August 01, 2013

In Telangana Decision, a Microcosm of India's Geopolitical Challenge

India is set to inaugurate its 29th state: Telangana will be carved out of the existing southern state of Andhra Pradesh after the highest working body of India's ruling Congress Party decided late July 30 to find the legal means to create the new entity. The success of the Telangana movement for statehood encapsulates the deep-rooted struggles New Delhi faces in trying to preserve and manage a nation riven with internal complexities.

Now that the Congress Party and its allies in the United Progressive Alliance coalition, as well as the main opposition Bharatiya Janata Party, have endorsed Telangana statehood, the proposal will move to the Andhra Pradesh state assembly, which will be called upon to sort out water and energy distribution as well as pending political issues before the new state can be approved by a simple majority vote in the national parliament. Some Congress Party officials, eager to seize political momentum and in hopes that the move will translate into votes in the 2014 general elections, claim the process can be completed in as little as four to five months, but that is probably too optimistic an estimate.

The Indian government has deployed an additional 1,500 paramilitary personnel to the state in anticipation of riots, fearing that clashes will ensue between celebrating pro-Telangana activists and opponents protesting the split of Andhra Pradesh. In addition to the threat of riots, Naxalite insurgents and Islamist militants known to operate in the area may use the opportunity to stir up unrest at a time when political sensitivities are running high.

The Prize of Hyderabad

The soon-to-be-altered boundaries of Andhra Pradesh currently encompass three geographically distinct areas: Telangana, the Andhra coastal plain and the interior Rayalaseema region. The proposal in its current form calls for carving an independent Telangana state out of the 10 northwestern districts of Andhra Pradesh, an area comprising roughly 60,000 square miles with a population of just over 35 million; Andhra Pradesh has a total estimated population of 85 million.

The area that will become Telangana is sandwiched between the Godavari and Krishna rivers and sits on the Deccan plateau, west of the Eastern Ghats mountain range. Though the mostly barren north suffers from acute power shortages, has a high rate of poverty and is a hotbed for Naxalism -- India's Maoist militant movement -- its geographic boundaries include Hyderabad, one of India's most vibrant economic regions.

To the east of the Ghats range sits the coastal plain, where the Godavari and Krishna drain into the Bay of Bengal and open the Andhra coast to trade and commerce with the outside world. Rayalaseema, on the other hand, occupies the state's southwest interior, west of the Eastern Ghats mountain range and just south of the Krishna River. Lacking a city like Hyderabad to serve as a magnet for foreign direct investment, and missing out on the perks of a long coastline to fuel growth, Rayalaseema, drought-prone and teeming with Naxalite militants, has lagged behind its Andhra counterparts.

The new plan to divide Andhra Pradesh would have the residual non-Telangana parts -- coastal Andhra and Rayalaseema -- form the state of Seemandhra. Further, the most controversial element of the Congress Party's current proposal entitles Telangana to the economic prize of Hyderabad, which would serve as a joint capital for 10 years during which Seemandhra is tasked with appointing or building its own capital.

A History of Scissions

Telangana is poised to join a long list of states that have been created since India's independence in 1947. Before Telangana, the states of Chhattisgarh, Jharkhand and Uttaranchal were carved out of Madhya Pradesh, Bihar and Uttar Pradesh, respectively, in 2000. Goa defined its state boundaries in 1987, while Arunachal Pradesh and Mizoram in the country’s far-flung northeast grew out of Assam in the same year. Manipur and Tripura earned their statehood in 1972, Haryana and Himachal Pradesh were carved out of Punjab state in 1966 and Bombay state in 1960 was divided along linguistic lines into Maharashtra and Gujarat. There is a much longer list of agitated pockets throughout India that are trying to get on the list for statehood, including but not limited to calls for a Bodoland in Assam, Gorkhaland in West Bengal and Vidarbha in Maharashtra.

India's constantly shifting map is no accident. Nation-building can be a messy process, and politicians, activists and militants of various stripes are still grappling with a score of unsettled issues left by India's chaotic transition from the British Raj to an Indian republic in the mid-20th century. Like a cracked window pane, India's multiple river systems cut across the subcontinent and give shape to hundreds of distinct geographic, ethnic, religious and linguistic identities.

Jawaharlal Nehru, India's first prime minister and the father of the Indian republic, quickly realized that the three-tier division the British Raj used to divide and administer India's governorships and princely states was ill-suited to the new country. In 1953, he launched a commission to figure out how to reorganize the country. Controversial political questions naturally emerged -- whether to redraw states along lines of linguistic and cultural unity, as well as how to preserve geographic continuity and financial viability. Leaders worried about the precedents any action could set in a country that speaks hundreds of languages and dialects and is beset by overlapping boundaries and economic interests.

The decided course of action -- as often happens when government commissions confront politically explosive tasks -- was to maintain ambiguity. In the words of the commission that led to the States Reorganization Act of 1956, "it is neither possible nor desirable to reorganize States on the basis of the single test of either language or culture, but that a balanced approach to the whole problem is necessary in the interest of our national unity."

