The Tribune, Chandigarh, India

New dawn in Myanmar
Implications of Suu Kyi’s victory

IT is celebration time for pro-democracy people of Myanmar. Nobel Laureate Aung San Suu Kyi’s National League for Democracy (NLD) has posted a landslide victory in the byelections for 45 parliamentary seats in this South Asian nation, which has been ruled by the military junta for nearly 22 years. Unofficial estimates claim that 44 of the 45 constituencies where voters exercised their right of franchise after 12 years (the earlier poll was held in 2010) have returned NLD candidates. Suu Kyi, the icon for democracy, has won nearly 99 per cent of the votes cast in her rural constituency. The NLD has swept the polls despite reports that “waxing” of ballot papers was done at many places to harm the interests of the party.

However, in real terms, the byelections for the 45 vacant seats in a 664-member House cannot tilt the balance of power in favour of the pro-democracy forces. The new government, a civilian set-up in name only, will continue to be controlled by the army and the party it has created, the Union Solidarity and Development Party. Yet the entry of Suu Kyi and other NLD candidates into Myanmar’s parliament sends across the message what the people in general want. They yearn for democracy, which, it seems, cannot be denied to them for a long time. The NLD victory is a giant leap towards democracy in Myanmar.

It is now clear that the struggle for democracy launched by Suu Kyi has begun bearing fruit. Sunday’s election results, though to be officially announced after some time, are bound to boost the morale of the NLD cadres and others involved in the drive to end the rule of the military junta. The military, too, appears to be going ahead with its commitment for introducing political reforms. Only 17 months ago Suu Kyi was under house arrest and her party banned. The world community needs to have a fresh look at the UN sanctions imposed on Myanmar, which have made life miserable for the people in this poverty-stricken country.

The return of Sasikala
Jayalalithaa pardons her closest aide

CHIEF Minister and AIADMK chief J. Jayalalithaa’s decision to revoke the expulsion of her close aide Sasikala after the latter issued a public statement explaining her innocence and distancing herself from all her relatives who had allegedly conspired against Jayalalithaa, marks the possible end of an estrangement which had caused waves in Tamil Nadu politics. In December last, Jayalalithaa had sacked Sasikala and several of her relatives from the basic membership of the party and driven them out of her bungalow without giving any reason. She had told party members not to have any contact with the lot. Later, the police started acting on complaints against the relatives of Sasikala. Her husband M Natarajan and some close relatives were arrested on several charges. According to Sasikala, it was only after Jayalalithaa cracked down on her family members that she realised that her relatives and friends had misused the Chief Minister’s status. Earlier, in a hearing of Jayalalithaa’s disproportionate assets case in a Bangalore court, Sasikala had even broken down and said Jayalalithaa was innocent.

Now that Jayalalithaa has accepted Sasikala’s profuse apology and rehabilitated her in her party, this would pave the way for Sasikala’s return to Jayalalithaa’s Poes Garden residence in Chennai where she had been living right since 1988 until the recent estrangement. Once earlier too, after the 1996 poll debacle, Jayalalithaa had distanced herself from Sasikala but that was an even shorter break than this. Ever since the death of then Chief Minister M.G. Ramachandran, no one has been closer to the enigmatic Jayalalithaa than Sasikala. She has been everything: soulmate, housekeeper, political confidante. For the last decade, nobody had access to Jayalalithaa without Sasikala’s permission. It had reached such a stage that ministers were discussing policy issues with Sasikala. Civil servants were briefing the Chief Minister in the presence of Sasikala. Her words were considered Jayalalithaa’s command.

Jayalalithaa’s word is law in the AIADMK in Tamil Nadu but many in her party would be unhappy at Sasikala’s return. How much Jayalalithaa would trust the rehabilitated Sasikala will indeed be watched with interest. In any event, her family would be kept at arm’s length and Jayalalithaa, who does not trust anyone easily would predictably become even more suspicious of those around her.

Thought for the Day

A bird doesn't sing because it has an answer, it sings because it has a song.

— Lou Holtz

ARTICLE

The Kashmir question
Time to give up entrenched positions
by Kuldip Nayar

THERE was a time when any statement on Kashmir either by the Prime Minister of India or that of Pakistan used to create rumpus. Politicians and the media on both sides would dwell on for several days on what a particular remark tried to convey.

Pakistan Prime Minister Yousuf Raza Gilani said the other day that his country would seek a solution on Kashmir through a dialogue, not hostilities. I have not seen any comment in India nor have I found any Pakistani opposition leader or the Press taking notice of it. More significant has been the silence of pro-terrorist groups which talk in terms of jihad against India all the time. The usual Pakistani reiteration that Kashmir would not be allowed to stay on the backburner is there. President Asif Ali Zardari has said that Pakistan has not forgotten Kashmir. But this does not change the ground realities which have recognised that the Line of Control is the border between India and Pakistan.

