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EDITORIAL

BUSH Vs GORE

It has been one of the closest ever election in America between traditional rivals Republican party and Democratic party. It has also been the highest budget election where besides issues and policies even personnel attacks manifested their ugliness. Presidential election in America is somewhat typical. The President can be from one party while the House of Representatives and Senate can have majority from the other party......more

INFILTRATION

IGP Jammu confirms that infiltration on the international border in Jammu region goes on unabatted. During the current year more than 70 militants have been killed while crossing the border even as total elimination in Jammu province is around 700. This is good go by any reckoning. But worrisome aspect relates to the total number that has successfully infiltrated......more

A View Point
Trifurcation of
Jammu and Kashmir

By Swami Raj Sharma
By now a large cross-section of population particularly from Jammu and Ladakh Sub regions (Leh District and Zanskar Sub Division of Kargal.....
more

Of JKCA, Jadeja and
J&K cricket

By Rajesh Dhar
The outright victory over Haryana in the very first Ranji tie of this season is simply the indication of the boosted morale of the Jammu and Kashmir ...
more

The Chinese deluge

Dr. Bharat Jhunjhunwala
Cheap Chinese goods are flooding the Indian markets and Indian industry is finally waking up to the flip side of globalization. It is demanding protection ...
..more

EDITORIAL

BUSH Vs GORE

It has been one of the closest ever election in America between traditional rivals Republican party and Democratic party. It has also been the highest budget election where besides issues and policies even personnel attacks manifested their ugliness. Presidential election in America is somewhat typical. The President can be from one party while the House of Representatives and Senate can have majority from the other party. Even during Clinton's 8 years stint (four years for each term), legislature has been under the control of the Republican party, while President belonged to Democratic party. House of Representatives has 435 seats while Senate has 100 seats. The results indicate that Republican party has already won majority in both the Houses. Now it is the question of who will be the next President. Bush or Gore, who are logged in neck to neck race. At the time of going to Press, recount was on in Florida State where 6 million votes have to be counted. The first count indicated majority of 1,734 votes for George W Bush, which earned him all the 25 votes of Florida to log a total of 271 votes. It may be mentioned that to get elected as President 270 votes are needed.

Coming to specifics and going by the respective manifestos of Bush and Gore, if George Bush wins, it is certain that there will be many changes. It would be apt to divide such changes in two distinct compartments i.e. India-specific and world-specific. As regards India George W. Bush is indeed more favourable on several counts. First, he has made it amply clear that American thrust will not be China specific but India-centric in as far strategic partnership is concerned. He treats China as a competitor and a competitor can never be regarded as strategic partner. It has much deeper ramifications in as much as policies towards India are concerned. One can draw the inference that Bush is inclined to treat India as the balancing force in Asia vis-a-vis rising Chinese military power. This stands duly manifested when Bush says that India is important to USA not only in South Asia but entire Asia as a whole which in other words means assigning it more dominant and strategic role than what Clinton administration has been inclined to do. Second noteworthy aspect relates to CTBT. Clinton administration has been consistently pressurising India to sign CTBT as pre-requisite to opening up better cooperation. Bush has been on record to say that it is not so as far as his administration would be concerned. During Vajpayee's trip to America, Bush had specifically phoned him to reassure India that he values the partnership. Third aspect is that Republican party has been inclined to put a stop on Pak role as State sponsor of global terrorism. In fact, former US President who happens to be father of George W. Bush had put Pakistan on the prospective terrorist list. But Clinton who took over from him removed Pak name from that list and went in for Pressler amendment to supply arms to Pakistan worth 1.1 billion dollars. Various reports of Republican Party on global terrorism have also mentioned Pakistan as the villain not only in J&K but also worldwide. It is to be seen whether Bush, if elected would push the anti-terrorism stance more convincingly than Clinton vis-a-vis Pakistan. It is one thing to be pro-Muslim which Bush happens to be. It is quite another to be strongly anti-terrorists which Bush and Republican Party openly profess and practise. It is to be noted that Republican dominated Senate had rejected ratification of CTBT. It will be watched with interest if Bush would totally scraps it.