Intractable Geopolitical Realities

India is still struggling to find that balance, and the Telangana movement encapsulates the broader issues. Under the States Reorganization Act, Andhra, a Telugu-speaking region, was the first state to be created on a linguistic basis when it was carved out of the wealthier Madras state, a Tamil-speaking region, in 1953. The people of the Andhra coastal plain looked toward the Deccan plateau to the bustling city of Hyderabad for an economic boost, arguing that Telugu would be the linguistic bond to conjoin the Andhra and Telangana regions. But the largely impoverished Telangana people did not identify with their Andhra neighbors, fearing that any economic benefit derived from Hyderabad would be monopolized by the relatively better-off Andhra traders on the coast.

To convince the Telangana to forgo their demands for a separate Hyderabad state and join a Telugu-speaking Andhra state, a so-called gentlemen's agreement was drafted in 1956 to guarantee Telangana demands in the new state. Those demands were left unfulfilled, and after 60 years of political agitation, violent crackdowns and unfulfilled promises of statehood, Telangana is now the closest it has ever been to marking its independence from the Andhra region.

But New Delhi's struggle does not end here. The creation of a new state that affects Hyderabad, a major economic hub home to a number of multinational corporations, is going to be a messy affair. And the statehood question is being addressed at a time when the government is desperately trying to attract and retain long-term foreign direct investment to help it cope with the global economic crisis. There is also substantial opposition within the ruling party itself over the idea of acquiescing to Telangana's demand for statehood. The widespread concern is that this could provide a spark to an array of long-simmering separatist movements, many of which can turn violent.

India's geopolitical reality denies New Delhi the influence and power to maintain its internal boundaries unaltered strictly via force. Compromises are inevitable and dealt with on a case-by-case basis -- always with the fear of setting a new and dangerous precedent. For now, the ruling party appears ready to absorb the risk of granting Telangana statehood, but New Delhi's job of cutting, pasting and mashing together a nation of disparate identities is still far from complete.

Read more: In Telangana Decision, a Microcosm of India's Geopolitical Challenge | Stratfor
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July 31, 2013

Media madness: What BJP and Modi should learn from Mamata
by Akshaya Mishra 24 mins ago
The Congress is losing the 2014 parliamentary elections, but the BJP is not winning it. This is the message from the poll surveys conducted recently by different media groups. As the surveys indicate, the presence of Narendra Modi, the BJP’s great white hope, is not likely to cause a dramatic change to the prospects of the party.

Frankly, this is not how things were supposed to be.

With all that buzz around Modi, the media’s tacit support, a Congress groaning under the weight of anti-incumbency and with no new political front in sight, the BJP was expected to have a cakewalk – well, by cakewalk we don’t mean 272 seats; we mean a realistic 190 seats which would open possibilities for it to find allies. Surely, the party is getting things wrong somewhere. And it has only partly to do with the over-dependence on a single person’s supposed charisma.

So are there lessons for the BJP at the national level from Mamata Banerjee’s thumping victory in the local body polls in rural West Bengal?

Admittedly, national and panchayat polls are worlds apart. The priorities before the voters are different in each case, as are the issues. The results of one do not serve even as a loose indicator of the trend in the case of the other. And, the BJP is never more than a marginal force in the state. Yet, there could be important takeaways from the TMC win for the party.

After the massive chit fund scam, the slew of controversies involving rape cases and acts of violence from party workers, Mamata Banerjee, by the reckoning of most political observers, should not have won the rural local body polls in the state. Even the Left, who watched with glee as Mamata’s party got into self-destruct mode, felt that the collapse of the Trinamool was an inevitability. Yet she won the elections convincingly, bringing rural Bengal, the CPM’s once loyal constituency under her firm grip.

The first lesson from her victory: media don’t matter much.

Mamata has been hounded by a belligerent media ever since she took charge of West Bengal. Not all the actions of her government were above board, but the aggression with which she has been treated, particularly by the television and the English language media, is rather unusual.

Rural voters don’t get carried away by the perception created by others. That they could forget and forgive her for the chit fund scam – lakhs of victims of it were the rural poor – is proof that her bond with this section of the electorate remains intact and certificates of good conduct from the media do not count for much.

The BJP’s obsession with dominating the media space is perplexing indeed. In 2004, the party created hype around its own successes through the India Shining campaign. Once a big section of the media started swallowing it hook, line and sinker and went to town about it, the party actually started believing its own fiction and confusing it with reality.

It forgot India Shining was essentially a campaign designed for the urban middle class and it would have little appeal with the rural masses for which it had done precious little. The creation of 53 million jobs looks good as a statistic but what matters really is the quality of jobs. The party missed that completely.

The TMC has not lost touch with its rural voter base: Reuters imageThe TMC has not lost touch with its rural voter base: Reuters image
Obviously, the BJP has learnt no lessons. A similar myth-building exercise is already in progress with the help of a section of the media. Modi is aggressively wooing the young, urban electorate with his social media campaign and other BJP leaders have been more busy before television cameras than in the fields interacting with real people. All of them are wooing the same set of people.

Modi, as the campaign committee head of the party and someone with deep understanding of grassroots politics, must change this culture of slothfulness. As the pre-poll surveys and the vote share calculation over the last two elections suggest, the party has covered no new ground. It should recognise that although media help, it does very little in winning elections. The real work is not in cosy television studios but on the streets and villages of the country.

