06 PERSPECTIVES

ECONOMICS

All for currency!

G-20
backs
off
austerity drive, rejects hard debt cut targets
SIGN OF WORRIES OVER A SLUGGISH GLOBAL RECOVERY
Reuters
Washington

inance leaders of the

Group of 20 (G-20)
economies on Friday
edged away from a
long-running drive toward government austerity
in rich nations, rejecting
idea of setting hard targets
for reducing national debt
in a sign of worries over
sluggish global recovery.
The G-20 club of advanced and emerging
economies also said it
would be watching for negative effects from massive
monetary stimulus, such as
Japans a nod to concerns of developing nations that those policies
risk
flooding
their
economies with hot capital
and driving up their currencies.
Russian Finance Minister, Anton Siluanov said at
a news conference that officials from the G-20 nations
believed overall debt reduction was more important
than specific figures. We
agreed that these would be
soft parameters, these
would be some kind of
strategic objectives and
goals which might be
amended or adjusted, depending on the specific situations in the national
economies, he said. Russia this years G-20 chair

had hoped to secure an

agreement on setting fixed
targets for reducing debt by
G-20 leaders meet in St Petersburg in September.
But the United States and
Japan have firmly opposed
the idea of committing to
fixed debt-to-gross domestic product targets, with
Washington trying to keep
the focus of the G-20 on
growth.
Quite frankly, the language could have been
stronger but its sufficient
to move this forward, said
Canadian Finance Minister, Jim Flaherty.

legaleagle

State of
statelessness
LACK OF CITIZENSHIPS MAY DEPRIVE
A LARGE NUMBER OF PEOPLE
OF THEIR VOTING RIGHTS
Ananta Raj Luitel
Kathmandu

recent
report
by
Forum for Women,
Law and Development
(FWLD) shows six per
cent of the total population
are stateless without
citizenship certificates. In a country
populated by 26.49
million people, 4.3
million stateless
people hints at a
total mockery of
democracy.
The FWLD report shows that
the situation of statelessness is not only confined to
people living in the Terai
region but even those in the
hilly and mountain region
as also suffering the same
fate. Manang has the lowest
number of persons lacking citizenship certificates
(3,220) while its total population is not more than
10,000. Kathmandu district
has the highest number of
persons (215,767) lacking
citizenships, as the population in Kathmandu crosses
1.7 million.
Citizenship certificate is
not only related to ones
identity as a citizen of the
country. It is also linked
with ones right to job,
health, education and state
facilities. A large section of
the populace lacking this
card is an indication of
them being deprived of all
the rights guaranteed by

the state.
As per Article 9 of the Interim Constitution, any
person who was born in the
territory of Nepal and has
been permanently residing
in Nepal shall acquire
citizenship of Nepal by
birth. A person is also able
to acquire Nepali
citizenship
by
showing proof of
Nepali descent.
The issue of
procuring citizenship is, still riddled with challenges. For instance, a woman of
foreign nationality who
marries a citizen of
Nepal acquires naturalised
citizenship. However, serious debates ensure should
a man of foreign nationality marry a Nepali woman.
These matters need to be
dealt with seriousness
and urgency so that the
rights of all Nepalis can
be ensured.
The FWLD report highlights the need to do
something concrete in regard to providing citizenship certificates to genuine
persons so that their
democratic rights are
safeguarded, Neelkantha
Upreti, chief election commissioner
told
THT
Perspectives. We should
bring reforms in our system by keeping this data in
mind, as no citizen should
be deprived of their voting
rights, Upreti added.

WATCHING JAPAN
In a communiqu after a
two-day meeting, the G-20
said it would be mindful
of possible side effects from
extended periods of monetary stimulus, a phrase
added the insistence of
South Korea to take into account the concerns of
emerging markets. Monetary policy should be
directed toward domestic
price stability and continuing to support economic recovery, the statement said.
The economic policies of
Japanese Prime Minister,
Shinzo Abe have weakened

the yen, but only as a byproduct of stimulus geared

at pulling the country out of
deflation, the countrys finance minister said. To say
that a cheap yen is our goal
will grossly miss the point,
Taro Aso told the Centre for
Strategic and International
Studies in Washington. The
big D deflation is too
difficult and too persistent to
get rid of. At the end of the
day, a shrinking Japan can
only do harm to the world.
The Bank of Japan (BoJ)
is not alone in flooding its
economy with cheap funds
to try to boost borrowing and
spending. The US Federal
Reserve, the Bank of England and, to some extent, the