Gilani has reiterated what the late Zulfikar Ali Bhutto had enunciated in the Shimla Agreement four decades ago. It says: “In Jammu and Kashmir, the Line of Control resulting from the ceasefire of December 17, 1971, shall be respected by both sides without prejudice to the recognised position of either side. Neither side shall seek to alter it unilaterally, irrespective of mutual differences and legal interpretations. Both sides further undertake to refrain from the threat of the use of force in violation of this line.” The agreement has stood the test of time for more than three decades and except for the Kargil misadventure there has been peace.

Perhaps leaders of the Pakistan government, including the hawks, have come to realise that there is no alternative to amity. Perhaps the peace lobby on both sides has got expanded for even the governments to notice and they refrain from giving ultimatums as it used to happen not until long ago. Perhaps the warning by Jawaharlal Nehru that any attack on Kashmir would be regarded as an attack on India has gone home. Three wars plus the misadventure at Kargil have proved that New Delhi will resist with all its force any push by Islamabad. Therefore, Prime Minister Gilani’s observation not only makes sense but also throws up another opportunity. Both countries have to resolve the Kashmir issue or, for that matter, any other problem peacefully. It is a sort of no-war pact without the formality of signing one.

Yet Gilani’s statement should not lull India into complacency. Kashmir continues to be a problem. Every now and then there is an incident in the Valley to register the people’s discontent. Even the elected government, headed by Chief Minister Omar Abdullah, has said more than once that Kashmir cannot be sorted out without Pakistan’s participation.

India’s armed forces too are not happy with the situation because the successive Army commanders of Jammu and Kashmir have said that it is a political problem, not a military one. Yet India continues to station a large number of troops in Kashmir. It has been experienced again and again that they are not trained to deal with domestic troubles. The country’s defence is understandable but the forces should be on the border, and not used for the law and order purpose. The stationing of forces within the state only confirms that the government has no solution to the situation and it does not know how to settle the problem.

True, New Delhi has tackled the international opinion effectively. There is hardly any adverse notice abroad. But this does not solve the problem. At best it remains suppressed. Still there is civil society in India which has certain obligations that a democratic polity has to carry out.

If the Kashmiris remain unhappy and the government they elect too feels that the problem has to be sorted out with Pakistan, New Delhi has to face the fact. This does not necessarily mean that Islamabad’s demands have to be met. The latter too has to take certain realities into consideration and one of them is that India can never have another division on the basis of religion.

The Valley, predominantly Muslim, has gone its own way and has kept at a distance both the Hindu-majority Jammu and the Budhist-majority Ladakh. Therefore, when President Asif Zardari says that Pakistan would continue to support Kashmir, he is only underlining the two-nation theory which India buried deep long ago. I do not think that even the intelligentsia in Pakistan has any faith left in that theory. But that is not the point at issue. It is Kashmir which I believe should get attention after Gilani’s olive branch.

I do not agree with those who argue that Pakistan has no case to claim on the table what it could not get through wars. What the two countries have to realize is that they have to give up their entrenched positions. Peace and friendship is more important than hostility. The extremists will continue to talk of hostilities because they have developed a vested interest in an unsettled situation.

I have a solution to offer. Both governments should transfer all subjects except defence and foreign affairs to Kashmir and soften the border so that the people of Jammu and Kashmir and occupied Kashmir meet and plan jointly the development of their region. They can have their own air service and trade and cultural missions abroad.

Visitors, not from the region, will seek visa to enter either Kashmir. “Azad Kashmir” will be part of Pakistan, and Jammu Kashmir of India. The case pending before the UN would be withdrawn. The part of my proposal is that the Lok Sabha’s elected members from Jammu and Kashmir should sit in Pakistan’s National Assembly and those of “Azad Kashmir” in India’s Lok Sabha. This is aimed at setting a pattern for the two countries to come closer in the future.

MIDDLE

A thumbs-up to hand-me-downs
by Raji P. Shrivastava

FOR as long as I can remember, an album of black and white pictures has nestled in the folds of an old silk sari at the bottom of my mother's cupboard. Pictures of cousins, uncles, aunts, grandparents, neighbours and friends have been lovingly preserved with golden caps on all four corners. Newborn babies with kajal-rimmed eyes and a black spot on the cheek have been captured in various degrees of undress.

