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The Google Tax

Giancarlo Elia Valori

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The European Treasury, individually as member States or collectively as Union, has so far reached – with a race to the bottom – as many as 72 agreements with large global companies.

Tax competition is still very strong and active. Just think of the US corporate tax that-following the latest reforms- has  decreased to a maximum 26% rate, more than one third less than the previous rate, with a US average corporate tax rate which is now below all OECD and G7 levels. Similar approaches, however, are developing in Argentina, Colombia, Luxembourg, Canada and even Japan.

Conversely corporate taxes have increased in Turkey, Portugal and Taiwan, with further increases – albeit slight – also in India. They are selective increases to favour some foreign or national companies compared to others.

At world level we now have as many as eleven jurisdictions –which account for 27% of the total corporate taxes in the world – that are currently increasing corporate  taxes, while all the other small and large countries will keep on competing fiercely at tax level with their neighbouring countries.

In short, technology has made all the old tax strategies obsolete.

In fact, currently competition between EU tax systems costs the weakest countries 60 billion euros a year.

It is worth recalling that nine of the twenty companies with the largest capitalization in the world are digital.

The most used corporate tax avoidance strategies to move profits sourced in EU countries to offshore tax havens include the “Dutch sandwich”, the Luxembourg tax rulings-which have recently come to light with the LuxLeaks scandal which hit the headlines – or the specific Irish tax policy, known as the double Irish arrangement.

They rely on the tax loophole that most EU countries allow royalty payments be made to other EU countries without incurring withholding taxes. However, the Dutch tax code allows royalty payments to be made to several offshore tax havens, without incurring Dutch withholding tax.

The Dutch sandwich is based, at first, on the Dutch national rule according to which the dividends and surplus value of a parent company can be transferred to its subsidiaries without paying any tax.

Hence any capital can be transferred to companies based in the Netherlands, thus avoiding all taxation on this liquidity.

Therefore the Dutch sandwich behaves like a “backdoor” out of the EU corporate tax system and into the untaxed non-EU offshore locations.

On the other hand, Luxembourg tends to enter into bilateral agreements with large companies and multinationals, as in a sort of State-company agreement. Everyone tends to do so, but in Luxembourg the transactions and agreements with companies are always particularly beneficial to the private sector.

Ireland imposes a maximum 12.5% corporate tax rate on the total taxable income stated. For purely financial companies said tax rate is only 10%.

Currently the EU tax policy is still based on the destination principle which allows for VAT to be retained by the country where the taxed product is sold.

This is a strategy dating back to the period when the European Union had to deal with the booming phase of Internet sales.

In that case, however, it was a matter of selling traditional goods in a new way. Nowadays brand new goods are sold on the Internet in an even more unusual way.

For IT companies, however, the matter is even more complex, considering they can make turnover and profit anywhere without having any kind of permanent and stable organization where they sell or buy product (or, possibly, produce them).

According to the latest data, with the aforementioned  “Dutch sandwich” strategy, in 2016 Google put aside as many as 3.7 billion euros on a total taxable income of 15.9 billion euros.

As all web firms do, it is enough for an Irish subsidiary of the Californian company to sell products globally via royalty schemes to a Dutch company without staff or operations in progress or to another Irish subsidiary also incorporated in Ireland, but managed from an offshore tax haven like Bermuda..

Over a period of three years, the well-known monopolistic Internet firm of California has “saved” approximately 34.2 billion euros, with an annual saving increase of about 7%.

At this juncture, we could only define a universally applicable legal formula of registered office or business organization, in addition to the one of the tangible or intangible place where the tax is generated.

Obviously we also need to imagine the tacit blackmail power of major corporations operating on the Internet, which have very useful databases for all governments and for the US one, in particular. We should also consider to what extent this information and tax asymmetry is useful for the US hegemony over global markets.

This is the geopolitical issue: the tax supremacy of major web firms is an essential and irenouceable factor of the new US hegemony, namely of the New American Century.

With a view to curbing web majors’ tax power, someone has also considered the formula of “meaningful interaction” with users, obtained through widespread digital channels.