As regards global policies, Bush is committed to reduce aid to Russia, withdraw American forces positioned abroad and accelerate its star war programme to put the ABM system in place. He is for authentic measures for strengthening American security against prospective threat perceptions. This means saying goodbye to ABM Treaty of 1972 signed with Russia and going ahead with plans to defend American cities and partners abroad against approaching Inter-Continental missiles. He wants NATO countries in Europe to share the main burden of manpower as much as Japan to contribute more in terms of manning. American forces however reserve the right to intervene in troubled spots worldwide selectively to safeguard its global interests. Bush also wants that aid to foreign countries which is being routed through IMF and World Bank should be made more selective and conditional even as American direct aid would form the major policy thrust to have better leverage with the recipient countries.

Domestically, Bush has promised American middle class large tax cuts which may catapult him to the most powerful seat of power. Clinton administration has done a good job in as much as prosperity is pronounced, inflation is less, employment at the maximum level. Clinton has also been industry friendly. It is to be seen how Bush manipulates the promised tax cuts without disturbing the booming economy.

Taken in its entirety Bush administration would be more business-like, favourable to India and strongly anti-terrorists. To that extent there could be pressure on Pak military rulers to mend their ways vis-a-vis compulsive hostility towards India and sponsorship of terrorism in Jammu & Kashmir. Contrarily, if recount goes in favour of Al Gore in Florida, he becomes the President and Clinton's policies would continue without any change, be it for India or globally.

INFILTRATION

IGP Jammu confirms that infiltration on the international border in Jammu region goes on unabatted. During the current year more than 70 militants have been killed while crossing the border even as total elimination in Jammu province is around 700. This is good go by any reckoning. But worrisome aspect relates to the total number that has successfully infiltrated. As per army sources and intelligence intercepts 3 to 5 thousands jehadis are waiting across the border for infiltration. The latest call of Lashkar-e-Toiba dreaded militant outfit which has its headquarters in Lahore and which controls the suicide squads has charted the road map to make a success of so-called jehad. This comprises of three significant formulations. First, LeT will not permit holding of talks with the Indian Government. Second, Lashkar will spread its tentacles to other parts of the country to teach anti-Muslim forces some lessons. Third, it would go the whole hog in foiling conspiracies of western countries against continuance of jehadi organisations. It has also warned Pakistan Government not to pursue the American game-plan vis-a-vis marginalisation of Afghan Talibans and jehadi outfits in Pakistan. Another militant outfit active in J&K namely Hizbul Mujahideen has threatened to accelerate its activities. The worst part of the entire scenario is that none in the power hierarchy strikes positive note. They all keep their fingers crossed hoping that all would be over. Some predict normalcy in two years and some stretch it to 20 years. And of course some cannot ignore the former slain Pak Premier Zulfiquar Ali Bhutto's call for 1000 year war to annex Kashmir. While one can indeed commend the remarkable achievements of security forces in Jammu region in particular (security forces include State police as well), one tends to be worried about the fresh infiltration. There is no indication from any quarter whether rate of infiltration now is less than rate of elimination of ultras. Unless this is true and rate of elimination is having substantial edge over rate of infiltration, normalcy shall ever remain elusive. One expects that the arithmetic is properly worked out and rate of elimination accelerated substantially in all sectors, not Jammu alone. Otherwise, people would continue to remain victims of indiscriminate blood-spillage.

A View Point
Trifurcation of Jammu and Kashmir

By Swami Raj Sharma

By now a large cross-section of population particularly from Jammu and Ladakh Sub regions (Leh District and Zanskar Sub Division of Kargal District) including some political parties are advocating the establishment of a separate State hood for Jammu and Kashmir Divisions respectively and Union Territory status for Ladakh. It's supporters say that the demand is based on the call of history to meet the sub-regional aspirations of the three regions by doing away with the present domination of Valley over the others. It is based on logic and merits. Its opponents oppose it by saying that if conceded it will disintegrate the State. It may also lead to communal tension and migration of population from one division to the other. Let us examine the two view points dispassionately and objectively.

HISTORICAL GENESIS OF THE SUBJECT

History is the root and politics is the fruit. Does the present demand find support from history is the first question to be answered. Stated very briefly the present State of Jammu and Kashmir came into existence as one of newly carved out princely States of erstwhile India in 1846 AD by virtue of the Treaty of Amritsar 1846 A.D. executed between the British Raj and Maharaja Gulab Singh. For various political and military reasons the British Raj did not favour the retention of area between Ravi and Sindh secured by them under a separate Treaty from the Sikh Darbar of Lahore earlier and transferred this entire area to Gulab Singh for a consideration of Rupees seventy five lacs.

