‘Benign conspiracy’ in Geneva by India and USA to make Sri Lanka move towards a political solution

By Izeth Hussain

We have to face up to the fact that the Sri Lankan Government suffered a serious set-back at Geneva. We can of course argue that adding the abstentions to the votes against the US Resolution shows that we lost only by one vote.


That kind of statistical casuistry will take us nowhere. In fact the refusal to face up to ugly facts that motivates such casuistry could prove to be dangerous.

It could even lead to the international isolation in which Sri Lanka found itself under the Jayewardene Government in 1987, as acknowledged by JRJ himself. It is true that two powerful countries, namely China and Russia, voted on our side. During a spell of service in Moscow from 1995 to 1998 I found that the strong Indo-Soviet bonds forged during the Cold War remained just as strong as ever, and my guess is that in the last resort, sometime in the future, Russia will side with India against us. We must acknowledge Sri Lanka’s vulnerability.

In coping with the post-Geneva situation we must first of all acknowledge Sri Lanka’s vulnerability, instead of resorting to arguments that befit the school debating society. Next, we must try to achieve as precise an understanding as might be possible of what the US Resolution signifies – the why and the wherefore of it, and what it portends. It is only then that we can fashion responses that can meet the post-Geneva challenges that will be arising, challenges to the political unity of Sri Lanka and even to its territorial integrity.

In realistically assessing those challenges we must stop giving excessive weightage to the backside of the LTTE – the backside that is usually referred to as the LTTE rump. Instead, we must give weightage to something that is infinitely more powerful, namely India, and what it might perceive as threats to its primordial interests arising out of Sri Lanka’s unsolved ethnic problem, as I have argued in earlier articles.

In trying to understand the significance of the US Resolution we must first of all pose a question: Why has the US, the sole super-power in the world with so many other serious preoccupations, given so much importance to the relatively unimportant situation in Sri Lanka? This country does not belong to the US sphere of interest and the US itself would regard it as India’s turf.

The human rights situation in Sri Lanka certainly needs correction, but comparatively speaking it is not of so horrendous an order as to require a country-specific resolution at Geneva. Sri Lanka, after all, is a functioning democracy, flawed and showing a trend towards the dynastic and the dictatorial but still, indisputably, a functioning democracy.

As for the arguments that the Resolution has behind it US and Western chagrin over the fact that we would not stop the war at the crucial final stage, and that we unlike them have defeated terrorism, I will not deal with such arguments as they are not worth serious address.

As for the argument that the West is annoyed by the fact that we don’t toe the Western line, it seems to me that the Government’s foreign policy is still Non-Aligned and it is certainly not anti-Western to the point of provoking hostility. I can think of only two plausible reasons for the Resolution: the US wants to advance the New World Order and it wants to oblige India.

At the time that Ban Ki-Moon decided to appoint his Panel of Experts I argued that he was doing so at the behest of the US which was engaged in a “benign conspiracy” to exert pressure on the Sri Lanka Government to make it really move towards a political solution of the ethnic problem.

I postulated a convergence of interest between the US and India. A new world order has to be instituted by the US and India together with some other powers. In helping solve the ethnic problem the US would be making a contribution, albeit a small one, to the new world order.

Far more important is that it would also be helping India get rid of a problem that could come to threaten its primordial interests, meaning its political unity and even – in a worst-case hypothesis – its territorial integrity, as I have argued elsewhere. In a more recent article I pointed out that there was good reason to believe that a strong Indo-US nexus had been formed in the ‘eighties and that that was a factor behind the Indo-Sri Lanka Peace Accords of 1987.

In terms of the arguments that I have been developing in recent weeks, India’s volte-face in unexpectedly voting for the US Resolution should have been expected. A convergence of interests had led inexorably to a convergence of votes.

The twin purposes behind the “benign conspiracy” have been advanced significantly at Geneva, though with only partial success in advancing the new world order. The major problem has been the veto power at the Security Council – a point emphasized in a recent article by my former colleague Bandu Silva – a veto power that the US and its allies want to circumvent. A way forward has been shown by the Darusman Report. The Panel of Experts did not have the decision of any UN body behind it, but its Report has been given the imprimatur of the UN.

It is something more than just another document that can be used by the powers that want to put the SL Government in the dock. Now, at Geneva, the UNHRC has been given virtual monitoring powers, something that far exceeds its mandate. It looks like a usurpation of the functions of the Security Council.

Here, however, the success has been partial because G.L. Peiris and others have done an excellent job in showing up the dangers inherent in that success. The powerless in the international community have been alerted to those dangers, for which the Sri Lankan Government deserves credit.

The purpose of helping solve the ethnic problem has been advanced with consummate diplomatic skill at Geneva. The focus earlier was on war crimes allegations, but although the shouting about those allegations continued at Geneva the focus shifted to the LLRC recommendations in which the allegations are merely one out of several issues.

The probable reason is that it has come to be realized that if alleged war crimes are seriously investigated, much bitterness will be generated and the full implementation of 13A and ethnic reconciliation will become impossible for the foreseeable future. 13A itself does not figure explicitly in the Resolution and it is recommended in the LLRC merely that a political solution be found on the basis of devolution.

The probable reason – so it seems to me – is that India, the US and others wanted to exclude as far as might be feasible anything that seems controversial from the Resolution, the purpose of which is no more than to get the SL Government to carry out its own commitment to implement the LLRC recommendations.

There is nothing adverse to the SL Government in the Resolution. That is ostensibly so, but at the same time the SL Government has been effectively put in the dock and becomes answerable to the international community on ethnic reconciliation. There is also an implicit, but very real, threat that punitive action including sanctions could follow. It seems to me that diplomatic skills of a very high order were deployed at Geneva

For me the point of central importance is that the Indian Government has made it quite clear that for it the main purpose of the exercise in Geneva was to make the SL Government proceed to the full implementation of 13A.

At the conclusion of his last visit to Sri Lanka a few weeks ago, the Indian Foreign Minister Krishnan claimed that President Rajapakse had reiterated his commitment to the full implementation of 13A and beyond, a claim that he later repeated in the Indian Parliament. India’s explanation of its vote in favor of the US Resolution contained the following: “In this context we urge the Sri Lankan Government to take forward the process of broader dialogue and show concrete movement towards a meaningful devolution, including the implementation of the 13th Amendment and beyond.”

After the vote Prime Minister Manmohan Singh wrote to our President in an obvious attempt to mollify him, and he too referred to the Indian “conviction that a meaningful devolution package, building on the 13th Amendment would lead towards a lasting political settlement ….” It has been made abundantly clear that in the complex drama that was being played out in Geneva the centre of gravity for India was all along the 13th Amendment and nothing else.

My reading of the significance of the US Resolution is therefore as follows: the ostensible purpose is to promote human rights and it can therefore be taken as being meant to promote the New World Order, but the underlying purpose is to promote a political solution of the ethnic problem on the basis of 13A. What does it portend? If the Government honors its commitments and implements what it promises to implement, a lasting political solution could follow.

