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Archive | February, 2009

End of Story, Morning Glory?

The United Arab Emirates (UAE) is experiencing the antithesis of the “Dubai Chalo” mantra of the ’60s and ’70s.  Dubai is likely the shed 10% of its population over the next two years, as a result of unmanageable debt, failing businesses and shrinkage of property values.   This is only to be expected —  unsound economics have driven Dubai’s growth in recent years.  Unlike other states in the Arabian Peninsula, Dubai has no oil of its own.  Indeed, from the emirati pearl merchants of the early 1900s to the establishment of the Jebel Ali Port in the 1970s, its historic strength has been trade.

However, the single minded pursuit of turning this free-trade town into a megacity rivaling New York or Los Angeles is as bad an idea today as it was when it was conceived.  And now, conservative but oil-rich Abu Dhabi, who many said was slow off the mark in this maddening real estate circus, is having the last laugh.  The Maktoums of Dubai have had to had to swallow their pride and approach Abu Dhabi to bail them out.  But even Abu Dhabi’s bailout of Dubai comes with strings attached:

[T]he rapid deceleration had given rise to speculation that Abu Dhabi, the richest member of the UAE, might have to bail out its flashier neighbour. Rumours spread that Abu Dhabi would only stump up the cash if Dubai ceded control of its successful airline, Emirates.

Federal support has come through folding Dubai’s troubled mortgage companies into well-capitalised Abu Dhabi banks. There have been other direct discussions between Dubai and Abu Dhabi state companies, although none has reached agreement.

Sheikh Mohammed’s Dubai International Capital fund, whose assets have shrunk sharply, briefly courted investment from Mubadala, the Abu Dhabi investment arm. No substantive discussions ensued, people close to the matter say, but the incident fuelled rumours of a bail-out. Well before the credit crisis raised questions about Dubai’s solvency, Mubadala and Dubai Aluminium had been discussing equity restructuring of their joint venture, Emirates Aluminium, a vast smelter on the Abu Dhabi/Dubai border.

What Dubai needs to do now is to rightsize.  New York City was not built overnight.  Even if NYC’s economy relies heavily on financial markets, these markets trade against tangible products — from the pharmaceuticals of New Jersey, to the automobiles of Detroit.  Dubai’s financial markets trade in recycled financial instruments, which have a tendency to flourish during the good times, and falter during the bad.  This blogger also feels that Dubai (and the UAE as a whole) needs to address debt insolvency.  Given that foreigners and foreign owned entities form the majority of Dubai’s demographic and economic footprint, a credit history check system such as the one in the United States would be ineffective.  Yet, there is an urgent need to address the frequency with which expatriates and foreign-owned companies run up substantial debt and abscond from the country.  The current economic crisis in Dubai is as much a result of a nonexistent debt reconciliation system, as it is due to building artificial islands, skyscrapers and magical kingdoms that no one could afford.

The one benefit of an Abu Dhabi bailout might be that the UAE would start functioning more like a federation with a visible nucleus (Abu Dhabi) than the disagreegated collection of city-states that it now is.

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N.S.A. – Narayanan Should Abdicate

It’s somewhat unfair to pick on just one ungainly grain from a compost heap of failure that has been the United Progressive Alliance’s reign so far.  But when you’ve been the National Security Advisor (NSA) of a country that has seen an unprecedented number of urban civilian casualties and has witnessed its relations with several other countries sour, you should start to ask yourself if it isn’t about time you stepped off the pedestal.   When Brijesh Mishra was NSA, we saw an India that was beginning to embrace its growing influence in the world.  India seemed at once, confident and comfortable about its place in global affairs.  Five years of UPA rule has seen India recoil like a fetus on the international stage.  The Congress’ return to power in 2004 brought back with it a baggage of personal insecurities that people like Nehru perpetuated on the national front.  KC Singh, former secretary, Ministry of External Affairs makes the case for Narayanan’s ouster:

Narayanan now had control of all the intelligence agencies, as well as the defence and external affairs tracks into the prime minister’s office. In addition, he was the prime minister’s special representative for border talks with China and parleys with counterparts abroad. In particular, that included the American NSA, Stephen Hadley, a route into the White House and thus the India-US nuclear deal. Essentially, Narayanan focused on the two issues of greatest interest to the prime minister: Indo-Pak relations and the nuclear agreement with the US.

Today, two months after the 26/11 Mumbai atrocity, we have limited options to first punish Pakistan and then deter it from fomenting terrorism. Whose job was it to develop these coercive options, debate them with the concerned ministries and departments, and then get them adopted into our doctrines and responses? All we hear is a monotonous lament for the demise of the Musharraf presidency. The Obama administration has started singing a different tune in Afghanistan, giving consideration to an Iraq-type cutting of deals with tribal groups on the fringes of the Taliban. India’s relations with Iran continue to be saddled with US-demanded ‘actions’ against that country. Do we have a fallback strategy if the Obama administration’s approach starts diverging from India towards Pakistan?