The BJP should learn it from Mamata.

Yes, the urban population is growing and the young among it are expressive about corruption, poor governance and lack of opportunities. This constituency is important for any party – in 2009, it was the urban voters who tilted the balance decisively in favour of the UPA. But what about the rural constituency? Doesn’t it matter too? It still accounts for 370 constituencies, enough to make or break the chances of any party or formation in a general election.

While the Congress has been silently yet aggressively working to woo this section, we have not yet heard of a rural outreach programme of the BJP. Does it expect to come to power solely on the strength of the urban voters? Mamata, for all her weaknesses as an administrator, has not lost touch with her core constituency.

The BJP must learn to build long-term association with this section of the electorate.

None of the surveys has mapped the rural mood yet. Similar surveys in 2004 were gung-ho about the BJP’s prospects. Urban regions were over-sampled and thus the results had a strictly urban bias. They fell flat because they ignored rural India.

The rural constituency is silent and inexpressive, and thus not easily undecipherable and dangerous. The BJP should be careful, very careful.

Akhilesh and Durga

Durga vs Akhilesh's vote-bank politics

July 30, 2013

Narendra Modi's open letter to AP on Telangana

Full text: Narendra Modi\'s open letter to AP on Telangana
Dear Brothers and Sisters from all regions of Andhra Pradesh,
Namaskaram! I am looking forward to interacting with all of you on 11th August at the Nava Bharath Yuva Bheri Public Rally in Hyderabad.
During the public meeting at Hyderabad, I was hoping to share my thoughts on the issue of statehood for Telangana as well as on all of your concerns on a roadmap for all the regions of Andhra Pradesh.
However, in the wake of the sequence of events, the Congress Party has done in the last few days what it shied away from doing in the last 9 years- to work overtime on a decision over Telangana. It is an undisputable fact that Congress Party has neither been consistent nor transparent in its conduct over the creation of a Telangana state. Thus, a Party and a Government that has betrayed the people on the issue of Telangana time and again can hardly be trusted on this issue this time around.
It is equally true that the BJP has been forthcoming and transparent in its support for statehood to Telangana.
The BJP is the only party with the strongest record on the creation of small states. It maybe recalled that it was the NDA Government under the leadership of Shri Atal Bihari Vajpayee that created three new states of Chhattisgarh, Uttarakhand (then known as Uttaranchal) and Jharkhand in 2000 thus giving a new ray of hope to the aspirations of the people in these areas.
Friends, the same Congress party that won in 2004 on the promise of Telangana has played cynical games with the aspirations and sentiments of the people for nine long years. Now, at a time when there are only a few months left before the people of this country vote again, the Congress Party is rushing to announce Telangana. This raises serious concerns on the seriousness and intentions of the Congress.
After winning handsomely in Andhra Pradesh under the leadership of Dr YS Rajashekhara Reddy in 2004 and 2009, the Congress has turned its back on this state since the former Chief Minister died. In December 2009, the then Home Minister Shri P Chidambaram announced the commencement of the process for statehood to Telangana only to be withdrawn hastily. The Congress party then sought to buy time by creating another committee on the question of Telangana. But, it remained indifferent to the collapse in administration, political violence and the unfortunate specter of suicides by youngsters of Telangana. Meanwhile, governance came to a standstill in Andhra Pradesh.
While we welcome any forward movement on the issue of Telangana, we yet again ask how real is the intent of the Congress and the UPA Government this time around.
I would like to pose the following questions to the Congress party leadership and the UPA Government.
Question 1 - Where is your homework in terms of creating consensus in your own party, within the Government and within all political parties on the issue of Telangana when you have been speaking in so many divergent voices ?
Question 2 - Unlike capital cities that became shared capitals by virtue of being on the border between two states, Hyderabad becomes a shared capital despite being located well within Telangana. Thus, this does not justify the logic of sharing a capital albeit for a short duration. This leaves scope for operational difficulties.
Thus, how practical is it for a state to have a capital that does not lie neither within its boundaries nor along its borders?
Question 3 - What constructive measures have you taken to prepare the minds of the people of Andhra Pradesh and Rayalseema to welcome this decision on Telangana? What assurances have you provided to them so as to assuage their anxieties and to take them on board? Where is your "political roadmap" to creating this consensus among the people, all we have here is a "technical process" ?
Question 4 - What commitments are you prepared to make to the people of Telangana, who have already suffered severe trauma over your many betrayals, that you will not take them for a ride one more time?
Question 5 - Many youngsters of Telangana have committed suicide. Hyderabad as an investment destination has suffered, the state of Andhra Pradesh has slipped. The state once considered the rice bowl of India has seen agricultural slides making it a state with high farmer suicides.
It is indeed ironical that the Congress Party has sought to hide itself behind committees, reports and futile deliberations instead of courageously facing the people of Andhra Pradesh. Neither the Congress President nor the Congress Vice President have set foot into Andhra Pradesh in recent years, despite the fact that Andhra Pradesh sent the highest MPs for the Congress both in 2004 and 2009. Will the Congress leadership not apologize to the people of Andhra Pradesh for treating them like doormats to suit the Congress' political opportunism?
BJP's Principles for a Meaningful Roadmap to all Regions of Andhra Pradesh
We stand by our commitment to statehood for Telangana. We however believe that the Roadmap should be such that it is a win-win solution to all the people of all regions. Statehood for one region should not be viewed as coming at the expense of another region.
We believe that this is an Opportunity for us to develop all the other major Cities of Andhra Pradesh across all regions so Vishakhapatnam, Vijayawada and Guntur, Warangal, Karimnagar and Ongole, Anantpur Kurnool and Kadapa etc. all stand to gain.
We respect the Constitution that Protects the Rights of all Citizens. The BJP will take every step to protect persons, families, businesses and assets of all the people of Andhra Pradesh living across regions irrespective where their roots may lie.
We are committed to reviving the economy of all the regions of Andhra Pradesh. Law and Order, Political Stability and a Dynamic Policy Regime will be our priorities. BJP will ensure that the benefits of River Water will reach all regions and water resources sharing will be fair, just and equitable.
We are committed to restoring Trust and Confidence once again of all regions There shall be no more cynical political games and no more betrayals.
We are committed to preserving the shared Telugu cultural heritage of all regions that shall in no way be affected by what is merely an administrative boundary. Telugu Culture and Pride shall remain boundary-less.
This may be the first time a state formed on Linguistic basis is being proposed to be divided. It is an emotional moment.
Even at this time as the state is being divided, to respect the popular sentiment we bow our heads in respect to martyrs like the late Shri Potti Sreeramulu who sacrificed their lives for the creation of Andhra Pradesh. Inspired by their memory we commit ourselves to work for the progress of all Telugu people in each of these regions.
Narendra Modi