Alternatively, if it goes on and on and on, endlessly procrastinating and prevaricating, disaster will follow. The intractable problem is supposed to be that the people are adamantly against 13A, on which subject there is a huge literature. As far as the international community – consisting of other governments- is concerned, the whole of that huge literature should be consigned to the waste-paper basket because other governments go by what our Government says. And what it keeps on saying is that it remains committed to the full implementation of 13A.

AFTER SRI LANKA NOW INDIA IN TROUBLE,UN ASKS TO REPEAL AFSPA - REPORT

It seems that after Sri Lanka, now India has fallen in the hawk eyes of United Nations and the country (India) may face similar kind of situation like Sri Lanka if it does not follow the instruction given by the UN.


Emphasising on the democracy prevailing in the nation, the UN on Saturday, Mar 31 asked India to repeal the controversial Armed Forces Special Powers Act (AFSPA) which empowers Indian military and soldiers to tackle militants with massive power in the terror dominated region in the country especially in Kashmir and in the North-East states of India.


“Armed Forces (Special Powers) Act has become a ‘symbol of excessive state power’ and ‘has no role to play in a democracy’,” said Christof Heyns, UN’s Special Rapporteur on extrajudicial.


Heyns, stating about his experience in Kashmir, said, “During my visit to Kashmir, AFSPA was described to me as ‘hated’ and ‘draconian’. It clearly violates International Law. A number of UN treaty bodies have pronounced it to be in violation of International Law as well.”


“The main finding in my report is that despite constitutional guarantees and robust human rights jurisprudence, extrajudicial killings continue in India and it is a matter of serious concern,” Heyns continued as informing about his report.


“India also should ratify a number of international treaties, including the Convention Against Torture and the International Convention for the Protection of All persons from Enforced Disappearance,” the official added.


However, it seems that finally Irom Sharmila’s voice reached UN. Sharmila had her last voluntary meal on Nov 4, 2000. She started her agitation to repeal the AFSPA which which gives power and rights to Indian soldiers and military to arrest suspected militants without a warrant and to shoot anyone suspected of being a rebel.


Citing the current situation of India, Sri Lanka might be overwhelmed as India recently cast its vote against Sri Lanka over a US moved UN resolution.


India is one among the 24 nations who cast vote to pressurise Sri Lanka to start investigations over alleged war crimes during the 26-year-old war. - OneIndia News

‘American Exceptionalism’ means USA should be regarded above international law norms

By Harith de Mel

Thursday the 22nd of March was a day Sri Lanka was given a lesson in International Law.

This is not to suggest we are inadequate in our understanding of this fascinating subject but events preceding suggest that we have either not comprehended the reality of ‘International Law’ or have been ignorant of it in the wake of International relations.

As the biblical saying goes one must first take the log out of ones own eye before tending to the rod in a friends eye akin to ‘physician heal thyself’. An angry reaction from the Sri Lankan population was to this effect; that the American military policies continuously violate human rights and commit war crimes in many forms. Substantially correct as that maybe first that clearly does not in any legal sense justify any alleged violations of the same by Sri Lanka.

Secondly one may ask but what about the rule of law which suggests that everyone should be equal before the law so then why the double standards? The reasons are found in the practice of International Law itself. International law in its nature is not comparable to a domestic legal system. Much remains in theory (Law) which is not in practice (Relations).

That is not a weakness of the system but its dynamic nature itself. It must be taken with a pinch of salt, in our case a handful. Equality before the law in International Law is a rare quality. Certain states enjoy a better status in International Law than others such as America, China, Russia as they are in fact global super powers.

The first reason for this is that in International law there is no one objective body that can decide what is legal and what is illegal. For example Sri Lanka’s 2009 efforts to rescue the north was termed a ‘humanitarian mission’ by our interpretation. However certain other states interpret it to be a ‘massacre’ or a ‘killing field’. When America bombs countless territories costing innocent lives, to kill a few terrorists; that is not a ‘massacre’ but of urgent legitimate national security’ interests’.

This is due to each countries subjective interpretation of their actions in International Law. However clearly certain interpretations are ‘more correct’ than others due to the nature of International Law and thus we see the United States unchallenged and Sri Lanka borne with a resolution.

Secondly and controversially so in International law there is a doctrine by the name of ‘American Exceptionalism’. This suggests that due to the American position as a global super power it is functionally necessary that they are considered as somewhat above the norms of International law. This is explained by theorists not as an attempt to subvert International law but to assert that the domestic laws of America are by far better than those placed by International laws so there is no necessity to comply as such.

There is a certain justification in that a country like America can subvert International Law for the greater good of the world as sometimes International Law is toothless in the wake of true adversity, as well as be the enforcer of International law when other states stray in the absence of a unified mandatory system of enforcement This is somewhat a justificatory reason as to American concern with the position in Sri Lanka as well as its double standards as to its own and its close ally Israel.

If one contends this is absurd think no further than the United Nations Security Council which is an embodiment of this same notion of global super powers superiority. Why only USA, China, Russia, United Kingdom and France as permanent veto members?

The next lesson we learnt is that in International Law substantial matters can be in fact be secondary. As the Sri Lankan delegation at the UNHRC allege the resolution against Sri Lanka was politically manipulated by concerns other than the actual issues such as supposed war crimes and human rights violations.

This shows that even if Sri Lanka had done their utmost to adhere to the International Law obligations both before and after conflict this resolution still may have been passed. One may ask then what our tool to avoid such is as it seems inescapable. The tool was clearly the fine art of diplomacy. Diplomacy is the true language of International Law.

This is of course mainly to be done by the Foreign Ministry (External Ministry) which will also direct the various ambassadors and diplomats of Sri Lanka all over the world. This goes to show however that in general, retired service persons, defunct politicians and others lacking an education in the subject and its finesse are not in the least suited for the job.

If we are scratching our heads today as to why the resolution was passed one may suggest it was not due to any other reason but a lack of timely and effective diplomacy.

What we saw recently with the advent of the resolution was an attempt at hurried diplomacy which closely bordered desperation.

One can suggest that the fire should be doused when the sparks are seen and not when it is ablaze. One such example being the foreign Minister of Sri Lanka refusing an invitation from the Secretary of State of the United States in March 2012. On a reading of the resolution one understands it to be a mere statement of existing obligations.

Further according to International Law Sri Lanka suffers no substantial loss of its sovereign capacity. However one must note the symbolic effect of this resolution and take it seriously that the International community now does have one foot in the door. Further complacency will only result in the door being opened wider.

Mere subservience to international pressure too will result in the same.

The only answer is a nationwide response for substantially amending grievances within the post conflict nation and a skilled diplomatic programme which balances all interests to avoid instances such as these in the future. courtesy: Daily Mirror

Country has fallen from ‘Safe Zone’ into ‘Endangered Zone’ due to Indo-American Resolution

By Gomin Dayasri

There is a time to criticize and a time to be constructive. Country is being systematically throttled with a lasso thrown around its neck by an alien fist. Reconstruct is the proper term.