For carving out a new State Pannikar calls Gulab Singh as Ulleyssis of the hills of 19th century India and his creation of the new State of Jammu, Kashmir and Ladakh as a miracle of history. This is one side of the picture. What is the other side which is more relevant for our purpose directly touching the present subject. The other side of the picture has been summarised in the best form by B. N. Mullick (Ex-Director C.B.I. in his book My Years With Nehru). He graphically touches the truth by stating "Ladakh, Kashmir and Jammu were brought together by an autocrat through the power of his sword and diplomacy and held them together as a single unit under the despotic rule. But after the ushering in of democracy in 1947 the day is not far off when the three regions are bound to re-assert their legitmate regional aspirations for autonomy as separate entitles of the State" I fully endorsed this view for obvious reason that prior to 1846, Ladakh, Kashmir valley and Jammu region have remained as separate socio-cultural and political entities for ages each having a separate culture, language, traditions and aspirations including the basic aspiration of enjoying and exercising independent political autonomy. From political autonomy alone flows economic and administrative autonomy, without the first, the later two are distant vanishing dreams. Time is ripe to assert and attain regional aspirations by Jammu and Ladakh as visualised by B. N. Mullick.

A - Digression

Jammu and Ladakh regions could not assert this right in a proper degree so for. The Central Govt, also never thought of re-organising Jammu and Kashmir like other 500 odd princely States of India. The State of Jammu and Kashmir got engulfed in a serious Indo-Pak conflict right from 1947 when the Afgan Tribals supported by Pak Army attacked Kashmir in 1947 and Jawaharlal Nehru the most illustrious Prime Minister of India committed the historical blunder of refering the complaint to the UNO much against the advice of his Cabinet and a man like Mahatama Gandhi. The dispute became more acute and prolonged. Jawahar Lal Committed another military blunder in 1947 by ordering pre-mature cease - fire with Pakistan when Indian forces hardly needed a week more to recover the entire State territory from Pakistan when the Pakistani forces well on the retreat and Indian forces made persistent proposal to the Govt of India to allow them to recover the entire area. The war of 1947 was followed by the war of 1962, but the dispute remained unsettled in 1971 war. Indira Gandhi the other illustrious Prime Minister of India committed another blunder when she handed over all the 90,000 captured soldiers to Pakistan together with Chhamb area, of Jammu and Haji Peer Pass on Poonch Muzfarabad road without settling the Kashmir dispute with Pakistan. The continuity of the dispute gave no time to the concerned parties to raise there-organisation issue of the State. Rather raising such an issue was made a political regional autonomy through the amendment of the Constitution as put forth by Jammu Regional Autonomy Forum headed by Balraj Puri. At the same time, New Delhi made no serious and purposeful attempt to put Jammu and Kashmir in the national mainstream, Democracy was stiffled in broad day light and dissent was curbed with full vigour. The people, especially the youth became frustrated and disillusioned and fell into the net of eagerly awaiting fundamental forces across the border. In this dust and din the Valley dominated Government started neglecting, discriminating and dominating the other two sub-regions in the matter of sharing political power, economic development and administrative equality. The think tank of National Conference never inducted men of proven merit from Jammu in its inner Circle on policy formulation or as members of the important Committees constituted from time to time on sensitive issues despite the liberal mind of the present Chief Minister. The discrimination started getting felt more sharply and more painfully as the years passed on. Two important recommendations were made by Gajindergadkar Commission to lessen the pangs of regional imbalances. Among other things, it suggested that if the Chief Minister of the State hails from one Division the Dy. Chief Minister should be taken from the other. Secondly, it recommended the establishment of statutory Regional Development Boards to prepare development plans for each region by receiving equitable funds for the purpose from the State and the Centre and also to supervise the plans fo District Development Boards. These recommendations were never implemented in letter and spirit. The demand of Jammu Division to create new district at Kishtwar, Reasi and Samba based on justice Wazir Commission report was not considered by the Kishtwar itself is more in areas as compared to the six Districts of the Valley. As against this three new districts were created in the Valley without public demand. One of such new districts Budgam is located at the distance of 13 KM from Srinagar district only. The demand for union territory status for Leh and Zanskar is supported by both Ladakhi Buddhist Association and Ladakh Muslim Association. They have been given Autonomous Development Council for Leh without financial autonomy and appropriate political devolution of powers. It is a financially starved and politically defunct council.