It may happen, however, that at least part of the online turnover is produced through peer-to-peer channels between the company and some customer sectors or through a splitting of the IT mediation between small companies, carried out by customer groups.

With the pretext of “dedicated” content, you can avoid taxation and artificially limit the visible invoicing in one  single country.

A faster option than “significant interaction” would be to hit only the companies which invoice the intermediate services (advertising, etc.) to the web majors.

Nevertheless, if the web majors bought also these intermediaries, we would go back directly to the Dutch, Irish and Luxembourg tax avoidance schemes and practices.

Furthermore, current data points to a 3% average tax for the companies supplying services to the web majors in Italy and in the rest of the European Union.

In the latter case, the European Commission foresees revenue of only 5 billion euros for the whole EU-27.

However, if we calculate the average of the tax rates currently in force in Europe, the Internet majors pay income tax rates equal to 9.2%, as against the EU average rate of 23.3%.

Is it rational, however, that companies are taxed only on the basis of self-stated annual invoicing?

In essence, with current regulations the sale of data or User Generated Content cannot be taxed properly and profitably.

In this respect, the EU has proposed two different levels of taxation, but considering the digital platform to be a “presence” of company and, therefore, a “permanent and stable organization”.

The criteria under discussion will be the following: exceeding a revenue threshold of 7 million euros in a single EU Member State; the presence of over 100,000 users in one Member State during a single fiscal year; the presence of over 3,000 contracts for digital services concluded between company and users in a single fiscal year.

Hence, with a view to circumventing EU rules, the Internet majors can rely – for their “permanent and stable organization” – also on systems based outside the EU. They can also distribute their users among various micro-companies, not necessarily having a permanent and stable organization in the country using them. Finally they can invoice the 3,000 minimum contracts differently.

A second proposal, still under discussion among the EU leaders, regards the “temporary tax” on digital activities which, moreover, are not currently taxed in any way by the EU.

Hence, according to this proposal, revenues resulting from the sale of advertising space for goods or services other than the means used would be taxed.

Or the revenues resulting from the sale of data based on the information provided, free of charge, by users would be taxed.

Obviously the tax would be collected by the Member States in which the users are located.

Are we sure, however, that an online service can be used without being tracked? This is the rule in what is currently known as the dark web.

If smuggling is the strategy used by all those who do not want to pay taxes on sales, the dark web could become – with some mass IT devices – the new Tortuga of Internet majors.

In Italy, the new Budget Law provides for a tax on digital transactions -as from 2019 – but only relating to the provision of services to subjects resident in Italy both by national companies and through non-resident companies.

In more specific terms, each transaction shall be taxed at 3% net of VAT, thus further loosening the legal connection existing between company’s presence and provision of services, i.e. between “permanent and stable organization” and online commercial activity.

The Italian rule for 2019, however, regards only business to business transactions, thus explicitly excluding both e-commerce ones or the final business to consumer connection.

Much Internet content, however, can easily shift from  business to business(B2B) to other types of sales or supply.

Therefore the tax levied should be the withholding tax on revenues, which creates a difference between resident and non-resident companies, which could not suit the EU system.

Hence, again with reference to Italy, the new tax will be neutral with respect to the place of origin of the transaction, but revenues can be subjected not only to the 3% levy, but also to other taxes.

Moreover, it could also be possible to carry out manoeuvres on the prices of the IT supply, with a sort of new dumping on EU or Italian companies by the big Internet majors.

On the other hand, the Italian web tax relies only on self-certification. There will be trouble.

If the web tax and the other taxes on the Internet are VAT modelled, we will face the problem that the VAT  transitional regime, defined in Europe until 1997, is still currently in force.

Not to mention the fact that the transfer of capital via the Internet is fully uncontrollable for the States or unions of States and that information gap and asymmetries between States and Companies in this field are such that everything relies on the “good will” of the subjects taxed. Too little.

A solution would be to equip the EU with a stable IT system capable of controlling, at least, a significant part of commercial transactions via the Internet, but this is almost science fiction.

