. By the looks of it, we already are a prancing pony. But can he make us the galloping steed. Unfortunately, only time will answer this, with any certainty.


The author is neither an economist nor claims to be one.

Vikas is pursuing his PhD from the Department of Management Studies, Rajiv Gandhi Institute of Petroleum Technology, Jais

The views expressed by the authors above are personal. The authors declare that all sources used in the above article are freely accessible on the internet. The images are snapshots of existing accessible data, sources of which have been acknowledged beneath every image. The authors declare no competing financial interest.

Continue Reading
Comments

Economy

China’s economic slowdown and its implications for the rest of Asia

Published

on

China’s economy has slowed down considerably since the past year. The key reasons for China’s slow growth are its stringent lockdowns, to achieve its objective of a zero covid policy. Here it would also be pertinent to point out, that many of Chinese President Xi Jinping’s policies especially tightening of credit for the real estate sector had an adverse impact on the real estate sector and the economy as a whole (according to estimates, real estate counts for 29% of the country’s Gross Domestic Product (GDP). A number of Chinese real estate developers have been downgraded by Moody’s. A number of companies, including Evergrande are part of the B3 category, which denotes “speculative and are subject to high credit risk’.

  In August 2022, Chinese Premier Li Keqiang while commenting on the slowdown said:

‘A sense of urgency must be strengthened to consolidate the foundation for economic recovery’

There is a growing realisation that a further slowdown could lead to serious social problems, the stringent lockdowns have resulted in growing unemployment.

A number of steps have been taken to prevent the slowdown, such as Real Estate Sector and steps for Small Medium Enterprises. In August 2022, the Chinese government offered support to the tune of US $29 billion to Chinese real estate developers so that they can complete stalled projects and deliver them to home buyers. Earlier this year, China’s government announced that it would provide fiscal concessions and tax exemptions to MSME’s to small businesses in China. One of the key factors behind this course correction by Xi Jinping  was the 20th national congress of the Communist Party will be held from October 16, 2022 (Xi Jinping is likely to secure a third-term and also consolidate his hold over the party and consolidate his position as the most powerful leader after Mao Zedong)

Challenges still persist for China’s economy

Reports of multilateral agencies clearly point to China’s growth in 2022 being well below earlier estimates and targets. According to a World Bank Report, growth in 2022 for the Asia-Pacific region is likely to be a little over 3% (3.2%), while China’s growth is likely to be 2.8%. China had targeted a growth of 5%, and even multilateral agencies had estimated that the country would grow at over 5%

An Asian Development Bank (ADB) report which estimated that China’s growth will be a little over 3% states that ‘developing’ Asia  (which includes Cambodia, Bangladesh, Nepal, Myanmar, Sri Lanka etc) will grow at over 5% and highlights a significant point, that the last time China grew slower than the rest of Asia was in 1990, when China grew at below 4% (3.9%) and the rest of the region grew at 6.9%. Emerging Asian economies which include China, India, Indonesia, Thailand, the Philippines and Vietnam are likely to grow at 4.3% in 2022 and 4.9% in 2023 again a drop from earlier estimates.

It would be pertinent to point out, that a number of foreign investors in China have also complained about the lockdowns and restrictions. While in the short run, it is unlikely that they will shift their operations in a big way, they are likely to look for alternatives.

In contrast to China, the rest of the region has benefited from easing out covid19 restrictions. Says the ADB report:

‘Easing pandemic restrictions, increasing immunization, falling Covid-19 mortality rates, and the less severe health impact of the Omicron variant are underpinning improved mobility in much of the region’

Can ASEAN and South Asia benefit from China’s slowdown?

    The case of Association of South East Asian Nations  (ASEAN) countries is especially important, because their policies with regard to covid have been fundamentally different from that of China. Opening up of borders has given a boost to the tourism sector in the region — especially Malaysia and Thailand.  This is important, because tourism accounts for a significant percentage of the GDP of these economies. Here it would also be pertinent to point out, that a number of companies have moved out of China, in the aftermath of covid 19, with Vietnam being a favoured destination due to its geographical location and other economic advantages (some companies have also moved to other ASEAN nations as well as India).

Even the stock markets of these countries have been doing reasonably well. In April 2022, analysts from JP Morgan and Goldman Sachs had picked Indonesia, Vietnam and Singapore as their favourite markets, while last month Credit Suisse said its favourite market in the region was Thailand.