Let’s stand firm and heave the wretched curse of the albatross stuck around our neck and breathe again like a free nation.

Country is in the dock with the men who won the war, providing the space to inhale freely, being targeted by the West for punishment and by India designing to bring the full impact of its fissiparous 13 Amendment. This is a government, successful in the war theatre and found wanting in its peace venture

After the war, the country securely positioned in a ‘safe zone’, has fallen into the ‘endangered zone’ with the Indo-American resolution. A unique situation has developed – Government and the NGO lobbies are singing in harmony the same theme song- of an innocuous harmless resolution that carries no poisonous fangsIs it to make it worse by falling into the ‘danger zone’ from the present ‘endangered zone’, of doing nothing, the route often taken by resting on “our laurels” after having lost the resolution?

If the resolution had no sting or bite in it, why was a team of over fifty air dropped into Geneva to hibernate in Europe’s most expensive city and send Ministers globe trotting around the world in fifteen days to defeat it. Lack of foresight, state sponsored go-slow on LLRC recommendations, stupid strategy and diplomatic misadventure contributed to the sorry state.

Put it aside and start afresh making a situation that is bad better instead of indulging in silly talk that is making it worse. We cannot bow down to the resolution and lose our rights to sovereignty that is vested in the people. [A unique feature of vesting sovereignty in the People and making it "unalienable" is due to the prudence and skills of the draftsmen of 1972 Constitution.

The magic phrase was retained in its purity in the changes made in 1978.] The resolution permits the UNHRC to trespass on our land with our ‘concurrence’ devaluing our cherished sovereignty secured in the people. Denying the right of access by electing not to ‘concur’ would mean an adverse report at the next session of the UNHRC where the consequences would be worse. Government will find it hard to refuse in a virtually no-win situation.

The Indian amendment to the draft resolution made the obvious appear less compulsive cosmetically, without taking Sri Lanka out of the nightmare. Point of desired entry is on war crimes to punish the men-of-war, if possible casting aspersions on the President, Defense Secretary and the Military Commanders to effect a limited regime change. It’s the point where endangering enters the equation.

Commencing on a slow benign note, as is usual in the UNHCR circles and progressively enter the domestic realm: with time the intensity increases to reach uncomfortable proportions.

It happened last time when the socalled “Eminent Persons” were granted official observer status including the jolly old Darusman (who appeared by proxy having never visited Sri Lanka) delivering a stinging report on Sri Lanka with a symbolic walk out, at the Presidential Commission on Human Rights Violations headed by Nissanka Udalagama, after a courteous beginning. (Why was a biased Darusman not disqualified on the basis of a pre judgment on Sri Lanka when nominated to the Moon panel-the objection that we failed to punch home based on the rules of natural justice?).

Expect a repeat performance if foreign visitors are allowed to meander on our soil. Without bartering away our sovereignty the need is to vault over the barricade imposed by the resolution. Defy it diplomatically- in other words – circumvent it craftily. Navigate around by doing what we should do in the national interest. Implement the LLRC report picking on the priorities according to the need of the national almanac and execute it on a timing shown on our stopwatch.

Do what we need do without being told what to do. Had this course initially been followed, the resolution would not have surfaced. Lets not make the mistake twice with the watchdogs now on the prowl.

The areas to concentrate, fashioning it according to our interest in a transparent manner, are as stated in the LLRC report:

(i) address Accountability
(ii) work on the Tamil grievances as out lined in the LLRC
(iii) wipe off the slate land and police powers from the Constitution
(iv) import good governance
(v) devolve power to the grassroots as outlined in the LLRC report by empowering the people.
(vi) implement the trilingual schedule.

This is the balance to satisfy all communities. The importance lies in a quick take off. UNP continues to make the mistake of being on the side of the anti national forces against the interest of the nation. UNP says it is stands for the country but in practice does the virtual the opposite by siding with the foreign forces by their pronouncements -except for Sajith Premadasa – who is against the resolution but remains critical of the government, which is a stand an enlightened UNP should take to succeed.

Even those who call the government obnoxious finds it against their grain to vote for the UNP due their stand on the prime issue but would rather abstain than vote for the UNP. At a crunch election, the wavering locals can move back to the UPFA column jettisoning the abstention standbecause people prefer to have a government positively pro Lanka.

Ranil Wickremesinghe shows himself as the local boy servile to the western elements that ushered the Geneva resolution.

UPFA government defeats itself by its own inept performance while the UNP revives the government by its antics,which is the perennial equation.

Geneva and its aftermath for Sri Lanka and India

By Neville Ladduwahetty

The US backed resolution on "Promoting reconciliation and accountability in Sri Lanka" was passed in Geneva with Indian support as a result of Tamil Nadu compulsions. To save face for this reversal from its original principled stand not to support the resolution, India threw a lifeline to Sri Lanka by modifying the last paragraph in the resolution to include "in consultation with and with the concurrence of the government of Sri Lanka". This demonstrated with stark clarity the following: (1) Influence of Tamil Nadu on Sri Lanka/India relations. (2) Power and influence of state governments to compel Delhi to reverse principled positions and support positions that reflect interests of State governments. (3) Leadership failure on the part of Delhi to convince Tamil Nadu that what was at stake were India’s national and international interests as a regional and emerging global power. (4) The need for Sri Lanka to pay equal or more attention to developments in Tamil Nadu rather than Delhi.

The resolution encourages the Office of the UNHRC to actively engage in the implementation of the constructive recommendations in the LLRC report and to take additional steps to ensure justice, equity, accountability and reconciliation. While the emphasis of the LLRC recommendations is more on reconciliation and less on accountability the Office of the UNHRC would attempt to focus more on accountability. Furthermore, the Government is not bound to accept all the recommendations in the report. The responsibility for deciding which recommendations are to be implemented rests with Parliament. Under the circumstances, if there is a lack of concurrence as to what recommendations to implement and also the strategies and resources needed to implement them, it could strain relationships. Under the circumstances, only time will tell whether India’s intervention was a lifeline or whether it would turn out to be a noose.

REASONS for SUPPORTING the

RESOLUTION

In an attempt to explain the reasons for supporting the resolution India’s Prime Minister Manmohan Singh stated during a joint secession of Parliament that the US resolution "covers our objective namely, the achievement of a future for the Tamil community in Sri Lanka based on equity, justice and self-respect"(The Island, March 20, 2012). Instead of justifying Delhi’s actions in such generalities, it would be very helpful to Sri Lanka if the PM elaborated in specific terms how the Tamil community, and only the Tamil community, to the exclusion of the other communities were denied equity, justice and self-respect. If the primary reason for this perception is the absence of a political solution, the PM should be fully aware that the reason why successive governments have failed to forge a political solution acceptable to all communities is because the 13th Amendment that India imposed when it last intervened is inimical to the interests of the majority Sinhala community. Implementation of the 13th Amendment in face of this opposition would be at the cost of political instability for any government; the very same reason that prompted India to reverse its original stand on the US-sponsored resolution.