Otherwise, stringent and fast regulations would be needed to definitively close “tax havens” both in the EU and elsewhere but, apart from the unavoidable delays, the result would be that the countries which are currently tax havens would ask for something-indeed, much – in exchange to the other ones which are not tax havens.

Or it could be possibly stated very frankly that the EU market does not accept the free movement of capital in this sector.

However, this would favour the geopolitical areas that would like to use what, in their eyes, would be considered a European weakness.

Nonetheless, here as elsewhere, we should really rethink the architecture of the world economic and financial system.

Said system results from the fully geopolitical irrational anarchy which saw Eurasia yield to the US unipolarity, which currently no longer exists, at least according to the 1990s standards.

Here as elsewhere, we should import the idea of a great liberal and free trader, a disciple of Luigi Einaudi who, in the 1950s, imagined the “army of labour”.

I am referring to Ernesto Rossi who, while assuming a public system using the huge mass of post-war unemployed people, clearly theorized – as a liberal – “a marked  integration of Socialist elements into the market economy”.

Abolire la Miseria was written by Ernesto Rossi in 1942, on the island of Ventotene where he had been confined. It was published in 1945 and then re-edited in 1977 after his death.

The Tuscan liberal thinker theorized no “social safety nets”, but rather the creation of an army of labour to be recruited as an alternative to the military service.

The army provided all its members with essential services, with dignity and autonomy, but the “army of labour” had to work both on public infrastructure and on land use and maintenance activities, i.e. all the productive activities that – as Keynes said- could not attract and rely on private capital, which would record no sufficient and quick returns.

What about including clearly Socialist mechanisms in the current financial system, and not only through tax systems, thus rightfully leaving high-income activities to private capitalism?

It would finally be the merger between the two best intellectual and technical lines of Italian democracy, namely social Catholicism and secular Liberal Socialism.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

Economy

Protectionist headwinds in the US Trade Policy under Trump Administration

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At the end of the First World War, US led internationalism was initiated by the then President Woodrow Wilson. When we look deeper into the origins of the first Great war, it clearly shows signs of deep rooted animosities, triggered by culture, race and delusioned nationalism. Once the war ended, Woodrow Wilson embarked on a utopian idea to make the world truly an international place. The breed of politicians in America and its allies the British Empire and France, supported the idea and laid the foundations of world’s internalist movement, Never in the history of mankind a world sets sails on such an ambitious project to make the world a global stage for commerce where every aspect of human life will governed by a certain set of rules, which will form the basis of rule based order. A journey of rule based system was not smooth and its first test came in the form of a second world war, a war which was again fought on the basis of rogue nationalism and race. The victors at the end world war II was committed to forward the idea of globalism, United States was the only country which rose from the ashes of the world war II with minimal damage, it first supported a war ravaged Europe with a Marshall Plan, and then they together embarked on a path to liberal internationalism. The United States journey in making the world truly a global place is unique and unprecedented, with all the allegations of doublespeak and forwarding its own agenda of undisputed global power, United States global project was indeed a sincere effort to govern the world through supranational democratic institutions, early examples of such bold agenda were United Nations and Bretton Woods institutions.

Journey in and after the cold war

Obama Presidency : At the end of Bush Presidency, the protectionists were bracing for an extreme stance on new winners in the Global economy and especially China, commonly denoted as Frankestien at that time. President Bush in 2001 granted China PNTR a permanent normal trading relation status. Many trade hawks in the US think that this decision was a turning point, which helped China to become so big. President Obama was an overt globalist and He in his presidential campaigns regularly highlighted the importance of globalization, that how and why we need to appreciate new winners in the global economy, he cited computational technology as the main driver behind a dispersed value chain rather than concentrated one. Obama in his presidency supported the Trans pacific partnership TPP deal, and supported the idea of equal opportunity in the global economic system. He repeatedly highlighted the importance of globalization and termed as the force which can never be rolled back.