I could see that many dresses figured repeatedly in these family photographs. One particular frilly frock seemed to have been worn by many children down the years. My mother told me about this green dress which had been a hand-me-down from another cousin. "We passed on neatly washed and ironed clothes to the next younger child all the time," she said wistfully. The green frock was even worn by my cousin Venkatesh at the tender age of three months — it was quite normal for baby boys to wear frocks those days.

I thought of the pretty clothes that my daughter had outgrown as she advanced from infancy to adolescence. My sister has a daughter too — but it wasn't possible to transport my child's clothes across cities on a regular basis for my niece to wear.

It is no longer fashionable to give away children's clothes to close friends. We dispose of outgrown clothes usually by giving them away to the needy. Which is absolutely alright, for they need them more than we do. But I felt sad at the prospect that my daughter and niece would never be able to bond over nostalgic memories of handed-down favourites.

When I raised this point on our cousins' group e-mail, Jaya piped up, "I hated having to accept Radha's hand-me-downs because her dresses were full of gravy stains and sketch pen marks !"

Radha surfaced from her bolt-hole in Ontario, "I still manage to spill curry on my dress-front each time I eat Indian food !"

Archit said gleefully, "Thanks for sending the picture of Venky in the green frock. They made me wear it too — I think it was a frock the family had reserved for special photographs. But the minute I grew a brain, I tore up the pic of me in the green frock. Being a born genius, I could foresee the advent of email and such other potentially embarrassing technologies !"

A flurry of smileys grinned evilly at us at the end of Archit's post, provoking Venky to retort : "Thanks for mailing the picture of Arch in his baby dhoti the day of his first cereal meal. Notice how dhotis were ultra-transparent those days, leaving very little to the imagination !" Archit and Venkatesh then traded some choice unprintables in Tamil and English. They had always been competing cousins.

Comments, suggestions and repartee, embellished with emoticons, resonated from all over the globe as the clan debated the concept. We resolved to exchange and share sarees, shawls and coats for the sake of nostalgia and family bonding.

"Just get them dry-cleaned first, Radha !" was Jaya's parting shot.

OPED — FINANCE

India’s duty-free opportunity
With increasing debt and recession in the West, it seems no longer fitting for the rest of the world to follow traditional Western financial models. India’s long experience of capital markets is getting wider appreciation
K. N. Vaidyanathan

EUROPE is in a financial daze. Greece is under severe pressure. Even German banks, normally most stable, are reeling under losses of billions of dollars. Voters in the US, fed up with joblessness and a deeper recession, camped out in Wall Street, protesting and demanding reform of politics and finance.

The West, once viewed as the dominant nation- and institution-builder, especially by emerging markets and the under-developed world, is unable to follow its own prescriptions for growth and free markets. Far from it: its economies carry systemic market risks and misplaced incentives which impact societies. They are hardly models for the world to follow.

The Bombay Stock Exchange (in pic) and the National Stock Exchange rank amongst the top five exchanges in the world in terms of trading volumes. AFP photo

Then what is? Try India.

To some, it may sound frivolous that a country perceived to be plagued by corruption can be considered to export regulatory expertise. Issues of mis-governance and corruption in India have been legendary. But, at the margin, the good news is that in India today, this subject is capturing civil activists’ attention. The courts in India have been more interventionist recently to bring the issue to focus. And, the public at large have benefited from the RTI Act (Right to Information Act) which has helped bring issues in public what would otherwise have remained buried in files.

Hope and opportunity

Therefore, while the malice is large and threatening, solutions are beginning to appear and through democratic means – through public and institutional engagement. And that provides the hope and opportunity. This is not too different from other examples from history. Notwithstanding its long track record of colonialism, the British have ‘exported’ its Common Law as the basis for most legal systems around the world. Notwithstanding its support to dictators in the past, America is still considered credible to ‘export’ democracy to emerging countries. India, too, merits a chance.

India has long exported its ‘soft’ strengths. A thousand years ago, the Chettiars from South India travelled to South East Asia and helped establish banking and money-lending systems in these countries. The overlay of colonialism dissolved many of those systems. But in the last five years, India has once again begun building the financial and regulatory systems of other nations.

Since 2006, Mumbai’s Multi-Commodities Exchange (MCX) has set up exchanges in Singapore, Bahrain, Mauritius, Botswana and Dubai. The National Stock Exchange (NSE) has set up a surveillance system for the Colombo Stock Exchange and runs the certification programme in derivatives in both Colombo and Mauritius; the two national depositories, NSDL and CDSL, have agreements to share best practices with their counterparts in the US, Japan, Russia, Taiwan, Korea, Malaysia and Euroclear.

This is one area where India leads China. Sure, in many emerging nations, China has taken the lead, readily helping them turn their back on the Western model of development by building their hard infrastructure and extractive industries. But now those same countries – many affected in some form by the wave of recent democracy movements - are looking with urgency at building ‘soft’ infrastructure like markets and regulatory and institutional frameworks.