Being forced to accept a political framework that is inimical to Sri Lanka’s innate interests is the reason for the lack of enthusiasm to implement the 13th Amendment. India’s repeated reference to it is not perceived as being genuinely helpful. If India is truly interested in the welfare of the Tamil community in particular, for reasons internal to India and the welfare of the other communities in Sri Lanka for regional reasons, India should unshackle Sri Lanka from the political bonds it imposed when India last intervened, and give Sri Lanka the space and freedom to evolve its own autochthonous political framework similar to what Sri Lanka requested in Geneva regarding reconciliation. This is a debt India owes Sri Lanka for having backtracked from its original principled stand on the resolution.

PROTECTING SRI LANKA’S INTERESTS

The previous intervention by India on behalf of the Tamil community resulted in Sri Lanka being forced to accept the Indo-Lanka Accord and the 13th Amendment. This sealed how Sri Lanka was to be governed in complete violation of a Peoples’ right of self determination to choose how they are governed. As in the past, in the future too, the influence of Tamil Nadu would determine outcomes relating to fishing, oil exploration and the future of Kachchativu. Judging from the suggestion of the former President of India, Abdul Kalam for Sri Lanka and Tamil Nadu to each fish 3days in the week and allow the fish to take a breather on the 7th day, is a pointer to the level of "equity and justice" Sri Lanka could expect from the fact that Tamil Nadu’s fishing fleet is several fold more than that of Sri Lanka’s. At this point in time India is only "seeking" oil exploration blocks from Sri Lanka. The lifeline marketed by India in Geneva would be the reminder to demand favourable responses and how persuasive India could be in this regard would be influenced by the political clout Tamil Nadu could exert on the central government in Delhi. Demands also have been made to claim Kachchativu. However spurious the claim, pressures to cede to this demand would result in an alteration of the International Maritime Boundary in favour of India.

These developments must be seen in the background of Mr. Karunanadhi’s statement that his dream is Tamil Eelam. Although this statement reflects the sentiments of the DMK for the moment, it is bound to be picked up by Mrs. Jayalalitha’s AIADMK because of the rivalry between the two. In their attempt to outdo each other politically the influence each has with the center would be exploited at the expense of Sri Lanka. Sri Lanka cannot hope to depend on Delhi to act with principle as evidenced in Geneva. Therefore, Sri Lanka has to develop strategies to protect its sovereign interests starting with establishing an identifiable International Maritime Boundary that could be monitored. Such an undertaking should be seen as an investment to protect healthy relations with India. Not to do so would be to allow relations with India to deteriorate to contentious levels through the manipulation of rival political parties within Tamil Nadu.

US – INDIA NEXSUS

The outcome in Geneva was perhaps forged when US Secretary of State Hillary Clinton visited Jayalalitha, the Chief Minister of Tamil Nadu. The motivation for the US Secretary of State to visit the Chief Minister of one of India’s 28 states has to be compelling. This relationship is driven by the respective interest groups; Tamil diaspora in the case of the US and the Sri Lankan Tamils in the case of Tamil Nadu. The power and influence of these internal alliances and international relationships vary depending on the developments within each country. Whatever these variables, Sri Lanka has to figure out and develop strategies to overcome the effects of "dreams" such as those of Karunanaidhi and the Tamil diaspora for Tamil Eelam, with dividends for the US not only to gain a foothold but also to curb China’s influence in the emerging strategic relevance of the Indian Ocean. Since the dream of Tamil Eelam could encourage Tamil Nadu to also unhinge itself from the Indian Union, both India and Sri Lanka should prepare strategies to protect each other separately and jointly from possible threats to the integrities of their respective territories.

Perhaps, the political hierarchy and the intelligentsia of India are confident that despite these developments India has the needed capabilities to prevent the dismemberment of India. If this confidence is misguided, the 13th Amendment would be the first step in a long chain of events to destabilize both Sri Lanka and India. It is therefore in the interest of Sri Lanka to bring to the attention of India that what is at play are mutually self-fulfilling efforts by internal and external forces to destabilize Sri Lanka and through it India, in the pursuit of dreams and geostrategic interests. The soft power of diplomacy should be exploited to the fullest to explain to India that Sri Lanka needs to protect its interests even if India remains unconcerned, and engage with India to inform them the measures Sri Lanka plans to adopt to protect its sovereign interests.

CONCLUSION

The Geneva resolution calls for the implementation of the recommendations in the LLRC report. The Government on the other hand intends to be selective and implement only those recommendations sanctioned by Parliament. Any lack of congruency would make the relationship between the Office of the High Commissioner for Human Rights and the Government contentious. In such an eventuality, the professed lifeline maneuvered on behalf of Sri Lanka by India would in fact turn out to be a noose. Notwithstanding this possibility, one fact is starkly evident; that India left Geneva with its image bruised as far as the Asian countries that opposed the resolution were concerned. Despite this image, India would claim that it did Sri Lanka a favour and attempt to use this spin to claim drilling rights in the Cauvery Basin.

The last minute reversal by India from the principled position it initially took was due to compulsions from Tamil Nadu. This demonstrated with stark reality, the power of state governments to force the Central government in Delhi to act against its larger regional and global interests. This power would continue to be exploited by Tamil Nadu to make demands for the rights of Kachchativu and to fish in Sri Lankan waters. This display of failed leadership to convince Tamil Nadu will cause Sri Lanka to act with cautious apprehension in its dealings with India. One way for Delhi to regain its image after the betrayal in Geneva, would be to relieve Sri Lanka of its obligations under the 13th Amendment, and free Sri Lanka to evolve a political solution that would not turn out to be a threat to its territorial integrity with reverberations in India. Such a step should be undertaken with the clear realization that to do so would not only secure Sri Lanka’s territorial integrity but that of India as well. The emphasis by India to implement the 13th Amendment carries with it inherent threats to the integrity of both countries, with opportunities for external influences such as the US and the Tamil diaspora to manifest themselves in the affairs of both countries as they did in Geneva.

The External Affairs Minister of India Mr. Krishna stated as recently as January 2012: " India’s security depends on Sri Lanka – there are large security issues that affect both countries in the Indian Ocean". If Sri Lanka is to be territorially secure, devolution should not be to Provinces but to Districts. India for the sake of its own security, should take the initiative to bring about this change and make both countries territorially secure.

The rise of populism: A comparative perspective from South Asia

by Prof.Rajiva Wijesinha M.P.

 

I must begin by thanking the Secretariat of the Council of Asian Liberals and Democrats for putting together an excellent concept paper, which presents us with a very balanced view of the topic of our general assembly this year.

It is all too easy to think of populism in negative terms, and indeed the list of what are seen as populist leaders of recent times with which the paper begins is one that many liberals would abhor.

But the fact remains that the individuals on that list have in almost all cases been the leading choice of the people in their own countries, and we cannot dismiss them readily without trying to understand what makes them popular.