The PC16: Identifying China's Successors

Geopolitical Weekly
TUESDAY, JULY 30, 2013 - 04:02
By George Friedman

Editor's Note: For more information on purchasing the full PC16 report, which assesses each member of the grouping, and for details on custom briefings and analysis for your organization, please click here.

China has become a metaphor. It represents a certain phase of economic development, which is driven by low wages, foreign appetite for investment and a chaotic and disorderly development, magnificent in scale but deeply flawed in many ways. Its magnificence spawned the flaws, and the flaws helped create the magnificence.

The arcs along which nations rise and fall vary in length and slope. China's has been long, as far as these things go, lasting for more than 30 years. The country will continue to exist and perhaps prosper, but this era of Chinese development -- pyramiding on low wages to conquer global markets -- is ending simply because there are now other nations with even lower wages and other advantages. China will have to behave differently from the way it does now, and thus other countries are poised to take its place.

Reshaping International Order

Since the Industrial Revolution, there have always been countries where comparative advantage in international trade has been rooted in low wages and a large work force. If these countries can capitalize on their advantages, they can transform themselves dramatically. These transformations, in turn, reorganize global power structures. Karl Kautsky, a German socialist in the early 1900s, wrote: "Half a century ago, Germany was a miserable, insignificant country, if her strength is compared with that of the Britain of that time; Japan compared with Russia in the same way. Is it conceivable that in 10 or 20 years' time the relative strength will have remained unchanged?" Lenin also saw these changes, viewing them as both progressive and eventually revolutionary. When Kautsky and Lenin described the world, they did so to change it. But the world proved difficult to change. (It is ironic that two of the four BRIC countries had been or still are Communist countries.)

When it is not in the throes of war, trade reshapes the international order. After World War II, Germany and Japan climbed out of their wreckage by using their skilled, low-wage labor to not only rebuild their economy but to become great exporting powers. When I was a child in the 1950s, "Made in Japan" meant cheap, shoddy goods. By 1990, Japan had reached a point where its economic power did not rest on entry-level goods powered by low wages but by advanced technology. It had to move away from high growth to a different set of behaviors. China, like Japan before it, is confronted by a similar transition.

Post-China 16: Emerging Economies
The process is fraught with challenges. At the beginning of the process, what these countries have to sell to their customers is their relative poverty. Their poverty allows them to sell labor cheaply. If the process works and the workers are disciplined, investment pours in to take advantage of the opportunities. Like the investors, local entrepreneurs prosper, but they do so at the expense of the workers, whose lives are hard and brutal.

It's not just their work; it's their way of life. As workers move to factories, the social fabric is torn apart. But that rending of life opens the door for a mobile workforce able to take advantage of new opportunities. Traditional life disappears; in its place stand the efficiencies of capitalism. Yet still the workers come, knowing that as bad as their lot is, it is better than it once was. American immigration was built on this knowledge. The workers bought their willingness to work for long hours and low wages. They knew that life was hard but better than it had been at home, and they harbored hopes for their children and with some luck, for themselves.

As the process matures, low wages rise -- producing simple products for the world market is not as profitable as producing more sophisticated products -- and the rate of growth slows down in favor of more predictable profits from more complex goods and services. All nations undergo this process, and China is no exception. This is always a dangerous time for a country. Japan handled it well. China has more complex challenges.

The PC16

Indeed, China is at the fringes of its low-wage, high-growth era. Other countries will replace it. The international system opens the door to low-wage countries with appropriate infrastructure and sufficient order to do business. Low-wage countries seize the opportunity and climb upon the escalator of the international system, and with them come the political and business elite and the poor, for whom even the brutality of early industrialism is a relief.

