Miscellaneous-2
India gains clout in IMF governance reforms
The International Monetary Fund’s historic quota and governance reforms that for the first time place four emerging market countries – Brazil, China, India, and Russia – among its 10 largest members have become effective.
The reforms that also increase the financial strength of the IMF, by doubling its permanent capital resources to Special Drawing Rights (SDR) 477 billion (about U.S.$659 billion) from about SDR 238.5 billion (about U.S.$329 billion) entered into force Tuesday.
Other top 10 members in the 188-nation agency include the U.S., Japan, and the four largest European countries – France, Germany, Italy, and Britain.
The reforms represent a major step toward better reflecting in the institution’s governance structure the increasing role of dynamic emerging market and developing countries. The entry into force of these reforms will reinforce the credibility, effectiveness, and legitimacy of the IMF, it said.
The conditions for implementing IMF’s 14th General Quota Review, which delivers historic and far-reaching changes to the governance and permanent capital of the Fund, have now been satisfied, IMF said. The quota increases under the 14th Review, which were conditional on the entry into force of the Board Reform Amendment, are expected to come into effect in the coming weeks, IMF said.
“I commend our members for ratifying these truly historic reforms,” IMF Managing Director Christine Lagarde said. “These reforms will ensure that the Fund is able to better meet and represent the needs of its members in a rapidly changing global environment… [and] marks a crucial step forward and it is not the end of change as our efforts to strengthen the IMF’s governance will continue.”
Main outcomes of the 2010 quota reforms:
Ø More than 6 per cent of quota shares will shift to dynamic emerging market and developing countries and also from over-represented to under-represented IMF members.
Ø The quota shares and voting power of the IMF’s poorest member countries will be protected.
Ø For the first time, the IMF’s Board will consist entirely of elected Executive Directors, ending the category of appointed Executive Directors. Currently the members with the five largest quotas appoint an Executive Director.
Ø The scope for appointing a second Alternate Executive Director in multi-country constituencies with seven or more members has been increased to enhance these constituencies’ representation in the Executive Board.
Ø Advanced European countries have committed to reduce their combined Board representation by two chairs.
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World Bank scales down global growth forecast
With global crude oil prices in free fall through most of 2015, the World Bank has sharply revised downwards its forecast for oil price in 2016, at an average of U.S.$37 a barrel from U.S.$51 predicted in October, in the context of the continuing supply glut and low demand prospects from emerging economies.
“The World Bank is lowering its 2016 forecast for crude oil prices to U.S.$37 per barrel in its latest Commodity Markets Outlook report from U.S.$51 per barrel in its October projections,” the multilateral lender said.
In this regard, the bank also scaled down its growth forecast for emerging and developing economies to 4 per cent in 2016, from an expected 4.6 per cent previously, and said the prediction was “subject to considerable downside risks in a fragile global environment”.
Explaining that the lower forecast reflects various supply and demand factors, the World Bank said “these include sooner-than-anticipated resumption of exports by Iran, greater resilience in U.S. production due to cost cuts and efficiency gains, a mild winter in the Northern Hemisphere, and weak growth prospects in major emerging market economies”.
The bank forecast crude oil prices at U.S.$37 a barrel for 2016 by using an average of UK Brent, Dubai and the U.S. West Texas Intermediate (WTI) oil prices, equally weighted. “Many of the factors underpinning the slowdown in recent years – including low commodity prices, weak global trade and slow productivity growth – are expected to persist,” the report said. Besides, deteriorating growth prospects in many emerging economies were eroding their fiscal and monetary policy buffers, it added.
With OPEC deciding last December against cutting output, traders are betting the cartel is less likely to cut output now to prevent easy passage of Iranian crude into the market, particularly at a time of tensions between Iran and Saudi Arabia. However, Iran said that it is determined to regain its market share, which collapsed after the international sanctions were imposed. He said Iran plans to increase oil production by 500,000 barrels a day.
WTO rules against India in PPAs with solar firms
Ruling against India, the World Trade Organisation (WTO) said the government’s power purchase agreements with solar firms were ‘inconsistent’ with international norms – a matter in which the U.S. had filed a complaint before the global trade body alleging discrimination against American firms.
The U.S. had dragged India to the World Trade Organisation (WTO) on this issue in 2014, alleging that the clause relating to domestic content requirement (DCR) in the country’s solar power mission were discriminatory in nature and ‘nullified’ the benefits accruing to the American solar power developers.
After looking into the matter, the WTO’s Dispute Settlement Panel has ruled that ‘the DCR measures are inconsistent’ with relevant provisions of TRIMs (Trade Related Investment Measures) Agreement and with the articles of the erstwhile GATT (General Agreement of Trade and Tariffs).
The panel also found that the DCR measures accorded ‘less favourable treatment’ to the American companies and were ‘not justified’ under the general exceptions in GATT rules. India can challenge this ruling before the appellate body of the WTO.
The dispute relates to the domestic content requirements imposed by India for the National Solar Mission, including in the Guidelines and Request for Selection documents, the model power purchase agreement, and the individually executed power purchase agreements between Indian government agencies and solar power developers.
Asking India to “bring its measures into conformity with its obligations under the TRIMs Agreement and the GATT 1994”, the panel said that “in cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. We conclude that, to the extent that the measures at issue are inconsistent... (with the relevant articles of the TRIMs Agreement and the GATT 1994), they have nullified or impaired benefits accruing to the United States under those agreements”.
In January 2010, India had launched its national solar policy, named Jawaharlal Nehru National Solar Mission. The country has an ambitious target of generating 20,000 Mega Watts of solar power by 2022.
U.S. accuses China of militarizing the South China Sea
The United States accused China of raising tensions in the South China Sea by its apparent deployment of surface-to-air missiles on a disputed island.