Trump Presidency and a wave of non stop protectionism

President Trump in an his election campaign termed TPP trade deal as a “rape of America”. When he won election, he issued endless warnings to trade partners and threatened to eliminate NAFTA the North American Free Trade Agreement, NAFTA now USMCA, United States Mexico Canada Agreement was later rescued at last minute negotiations, which took place in several rounds spanning over many months. Trump launched a full blown trade war against China, and its allies in Europe accusing them of using America to their advantage and stripping the US of billions of dollars. He is now pursuing a most hawkish policy in the trade realm to disband the world trade court also known the World Trade Organization. This anti trade policy is aimed at reviving the US industrial base, which according to many experts is a lost cause in the era of global value chains.

References :

Panda, A., 2020. Bush Gave China Permanent Normal Trade Relations Status With The US 15 Years Ago. What Did That Change?. [online] Thediplomat.com. Available at: <https://thediplomat.com/2016/12/bush-gave-china-permanent-normal-trade-relations-status-with-the-us-15-years-ago-what-did-that-change/> [Accessed 4 June 2020].

Nytimes.com. 2020. Trump Says He Plans To Withdraw From Nafta. [online] Available at: <https://www.nytimes.com/2018/12/02/us/politics/trump-withdraw-nafta.html> [Accessed 30 June 2020].

BBC News. 2020. No Way Back From Globalisation – Obama. [online] Available at: <https://www.bbc.com/news/world-europe-38006937> [Accessed 1 July 2020].

Foreign Affairs. 2020. Reconsidering Woodrow Wilson: Progressivism, Internationalism, War, And Peace. [online] Available at: <https://www.foreignaffairs.com/reviews/capsule-review/2009-05-01/reconsidering-woodrow-wilson-progressivism-internationalism-war> [Accessed 1 July 2020].

Wrap.warwick.ac.uk. 2020. Globalisation And Ideology In Britain : Neoliberalism, Free Trade And The Global Economy – WRAP: Warwick Research Archive Portal. [online] Available at: <http://wrap.warwick.ac.uk/49332/> [Accessed 1 July 2020].

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Economy

The International North-South Transport Corridor: Shifting Gears in Eurasian Connectivity

Grace Cheema

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As the centre of gravity of the global power play tilts towards its economic underlining,

issues like trade, connectivity and infrastructure have come to warrant greater significance in foreign policies. This holds particularly true in Central Asia where the need for investment coupled with its strategic geographical stretch has drawn increasing attention towards the potential of transport corridors as catalysts of economic integration and connectivity. While China’s colossal Belt and Road Initiative (BRI) has been at the centre of global attention, India, Iran and Russia have mapped out their own plans for a transcontinental transport corridor. The International North-South Transport Corridor (INSTC) is a landmark initiative for Eurasian connectivity. Twice as short as the traditional trade route between India and Russia, the corridor augments economic cooperation and gives sea access to land-locked member states in Central Asia. This paper seeks to advance an understanding of the development of the INSTC and examine its significance in the Asian transportation grid. In doing so, it analyses the geopolitical dynamics that underlie the project’s agenda, examines it in the context of the BRI, explores the stumbling blocks in its developments and comments on its future prospects while highlighting some recommended policy changes.

Bridging the Connectivity Gap

The International North-South Transport Corridor is a 7200 km-long multimodal transportation network that links the Indian Ocean to the Caspian Sea via the Persian Gulf onwards into Russia and Northern Europe. Launched as a joint initiative by India, Iran and Russia in 2000 and ratified by the three in 2002, the corridor has now expanded to include eleven more members, namely, Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Syria, Belarus, Oman and Bulgaria (observer status). The 2000 agreement was set in motion with the objectives of simplifying and developing transportation services, enhancing access to global markets and coordinating transit policies while also ameliorating route security. India’s accession to the Shanghai Cooperation Organisation (SCO) in 2017 and the Ashgabat Agreement in 2018 have only increased these connectivity prospects.