But identifying these countries is difficult. Trade statistics won't capture the shift until after it is well underway. In some of these countries, such as Vietnam and Indonesia, this shift has been taking place for several years. Though they boast more sophisticated economies than, say, Laos and Myanmar, they can still be considered members of what we are calling the Post-China 16, or PC16 -- the 16 countries best suited to succeed China as the world's low-cost, export-oriented economy hub.

In general, we are seeing a continual flow of companies leaving China, or choosing not to invest in China, and going to these countries. This flow is now quickening. The first impetus is the desire of global entrepreneurs, usually fairly small businesses themselves, to escape the increasingly non-competitive wages and business environment of the previous growth giant. Large, complex enterprises can't move fast and can't use the labor force of the emerging countries because it is untrained in every way. The businesses that make the move are smaller, with small amounts of capital involved and therefore lower risk. These are fast moving, labor-intensive businesses who make their living looking for the lowest cost labor with some organization, some order and available export facilities.

In looking at this historically, two markers showed themselves. One is a historical first step: garment and footwear manufacturing, a highly competitive area that demands low wages but provides work opportunities that the population, particularly women, understand in principle. A second marker is mobile phone assembly, which requires a work force that can master relatively simple operations. Price matters greatly in this ruthlessly competitive market.

Therefore we tried to determine places where these businesses are moving. We were not looking for the kind of large-scale movements that would be noticed globally, but the first movements that appear to be successful. Where a handful of companies are successful, others will follow, so long as there is labor, some order and transportation. Some things are not necessary or expected. The rule of law, understood in Anglo-Saxon terms of the written law, isn't there at this stage. Things are managed through custom and relationships with the elite. Partnerships are established. Frequently there is political uncertainty, and violence may have recently occurred. These are places that are at the beginning of their development cycle, and they may not develop successfully. Investors here are risk takers -- otherwise they wouldn't be here.

The beginning of China's boom is normally thought of as 1978-1980. The Cultural Revolution had ended a few years before. It was a national upheaval of violence with few precedents. Mao Zedong died in 1976, and there had been an intense power struggle, with Deng Xiaoping consolidating power in 1977. China was politically unstable, had no clear legal system, sporadic violence and everything else that would make it appear economically hopeless. In fact, Egbert F. Dernberger and David Fasenfest of the University of Michigan wrote a paper for the Joint Economic Committee of Congress titled "China's Post-Mao Economic Future." In this paper, the authors state: "In the next seven years as a whole, the rate of industrial investment and production, more than the total of the last 28 years, imply a level of imports and industrial labor force such that the exports, transportation facilities, social overhead capital, energy and middle-level technical personnel requirements would exceed any realistic assessment of Chinese capabilities."

I don't mean to criticize the authors. This was the reasonable, conventional wisdom at the time. It assumed that the creation of infrastructure and a managerial class was the foundation of economic growth. In fact in China, it was the result of economic growth. The same can be said for rule of law, civil society, transparency and the other social infrastructure that emerges out of the social, financial and managerial chaos that a low-wage economy almost always manifests. Low-wage societies develop these characteristics possibly out of the capital formation that low-wage exports generates. The virtues of advanced industrial society and the advantages of pre-industrial society don't coincide.

There is no single country that can replace China. Its size is staggering. That means that its successors will not be one country but several countries, most at roughly the same stage of development. Taken together, these countries have a total population of just over 1 billion people. We didn't aim for that; we realized it after we selected the countries.

The point to emphasize is that identifying the PC16 is not a forecast. It is a list of countries in which we see significant movement of stage industries, particularly garment and footwear manufacturing and mobile phone assembly. In our view, the dispersal of industries that we see as markers of early-stage economic growth is already underway. In addition, there are no extreme blocks to further economic growth, although few of these countries would come to mind as having low political risk and high stability -- no more than China would have come to mind in 1978-1980. I should also note that we have excluded countries growing because of energy and mineral extraction. These countries follow different paths of development. The PC16 are strictly successors to China as low wage, underdeveloped countries with opportunities to grow their manufacturing sectors dramatically.

The new activity is focused on Africa, Asia and to a lesser extent, Latin America. When you look at the map, much of this new activity is focused in the Indian Ocean Basin. The most interesting pattern is in the eastern edge of Sub-Saharan Africa: Tanzania, Kenya, Uganda and Ethiopia. Sri Lanka, Indonesia, Myanmar and Bangladesh are directly on the Indian Ocean. The Indochinese countries and the Philippines are not on the Indian Ocean, and even though I don't want to overstate the centrality of the Indian Ocean, they are nearby. At the very least we can say that there are two ocean basins, the Indian Ocean and the South China Sea. You might want to read my colleague Robert D. Kaplan's book Monsoon on this region.

There are some countries in Latin America: Peru, the Dominican Republic, Nicaragua and Mexico. A special word needs to be included on Mexico. The area north of Mexico City and south of the U.S. borderlands has been developing intensely in recent years. We normally would not include Mexico but the area in central-southern Mexico is large, populous and still relatively underdeveloped. It is in this area, which includes the states of Campeche, Veracruz, Chiapas and Yucatan, where we see the type of low-end development that fits our criteria. Mexico's ability to develop its low-wage regions does not face the multitude of challenges China faces in doing the same with its interior.

