GK & INFORMATION

Wednesday, May 20, 2015

[Economy] The building of the BRICS bank

India named veteran banker K.V. Kamath to be the first President of the New Development Bank, popular as the BRICS bank. The focus of this bank will be to invest in infrastructure. Mr. Kamath, 67, is a veteran banker, who was credited with developing ICICI Bank into India’s second-largest lender. He headed the bank for 13 years until 2009 and is now its Non-Executive Chairman. He is also Non-Executive Chairman of India’s second-biggest software services exporter Infosys.

What is BRICS?

In 2001, the then Goldman Sachs Group economist Jim O’Neill coined the term BRIC to describe the growing prominence of Brazil, Russia, India and China in the global economy. Not yet considered developed countries, the four were grouped together for being at the same stage of economic development.

BRIC country leaders started meeting as a bloc in 2009. South Africa joined them later, though there was some scepticism that as a country of less than 50 million people it is too small to join the group. So, BRIC is now BRICS.

What is BRICS bank?

It is how the New Development Bank is better known as. Last July, the BRICS countries agreed to set up a development bank, whose purpose, according to its articles, is to “mobilise resources for infrastructure and sustainable development projects” not just in BRICS countries but also in other emerging economies. It seeks to do so by supporting public and private projects through loans, guarantees and equity.

But doesn’t the world already have enough institutions to do that — the IMF/World Bank, for instance?

True. It’s clear their presence hasn’t been ignored in the creation of the New Development Bank. The articles of the bank do say that its creation is to complement “the existing efforts or multilateral and regional financial institutions.” But, in a sense, the BRICS bank was born because the countries that represent this have long realised they need an alternative system to IMF/World Bank, one in which they have greater say.

How will the New Development Bank be different?

So, BRICS account for about 40 per cent of the world’s population and a combined economy of about $16 trillion. Although they account for over one-fifth of the global economy, together they garner only 11 per cent of votes at IMF. On the other hand, developed countries such as the U.S., Japan, Germany, the U.K. and France hold 40 per cent of the voting power. In the BRICS bank, the founding members have equal voting rights.

Is there more to its founding?

Definitely! Hongying Wang, senior fellow at global think-tank Centre for International Governance Innovation, reckons dissatisfaction toward traditional multilateral financial institutions to be just one of the three reasons.

One of the other reasons is that the creation of a joint development bank is a milestone in the evolution of the BRICS. That is, it turns the informal co-operation among those countries into a concrete institution. Finally, the bank seeks to fill the enormous hole that exists in infrastructure financing in many developing countries.

The last point assumes significance because the traditional development banks have reduced funding for infrastructure in recent decades while private investors have been reluctant to take on long-term projects of this kind. The infrastructure financing deficit in developing countries is estimated to be $1 trillion annually. BRICS countries, especially China, have accumulated financial resources that enable them to fill the gap to some degree.

How will the bank be structured and run?

The bank will begin with a subscribed capital of $50 billion, divided equally between its five founders, with an initial total of $10 billion put in cash over the next seven years and $40 billion in guarantees.

The group has also agreed to a $100 billion currency exchange reserve, which member-countries can tap during balance of payment problems. China, the biggest foreign exchange reserve-holder amongst them, will contribute the major portion of the currency pool. Brazil, India and Russia will contribute $18 billion each while South Africa will chip in with $5 billion.

In a crisis, China will be eligible to ask for half its contribution, South Africa for double its contribution while the others can get back what they put in.

The bank will be based in Shanghai. After a five-year term at the helm by an Indian, the President’s post would by turn go to a Brazilian and then to a Russian.

The bank can add more members. Media reports suggest Russia has invited Greece, which has a huge economic battle on its hands, to be a member. Even if more members are added, the capital share of BRICS can’t drop below 55 per cent.

How does the bank’s creation play out for each of its member-countries?

Hongying Wang says, for China, this is an opportunity to export its infrastructure over-capacity. China can reduce its mammoth reserves and improve financial returns on its external assets while at the same time learn to play a leading role among the developing countries. For India and South Africa, this promises to be a welcome source of much-needed infrastructure financing. For Russia, the benefit at the moment is largely seen to be political, given that the country has been isolated in the international arena over the Ukraine issue. For Brazil, the new development bank could bring financing for its oil exploration projects.

What would be the challenges?

Raj M. Desai, Non-resident Senior Fellow, Global Economy and Development, Brookings, says the main challenges will be in setting up and operating a bank in which shares are equally divided among countries that do not have much in common, apart from their distrust of the current global governance system.

Hongying Wang has a similar view. The differences are many, as amplified by their political systems (example: China and Russia v. India, Brazil and South Africa), economic interests (example: commodity exporters v. importers), and enormous power discrepancies (China’s economy, trade, and foreign reserves being much larger than the rest combined).

Dr. Pallavi Roy, who teaches at the University of London, points out that one of the threats could, interestingly, be another development bank incubated by China. The Asian Infrastructure Investment Bank (AIIB), backed by China, has more capital and members than the BRICS Bank.