One name on that list however is an exception, and I think it makes clear to us the difference between populism that must be respected, even if it cannot be approved of, and what must from our point of view at least be rejected.

I refer to Geert Wilders of the Netherlands, who was never chosen by a majority of the people of his country to be its leader. I would suggest that shows the limits of populism that is based on pure negativity, an appeal to people that necessarily means rejection of other people.

Wilders did strike a chord with the people of the Netherlands and did comparatively well, but he did not have a majority, unlike Chavez and Morales in Latin America, Shinawatra and Estrada in Asia, and Berlusconi in Europe.

Interestingly enough, the first four appealed to people on the basis of their poverty, which demanded alleviation. Berlusconi seemed rather to appeal on the basis of wealth which demanded protection. I think that suggests another dimension to populism that will become increasingly important in the years to come, as the privileged use the media with increasing skill to hold onto their privileges.

Indeed I would suggest in this regard that perhaps Ronald Reagan was the first populist President on that pattern, using his cinematic skills to win people to a partisan agenda that, like Berlusconi’s, was based on the suggestion that the state had been too indulgent to its less affluent segments.

I still recall John Kenneth Galbraith claiming that Reagan’s philosophy was that the poor were not working hard enough because they had too much money, and the rich were not working hard enough because they had too little. The consequences of that type of populism are I believe still with us, in the rhetoric that dominates American primaries and which therefore finds its way into government policy too.

In Asia, though, it is to the deprived that populists generally appeal, and it is for that reason that, though we may worry about the policies they advance, that seem to us to be unsustainable, we must worry too about the sense of deprivation to which they appeal, and which demands alleviation. The Democrats in Thailand, and the Liberals in the Philippines, have both realized that they must overcome the image they project amongst many of the underprivileged, that they are an elite that does not understand the day to day problems of the peasantry and the urban poor.

The need then to first develop policies that take those problems into consideration, and second to explain more clearly and convincingly the benefits of measures that may seem harsh initially, is better understood now because of the success of a more simplistic approach to poverty alleviation on the part of less responsible forces.

In the Sri Lankan context, I believe we too must recognize that some policies which seemed populist, in catering to the deprived without concern for wider interests, cannot be condemned out of hand. The shift in language policy that occurred in the fifties, the takeover of schools in the sixties, the takeover of lands in the seventies, the introduction of quotas for university education during that time, are all seen now as shortsighted, and certainly they were implemented with a lack of sensitivity and careful planning that has cost us dear.

But we must also realize that they sprang from very real needs, and it was only the haste with which they were imposed, rather than being implemented after careful consideration of all options, that caused problems.

The manner in which Sinhalese was made the sole Official Language of the country provides an instructive example. The original proposal was based on the fact that government functioned largely in English, and this was not a language that was understood by the vast majority of our people. Mr Bandaranaike, whose party was largely based in Sinhalese areas, proposed to replace English with Sinhala

The then UNP government, which was more Westernized in its approach, realized however that change was necessary, and adopted the same policy, but its leader, then Prime Minister John Kotelawala, declared in Jaffna that Tamil too would have parity of status.

It was then that all hell broke loose. He was not entirely popular in his own party, and his opponents called for a special session of the Party which rejected his commitment and not only declared that it was for Sinhala Only, but also decided to dissolve Parliament and seek a mandate from the people to implement this.

The election campaign that followed was marked by both parties outdoing each other in appealing to Sinhalese voters but, in this populist campaign, the edge was held by Mr Bandaranaike, who had initially floated the idea. His majority in the end was massive, for the UNP lost its Tamil voters, who turned to the Leftist parties in the South, and to the Tamil Federal Party in the North.

Populism then became uglier, for when Mr Bandaranaike tried to reach accommodation with the Tamils, the UNP, now in the hands of its more racist leaders, John Kotelawala having decided to retire and go away to his farm in England, agitated against this. The scene was thus laid for the hostilities that dogged us for half a century more.

The SLFP sadly engaged in similar tactics a decade later when the UNP, back in power, tried to reach similar accommodation with the Tamils. And we saw the UNP again playing a racist card in 2000, when Mr Bandaranaike’s daughter Chandrika Kumaratunga made her own efforts.

Sadly by then the main Tamil party, which had been let down twice previously, did its own letting down under pressure from the terrorist Tigers, and Mrs Kumaratunga found herself abandoned on both sides.

My argument then is that it was not the policy designed to compensate for disadvantages that led to the destructive side of populism. Rather, it was a deliberate decision to exploit the appeal of such a policy, by also using it to set up an oppositionality that permitted easy rhetorical flourishes.

It was not pro-poor policies that were the problem, but rather anti, not the rich, but rather other poor who could readily be victimized. On such lines did Hitler operate, in using the Jews as scapegoats for the problems of the German poor, on such lines I believe do the American New Right operate in condemning immigrants, in order to add working class Americans to their vote bank.

In Sri Lanka it was Tamils who bore the brunt of policies intended initially to overcome social disparities. The imposition of Sinhala as the only official language of the country, through a one line Bill that made no mention of the use of Tamil, was followed a decade and a half later by a policy of standardization for university entrance that hit educationally privileged Tamils hardest.

It is true that educationally privileged Sinhalese in Colombo also suffered, but they had other outlets for their talents, which the Tamils of the North did not have. And, appallingly, when the policy, cancelled in 1977 on grounds of equity, was reintroduced a year later, it was in the context of unashamedly populist critiques of Tamil examiners, designed to promote an aspirant for the leadership of the UNP who saw his own power base as being exclusively Sinhala.

That then is the danger, that political parties which should work towards developing an inclusive national character decide, usually because of the ambitions of those without much popular appeal, to concentrate on deepening a narrow power base rather than expanding laterally.

In the process, though they may achieve temporary success, it is against their own party rivals who had wider appeal. Ultimately they end up destroying their own party, as Cyril Mathew did with the UNP, as Communist and Trotskyist leaders did during their thankfully brief flirtation with exclusivist elements in the SLFP during the sixties.

he old left never regained the Tamil support that had helped it to such prominence in the forties and fifties, while the UNP has faced a similar situation with regard to the Tamil support in the North that gave it such healthy majorities in the period before 1956.

In Pakistan we have seen something similar. Indeed its creation owed something to Mr Jinnah’s realization that his influence in the Congress Party was waning. He believed however that, while creating a state for Muslims, he could imbue it with his own more expansive vision. That went up in smoke in the passions that his rhetoric, and the answering rhetoric on the other side, engendered, rousing oppositionalities and forgetting positive perspectives.

A quarter of a century later another political leader who also wanted to shore up his power base began the process of Islamicization that Jinnah had tried to avoid, and so we have seen Pakistan slide into more and more exclusive perspectives that seem to have narrowed its horizons as well as its influence. I should note that its more enlightened politicians try hard to resurrect the inclusive South Asian culture which had in early days made Pakistan a leading light in the Islamic world as well as internationally, but their efforts have not seen much sustained success.