It cannot fulfill the aspirations of local population having a distinct culture, language, history and developmental problems. The result is continuous friction and conflict with the powers that be at Srinagar at the cost of healthy development mutual harmony and contentment of the people. Every rational citizens of the State has to endorse the view that things for Jammu Division are being made complicated more and more by the Valley dominated think tank of the National Conference.

In the matter of granting more internal autonomy to Ladakh and Jammu regions by developing and delegation more political powers upon each the think tank created history of all sorts when it recommended (through the Regional Autonomy Committee) creation of three divisions (in place of one) in Jammu division and three in Valley (in place of one) and one in Ladakh. This proposed re-organisation of the State is most degressive, shorn of all administrative norms but fully influenced by communal overtones to create two Muslim dominated divisions in Jammu and Jammu as the only Hindu, majority, division. Doda Mahore and Poonch-Rajouri cannot be viable divisions. Likewise Anantnag - Pulwama, Srinagar Budgam and Baramulla - Kupwara are too small and unviable proposed divisions such to get parity with Jammu. These three divisions were three district till 1979. Even creation of three more districts in the Valley in 1979 was patently unviable like the creation of Budgam district at a distance of 13 KM from Srinagar. As against this the question of establishing a new district at Kishtwar as recommended by Wazir Commission, which is more in area then the combined area of six districts of the Valley was never conceded alongwith other new districts proposed for Samba and Reasi. Such type of administrative indulgence on the part of National Conference Think tank speaks volumes about the motive behind the proposal. Mahore has age old link and relations with Reasi. Vehicular road from Reasi to Mahore via Arnas has made the links more close. Delinking Mahore from Reasi and attaching it with Doda is just to create a Muslim majority division on communal grounds. Let it also be known to the general readers that in Doda district out of seven Tehsils, three are Hindu majority, namely Ramban, Bhaderwah and Thathri. One, nemely Doda has 50-50 ratio of the two communities, the other three are Muslim majority. The proposed creation of new division being totally communal oriented is not acceptable to Hindus and majority of Muslims of the district who have age old links with Jammu. The absolute majority of Muslims in District Doda can speak Dogri and Punjabi and culturaly the rural population has closer cultural links with Jammu and Himachal Pradesh. The District Doda does not merit linking with Mahore which will create general resentment in the district. It will also create inconvenience to the general public of Mahore. The Muslim majority districts of Poonch -Rajouri have three pre-dominently Hindu populated Tehsils, namely, Sunder Bani, Nowshera and Kalakote. These will certainly opt for Jammu divisions, Rajouri Tehsil has 50-50 ratio. Gujjars and Bakkarwals, and Rajput convert Muslims have traditional cultural, linguistic and trade links with Jammu and Punjab. The other of Muslim community from these districts also have age old links with Jammu and they have no aspiration to have separate division for them, but the present Govt has done it for them for the consideration other than the wishes of the people. This perception is fully verified by the author when he served as Deputy Commissioner in these districts.

FINDINGS OF THE RESEARCH STUDY.

To continue with the digression a little further fruitfully, Dr Navnit Chada has recently conducted a research study on the issue titled "State Identity and Violence Jammu, Kashmir and Ladakh". She has come to the finding that "Little is known about the plurality of the State with diverse communities such as Dogra, Gujjars and Bakkarwals, Kashmiri Pandits and Ladakhis, Buddhists for whom the right of self-determinaton has little appeal and less is known about their political aspirations and political choices. Each is engaged in a little battle for nurturing its won socio-cultural identity seeking avenues of social and economic development and creating their own political space." Taking note of this finding a leading scholar on public Administration, Dr Panandikar (Director Centre for Policy Research New Delhi) has suggested that "international community should also be sensitised towards this multi-faceted character of the Kashmir conflict because the sub-regional demands have not been conceded." Kashmiri Pandits who have been forced to migrate from the Valley are justified to demand a separate home land in Valley if the Govt cannot ensure their security in different nooks and corners of the Valley where they originally lived.