European Central Bank have

as well.
Japans growth is good
for India. Stagnation in
Japan is not good for India.
We want Japan to grow,
said Indian Finance Minister, P Chidambaram, who
spoke at the Peterson Institute in Washington on Friday. Brazilian Finance Minister, Guido Mantega said
that because of Japans long
history of deflation, its stimulus efforts were understandable, but he added that
the G-20 must remain vigilant on exchange rates.
The G-20 leaders urged the
Euro Zone to quickly move
toward a banking union in
order to help revive the regions economy. However,

Germany repeated its earlier position that European

Union laws needed to be
changed before one of the elements of the banking
union, a scheme for winding
down failing banks, can be
introduced which is likely
to delay the process.
The struggles of the
Euro Zone dominated G-20
discussions, delegates said,
as harsh austerity measures
have failed to lift the region
out of its economic slumber.
The United States has been
pressing Europe to ease up
on its budget cutting.
A senior US Treasury official, speaking to reporters
on condition of anonymity,
said that Cypruss bailout

showed Europe needs to

do more to move towards
banking union.
Discussions of the Euro
Zone will likely remain
prominent on Saturday as
global finance officials
gather again for a meeting of
the International Monetary
Funds (IMFs) governing
committee. Stronger demand in Europe is critical to
global growth. Weak domestic demand has undercut
euro area growth for six
consecutive quarters and
output continues to contract, US Treasury Secretary, Jack Lew said in a statement prepared for delivery
to the IMF committee.

SOFT DEBT TARGETS

The drive toward government austerity has been
undercut by weakness in
economies that took severe
measures to cut deficits,
including Britain, which is
headed into its third recession in the last five years.
The US economy also shows
some signs of strain that
economists pin on belttightening in Washington.
Earlier this week, the IMF
reduced its forecast for
global growth and reiterated
its call for some European
countries to throttle back
their austerity drives. Fitch
cut its credit rating on
Britain on Friday to doubleA-plus, citing expectations
that general government
debt will rise to 101 per cent
of GDP by 2015-16 due to
weak growth.
In an interview with
BBC television, IMF Chief,
Christine Lagarde said now
might be time for Britain to
consider relaxing its focus
on austerity given the recent
weakness in its economy.
Russias Siluanov also said a
greater amount of coordination was needed with the
IMF on global liquidity, with
recommendations expected
by next July.
G-20 ministers called on
the Financial Stability
Board (FSB) to oversee work
on reforms for short-term interest rate benchmarks such
as Libor in the aftermath of
a global rate-rigging scandal.
FSB was asked to report
back in July on its progress.

Contentious
development
Siddharth Poddar
Singapore

he pursuit of economic
development can often be
contentious and tricky,
ironically more so in the
developing world. This is
because the number of stakeholders (or those concerned
and willing to make some
noise anyway) is greater in
developing countries.
It is due to a dual effect. On
one hand, minority groups
with no access to resources or
wealth have until now not had
any outlet to voice their
grievances in the public domain or an effective platform
from which to seek their
rights, but that has changed
dramatically. The proliferation of sensationalist 24-hour
news channels has at least
played a hand in ensuring that
issues confronted by minorities and indigenous groups
are now brought into our
living rooms and stare us in
the face. Prior to this reach of

the news media, these were

merely abstract concerns.
On the other hand, increased incomes and increased levels of education
have led to increased levels of
awareness in the developing
countries. This has given
shape to a boisterous civil
society that is sometimes
well-informed but never shies
away from pinpointing something or someone to criticise.
This civil society is loud,
animated, laps up any attention it can get and sometimes
craves for it.
This has meant that decision-making in many contentious development issues
especially those that
purportedly pit the powerful
state or the evil multinational against the hapless
individual is not sole preserve of the government. Nor
is a bilateral agreement between an investor and the government sufficient. Other interested stakeholders include
environmental groups and