The U.S. State Department said commercial satellite imagery suggested “very recent” placement of missiles on Woody Island in the Paracel island chain that went against China’s pledge not to militarize the South China Sea. “The Chinese have said one thing, and yet appear to be doing another,” it said. “We see no indication that ... this militarization effort, has stopped. And it’s doing nothing ... to make the situation there more stable and more secure. In fact, it’s having quite the opposite effect.” The U.S. Secretary of State John Kerry said the United States would have “very serious” talks with China about militarization of the South China Sea.
China has offered little specific response to the missile deployment reports, but has accused Western media of “hyping up” the story and said China had a legitimate right to military facilities on territory it views as its own.
China claims most of the South China Sea, through which more than U.S.$5 trillion in global trade passes every year. Vietnam, Malaysia, Brunei, the Philippines and Taiwan have rival claims.
Australian Foreign Minister Julie Bishop, the first senior Western official to visit China since the reports appeared, said she raised the issue of the South China Sea’s militarization in talks in Beijing. She said that China had “challenged” the deployment report but had neither denied nor admitted that the missiles were there. “So until such time as we have a clear picture of it, of course it’s a matter of concern,” she said.
Ms Bishop referred to comments by Chinese President Xi Jinping in Washington last year that China did not intend to militarize islands in the South China Sea, and added: “We certainly hold China to that and that`s been reiterated to me.” On the other hand, China asked Australia to stick to its promise not to take sides and “not participate in or take any actions to harm regional peace and stability or Sino-Australia ties”.
The United States claims no territory in the South China Sea but has expressed serious concerns about how China’s increasingly assertive pursuit of territorial claims there could affect the vital global trade routes that pass through it.
Beijing has been angered by air and sea patrols the United States has conducted near islands China claims in the South China Sea. Those have included one by two B-52 strategic bombers in November and by a U.S. Navy destroyer that sailed within 12 nautical miles of Triton Island in the Paracels in February 2016.
India exhorts Nepal to solve constitutional crisis
India conveyed to Nepal that success of its new Constitution will depend on resolution of contentious issues through “consensus and dialogue” in a time-bound manner as both sides held extensive talks with focus on repairing ties soured in the wake of a four-month long agitation by the Indian-origin Madhesi community
India was for peace, stability and overall development of Nepal, Prime Minister Narendra Modi asserted after meeting his Nepalese counterpart K. P. Sharma Oli, who on his part said the main reason for his visit was to clear “misunderstandings” in ties that persisted in the last few months and that they “no longer exist”.
The two sides signed nine agreements including one on utilisation of Indian grant of U.S.$250 million to Nepal for post-earthquake reconstruction and another on improving of road infrastructure in Nepal’s Terai region bordering India.
Calling finalisation of Constitution a major achievement for Nepal, Modi expressed the hope that all political parties will come together to successfully resolve the ‘remaining’ Constitutional issues satisfactorily, taking in considerations aspirations of all sections of the society.
“The drafting and announcement of the new Constitution after decades of struggle in Nepal is a major achievement. I appreciate the contribution of the political leadership and all sections of the society in Nepal in its making. But its success depends on consensus and dialogue. I am confident on the basis of these principles and through political dialogue and by taking all sections together, you [Mr Oli] will be able to resolve all issues relating to the Constitution satisfactorily and take Nepal forward towards the path of development and stability,” Mr Modi said.
Mr Modi stressed that Nepal’s stability was linked to India’s security. On combating terrorism, he said, “We will not allow terrorists and criminals to use our open border. In this regard the security agencies of the two countries will intensify cooperation.”
Asked if the Nepalese Prime Minister could address India’s concerns, Foreign Secretary S. Jaishankar said the “tone and tenor” of the visit was forward-looking, adding assurances given on addressing grievances within Nepal if left unaddressed may “detract” the country from stability. “This was not a recriminatory visit. This was a forward- looking visit. It was a visit in a cooperative sense,” he said, replying to a barrage of questions on whether India was satisfied with Nepal’s assurance on issues relating to the new Constitution. He said Mr Modi expressed the hope that all the outstanding issues in the Constitution will be resolved in a time-bound manner. On whether India was worried about Nepal getting closer to China, the Foreign Secretary rejected such apprehensions saying the word China did not come up in the talks.
Mr Oli said he came to clear misunderstandings and “have done so”. Ties between the two countries had soured in the wake of agitation by the Madhesi community, which shares close family and cultural ties with Indians, saying it failed to address their concerns over representation and homeland. The agitators had blocked trading points for almost four months crippling supply of petroleum products, medicines and other commodities by India to that country. The blockade was lifted in February this year.
The Madhesi community is opposed to carving of seven provinces under the new Constitution and has been demanding adequate protection of their rights. Three major demands of the Madhesi community include re-demarcation of the boundary, inclusion of proportionate representation and allocation of Parliament seats on the basis of population.
Mr Jaishankar said the issues within Nepal have impacted India. He said two issues including the one relating to provincial boundary are being resolved, while hoping that concerns by Madhesi community relating to citizenship will also be addressed.
The Prime Minister said India always wanted peace, stability and prosperity of Nepal and that it would extend all possible help to ensure its all-round development. He said India’s economic progress may become a reason for Nepal’s progress and that transport corridors may become “highways” of growth and development.
The countries decided to open two more transit points which Mr Modi described as a major development. Talking about hydropower potential of Nepal, he said the two countries are working on projects to facilitate generation of 7,000 MW of power and that their quick implementation will result in Nepal’s speedy development.
The two Prime Ministers also dedicated 400 KV Dhalkebar-Muzaffarpur transmission line via ‘tele-inauguration’ from Hyderabad House. India will supply 80 mega watt of power through the line to Nepal now and it will be enhanced to 600 MW in the next two years.