In India, though we have had aberrations – and given its size, aberrations can be very destructive – I believe the Gandhian legacy has contributed to a pervasive moral imperative to avoid destructive populism. Gandhi did much to change the Congress, which was very much an elite institution, into a popular body. But he also did his best to prevent popular policies descending into violence against the other.

More practical politicians may have despaired when he called off a satyagraha on the verge of success to protest against the killing of policemen, but I believe that, in the long run, he was right to demand absolute rejection of such violence. All too often violence begets violence, not only as the Buddha said of one side against the other, but also of fundamentally decent people on the one side following the apparently successful example of their less scrupulous peers. True leadership means stopping such excesses through what I would term a categorical imperative.

Whether this spirit of Gandhism will triumph in India is an ongoing question. We have seen all too often the rousing of communal tensions, most notably in what seemed two incidents of state sponsored violence, in Delhi after the assassination of Mrs Gandhi, in Gujerat more recently. In the first example, Rajiv Gandhi responded promptly, with an assertion of decency that was recorded by the Founder of the Liberal Party of Sri Lanka in a deeply moving obituary that we have reproduced in the recent publication on the 25th anniversary of the Party

In deeply moving words Raiv Gandhi praised the contribution of the Sikhs to the making and preservation of India, declared how proud India was of the great Sikh people being within it and concluded:

nothing would hurt the soul of my beloved mother Indira Gandhi more than that the great Sikh people who have done so much and sacrificed so much for India should be harmed because of the act of a few fanatics.

Watching this broadcast in London in October 1984, I could not help contrasting it with another broadcast by our own President of the time, President J. R. Jayewardene in July 1983, when amidst the abominable riots in which our own Tamil minority was killed there were no words of comfort whatsoever to the victims of the violence, instead of which the President spoke of the riots as:

the understandable reaction of the Sinhala people who will never allow their beloved country to be divided.

I felt then how noble was Rajiv Gandhi’s spirit and how narrow, how shabby the outlook of our own leaders.

That quotation I think sums up the contrast between the statesmanship that has characterized so many Indian leaders and the shameful legacy of our first Executive President, which we must strive to overcome.

But in case we get too starry-eyed about India, we must recall too what happened in Gujerat, and the dilemma of the main Indian opposition party, the BJP, as it strives to decide whether a successful Chief Minister should be its next Prime Ministerial candidate, despite what continues to be seen as his involvement in communal violence. I can only hope that, as happened previously, when it put forward the inclusive figure of Mr Vajpayee, instead of its more populist elements, it will ensure allegiance in the future too to what I have characterized as Gandhian ideals.

For, ultimately, it is strong and principled leadership that provides the only answer to the temptation to pursue popular policies to their populist conclusions, where they do down some in an effort to strengthen support amongst the rest.

To overcome the temptation we need constant vigilance, and a constant building up of awareness of the generally positive effects of inclusivity as opposed to divisive politics. Promoting the interests of the poor and the deprived is vital, and should never be seen as populism in itself.

Doing so while rousing resentment against those who do not or will not contribute to one’s continuation in power is wickedness, and this is a lesson all leaders, from Barack Obama and his successors to the rulers of the smallest Commonwealth islands, should understand.

Obama picks Sison as next ambassador to Sri Lanka

 

 U.S. President Barack Obama on Monday nominated Michele Sison to be ambassador to Sri Lanka and the Republic of Maldives.

Ambassador Michele J. Sison, a career member of the Senior Foreign Service with the rank of Minister-Counselor, is currently the Assistant Chief of Mission for Law Enforcement and Rule of Law Assistance in Baghdad, Iraq.

From 2008 to 2010, she was Ambassador to the Republic of Lebanon.  She was Ambassador to the United Arab Emirates from 2004 to 2008 and Principal Deputy Assistant Secretary in the Bureau of South Asian Affairs from 2002 to 2004.

Ambassador Sison’s prior assignments include:  Deputy Chief of Mission at the U.S. Embassy in Islamabad, Pakistan; Consul General in Chennai, India; Consul General in Douala, Cameroon; and Director of Career Development and Assignments in the Department of State’s Bureau of Human Resources.

Additional overseas assignments include roles at the U.S. Embassies in Côte d’Ivoire, Benin, Togo, and Haiti.  Ambassador Sison received a B.A. from Wellesley College.

“Our nation will be greatly served by the talent and expertise these individuals bring to their new roles,” Obama said, according to a White House statement.

“I am grateful they have agreed to serve in this Administration, and I look forward to working with them in the months and years ahead.”

Tamil Nadu peoples protest against the Koodankulam nuclear power project

by D.B.S. Jeyaraj

Fifteen persons comprising eight men and seven women have been on an indefinite hunger strike for eight days now at a place called Idinthakarai adjacent to Koodankulam in Tirunelvely district of the Southern state of Tamil Nadu in India.

The indefinite hunger strike is a continuation of a long drawn out peoples struggle a nuclear power plant being set up and commissioned in Koodankulam.

The India-Russia Nuclear plant project got underway in the eighties of the last century but a vigorous peoples protest going on for nearly eight months has prevented it from commencing operations.

The protests have been spearheaded by a committed grass roots activist SP Udayakumar who is the Convenor of the Peoples Movement Against Nuclear Energy (PMANE).

The sustained campaign against the nuclear plant being commission entered a new phase on March 12th 2012 when a relay of protest fasts were held at Koodankulam in opposition to the nuclear plant.

On March 19th the authorities cracked down by deploying thousands of Police and para-military personnel to Koodankulam. Several leaders of the non – violent peoples struggle were arbitrarily arrested and charged for sedition The inhabitants of Koodankulam were forcibly evicted from their village.

The Para – military and Police personnel also cordoned off the village and curtailed transport to and from the village. Inflow of food and medicine and other essentials were restricted.Outsiders were not allowed to come in. Media access was denied.

The forcibly dispersed people relocated to neighbouring Idinthakarai village where the protest demonstration continued. The PMANE convenor SP Udayakumar commenced a fast unto death campaign protesting the crackdown and arrests. 14 others comprising seven men and seven women accompanied him on an indefinite hunger strike in solidarity.

Thousands of people from Koodankulam,Idinjakarai and other villages in the region have assembled in sympathy and in support at Idinthakarai where the Koodankulam nuclear project protest ampaign continues.

Despite threats and intimidation and offers amounting to bribes the fast continues. Despite news stories planted in sections of the media that the protest has fizzled out the indefinite hunger strike goes on. It will enter its ninth day on March 27th 2012.

As stated earlier the on going hunger strike is the culmination of an eight month struggle launched by the peoples movement against the commissioning of a hazardous nuclear plant in their vicinity.

While more than 200 protestors have been arrested in batches over the past weeks, Udayakumar and his core group of hunger strikers have not been arrested yet.

One reason for that may be due to thousands of people including women and children keeping vigil over the fasting persons both day and night.It may be that the authorities fear a huge backlash if the highly respected ,popular Udayakumar and his fasting band are arrested.