T H E H I M A L AYA N T I M E S
SUNDAY , A P R I L 2 1 , 2 0 1 3

THERE IS MORE THAN WHAT MEETS THE EYE

IN ECONOMIC STIMULUS PACKAGES

investosansar
Sandip Nepal
Kathamndu

orld economic giants

have been momentarily
printing more currency
day-after-day just for the
sake of economic recovery.
From the largest economy of the
world, the US, single currency
bloc, Euro Zone or the land of
the rising sun, Japan all major economies are severely exercising monetary stimulus packages citing economic degradation. The US, on one hand, via
Quantitative Easing-three (QE3), has been spurring liquidity
into the market in the form of
bonds and treasury buy backs,
while Japan, has set an inflation
target of two per cent to
be attained by two
years and already
started extensive

monetary stimulus packages to

stimulate the economy.
Japan and the US, being major
reciprocal trading partners,
command and influence many
economic sectors of corresponding nations. Under such critical
trade scenarios, where a slight
economic reform by one nation
affects the trading scenario of
another, monetary and fiscal
policies and re-structuring are
considered to be of great importance. As the US has been constantly exercising QE-3 to cut
back on the unemployment rate,
obviously keeping track of inflation, the greenback has been
kept at a lower index. Similarly,
as the third round of the US
stimulus affected Japanese
trade, with the commencement
of stimulus regime recently,
Japan has made the Yen an export-friendly currency.
Although both nations the
US and Japan have been going
through expansionary economic

measures, if scrutinised scrupulously, these regimes could exhibit an outlook of a currency

war between these core global
economies. The rationale is fairly simple, make export cheaper
and import dearer. As every story has two sides, the ongoing
monetary measures in different
economies around the world by
far bypasses variables like unemployment, inflation, and interest rates, et cetera, but also
manoeuvre the balance of trade
positions.
It is always beneficial to understand global economic dynamics, but analysis and assessment of economic variables and
cross-variable effects also need
to be understood broadly. In this
age of global competition
and economic supremacy, we, the general peo-

ple, ought to be cautious and scientific enough to grasp the global economic instances and logically identify cause-and-effect
relationship of such economic
stance.
For the time being, the most
likely economic reforms, as
sought, could be supportive or
expansionary monetary and fiscal policies by the Chinese economy, obviously, to improve, expand, and create economic multiplier-effect in the domestic
economy! Time will tell how
these economies accommodate
their monetary policies and reforms, taking into account the
cross-currency valuation and
trading regimes.
(The author is the assistant manager at the research and development
department of Mercantile Exchange
Nepal Limited. He can be contacted
through r&d@mexnepal.com)

burningbright
CHALLENGES IN OFFERING ALL STAKEHOLDERS WITH
THE CHANCE TO WALK AWAY WITH SOMETHING

those petitioning for rights of

local inhabitants who stand to
lose their livelihoods and way
of life as a result of the proposed activity or investment.
Often, a belligerent civil society can be overly critical of
any proposed investment by a
multinational. Sometimes it
can also appear rather foolish
in the process. However, all of
that notwithstanding, its presence and actions ensure there
is greater awareness of issues,
and prevents governments
from acting unilaterally.
In the week gone by, this was
in evidence in India where the
Supreme Court disallowed

Vedanta Resources from

mining for bauxite from the
Niyamgiri Hills in eastern
India till the Dongria Kondh
tribe, which lives in those
hills, agrees to let it do so. The
tribe holds the Niyamgiri
hills as sacred and has voiced
its opinions against the
proposed mining plans, arguing the mines would rob them
of their way of life and
destroy their religious and
cultural traditions.
The gram sabhas of two of
the affected districts have
been given three months by
the Supreme Court to offer
their views on the proposed

mining project to the

ministry of environment
and forests for review, after which a final decision
will be made in another
two months. The court
made it clear that the
tribes right to worship
its deity has to be preserved and protected and
that the tribes views
must be considered.
In the circumstances, it
is a reasonable judgment,
for it does not place an
outright ban on mining
activities in the area and
brings the tribe into the
decision process. Vedanta, if
it is to have any chance to
access the abundant bauxite
in the area, needs to allay the
fears of the tribe. The entire
process will likely be messy
and long-drawn, but it
offers all stakeholders with
the chance to walk away with
something and can lay the
basis for a project on more
secure foundations.
(The author specialises in the
political economy of South and
Southeast Asia and is a co-founder
of StoneBench Research and
Communications.
He can be reached at
siddharth@stonebenchasia.com)