Figure 1: The INSTC route and the standard Suez route. Credit: Wikimedia Commons

Although the original agreement envisaged connecting India and Iran to Central Asia and Russia, the potential of the corridor to gradually envelop the Baltic, Nordic and even the Arctic regions is no longer far-fetched. The first or the central branch of the corridor of the INSTC begins from the Mumbai port in the Indian Ocean Region and connects to the Bandar Abbas and Chabahar ports on the Strait of Hormuz and then passing through the Iranian territory via Nowshahr, Amirabad and Bandar-e-Anzali, runs by the Caspian Sea to reach the Olya and Astrakhan Ports in Russia. The second or the western branch connects the railway network of Azerbaijan to that of Iran via the cross-border nodal points of Astara (Azerbaijan) and Astara (Iran) and further to India via sea route. The third or the eastern branch of the corridor connects Russia to India through the Central Asian countries of Kazakhstan, Uzbekistan and Turkmenistan. Notably, the INSTC is multimodal in nature, encompassing sea, road and rail routes in its network to offer the shortest route of connectivity for Eurasian cargo transport. Bereft of the INSTC, cargo between India and Russia moves either through the Netherlands’ port of Rotterdam or China’s Qingdao port which takes over 50 days for transit. The INSTC in its completion cuts this transit time down to about 16-21 days. It also offers a considerably shorter route than the Suez Canal transit passage which, besides being overloaded, is also much more expensive than the former. This was made apparent by the dry run conducted by the Federation of Freight Forwarders’ Association of India (FFFAI) in 2014 with the objective of discerning structural problems and missing links in the corridor. The study demonstrated that the INSTC was 30 percent cheaper and 40 percent shorter than the traditional Suez route, slashing the transit time to an average of 23 days for Europe-bound shipments from the 45-60 days taken by the latter. Although the study identified streamlining and coordination with allied agencies as some of the pitfalls, it ascertained that the corridor did not pose infrastructural or security hurdles in the maiden dry run. The second dry run, reportedly conducted in 2017, generated a similar sense of optimism.[1]

With an estimated capacity of 20-30 million tons of goods per year, the corridor facilitates transit and bolsters trade connectivity. But besides the more obvious benefits of increased trade, the time and cost savings coupled with access to new markets also translate into increased competitiveness in exports. This holds particularly true for the INSTC because unlike the BRI, the INSTC nations have a level-playing field, allowing for benefits to be distributed more evenly. For India, the corridor also augments its ‘Make in India’ initiative. Access to nations of the Eurasian Economic Union alone can offer it a market of 173 million people. Additionally, the corridor facilitates free trade agreements, opens new opportunities to engage with more regional trading blocs and in harmonising policies while bringing about a more uniform legal climate and enhances regional stability. 

Geopolitical Geometries

The INSTC acts as a gateway for India to reconnect with the resource-rich nations of Central Asia and Eurasia. It makes for one of the most salient aspects of India’s Connect Central Asia policy which was initiated by Indian policy markers in 2012 in a bid to revamp its ties with Central Asia. In a way, the INSTC serves the more proactive stance that the Indian foreign policy has come to adopt in recent years. For a long time, India’s westward connectivity had been disrupted by its contentious relations with Pakistan. In providing a direct link to the Iranian ports of Chabahar and Bandar Abbas, the INSTC allows the nation to bypass the Pakistan hurdle. Furthermore, it presents India with an opportunity to re-engage with Russia which, in the light of India’s increasingly cordial relations with the United States, has been advancing its relations with Pakistan. In 2018, bilateral trade between India and Russia stood at USD $8.2 billion, a dismal amount compared to the envisaged target of US $30 billion in bilateral trade by 2025. The need to re-energize trade coupled with the lack of a coterminous border renders the INSTC imperative for the two.

The INSTC also makes way for India to offset growing Chinese presence in the region. The partly Indian-built port of Chabahar in Iran is not only central to India’s connectivity to Central Asia but also holds significant strategic importance. Located just 72 kilometres west of the Pakistani port of Gwadar which has been developed under the BRI, Chabahar allows India to counter the Chinese strategic foothold in the Indian Ocean Region. The port is also pivotal for land-locked Afghanistan to unlock its trade potential and reduce its dependence on Islamabad. In this context, it is worthwhile to note that, positioned at the crossroads of the North-South and East-West transit corridors, Iran is the lynchpin to the success of the INSTC. Isolation of Iran in the wake of the U.S. sanctions then can inevitably put the actualisation of the INSTC in jeopardy. However, the signing of an MoU between the state-backed Container Corporation of India (Concor) and Russian Railways Logistics Joint Stock Company (RZD) in 2020 to transport cargo via the INSTC despite the threat of U.S. sanctions indicates a promising outlook for the full operationalisation of the corridor.