In conclusion, while there is no doubt that China has been driving economic growth not just in Asia, but globally, it is unlikely that its economic challenges are likely to reduce in the short run. It is not just covid, but Xi Jinping’s economic policies which have been responsible for the slowdown. The biggest beneficiaries of China’s covid19 policies as well, as it’s slowdown in the longer run, would be the ASEAN region — especially countries like Vietnam and Indonesia —  along with South Asian nations – especially India and Bangladesh who with investor friendly policies could attract more companies seeking to relocate from China.

Continue Reading

Economy

Russia Struggling to Explore Africa’s Market

Avatar photo

Published

on

Building on post-Soviet relations with Africa, Russia has been struggling for strategies on how to establish economic footprints, promote investment and deepen cooperation in Africa. Despite the road map adopted at the end of the first Russia-Africa summit held in October 2019, little has been achieved since then.

Late September, the Regional Chamber of Commerce and Industry welcomed the participants to another round of conference under theme: “Russia-Africa: Prospects for Cooperation” held in St. Petersburg. That gathering featuring a few interested Russian enterprises was part of a series of steps brainstorm and discuss opportunities, developments and challenges with regards to the preparation of the forthcoming Russia-Africa summit planned for July 2023.

Additionally, the goal of this St Petersburg conference event was in line with the priorities on how to engage with credible investors who can partner with the government and private sector to exploit the market. It discussed the possibilities of strengthening partnership between Russia and Africa, as well as issues related to export/import, logistics and peculiarities of working with African partners.

Vice President of the Chamber of Commerce and Industry of the Russian Federation Vladimir Padalko welcomed the participants via video link from Moscow. In the video, Padalko emphatically reminded that “preparations for the second Russia-Africa summit, scheduled for July 2023 in St. Petersburg, are in full swing and we should come to it with concrete results in the form of agreements ready for signing.”

According to him, the Coordinating Committee for Economic Cooperation with African Countries should focus on conducting business missions that would identify specific areas for conducting business cooperation with African countries. It is necessary to help Russians to learn what the African market is, so that they are not afraid of taking investment risks in Africa. 

Padalko said that the prejudices that Russians have regarding Africa should be overcome. He referred to his own experience, emphasizing that the first trip to the African continent made him change his mind significantly about the opportunities offered by cooperation with Africa. Russia is trying hard to improve its commercial relations with its African partners. In 2009, it established the Coordinating Committee for Economic Cooperation with sub-Saharan Africa to assist in promoting Russian business interests in Africa.

Senator Igor Morozov, Chairman of the Coordinating Committee for Economic Cooperation with African Countries, called for increasing the pace and level of cooperation with African countries through, as he put it, “bringing small and medium-sized businesses to Africa.” 

According to him, Russia is far behind in its activity on the African continent from such countries as the United States, Britain, China, France and even India and Turkey. These countries are developing a network of technology parks, working in the continental free trade zone, participating in the development of the infrastructure of African countries, the construction of roads, bridges and railways.

Senator Morozov noted that “Russian business does not have the tools to enter Africa ​​and, above all, in the field of the banking system. No other banks give guarantees to Russian business. According to him, African countries are interested in the supply of agricultural machinery, and in this sense, the Kirov Plant in St. Petersburg may have good opportunities. And in this sense, we should take an example from our Belarusian friends.” 

That was not the first time analyzing the development of business and trade elations with Africa. The African market is competitive and complex, therefore Russian business needs to work thoroughly and systematically in it in order to achieve success.  It is necessary to help interested businesses willing to navigate African realities, find a niche for their work, learn about the conditions for entering certain markets.

According to Morozov, there is really the need for a specialized investment fund to support entrepreneurs. In general, with the prospect of working with African partners for many years, more serious state support is needed, and finally suggested that it is necessary to return to barter trade and concessions, which will make it possible to obtain minerals from Africa.

“We need to develop our international payment instruments – sanctions are already being imposed against the Mir system,” he said. A great deal of hope is being placed on the working group for developing new mechanisms in currency regulation and international settlements led by Kremlin aide Maxim Oreshkin, “which is supposed to work out these mechanisms soon,” Morozov said.