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Aero India 2009: The Drama Continues

Aero India 2009 kicked off in the Garden City on February 11, 2009, with firms from 25 countries showcasing their hardware in a quest for the supposed multi-billion dollar contracts that the Indian military is going to hand out in the years ahead. Defense Minister AK Anthony was on site, claiming confidently that there was no question of scaling down the defense budget in times of economic recession. He’s right. There’s no question about it, because scaling down the defense budget is already a foregone conclusion.

The fact that a country with the third largest armed forces in the world and a GDP growth of 7.1% amidst global economic downturn would peg its defense budget at a beggarly 1.98% of GDP is a colossal embarrassment. Compare that against China’s defense budget (4.7% of GDP), or even that of Pakistan’s (4.5%), whose revenue consists almost exclusively of dole money from the US, China and Saudi Arabia.

Worse, an inefficient defense procurement mechanism has resulted in a dearth of military hardware and parts, so much so that even the abysmal defense allocations of previous annual budgets have not been fully utilized. Given the circumstances, the rational reader will be justified in questioning why there should be an increase in defense budget allocation at all.  The procurement bottleneck notwithstanding, this biennial aero-drama in Bangalore continues unabated, with many firms eying that lucrative $9 billion, 126 multi-role combat aircraft (MRCA) deal intended to replace the Indian Air Force (IAF) backbone MiG-21 “Flying Coffin” aircraft.

The only problem being that the Defense Ministry has harped on about this proposed phase-out since 1998. American firms Boeing and Lockheed flaunted their F/A-18s and F-16s respectively in the hopes of hitting the motherload, while Russia rolled out the MiG-35 “Fulcrum-F”. France and Sweden threw their lot into the race with the Dassault Rafale and JAS-39, respectively. However, 11 years, 3 administrations, and 5 defense ministers later, India is still to decide on the vendor, much less enter into price and/or technical negotiations with anyone. Meanwhile, our air force faces critical shortages, most noticeable in the sharp reduction of the number of squadrons from 39.5 to about 30 within a span of seven years.

IAF also faces a shortage of advanced jet trainers (AJTs), with only about 20 of the expected 35 Hawk AJTs being currently operational. The most pressing shortage that can’t be outsourced to foreign service firms is in trained pilots — the headcount is currently 400 below par. About the only (relative) success story has been the (almost) on-time delivery of Israeli Phalcon Airborne Warning and Control System (AWACS) last month. The AWACSs will be mounted onto IL-76 transporters and will give the IAF the ability to detect missile movement deep within enemy territory.

Israel’s ability to translate demand into delivered product on schedule is a promising sign and indicative of a reliable long term supplier. That Israel has been fairly resistant to Beijing and Washington’s earlier protests against providing India advanced technology is also a good sign. At Aero India’09, Israel demonstrated its third-generation AWACS (called “Conformal Airborne Early Warning and Control System”, or CAEW) which have already been inducted into the Israeli Air Force in 2006.  The wildcard in the Indo-Israeli military equation is India’s political leadership, which shows neither the urgency to plug gaping defense holes, nor the capacity for strategic thought.

In conclusion, while the Surya Kiran’s aerobatics may light up the skies of Bangalore with mesmerizing tinges of saffron, white and green, this biennial platform is meaningless if the Defense Ministry isn’t willing to commit to an overhaul of its procurement mechanism, maintain a well trained and motivated yoke of pilots, and put its money where its mouth is with regard to defense budget allocation.

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Ahmad Hasan Dani, RIP

The subcontinent lost a distinguished resource in archeology in the passing away of the great Pakistani Indologist, Ahmad Hasan Dani on January 26. Dani was born in Basna (now in Chhattisgarh) in 1920 and became the first Muslim to graduate from Banaras Hindu University (1944). His works on Harappa, Mohenjo-daro and the Sarasvati civilization have had a profound impact on our understanding of the subcontinent’s history. Dani was one of the few scholars who continued to challenge the two popular, yet divergent theories of whether the Indus Valley Civilization (IVC) was Dravidian (supported by scholars like Asko Parpola), or Aryan (“Out of India Theory“). He also continued to question theories of IVC’s cultural and religious continuity into early Vedic Hinduism, disagreeing, again, with his contemporaries on the issue.

In 1949, Dani was the first to propose a connection between this reference to “Hariyupiah” in the Rig Veda and the IVC center of Harappa:

In aid of Abhyavartin Cayamana,

Indra destroyed the seed of Varasikha.

At Hariyupiya he smote the vanguard of the Vrcivans,

and the rear fled frighted.

(Rig Veda, XXVII.5)

Professor Dani was a recipient of the Hilal-e-Imtiaz (“Crescent of Excellence”), Pakistan’s second highest honor. During his career, he published more than 30 books, and lived and worked all across the subcontinent, including Dhaka, Peshawar and South India. He was fluent in 14 Indo-European and Dravidian languages. Professor Dani’s intervention in 2005 prevented the construction of an amusement park over an archaeological site in Harappa. His research has helped a region burdened by 400 years of subjugation and slavery, rediscover itself. May he rest in peace.

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