All of this has to be placed in context. This is not the only growth process underway. It is most unlikely that all of these countries will succeed. They are not yet ready, with some exceptions, for advanced financial markets or quantitative modeling. They are entering into a process that has been underway in the world since the late 1700s: globalism and industrialism combined. It can be an agonizing process and many have tried to stop it. They have failed not because of their respective ruling classes, which would have the most to lose. It doesn't take place because of multinational corporations. They come in later. It takes place because of profit-driven jobbers who know how to live with instability and corruption. It also takes place because of potential workers looking to escape their lives for what to them seems like a magnificent opportunity but for us seems unthinkable.

The parabola of economic development dictates that what has not yet risen will rise and eventually fall. The process unleashed in the Industrial Revolution does not seem to be stoppable. In our view, this is the next turning of the wheel.

Read more: The PC16: Identifying China's Successors | Stratfor 
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July 28, 2013

Is the U.S. Ramping Up a Secret War in Somalia?


The Obama administration earlier this year expanded its secret war in Somalia, stepping up assistance for federal and regional Somali intelligence agencies that are allied against the country's Islamist insurgency. It's a move that's not only violating the terms of an international arms embargo, according to U.N. investigators. The escalation also could be a signal that Washington's signature victory against al-Qaeda's most powerful African ally may be in danger of unraveling.

Just last year, Obama's team was touting Somalia as unqualified success. "Somalia is a good news story for the region, for the international community, but most especially for the people of Somalia itself," Johnnie Carson, the U.S. assistant secretary of state for African affairs, told reporters last October at the New York Foreign Press Center. Carson praised African forces, principally Uganda and Kenya, for driving the terror group al-Shabab out of the Somalia's main cities, Mogadishu and Kismayo. "The U.S.," he boasted, "has been a significant and major contributor to this effort." Indeed, the United States has emerged as a major force in the region, running training camps for Ugandan peacekeepers destined for battle with Somalia's militants, and hosting eight Predator drones, eight more F-15E fighter jets, and nearly 2,000 U.S. troops and military civilians at a base in neighboring Djibouti.

But despite the array of forces aligned against it, Al-Shabab is demonstrating renewed vigor. "The military strength of al-Shabaab, with an approximately 5,000-strong force, remains arguably intact in terms of operational readiness, chain of command, discipline and communications ability," according to a report by the U.N. Monitoring Group for Somalia and Eritrea. "By avoiding direct military confrontation, it has preserved the core of its fighting force and resources."
"At present, al-Shabaab remains the principal threat to peace and security in Somalia," the report adds. "The organization has claimed responsibility for hundreds of assassinations and attacks involving improvised explosive devices, ambushes, mortar shelling grenades and hit and run tactics."

Not coincidentally, perhaps, American involvement in the region is again on the rise, as well. Last year, according to the U.N. group, the United States violated the international arms embargo on Somalia by dispatching American special operations forces in Russian M-17 helicopters to northern Somalia in support of operations by the intelligence service of Puntland, a breakaway Somali province.

(The U.N. Security Council in 1992 imposed an embargo "on all deliveries of weapons and military equipment to Somalia" The embargo was eased in March, 2013, allowing for the transfer of weapons, equipment or military advisors for the development of the federal government's security forces. But the Somali government is required to inform the U.N. Security Council sanctions committee when it receives foreign military assistance.)

Two U.S. air-charter companies linked to American intelligence activities in Somalia have increased the number of clandestine flights to Mogadishu and the breakaway province of Puntland by as much as 25 percent last year.
Florida-based Prescott Support Co. and RAM Air Services, flew at least 84 civilian flights between August 2012 and March 2013. During the previous year, the two companies flew only 65 flights, "indicating an increase in United States support," the U.N. report notes.

The flights -- which have not been reported to the U.N. Security Council -- suggest a further strengthening of American cooperation with Somalia's National Intelligence Agency in Mogadishu and the Puntland Intelligence Service, which has been cooperating with U.S. counterterrorism operations for more than a decade.

Several flights last November by Prescott have been linked by the U.N. group with the construction of two buildings at the Puntland Intelligence Service compound, north of the town of Galkayo. "The construction of these two buildings during the month of November 2012 coincides with four Prescott Support Co. L-100-30 flights that landed at Galkayo airport between 3 and 9 November 2012 and constituted a load capacity of up to 80 tons of cargo," according to the report.

It's one of many ways that Western intelligence agencies -- including those of the United States, Britain and France -- have been secretly and "directly supporting intelligence services" in Mogadishu, Puntland and Somaliland, another breakaway Somali province, according to the U.N. investigators. At times, this assistance has been in violation of U.N. resolutions, claims their latest report, which runs nearly five hundred pages -- not counting several classified annexes.

Since the report was finalized, al-Shabab has been riven by internal fighting that has splintered the movement, left one of its leaders dead, and sent several others fleeing from the group's southern stronghold. But the insurgents's well-financed secret service - Amniyat - remains intact, capable of carrying out terror operations at will. And al-Shabab's leader, Ahmed Godane, remains firmly in charge of the movement's terror apparatus, according to experts on Somali politics.