“We need to see how we will work within the framework of national currencies” and use them for settlements with African countries, he said. “We need to work in this direction, understanding that SWIFT will never again be [the main system for interbank payments] for us,” Morozov, who also serves on the Federation Council’s Economic Policy Committee, said.

Talks on options for settlements between Russia and African countries in the current economic circumstances are already being held, but “we shouldn’t get ahead of events. African central banks are already beginning to come [to Russia]. Everyone understands that we are leaders in grain exports, leaders in sunflower oil, mineral fertilizers, and it is necessary to settle up,” Morozov.

Other options for settlements could be barter and concessions. The outlook for cooperation and possible Russian projects in Africa, Morozov said Russia can offer its competencies in hydropower, electric passenger transport, automobile manufacturing, farm machinery and pharmaceuticals. Afrocom operates with the support of the Russian Chamber of Commerce and Industry, the Federation Council and government institutions, according to the committee’s website.

Associate Professor Ksenia Tabarintseva-Romanova, Ural Federal University, Department of International Relations, acknowledges huge existing challenges and perhaps difficult conditions in the current economic cooperation between Africa and Russia. Creating African Continental Free Trade Area (AfCFTA) is the most important modern tool for the economic development of Africa, and this is unique for exploring the market and to get acquainted with the opportunities that it offers for business cooperation.

She, however, maintains that successful implementation requires a sufficiently high level of economic development of the participating countries, logistical accessibility, developed industry with the prospect of introducing new technologies. This means that in order for African Continental Free Trade Area to effectively fulfill its tasks, it is necessary to enlist the provision of sustainable investment flows from outside. These investments should be directed towards the construction of industrial plants and transport corridors.

Speaking earlier in an interview discussion, Tabarintseva-Romanova pointed to the fact that Russia already has vast experience with the African continent, which now makes it possible to make investments as efficiently as possible, both for the Russian Federation and for African countries. In addition, potential African investors and exporters could also explore business collaboration and partnerships in Russia.

Local Russian media, Rossiyskaya Gazeta also published an interview with Professor Irina Abramova, Director of the Institute of African Studies under the Russian Academy of Sciences, focusing on the economic cooperation with Africa. In this interview, Abramova reiterated explicitly that Russians have to do away with negative perceptions and attitudes toward Africa. The change in attitudes has to reflect in all aspects of the relationship with Africa and Africans.

“In Russians’ minds, Africa is synonymous with backwardness, poverty and hunger, which is not true at all. It is currently one of the most promising regions for foreign investment. In fact, it is a tiger ready to pounce. Africa today is in the same situation that China was in the 1990s. Today, China is the world’s number-one economy in purchasing capacity, a strong power which largely determines global development,” she explained.

“Africa is the zone where all big players overlap since its geographic location between the east and the west puts it at the peak of controversy and big game between all players, meaning between Europe and America, on the one hand, and China, India and other countries, on the other. And if Russia poses as a superpower it will lose its global influence without indicating its position in Africa as well,” she said.

According to her, seven African countries specifically Egypt, Algeria, Morocco, South Africa, Tunisia, Nigeria and Sudan, account for nearly 90% of Russia’s trade. “At the same time, China is present in almost all African countries. Millions of Chinese work in Africa today. It is a good moment for Russia now, because Western partners are trying to impose their values on the Africans, while China is dealing with its challenges at the expense of Africa,” the expert stressed.

The middle class is expanding very fast there, already amounting to 250-300 million people and this constitute a huge consumer market for products and services, according to her estimation.

Professor Abramova noted that it is a very good market for Russian products. The Chinese understood that long ago and are tapping the African market, having flooded it with their products, though Russia also has opportunities as it is fairly competitive in the energy, infrastructure and agriculture sectors, and exporting products such as fertilizers, trucks and aircraft supplies.

The fact that many prominent politicians and businessmen of the African continent graduated from Russian universities and speak Russian well contributes to strengthening of Russian-African relationship, the expert said, adding though that a new generation is about to take over in Africa, which is also reason why Moscow should maintain the existing solid social and cultural ties.

Senator Igor Morozov and Professor Irina Abramova are both members of the Kremlin’s Committee assigned the responsibility for coordinating and preparations for the next Russia-Africa summit in July 2023. Both Russia and Africa had problems finding a suitable African venue for the summit. The joint declaration adopted in Sochi says the summit be held every three years and the venue alternated between Russia and Africa.