Can the BRICS bank take on IMF, World Bank?

Brookings’ Desai points out that the capital base of the World Bank and the ADB combined is about $400 billion, so it would take the participation of several other middle-income countries for the BRICS bank to be able to compete with those institutions.

But the contingency reserve account also proposed as part of the BRICS effort may provide an alternative source of stabilisation support. In this, it could potentially compete with the IMF, which has had very few takers from BRICS economies on this front in recent years.

By: Sanjay Vijayakumar

Source: The Hindu

WiFi offered free in public places poses a major security risk

A researcher armed with a mere $100 (aboutRs 6,400) device recently walked into the Bengaluru airport and confirmed fears of security risk associated with offering free WiFi at public places.

He easily hacked into the computers of hundreds of users who had connected to the airport's complimentary WiFi. And while he was at it, he also accessed the users' WhatsApp conversations, credit card numbers and encrypted user names and passwords for good measure.

This casts a dark shadow over the government's plan to offer free WiFi in 2,500 cities and towns across the country.

Among other users, thousands of senior level executives including CEOs of companies may be sharing confidential information such as business plans without being aware of it. Some of them may even be the target of corporate espionage, cyber security experts said.

According to Shubho Halder, chief scientist at mobile security firm Appknox, who conducted the exercise at Bengaluru airport, most airports and free WiFi hotspots in India are a hacker's paradise owing to lack of proactive security.

Halder, who said he had also found security holes in products from Apple, Microsoft and Google, added that he found users accessing their corporate emails and banking applications at the free WiFi zones and he managed to get all such details in a jiffy.

"While these airports use a lot of security tools, they usually do not track what the users are doing with the WiFi connection which lets hackers use fake WiFi hotspots to gather tons of information from unsuspecting victims," Halder told ET.

Halder used WiFi Pineapple, a portable device which acts as a router and creates fake WiFi hotspots that appear to be authentic — such as Free_airport_WiFi, Free_cafe_WiFi, etc.

Once the user connects to this network, he or she is able to access the internet as usual without realising that somebody else is accessing all the information.
WiFi Pineapple can be carried by hackers around offices of large companies, coffee shops, malls, etc and create massive repositories of usernames, passwords, WhatsApp conversations, and credit card and banking data.

"Hackers are not just randomly collecting data at airports and cafes. We've seen cases where hackers are going after specific targets to steal business plans as part of corporate espionage and then sell it to competitors, which could be in India or overseas," said Jayaraman Kesavardhanan, founder and CEO of K7 Computing. According to American networking equipment maker Cisco Systems, which is working with the government on many public WiFi projects, the company has the tools to identify such fake WiFi hotspots and even locate the user who is trying to do this but smart hackers can get their way around it.

"If a hacker uses a 3G or 4G router to offer a fake WiFi hotspot, there is no way to detect or stop it. The only thing that can be done is to tell users not to use any WiFi hotspot that doesn't ask for SMS verification," said Pravin Srinivasan, lead-security architecture sales, Cisco India & Saarc.

In many cases, while the public hotspot providers have tools to prevent such misuse they often don't activate it, Srinivasan said, adding, "The tools can only tell you what's happening. It is ultimately up to the security teams of the public WiFi providers to monitor and take action."

While there are ways to fix security bugs, there is no way for users to tell if they are the target of snooping.

"We should consider public WiFi as raw internet," said Sajan Paul, directorsystems engineering, India & SAARC at Juniper Networks.

"At an average enduser level, it is very difficult to detect such scenarios. However, one must understand that anything that goes into the Internet is subject to snooping and other forms of attacks. The user should be vigilant while accessing and sending sensitive data over such mediums."

According to Symantec Corporation, deployment of security tools is not enough to deal with the menace of snooping in free WiFi zones. "Individual security products cannot help companies handle such a situation," said Tarun Kaura, directortechnology sales, India at Symantec.

Source: ET

Monday, May 18, 2015

[OPINION / ANALYSIS] India, Mongolia: Spiritually Connected Powers of Asia

On May 16 Prime Minister Narendra Modi would twit: ‘First Indian Prime Minister is visiting Mongolia after 60 years of our diplomatic relation’. If China is repositioning itself in the Silk Route (ancient India was a major link too) through larger economic thrust, India has to travel in the same breadth and length with the teachings and philosophy of Buddhism in North and East Asia, as Buddhism flourished prior to the Silk Route era. At last, the 21st Century Parivarjaka (wanderer) has arrived in the majestic land of Chinggiz (Genghis) Khan with a Bodhi tree sapling in his hand and a promise that ‘Asia, being the land of Buddha, has the responsibility to ensure that this is a century free from war’.

On February 19, 2015, Modi already broke the ice by wishing TsagaanSar (Lunar New Year) greetings to citizens of Mongolia. Most strikingly, he sent his wishes through twitter and in Mongolian language to reach out in particular to the tech savvy young generation of Mongolia. He is targeting 70 per cent of the 2.9 million populations below the age of 30 in Mongolia through social media. The country is also celebrating its 25 years of democratic rule. As the large section of Mongolians look towards India as a ‘spiritual nucleus’ with vibrant democracy and robust peoples power in terms of thriving civil societies, the Mongolian Premier Chimed Saikhanbileg is opening the Parliament (Great Khural) on Sunday for the legislators to listen to the Indian Prime Minister.