The survival of al-Shabab's terror infrastructure has dealt a blow to what had appeared to be a signature achievement of the Obama administration: backing an African led effort to deny an al-Qaeda affiliated insurgency a strategic toehold in the heart of East Africa.

In August, 2011, a U.S.-backed African peacekeeping mission wrested control of the capital of Mogadishu, helping to deliver a rare respite of calm. It set the stage for the September 2012, election of a new, Western-backed President Hassan Sheikh Mohamud. Another key American ally, Kenya, last year joined forces with a Somali clan and seized control of al-Shabab's principle stronghold, Kismayo.

But those gains are being threatened by rampant corruption within the U.S. backed government's weak institutions, al-Shabab's infiltration in the "highest levels" of the Somali government, and continued attacks against targets inside Somali, including a recent deadly strike on a U.N. humanitarian aid compound in Mogadishu.

Even worse, Kenyan forces in Kismayo have clashed with clans loyal to the U.S.-backed federal government while colluding with financial backers of al-Shabab in the lucrative and illicit charcoal trade, enabling the Islamist movement to refill its war chest. "The revenue that al-Shabaab currently derives from its Kismayo shareholding, its ... exports and the taxation of ground transportation likely exceeds the estimated U.S. $25 million it generated in charcoal revenue when it controlled Kismayo," the report stated.
Over the long term, al-Shabab appears to pursuing a strategy that can best be described as biding its time. It has not carried out a major offensive against African peacekeepers in nearly two years.

Instead, it has stockpiled weapons and ammunition throughout Southern and central Somalia, launching hundreds of attacks against foreign African forces, civilians and U.N. humanitarian aid workers, and waiting for foreign forces to withdraw from the country. Earlier this year, Ethiopian forces, worn down by a campaign of guerrilla attacks, withdrew from the towns of El Bur, in the Galgadud region, and Hudur, in the Bakol region. Al-Shabab effortlessly seized control of the towns.

Ever since the 9/11 terror attacks, American military intelligence agencies have expanded their presence in East Africa, seeking initially to track al-Qaeda militants responsible for attacks against U.S. targets, but later investing in regional African efforts to confront Somali militants. While the Obama administration has strived to conceal those activities from public view in the United States, its presence in Somalia has sometimes been hard to ignore. Last year, the U.N. monitoring group complained that drone flights had clogged the skies over Somalia, posing a threat to air safety in the country. According to the report, unmanned aircraft slammed into a refugee camp, skirted a fuel dump and nearly crashed into a passenger plan over Mogadishu.

This year's report notes that international investigators have requested information from the U.S. government about "uncorroborated information" about a "handcuffed and blindfolded passenger" who boarded a plane at Galkayo airport. The United States government "has not replied to date."
Spokespeople for the United States and British missions to the United Nations declined to comment on the reports, citing a longstanding policy of not commenting publically on intelligence operations. Officials from Prescott and RAM, the airlines, did not respond to requests for comment.

Kenneth Menkhaus, a professor at Davidson College and an expert on Somalia, said that for the time being the greatest threat to al-Shabaab is emerging within the organization's own ranks, not from the U.S. counter-terrorism effort.

Internal division within the Islamist group exploded into all out fighting during the past month. In June, forces loyal to Godane killed al-Shabab cofounder Ibrahim al-Afghani, and sent two other Shabab leaders, Sheikh Mukhtar Robow, and Hassan Dahir Aweys, fleeing. The fighting, according to Menkaus, has left Shabab "weaker. But weaker than what?"

The movement, more solidly under the control of Godane, remains "a strong and dangerous force, capable of extortion, intimidation, and assassination," he added. "This fits the shift of al-Shabab from what had been a standing army, capable of controlling large swaths of territory, to a decentralized, clandestine terrorist network."

In a particularly grim twist, it is America's counterterrorism partners -- corrupt Somali institutions and Kenyan collusion with al-Shabab's financial backers -- that pose a potentially even more lethal threat to American aims. "That Shabab is stronger than people think is interesting and newsworthy," said Menkhaus. But to Menkhaus, the bigger story is the failure of America's allies to maintain a united front against al-Shabab. "Our best friends are busy fighting one another."

Kurdistan borders

Gwadar: Gunmen storm Coast Guards check post

Bloodshed in Gwadar: Gunmen storm Coast Guards check post
By Mohammad ZafarPublished: July 28, 2013

Gunmen attacked a Pakistan Coast Guards check post in Gwadar district Saturday morning, killing seven officials and wounding as many others. Two of the wounded officials are said to be missing after the assault.Balochistan has increasingly become a flashpoint for both sectarian violence and  Baloch insurgency which has steadily become deadlier since the 2006 killing of Jamhoori Watan Party chief Nawab Akbar Bugti in a military operation in Kohlu district.

Saturday’s incident happened in the Sund Sar area, some 125 kilometres from Quetta city and close to the Pakistan-Iran border, according to Balochistan Levies sources and local administration officials.

“Around 24 gunmen, armed with rocket launchers and heavy weapons, attacked the Kalki check post and killed seven Coast Guards officials,” Home Secretary Akbar Hussain Durrani told reporters. At least seven officials were also injured in the early morning attack, he added.