Sampson Uwem-Edimo, President of the Nigerian Business Council and General Director of Trailtrans Logistic LLC, delivered a report “Nigeria as a Window to Africa” and further stressed that Russia does not have a common strategy on how to enter African markets, which exists, say, in China or France.

By removing barriers to trade in the region will create new entrepreneurial activities and spur innovations in technology. Now the African Continental Free Trade Area (AfCFTA) seeks to create better conditions for investment. On the other hand, Russian corporate directors most often have problems with their business in Africa. The key obstacles ranging from their inconsistencies in approach, poor knowledge of the local political and business environment. Russians must also invest more in R&D collaborations with their African partners.

According to him, while Russians hope for brisk business, many African business leaders today are still Western mind-oriented, have various support from the United States and Europe. But the practical reality, Russia could still steadily transfer technologies for local processing of raw materials as a catalyst for Africa’s development.

Uwem-Edimo noted that such former colonial powers as France and Great Britain, although they left their colonies, keep control panels in their capitals. The Nigerian businessman, who spoke in Russian, introduced the conference participants to the opportunities and vast potential of the African continent, focusing on Nigeria, which makes up 18 percent of the continent’s population – 240 million people.

President of the St. Petersburg Chamber of Commerce and Industry, Vladimir Katenev, also addressed the conference participants with a greeting. The moderator was Ekaterina Lebedeva, Vice-President of the St. Petersburg Chamber of Commerce and Industry Union, who called on representatives of the business community, in spite of the emerging challenges, to consistently work towards prioritizing Africa.

Continue Reading

Economy

China-ASEAN Comprehensive Strategic Partnership: A Shared Future for Pursuing Regional Economy Integration

Avatar photo

Published

on

For ASEAN, China is a neighboring country as well as a strategic partner in various fields, especially in the economic field. China has become the largest ASEAN trading partner for 13 consecutive years since 2009 (Global Times, 2022).

A survey conducted by the ISEAS-Yusof Ishak Institute to more than 1,600 ASEAN citizens said that 76.7% of them chose China as the most influential economic power in ASEAN (Heijmans, 2022). China has also grown to become an economic giant in the Asian region and is predicted to surpass the US as the world’s strongest economy by 2030 (Jennings, 2022).

This mutual relationship between China and ASEAN is getting stronger after the agreement of the Comprehensive Strategic Partnership (CSP). In the economic aspect, the implementation of the CSP is carried out in line with the Belt Road Initiative (BRI) and the Regional Comprehensive Economic Partnership (RCEP) project. Both projects are grand plans that have been prepared for economic integration and encouraging a more inclusive trade between two parties.

On the other hand, ASEAN also has a similar agenda in the region, which is to build an economic community that regulates trade as well as delivers economic benefit to its members. The common vision between China and ASEAN certainly smoothes the process of this cooperation. Then, how can China and ASEAN achieve their common goals? Are there any obstacles and challenges that they will face in implementing this CSP?

China-ASEAN: Sharing The Same Economic Vision

In pushing its foreign policy agenda, China has made visits to various neighboring countries in recent years. Rather than building an image as an economic great power, China focuses more on a friendly approach by promoting “a community with a shared future” to its neighbors (Wei, 2022). As a close neighbor and strategic partner, ASEAN become the one whom China wants to share the future with.

For ASEAN, BRI and RCEP itself have an aligned purpose with the establishment of the ASEAN Economic Community (AEC). AEC aims to promote a single market and product base, a highly competitive region, with equitable economic development (ASEAN, 2020a). Through AEC, ASEAN also commits to a freer flow of goods and services, and eases the distribution of skilled labor and the flow of capital in the region (Asian Development Bank Institute, 2015).

ASEAN’s ambition to build an integrated regional economy sounds promising. However, building an integrated economy ecosystem doesn’t only require geographical proximity, but also an adequate infrastructure (Donghyun et al., 2008).

Even though Southeast Asia is rich in resources and manufacturing, some areas still suffer from infrastructure lack and slow industrial development. Several ASEAN countries still have poor transportation infrastructures. In fact, transportation is a key factor in fastening economic distribution.

At this point, China came up with a BRI project plan which mainly prioritized large investments in transportation infrastructure (Donghyun et al., 2008). This long-term project has ample potential to provide infrastructure and other development facilities, hence promoting the growth in the region (Iqbal et al., 2019).