The Police have surrounded the area in large numbers and set up a blockade around Idinthakarai village where Udayakumar now resides. Food and medicine supply have been curtailed. Journalists have been denied access.

Udayakumar obtained a Ph D at the University of Hawai in the USA and then returned to India where he set up a school for poor children.

Along with his wife,Udayakumar founded the South Asian Community Center for Education, Research and Action-SACCER near Nager Koil in Kanniyakumari district in 2001. Last week this free enrollment school with 250 children was destroyed by those a gang of hooligans backed by sections of the Police.

The Koodankulam nuclear project is an Indo-Russian joint venture.Currently Udayakumar is being vilified as an American Agent. The Christian church is also being blamed for the protest.. Ironically the supposedly US backed protest has also been labelled as Maoist and Naxalite.

I have never met Udayakumar personally though I used to receive e-mails regularly from him in the past when he was in the USA. Although I lost touch with him after he returned to India, I have often been reading news reports about him galvanising people into action as a non – violent grassroots protest movement against the Indo-Russian nuclear project

SP Udayakumar is an inspired , sincere activist who has embarked on a tremendous struggle against overwhelming odds.I have the greatest respect for his courage and dedication.

Factual information about the Koodankulam-Idinthakarai situation is hard to get due to the controls imposed by the Indian state. Udayakumar was sending out e-mails frequently in the early days. Nowadays it has become infrequent as the fasting persons become progressively weaker.

Some of his friends are circulating Udayakumar’s e-mails widely in a bid to attract global attention to the David vs Goliath battle going on in Koodankulam-Idinthakarai. I would like to reproduce two of them here.

In references that convey depths of feeling and meaning Udayakumar cites in these e-mails the burning of the JAFFNA LIBRARY and MULLIVAAIKKAAL.

The first e-mail was sent out on March 20th 2012. Here it is-

“Police have arrested 18 men more at Koodankulam last night but nothing happened here at Idinthakarai. Some 5,000 women, men and children slept around St. Lourdes Church. Some 185 men and women and their Parish Priest were arrested at Koottapuli village when they sat down by the side of the road protesting against the police peacefully.

They are being held at Tirunelveli armed reserve camp. The other group of nine people, including our Struggle Committee members, arrested yesterday and now charged with sedition, including Sections 121, 121A and 153A, have been taken to Tirunelveli also and we do not know where they are being held.

“Police have clamped down Section 144 in our area prohibiting people from congregating in any manner. So no one can walk or move around.

Despite this curfew, people keep coming to Idinthakarai by boats and on foot. There is an unprecedented deployment of police around Koodankulam and it is highly condemnable that the police be harassing the peaceful protesters to this extent.

“Some 15 of us (eight men and seven women) including Pushparayan and myself are on indefinite hunger strike here at Idinthakarai demanding:

[1] the immediate release of our comrades,

[2] the withdrawal of the Tamil Nadu cabinet resolution,

[3] a thorough and complete probe of geologists, hydrologists and oceanographers into the safety issues of the Koodankulam nuclear power plant,

[4] release of the Inter-Governmental Agreement (IGA) signed secretly by the governments of India and Russia on liability in February 2008, and

[5] conduct safety drills and evacuation drills in the 30-km radius of the Koodankulam project.

“There could be public health problems and food shortage in a few days here at Idinthakarai.

“We appeal to the people of Tamil Nadu to be aware of this assault on the Tamil community.

“We appeal to the people of India to be mindful of impending nuclear nightmares in a highly and densely populated country such as ours.

“We appeal to the people of the world to keep a watchful eye on the forceful implementation of a mega nuclear project on our people without giving us any basic information about the project or conducting any public hearings.

“They are preparing to load uranium fuel rods into the reactor without conducting any safety or evacuation drills. This kind of Fascist development is taking our country to another round of New East India Companies and Neo-colonialism.

God save India!”

The Second e-mail was sent out on March 22nd 2012. Here it is-

“The situation here in Idinthakarai is still grim. There are some 10,000 people from coastal and interior villages. Most of them are women including pregnant and nursing ones. I myself saw many nursing women feeding their babied sweetened water as there was no milk coming to the village.

More people are coming by boats and on foot as the access roads are all blocked by police. There is no bus service to this place. There is no sanitary complex and women bear the brunt of it. No public health official has ever come to help the people.

“Some 15 of us have been on indefinite hunger strike and no medical doctor has ever come here to check our health. On March 21 my mother received a phone call from a lawyer called T. Udayakumar, who claimed he was calling from the DGP office in Chennai. He told her to ask me to leave the protest so that all the cases against me would be dropped and I would get whatever I ask for. My mother told him that I was not a man of that nature and ended the conversation.

That evening the Superintendent of Police of Tirunelveli District called me on my mobile and asked me to surrender alone so that people would not be affected. I told him that I was all ready for that but the people here at Idinthakarai also wanted to get arrested along with me and they would not let me go alone.

I proposed to the SP to send enough number of buses and two police officers so that there would not be any stampede or tussle and we all would board the buses peacefully and go wherever they wanted us to go. He would not accept that proposition and said in anger: “This is the last time I talk to you.” There ended our conversation.

“That night the police officer who was on security duty at our SACCER Matriculation School outside Nagercoil town had received a phone call from the Kanyakumari District SP office to go away from the school.

Then a group of vandals, obviously with the blessings of the police, entered the school and destroyed it very badly. The compound wall was completely demolished and the gate damaged. They ransacked the school bus after tearing down the car shed’s iron shutters.

They entered the KG classrooms and destroyed all the small little chairs which my children were using to sit on. They broke all the tables and chairs and I do not understand why they punished my little children like this. The vandals entered our school library and destroyed all the 12 glass bookshelves and tables and threw away the books. My 250 children are all avid readers and have been using our library extensively.

This reminds me of the burning of the Public Library at Jaffna a few years ago.

“The governments and the police treat and speak of me as if I were Osama bin Laden and our people some mindless terrorists. We resent this inhuman and brutal treatment. Electricity, water, milk and other essentials have been cut for two days; people cannot go out of and come into Idinthakarai as there is brutal police control.

We are surrounded by police and I truly feel like I am at Mullivaickal.

We are a group of simple people who have been fighting nonviolently and democratically against an untested foreign reactor with all kinds of problems and hiccups. We have not done any harm to anybody or anybody’s property in our eight-month long struggle. The whole country is proud of our people.

“The stalemate continues. There are protests happening all over the country and the state of Tamil Nadu. Whoever is farsighted enough to worry about the future of India’s “ordinary citizens,” our natural resources, the well-being of our progeny, the possibility of losing our freedom to the New Nuclear East India Companies and most importantly, the democratic fabric of our country support us.

We thank them and you for standing with us. We are ready for any brutal police action but will not give up our nonviolent noncooperation campaign.”