The geopolitical geometries of the INSTC are complicated not only by tangled relations with extra-regional players but also amongst the members themselves. Azerbaijan’s accession to the INSTC in 2005 spurred the corridor’s spread in the Caucasus and heralded the bridging of missing links like the Qazvin-Rasht-Astara railway line. Anticipating up to seven million tons of cargo transit through its territory in the medium term, Azerbaijan has agreed to finance $500 million for the project. But besides the economic benefits, the corridor also makes for a geopolitical asset for Azerbaijan in offering an opportunity to further isolate Armenia with which the country shares adversarial relations. The INSTC undermines Armenia’s own underfunded regional railroad initiative by providing more suitable economic dividends and linking Iran with Turkey via Georgia’s Black Sea Ports while bypassing those of Armenia with the Baku-Tbilisi-Kars route. Notably, for Armenia, the completion of the Armenia-Iran Railway Concession Project would bring colossal direct benefits for its economy by allowing it to avoid the Turkey and Azerbaijan blockade. However, given the paucity of funds, the Armenian project has remained only on paper. Another case in point is the possibility of friction in Russia-Iran relations in the future if a sanctions-free Iran makes headway in becoming an energy hub and gaining larger shares in the oil and gas markets of Europe which has been striving to reduce its dependence on Russian gas. Moreover, realities of the INSTC’s geopolitical geometries may complicate even further if the corridor expands to include countries from the Baltic and Nordic regions along with other interested states like Japan under its ambit. Nevertheless, given that the main argumentation behind the corridor is to reap commercial benefits, it is unlikely for the geopolitical rationale to override economic reasoning.

The INSTC and BRI: A Harmonious Grid?

The INSTC and China’s BRI are both colossal multi-modal undertakings which enhance economic connectivity and promote infrastructural growth. However, conceived almost a decade before the launch of the BRI,  the INSTC is a much older project. Unlike the BRI where China plays the role of the foreman, it follows a much more multilateral approach with multiple stakeholders participating on a level playing field. INSTC proposals are also devoid of ‘debt-trap’ fears which have often plagued the appeal of the BRI. While this makes the INSTC much more transparent and reliable and thereby increases its tenability in the long run, it also implies more constraints in its development process. The shortage of funds for constructing missing links in the corridor is one such example. As the helmsman of the BRI, China is not only willing to invest large sums into the project but is also willing to risk markedly low returns on its long-term investments. This, however, points to the concern that the entire project is a decisive strategic manoeuvre. For India, this holds particularly true for the CPEC stretch on the BRI whose Gwadar port is seen as a catalyst for China to gain a strategic foothold in the Indian Ocean Region. China’s bid to extend ties into Afghanistan and Iran have stirred these tensions further. Nonetheless, it is important to note that Iran’s growing ties with China need not necessarily come at the cost of India-Iran relations. Besides, the North-South axis of the INSTC can, in fact, complement the East-West axis of the BRI to make for a more cohesive transport grid in Eurasia. Although the INSTC and China’s BRI initiative are often pitted against each other, it must be understood that the two are not entirely incompatible with each other.