Mongolia, the landlocked rugged terrain engulfed by Gobi Desert in south and Steppe with abundant minerals and vastly nomadic population yet spiritual, should not be looked at only through narrow prism of China’s periphery. A general Indian perception of Mongolia ends with Genghis Khan and to some extent with his grandson, Kublai Khan. The Indian establishment usually boasts that India and Mongolia have interacted through Buddhism over a period of 2600 years. But overall bilateral relation potential is limited to mere exchanges of high level delegations, mostly from Mongolian side. The trade between the two countries has fallen below $16 million in 2014 compared with $60 million in 2012. The two countries have shared economic ties since 1996 when the Trade and Economic Cooperation agreement was signed, which provides Most Favored Nation (MFN) status to each other.

While security and foreign policy experts in India have put the geo-strategic position of Mongolia to the backburner for the last two decades, this sudden one-day visit will transform the strategic location in North East Asia. Modi’s stopover in Ulaan Bator after China visit is a good indication in both accounts. Engaging with China’s neighbor independent of it will put more leverage in India’s basket while dealing with China. Also, the visit symbolizes the substance that three nation trip is a responsible regional approach for Act East Asia foreign policy. But in practical term, as the Prime Minister argues that it is cost effective to add nations which are important for India’s aspiration of global power in one leg of the tour to maximize outcome.

Last year in December, a Mongolian delegation from General Authority of Border Protection (GABP) met with Home Ministry and Indian Border Security Force (BSF) in Delhi. India is expecting to conduct a joint exercise as both border forces have common aim of securing border with China.

On the other hand, India has featured importantly in Mongolia’s ‘third neighbor’ policy, which includes US, South Korea and Japan. There is also mutual trust and reciprocity visible at all international forums between the two countries, which can be categorized as warm and complimentary. India proposed Mongolia's candidacy for membership of the United Nations in 1961 despite opposition from Taiwan and China and also in Non-Aligned Movement (NAM). Similarly, Mongolia has been supporting India’s inclusion as a permanent member in the UN Security Council.

Another potential aspect of Modi’s visit is prospects of mines and minerals, including uranium and coal. Mining is a necessary evil for resource rich Mongolia. The contradiction of mining in the country is that even with nearly 32 per cent population living below the poverty line and lacking access to basic infrastructure facilities and social protections, the country posted 15-17 % annual economic growth rate two years back due to largely mining activities in gold and copper. In 2012, the Steel Authority of India (SAIL) inked a joint venture with the Mongolian government to set up iron ore and coal mines in the country. This has yet to be implemented on ground. At present, India-Mongolia has a Memorandum of Understanding (MoU) on civil nuclear cooperation (2009), according to which Mongolia can supply uninterrupted uranium for growing nuclear energy appetite of India. The domestic law in Mongolia for mining is yet to operationalise this MoU. The Indian Prime Minister’s visit will ensure possible progress in both these aspects.

With mining, there comes environmental degradation. Both countries are facing similar situation of irresponsible and unsustainable mining. The largest OyuTolgoi gold and copper mining in Gobi Desert being developed by notorious Rio Tinto has been tremendously affecting environmental and social fabric in Mongolia. Both countries could learn from their experiences in mining and India can extend a helping hand to establish robust legal framework on mining prospects in Mongolia. India can also extend its knowledge on building institutional capacities on environmental protection. It is right to point out that India has encouraged prospect of renewable energy by establishing solar electrification in Dadal Soum. With its successful achievements domestically in wind energy, India should tap the potential created by 2007 Renewable Energy Policy of Mongolia.

Modi would most likely speak on his favorite topic of skill development while delivering a speech in Parliament of Mongolia. India’s role would be more vital in developing tourism infrastructure in that country although there is minimal people-to-people contact between the two countries. It is also important for Modi to observe the constructive role played by Mongolian Civil society Organizations (CSOs) in governing the country. Since 2011, President of Mongolia has approved of and provided the Citizen Hall at the President’s Palace for annual tripartite dialogue amongst government, CSOs and donor agencies on important economic policies of the government.

It won’t be surprising to see Modi exchanging few Hindi words with the chief monk of Gandantegchinlen Monastery (Great Place of Complete Joy) in Ullan Bator. The mesmerizing chanting by young students at the Monastery who wouldn’t hesitate to take a selfie with the Indian Premier as they look at India as their spiritual home. The echo of largest and biggest bell gifted by India near the UNESCO heritage site at Karakorum in Gobi Desert reminds all of us the spiritual bond between the two countries. As Buddhist teaching points towards living with nature as against fast paced consumerism in terms of Gross National Happiness (GNH), India and Mongolia will be looking towards to achieve this sustainable development goal in 21st Century.

Written By: AVILASH ROUL

Source: sspconline.org