Editor of Transcend Media service, Antonio C.S.Rosa a personal friend of SP Udayakumar has in an editorial drawn attetion to the magnificient peoples struggle going on in Koodankulam

Here are some excerpts-

“Information from the Koodankulam Nuclear Power Plant nonviolent struggle is scarce as Tamil Nadu authorities imposed an efficient news blackout by blockading roads and accesses. A major reason for the strangulation of information is the authorities’ fear that the movement will spread to other areas in the country.

Such phenomenon is not foreign to Indian society as history shows. That could be one of the reasons that these demonstrations have not yet captured the attention of major western news media –corporate and alternative, Internet and traditional”

“However, doctors were under order not to take the 15 hunger strikers to a hospital given the potential for violent backlashes if Kuma (Udayakumar) or others were removed from the scene. They earned a lot of respect and the staunch support of the population.

The movement, which has been careful to maintain Gandhian approaches, methods and practices throughout, enjoys also the sympathy of the Catholic Church that has a large community in the region. It is believed that the potential for violent outbreaks among the 10,000 protesters guarding the hunger strikers is the main reason that Kumar has not been arrested along with over 200 others”

On March 26th some local journalist were allowed limited access.According to a news report in “The Hindu” SP Udayakumar has said that the Govt should talk to the protestors if they consider those engaged in as people of India. Here are excerpts-

“We are ready for talks. If we are considered people of this country and if our ahimsa protest is respected, government should talk to us. They should treat us like Indian people,” Mr. Udayakumar, on an indefinite fast since March 12 along with his supporters, told reporters in Idinthakarai near Tirunelveli, the epicentre of the stir against the project.

He said it was regrettable that the government was suddenly “belittling” the protesters by accusing them of having links with Maoists and foreign countries.

Observing that the protesters met Prime Minister Manmohan Singh once and Tamil Nadu Chief Minister Jayalalithaa twice as part of their dialogue process, he said, “suddenly to describe and portray us as having links with Naxals and as anti-nationals, demeans people who have faith in democracy.”

Thus the non – violent struggle of the people goes on in Koodankulam.One does not know when the authorities would crack down further and arrest the fasting grass roots activists.

One hopes and demands that saner counsel will prevail and that those in power would respect the peaceful protestors and talk as Udayakumar wants.

As for me I want to express my solidarity and support for SP Udayakumar and the people engaged in a peaceful protest against formidable foes for a worthwhile cause.

The future of Asian banking business

This week was my first visit to Bangkok since the floods in December. The city seems to have recovered and the economy is on the mend. After an estimated 0.1% growth in real GDP in 2011, the International Institute of Finance (IIF) is forecasting a robust 7% growth recovery in 2012, helped by a multi-year fiscal stimulus that would bring the fiscal deficit to an estimated 5.5% of GDP for the fiscal year 2011/2012. The package of fiscal stimulus included a 40% hike in minimum wages from April and an aggressive cut in corporate income tax rate from current 30% to 23% and a further cut to 20% for 2013. This would put Thai corporate tax rate closer to those of its neighbours. The combination of increase in minimum wage rates and generous price support programme for rice mean that the government is serious about tackling income gaps and pushing consumption.


The purpose of the Bangkok trip was to debate the future of Asian banking business models. The central question is how to recycle Asian savings within Asia. Because of its demographics and prudence in consumption, East Asia has always run a net current account surplus, with its accumulation in savings placed largely in the advanced markets. Why can’t some of these savings be used to fund much needed infrastructure within the region?


In 2003, Dooley, Folkerts-Landau and Garber named the current cross-Pacific arrangement Bretton Woods II, where Asia funded the US current account deficit by reinvesting its savings back in the advancedmarkets. This arrangement can also be called the Grand Bargain. Basically Asia swapped dollars for jobs for the youth entering the labour force and the exploitation of its natural resources. The Grand Bargain is ending as Asians realize that their holdings of dollars may be exposed tofuture depreciation and that Asianlabour force and natural resources should not be cheap forever.


The Grand Bargain had implications for the advanced country banking business models. A deficit country will very soon find that its banking system must have loans/deposit ratios running higher than 100%, because the excess consumption has to be funded by credit. In Asia, the average loans/deposit ratio is lower than 100%, because savings are larger than debt. The American banking system had to shift from retail banking into a wholesale banking system, relying on securitization of its assets (mortgages and loans) and selling them into the global market to fund its loan book. Quite a lot of AAA-rated securities ended up in European portfolios, because the prudent Asians stuck mostly to Treasuries. Thus, when the subprime crisis erupted in 2007, the European banks were one of the bigger victims.


There are good reasons why US and European banks evolved into leveraged wholesale banks turbocharged by derivative markets. 96% of OTC derivative trading in the US are dominated by 5 large banks. Europe as a region accounts for 70% of total global interest rate derivative trading. The Atlantic banks went into proprietary trading and financing engineering because by the 1980s, under competition from the Japanese banks, net interest margin business (basically the margin between lending rate and deposit rates) became less and less profitable.


This shift out of traditional retail banking business was also due to the free market ideology to reduce market friction to zero by lowering transaction costs (such as transaction taxes and commissions). In the old days when brokers made money from fat commissions, they were willing to provide research for their customers. When margins became near zero with computerized trading, securities firms engaged more and more into proprietary trading and leveraged trading in order to make money. Good quality research became scarce. Banks made more money from "pushing" derivative products to their retail investors, because they could earn more fees up-front and from granting credit to their customer from leveraged trading.


The combination of proprietary trading and leveraged derivative financial engineering morphed banking business away from being a trusted agent of the real sector into a competitor or principal that may trade sometimes in conflict against the interest of its customers. The financial sector became a principal in its own right, with total assets larger than the real sector and therefore Too Big to Fail.

This change in culture was exemplified by the remarkable Op-Edby Greg Smith, a former executive director in Goldman Sachs, published in the International Herald Tribune on 15 March, 2012, which I read on the plane back to Hong Kong. He basically highlighted the debate whether one should be making money for the bank or making money for the client.


Because Asia as a whole did not run into deficit, the banking system has not strayed from its retail banking roots. After the painful lessons of the 1997/98 Asian financial crisis, Asian regulators have been much more cautious in allowing Asian banks to go the derivative route.


The game is changing dramatically because Asian interest margins are also beginning to be squeezed as competition intensifies. Some Asian banks are already being rapped on the knuckles for not paying enough attention to client suitability in selling inappropriate wealth management products to customers. So the debate on whether Asian banks should make more money from capital market business is very much on the table.


This raises a fundamental question which current global regulatory reforms has not addressed. I have gone on record to say that if green engineers are paid less than financial engineers, will we expect a green economy to emerge before asset bubbles? Similarly, if banks are to serve their real sector customers better, what policies are required to induce them to make more money from real customer service than leveraged proprietary trading?


This means that regulators need to pursue less what banks should not do, but what business models are appropriate for the banks to serve the real sector better? This obviously requires the regulators and the industry to have a better conversation than the current lines of engagement.


Andrew Sheng is President of the Fung Global Institute (www.fungglobalinstitute.org)