Before 1846 AD the whole of Kashmir valley, Ladakh and major parts of Jammu division were under the domination of Sikh State of Lahore. All the regions aspired for freedom and liberty from Lahore. In 1846 Dogra Rule was founded by Gulab Singh. The Valley and Ladakh came under the domination of Jammu. The Valley and Ladakh regions aspired for freedom from the Dogra rule. In 1947, the Dogra rule came to end and with the help of more numerical strength of MLAs from the Valley the political and administrative powers were centralised by the Valley. The Valley started dominating Jammu and Ladakh regions by stiffling their regional aspirations. If Jammu would have got more numerical strength of MLAs after 1947 it would have equally dominated the Valley and Ladakh regions. Such is and has been the historical frame work of Jammu, Kashmir and Ladakh regions. The Valley is not inclined to grant internal constitutional autonomy to Jammu and Ladakh sub-regions for the last 53 years, it would not do so in the coming future. The Centre is equally non-responsive in the matter but keeping in view the sub-regional aspirations culture, language and customs the demand for trifurcation seems legitimate. Once this goal is achieved all the three sub-regions will live peacefully as good neighbours without any ill will or domination of one over the others.

Of JKCA, Jadeja and J&K cricket

By Rajesh Dhar

The outright victory over Haryana in the very first Ranji tie of this season is simply the indication of the boosted morale of the Jammu and Kashmir Cricket team courtesy Ajay Jadeja. It was delight to watch the enthusiasm, valour and favour of the players in this match where the hundred percent application which is the name of the game was seen in all the departmens of the game. The matter of great pleasure rather a feeling of ecstacy for the entire sports community is that by including Ajay Jadeja in the side there has been a sea change in the relationship among the members of JKCA (Jammu and Kashmir Cricket Association). It has been observed that the relationship among the members of JKCA of the two regions was famous and fragile and factionalism was at its peak before Jadeja's affiliation with the State.

Jadeja's vast experience, ready wit and unmatched skill undoubtedly helped the players to exploit their talent upto optimum level, and inculcated the sense of sports aesthetics among the budding players of the State but at the same time what shocked one is that he had been straightway made skipper of the squad when he was playing for the first time in J&K State. I am at my wits end to understand as to why only Jadeja and not any local boy was named to lead the side which would have helped the State in the future, if not at present. Any other skipper with Jadeja in the side would have acquired lot of leadership qualities.

Moreover, before the selection trails of this season's Ranji ties, some of the senior cricketers of the State who had left the game from two to three years after coming to know about Jadeja's affiliation with JKCA attended the selection trials for their self promotions, who to everybody surprise lateron got berth in the squad. To include these players in the squad was not a healthy sign not because these players were less talented but because of the fact that they made the entry of the budding cricketers almost impossible. It would have been better to select more and more young talent to be inspired by Jadeja in the side in order to serve the State in the future. Why to select a player ageing above 35 or round 40 when you have the young alent at hand? Jadeja's experience and skill could have helped the youngesters to serve the State for years together so, it was shell shocking to see Amit Paul Singh, Rohit Mattoo and Rakesh Koul not selected in this years Ranji Squad. All these three players had performed brilliantly in the last years Ranji Trophy.

Amit Paul Singh is the youngster who struck a marvelous hundred last year against Delhi but because of his unavoidable engagements he could not attend the selection camp this year.

Rakesh Koul another gritty allrounder has also not been picked in the party for some unknown reasons. He is the man who scored tons of runs in the local tourneys and was the highest score in the only four days match he got the chance to play against Delhi last year.

Mr Koul got the chance to represent the State last year only because the JKCA fell short of players due to the boycott of the players from the other region because of factionalism in the Association.

If JKCA is really serious in creating a niche in cricketing field, it has to leave no stone unturned to make possible the inclusion of such players.

The biggest blunder which the JKCA did was to invite Jadeja at a time when he was involved in match fixing scandal and not thinking in long term perspective. Now the board of Control for Cricket in India (BCCI) has temporarily has banned him along with four others involved in this scandal for 15 days which means that he will not be available to our State for atleast two or three forthcoming Ranji ties and afterwards the permanent decision on his future will be taken. Inclusion of such controversial players gives a bad name to the State. Now with the omission of Jadeja the State team will have to face all sorts of problems in the remaining matches.