The CSP also regulates the Regional Comprehensive Economic Partnership (RCEP) agreement that aims to broaden and deepen free trade activity between ASEAN-China, Japan, Korea, New Zealand, and Australia (“RCEP: Overview and Economic Impact,” 2020). The RCEP later marks the birth of the world’s largest FTA which surely opens up wider trade and market access for ASEAN.

The RCEP will also help both China and ASEAN forge mutually beneficial industrial chain and supply chain partnerships, also to shape more inclusive trade cooperation in the future (Bo & Jing, n.d.). This opportunity is expected to be an open door for ASEAN integration with global trade, which is also the initial mission of AEC. Also can attract other countries to plant their foreign investment in ASEAN countries (ASEAN, 2020b).

For China, BRI and RCEP are essential to strengthen China’s position in the region. China is contriving to build “literal and metaphorical” bridges as a connector and a highway to greater influence in global politics and economy (Lockhart, 2020).

Overcoming Challenge

Both China and ASEAN share great economic interests in the CSP agreement. This makes both parties find a smooth path in the negotiation and agreement process. However, in the implementation process, ASEAN and China need to be more serious and committed.

ASEAN is currently in the process of compiling the ASEAN Economic Community (AEC) Blueprint 2025. The mid-term review criticized the uneven implementation of the AEC blueprint, with “easier” initiatives prioritized over challenging commitments. Both policy-making processes at national levels and practice need to be in line in order to reach common goals (Chen & Jye, 2022).

The Covid-19 pandemic becomes another obstacle to realizing economic integration in the region. The pandemic hits ASEAN quite heavily, where currently the members are still concerned about restoring the stability of the domestic economy. The cooperation with China is used well by ASEAN countries at the national level, such as the proposal submission for building several economic infrastructures by Indonesia, encouraging digital development in Thailand, signing economic bilateral relations with Vietnam, etc. Yet for the regional purpose, it still needs to be maximized.

The CSP begins a higher level of relationship, as reflected in the deeper cooperation, shared normative frameworks and institutionalized cooperative mechanisms, and high-level political commitment and priority from China and ASEAN (Ha, 2022). It will be less than optimal if ASEAN only sees CSP as a bridge to strengthen bilateral relations with China. ASEAN needs to view CSP as a strategic relationship for an ideal future of regional economic integration.

For optimizing the common goals for both, mutual political trust is the basis and safeguard (Bu, 2015). CSP does not happen overnight, building connectivity and an integrated ecosystem is a large-scale and long-term project. In order to reap the rewards of this investment and agreement, active dialogue, healthy relations, and stable growth of the upbringing of China-ASEAN relations must be strived by both parties.

Continue Reading

Publications

Latest

World News1 hour ago

Fight against human trafficking must be strengthened in Ethiopia

Throughout Ethiopia’s Tigray, Afar and Amhar regions, women and girls are becoming increasingly vulnerable to abduction and sex trafficking as...

Energy3 hours ago

Natural gas markets expected to remain tight into 2023 as Russia further reduces supplies to Europe

Russia’s continued curtailment of natural gas flows to Europe has pushed international prices to painful new highs, disrupted trade flows...

Energy5 hours ago

Mozambique Readies For Developing Mphanda Nkuwa Hydroelectric Project

Mozambique is ramping up efforts toward establishing a sustainable energy supply to drive its economy especially the industrialization programme. As...

Defense7 hours ago

A Matter of Ethics: Should Artificial Intelligence be Deployed in Warfare?

The thriving technological advancements have driven the Fourth Industrial Revolution nowadays. Indeed, the rapid growth of big data, quantum computing,...

Health & Wellness8 hours ago

HL7 FHIR, the Future of Health Information Exchange?

Health Level 7 International is an association that calls itself a non profit organization, ANSI-accredited standards developing organization devoted to...

New Social Compact9 hours ago

Women’s Plight During Natural Calamities: A Case Study of Recent Floods in Pakistan

Recently, at the United Nations general assembly, the Prime minister of Pakistan’s speech started with the challenge of climate change,...

Defense11 hours ago

Between the Greater Russia and the MAD

With ‘The Greater Historical Russia’, the impossible that the dream appears to be, and the Russian defeat at Liman and...

Trending