India’s financial model

And they are turning their gaze upon India, a similarly developing nation with long experience of capital markets, democratic values and independent regulatory institutions built around affordable and robust structures. More relevant, India’s conservative and ‘inclusive’ financial regulatory system has insulated it from the global financial crisis, making it a compelling case study, especially for emerging markets.

India’s financial export model is based on a system at home that has developed affordably and robustly, though cautiously, with the Indian government and regulators working to ensure this emerging market does not run ahead of itself. Derivative products were introduced only after extensive consultations between regulator Securities and Exchange Board of India (SEBI) and central banker Reserve Bank of India (RBI), exchanges, market participants and industry experts.

Today, India has a thriving derivatives market in index and single stocks, currencies and interest rate futures. The T+2 settlement system, supported by a daily margin regime that requires even institutional investors to comply, helped Indian stock markets avoid defaults and systemic collapses through the global financial crisis of 2008.

The National Stock Exchange and the Bombay Stock Exchange (BSE) currently rank amongst the top five exchanges in the world in terms of trading volumes: From 500,000 trades a year in 1994-95, volumes have grown to over 2.1 billion trades in 2010-11. And India was the first country to glide ahead in retail investor protection – it abolished entry loads on mutual funds back in 2009, way ahead of the UK’s plans to do so in 2012.

Affordable systems

India’s adaptable and affordable systems are replicable for similar emerging markets around the world – and there is a swelling number of them, especially in Africa and the Middle East, which are looking beyond the once unassailable Western systems. The financial evolution of these emerging markets is important: they are the global GDP contributors of the future.

For now, their systems are infant, and not independent. In Africa, for instance, currently more than 25 countries – up from 10 in 1990 - have stock exchanges, but only 11 have an independent market regulator. In Zimbabwe, Rwanda, Namibia, Mozambique, Ghana, Cameroon and Botswana, the stock exchanges double up as regulator - but are evaluating separation.

In the Middle East, which has 14 stock exchanges – up from six just 20 years ago - countries like Lebanon and Kuwait are in the process of establishing independent market regulators. Eight of these markets have been created only in the last 15 years and are trying to evolve into major players by attracting both resident and foreign investors.

These markets share commonalities but are a stark contrast to the rest of the world. They are resource-rich, corrupt and war-torn; income and wealth distribution are skewed. Their experience with risk-taking has been limited to life, not money. In their saving and investing habits, they focus more on ‘return of principal’ than ‘return on principal’ i.e. their ability to take the risk of loss of principal is low.

Central banks often play the regulator’s role across all financial markets. The State is mostly the co-promoter of enterprises along with fledgling private sector entrepreneurs; it is also the dominant player in these economies and, most often, the provider of first and last resort to its people. In short, these countries are not internally ready or geared to adopt the more sophisticated Western model of capital markets as ‘pass through’ structures based on caveat emptor where all risk is borne by the investor.

Migration to capitalism and free markets, therefore, needs to be carefully planned with a long term perspective – calibrated to manage the downside risk of instability, while implementing plans to create a vibrant financial market. Because many of these countries are poor, the process has to be inclusive with a focus on the less privileged and more vulnerable. The regulatory framework has to strike a balance between market development and investor protection.

Satyam vs Enron

Indian regulators understand this. They remain conscious of the larger role that financial markets have to play and the influence it has over the economy. This alignment protects India from the excesses witnessed by other markets. In the $2.5 billion scam of IT outsourcer Satyam, the Indian government and regulators came together to find a new buyer and protected the interests of stakeholders – minority investors, customers and employees. This approach to problem-solving, in stark contrast to the all-round loss caused by Enron, will find greater resonance in emerging markets.

Of course, Indian markets have some distance to travel in improving quality and frequency of corporate disclosures (it needs quarterly financial statements, including cash flows), strengthening checks on promoters/majority shareholders and migrating to international accounting standards. And India needs to overcome a larger problem: If the Western institutions can be charged with ‘regulatory capture’ by dominant market participants resulting in excesses, their Indian counterparts are considered corrupt and prone to compromising their independence to government influence.

The challenge is to institutionalise islands of excellence and integrity through technology, transparency and stability in policy formulations. India’s globally-respected IT industry has already shown it can achieve these goals. New Delhi now must seriously tackle these issues soonest, or risk losing a new, stellar export: affordable, reliable, robust financial regulation for the emerging markets – and perhaps for the battered financial markets of the West.

The writer is a former ED, SEBI, and senior Geo Economics Adjunct Fellow at Gateway House. The views expressed are personal