A local tribal police official Muhammad Ali also confirmed the attack and casualties and said the identity of the attackers was not immediately known. According to sources, two of the injured officials went missing following the attack.

The officials manning the check post returned the fire and inflicted heavy casualties forcing them to retreat, Pakistan Coast Guards said in a press release. The terrorists also took away the bodies of their wounded fighters.
Gwadar tehsildar Akbar Baloch told The Express Tribune that the attackers, armed with sophisticated weapons, approached the check post in two vehicles around 6am.

Soon after the attack, the Coast Guards, Frontier Corps and Balochistan Levies mounted a manhunt for the attacker, Home Secretary Durrani said.

The casualties were shifted to the Pakistan Navy Hospital in Ormara. The dead Coast Guards officials – identified as Lance Naik Kamran Aslam and constables Ali Nawaz, Saifur Rehman, Amir Abbas, Rustam Bilal, Shabbir Israr and Abdul Qayyum – were flown to Karachi.

The injured officials were identified as Subedar Athar Khan, Lance Naik Jalil and constables Aftab, Lal Mohammad and Ali Raza. Naik Shafiur Rehman and Constable Jhango Khan were said to be missing following the attack.
A medley of Baloch separatist groups – including Balochistan Liberation Army (BLA), Baloch Republican Army (BRA), Baloch Liberation Army (BLA) and Baloch Liberation Front (BLF) – have been fighting a deadly insurgency in Balochistan since 2004.
Speaking to Quetta-based journalists from an undisclosed location, Gohram Baloch, a purported spokesperson for BLF, claimed responsibility for Saturday’s attack.

Governor Muhammad Khan Achakzai and Chief Minister Dr Abdul Malik Baloch condemned the attack and ordered the security forces to take immediate steps to improve law and order.

Gwadar is home to a newly built strategic warm-water, deep-sea port, which was jointly developed by Pakistan and China and inaugurated March 20, 2007. The port operations were officially handed over to China in 2013. And the new Pakistani government has chalked out elaborate plans for the development of the district.

Published in The Express Tribune, July 28th, 2013.

World looks anew on Balochistan as China dreams big

Thursday, July 11, 2013 - Islamabad—The world is looking anew on Balochistan as China is making a thumping entry by taking over control of Gwadar Port and agreeing to build an ambitious Gwadar-Kashgar economic corridor in partnership with Pakistan. Balochistan, the largest province of Pakistan, with an area of 347,190 square kilometres, but sparsely populated with 7.9 million people, has emerged as a vibrant factor when it comes to trade and energy supplies in the region.

Rana Abdul Baqi, an analyst, says Balochistan’s fortunes will be changing as China will make its investments to turn the province into a trade and energy corridor linking Gwadar Port to Silk Route extending into Central Asian states. Growing interest of China in taking advantage of Balochistan’s potential as regional trade hub, has drawn attention of other powerful players, many giving out ambivalent vibes.

Prime Minister Nawaz Sharif calls Gwadar-Kashgar economic corridor, a game changer, benefitting three billion people in the region. Balochistan province will serve as a transit zone for Iranian natural gas pipeline for Pakistan and Gwadar port is seen as a logistical hub for Afghanistan and Central Asia’s landlocked nations. China, which is partner of Pakistan, in many of its mega strategic infrastructure projects took control of Gwadar port during the first visit to Pakistan by China’s premier Li Keqiang in May.

China’s Overseas Ports Holding Company took charge of the port under an agreement signed in February after buying shares of the Gwadar Port from Port of Singapore Authority (PSA). Talking recently at a conference on Balochistan, Abdul Baqi expressed concern about growing interest of world powers and named intelligence agencies CIA, Mossad and RAW as trouble makers in Balochistan. He said former ambassador of Pakistan to the United States Hussain Haqqani issued visas to thousands of Americans, many of them intelligence operatives of infamous outfit Blackwater.

Gwadar port has assumed great importance in defence strategy of Pakistan. Abdul Baqi reminded that India’s navy, which besieged Karachi port in a war some decades ago, will now get its naval tail extended. Now Gwadar port will be connected to far north of the country through two additional routes including Indus Highway giving more strategic space to Pakistan’s armed forces.

Former army chief General (R) Aslam Beg sees conspiracies all around when it comes to events in Balochistan and is blunt in saying that Pervez Musharraf set the country in wrong direction by aiding an attack on Afghanistan. He stressed that politicians should take lead in effectively administering Balochistan province and resolving grievances of people. Defence analyst and leader of Pakistan Muslim League (N) Lt Gen (R) Malik Abdul Qayyum holds previous federal governments responsible for creating mess in Balochistan.

He saw Balochistan as a golden bridge connecting land locked states with sea lanes of Strait of Hormuz and Persian Gulf and trade routes reaching far and wide in East and Central Asia and Middle East. Abdul Qayyum quoted figures of 19 trillion cubic feet of gas and six trillion barrels of oil that go with huge deposits of gold, copper, iron ore, marble, limestone and a wealth of minerals still lying unexplored in Balochistan.

American think tanks like Carnegie Endowment for International Peace mentioned worriness of United States over growing Chinese influence in the region. Pakistani analysts also take note that seven consulates of India are working in areas of Afghanistan close to Pakistan border.—APP