Bottlenecks and Constraints

Progress on the INSTC has taken place in fits and starts. Following the progress made in the first few years of its inception, development on the corridor slowed down from 2005 to 2012. Progress picked up the pace again after the sixth meeting of the INSTC members in 2012 and the project has been gradually gaining momentum since. Coincidently, this was the same year in which India launched its ‘Connect Central Asia’ initiative. One reason behind the sluggish pace of progress was the imposition of sanctions on Iran which isolated it on the global stage. The other major stumbling block has been the lack of financial backing. None of the three main participants has pockets deep enough to ensure unwavering funds for a project of this scale. Different stakeholders are funding different sub-projects creating structural and technical problems for the corridor owing to its disjointed nature. One such problem is the break of gauge issue. The standard railway gauge used by Iran, a central transit hub, is different from the broad gauge used by Russia and the Central Asian nations. For instance, the Rasht-Astara rail link requires a change of gauge from the standard one as the line crosses from Iran into Azerbaijan. This necessitates the need for more change of gauge facilities. The presence of multiple stakeholders creates other problems like customs control and documentation issues, lack of harmony in transportation laws and improper insurance coverage.[2] Moreover, the project still lacks an information exchange platform. This points to the absence of adequate digitalisation and private sector participation in the INSTC. Although the corridor has garnered interest from some companies like Deutsche Bahn, private sector involvement in the corridor has largely remained dormant owing to their concerns for steady returns on investment and security fears. The corridor passes through regions with critical security risks — be it instability in the conflict-ridden Caucasus, extremism in Afghanistan, domestic discord or forms of transnational organised crime like drug trafficking. This puts the security of cargo transit into question and few companies are willing to gamble with this risk, putting the project’s economic viability in jeopardy.

The Path to the Future

While the North-South Corridor holds immense potential, its full realisation is contingent on the resolution of the bottlenecks and constraints impeding its progress. Addressing these challenges requires closer cooperation with government agencies and private enterprises at both regional and international levels. First, it is imperative to understand that the main selling point of the corridor is commercial gain from increased connectivity. To this end, the INSTC members must avail and make practical and effective use of its complementarity with the existing grid of transnational corridors in Eurasia owing to the North-South axis that the corridor operates on. Synergy with other corridors will allow the INSTC to create additional positive economic spill-overs. Synchronisation with corridors of the Trans-European Transport Network such as the North-Sea Baltic corridor, with organisations like the Black Sea Economic Cooperation (BSEC) and other nations like Japan, Myanmar and Thailand can significantly enhance the outreach of the project. Second, the INSTC members must incorporate new digital technologies, launch a web portal for information exchange and build digital nodes along the corridor to turn it into a fully integrated networking system. One way of achieving this is to have India, with its robust IT sector, take the lead in the digitalisation of the corridor. The other is to push for greater participation from the private sector which is significantly more efficient in advanced technologies.[3] Third, infrastructural and technical issues must be resolved. Integration of logistics assets, provision of visa facilities, ease of gradients, aggregation of cargo bound in the return direction and increasing availability of change of gauge facilities are some steps in this direction. Fourth, it is equally important to work towards greater harmonisation of policies. This necessitates the creation of high-level working groups and adept integration of policies and laws. It is, however, important to ensure that changes introduced in the direction of legal harmonisation must not be integrated with local laws unexpectedly in a trice but rather in a step-by-step manner to ascertain a smooth transition. Only once these steps are undertaken and the existing bottlenecks removed, can the INSTC members expand the ambit of the project to include new domains like smart energy, blockchain technology, pipeline connectivity, and consider the prospects of extending the corridor to areas like North Africa and the Arctic region.

Conclusion

The International North-South Transport Corridor was initiated based on the vision of India, Russia and Iran to enhance strategic partnership and economic cooperation by augmenting connectivity through Central Asia. Although the initial progress was slow, the project has expanded dramatically to potentially increase its reach up to Northern Europe. Extending its geographical stretch to such an extent and tapping into its vast potential, however, is bound to be a time taking process. Questions over sanctions on Iran and Russia, the mustering of adequate economic wherewithal and lack of private participation still linger. Nonetheless, it would be unwise to judge the corridor’s capacity to deliver before it becomes fully operationalised. Given that development on the corridor is still underway, it can be easily modified to overcome structural problems. Cargo exchange and private participation are also bound to drum up further as Asia slowly develops into a larger consumer market itself. While this presents a positive outlook for the corridor’s future, its actualisation rests on the ability of the member states to maintain sustained efforts.


[1] Hriday Ch. Sharma, “Turning the International North-South Corridor into a ‘Digital Corridor’”, Comparative Politics Russia, 4 (2018), 125, 10.24411/2221-3279-2018-10008.

[2] “INSTC Conference-India 2015”, 87-94.

[3] Hriday Sharma, “Turning the International North-South Corridor into a ‘Digital Corridor’”, 124-138

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Economy

Pandemic Recovery: White House – Check-In or Check-Out Times

Naseem Javed

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Credit: Diego Rivera

Some 200 nations of the world are in serious economic pains of varying degrees; the images and narratives on social media makes the world appear small and spinning out of control, shrinking mental abilities to Tik-Tok tempo to fit small size screens. In reality, when global dialogues engage some 5000 languages, 2000 cultures, bouncing in 10,000 cities, 11,000 Chamber of Commerce, 100,000 trade associations and some five billion connected alpha dreamers extremely dynamic vibrancy appears. The world is immensely large, as only less than 5% its populace has ever travelled globally while 50% never went outside their own country. On social media, everyone is a certified global expert.

Nevertheless, some 200 nations are trying to change the world toward a better workable plateau, peaceful diversity, tolerance and some sort of balanced trade. The world is hungry seeking out untapped hidden talents of its local citizens, suppressed by the bad local policies. There are continents, oceans, jungles, animals and things, simply, so much, so large, so vast, a mind cannot fathom. Blessed are those who have open minds and souls. The rest self-imprisoned in their own minds, lost in the darkness of their own fears. The borderless world of commerce always needs colorfully smart; open to diversity to bounce in global space with national and global collaborations.  

Such doctrines lost during the last decades as economic disconnectivity blossomed under hologramic economies. Pandemic recovery, today, forces mobilization of the midsize business economy as a bold adventure on quality exportability based on upskilled citizenry. Occupationalism demands small and midsize manufacturing to uplift local grassroots prosperity. In the history of humankind, no other experiment of human endurance has ever been as successful as America; a century old, image supremacy of entrepreneurialism wasted when some 100,000 factories and Middle-Class America disappeared from the heartland. The manufacturing based economy laughed at over ‘information economy’ and hologramic adventuring. Deep study and new global age thinking is a perquisite.

Three types of new challenges

Nations without funding: It is almost a fact most governments from top to bottom are simply broke, and almost a fact most governments have already wasted their funds beyond their means. However, if we focus just on priorities, above programs are primarily not new funding dependent rather they are deployment hungry and execution starved. Any government anywhere in the world in the name of superior efficiencies can easily adopt digitization policy as a survival strategy and make all the processes highly affordable by bringing them on digital formats. The rain of free technologies is flooding the global markets. It is more about upskilling departmental leaderships to adapt to such opportunities, without fear.

Nations without infrastructure: Small percentages of nations have the infrastructure, rest assembling like Lego as they go. The internet connectivity or knowledge plug is almost everywhere. The lack of imagination and upskilling of the gatekeepers is a critical issue.

Nations without digitization: there are a majority of nations where mental attitudes are significant problems, fear of being replaced as redundant or fear of exposing lack of competence preclude any adventure on digitization. No nation will survive on economic progress without national digitization mandates.

Three types of new models: Start with the Marshall Plan thinking, the revolutionary models and national mobilization to catch up the last decade. Start with open debates and honestly frank analysis, no finger pointing. Start with a plastic award night, congratulate failures, and carry on as usual until the next pandemic.

When history becomes nothing, but agreed upon lies, culture as agreed upon fables, truth becomes taboo, dumb down narrative dominates, restless citizenry emerges.

Summary: Within next 50 days, the US Election will make global shock waves, no matter who wins…it will be the battles on acceptance and concession speech, the mail-order selection criteria my linger weeks or months in chaos… the Vaccines races may collide with bad results and delay the process to 2022. The economic recovery shaped W may bring reopening normalcy possibly in 2022. Tough and difficult times demanding critical thinking and mental endurance on all fronts. Study how national mobilization of mid size economy works in digital age.

Plan wisely and select right paths; but open bold and honest discussions, as masked and sealed lips are where most of the problems originally germinated. Move or get moved. 

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