During my conversation with some of the senior members of the squad like Kanwaljeet Singh and Surinder Singh Baggal, they justified the JKCA decision of Jadeja's affiliation with the State by saying that his inclusion has brought the JKCA members and the players of the two regions closer. They further added that by making him captain of the side, none of the players is going to receive a squint-eyed treatment. I would like to ask these guys a question. What without Jadeja now?

The same old story will be repeated - favouritism will be at the top agenda in composing a team.

The skipper will enjoy the power of captaincy as has been observed before.

The factionalism will reach such heights that there is possibility of even players of the two regions falling out among themselves.

Now the team faces a tough task to play against the formidable sides like Punjab and Delhi in the remaining ties without the services of Ajay Jadeja. I fear that the result will be quite contrary to that of the first match where J&K dominated in all the departments of the game. Inconsistency in the performance of the team is because of the fact that the team is not accustomed to winning way and also because of the tenuous relations among the players of the two regions -- Jammuites wish that the teams should be led by a Jammuite and the Kashmiris wish it to be led by a Kashmiri. So the drama continues.

Vijay Sharma was the vice-captain of the side against Haryana where Jadeja led the team. So, he would have expected captaincy after Jadeja's exit but to his surpise Abdul Quyoom was named to lead the side, which led Vijay Sharma to express inavailability for the match against Punjab. So, it is suspected that this decision of Sharma has to do something with Quyoom's promotion as Captain.

Hence a serious introspection is needed to improve the standard of cricket in the State. The need of the hour is to avoid factionalism, favouritism, and nepotism. Inviting Jadejas or even Azhars only, is not the lasting solution.

The Chinese deluge

Dr. Bharat Jhunjhunwala

Cheap Chinese goods are flooding the Indian markets and Indian industry is finally waking up to the flip side of globalization. It is demanding protection from these imports. The Chinese are known to heavily subsidize their exports. China has a more business-friendly governance. Simultaneously, it is necessary for Indian government to put its house is order so that Indian businesses can compete in the global market. Indian business must demand good governance along with limited protection.

It is well known that the Chinese government is providing huge subsides to its export-oriented PSUs. The real challenge, however, comes from the private sector. Why is it that the private Chinese businesses are beating our industries hollow?

In a global market the price of raw materials and finished products is equal both in India and China. If Chinese goods are yet cheap then the reason has to be the lower conversion costs there. The overload of government costs is what appears to make Indian businesses uncompetitive.

The level of taxes in the Chinese economy is much lower than ours. According to the World Development Report the Tax revenue of the Chinese government in 1998 was only 5.7 per cent of GDP against 8.6 per cent in India. These taxes add to our cost of production.

China's record on corruption appears to be much better than ours. It is not an unusual event for a senior Chinese Communist Party official to be executed for corruption. It is difficult to imagine such a punishment in India.

The Chinese government is becoming trimmer while ours continues to get larger. The share of government consumption in China's GDP fell from 12 per cent in 1990 to 8 per cent in 1999. Ours remained constant at 11 per cent in the same period.

Our labour laws continue to be archaic and designed to support labour bureaucracy and aristocracy. Businessmen having dealings with China inform that there are virtually no restrictions on hire and dire and on closing down loss making units.

Our rate of savings has declined from 22 per cent in 1990 to 20 per cent in 1999. The decline has been mostly due to government dissavings. In this same period Chineses savings rate has increased from 38 per cent to 42 per cent. More savings means more investment and production.

Indian products are rendered uncompetitive because of these Indian bad governance. It will not be sufficient to stop the inflow of cheap Chinese products. Along with protection our business should be asking for better domestic governance. Instead of getting scared of Chinese imports we must aim to produce yet cheaper. And, we can if the bureaucratic overload in conversion costs is reduced.

The second dimension of Chinese goods is that they are being heavily subsidized by their government because China is, in all probability, not able to export as much as it is claiming. The glowing statistics of 8 per cent plus growth rates, huge foreign investment inflows and export surpluses appear to be fudged. Actually China is in deep trouble because of weak exports.

Consider the figures for India first. We received $ 10 billion as remittances from expatriates and $ 6 billion foreign investment. The RBI had these $ 16 billion in its kitty. We used this money to pay for our imports. In 1998 our exports were $ 47 billion while our imports were $ 59 billion. There was a deficit of $ 12 billion. Of the $ 16 billion received we used $ 12 billion to meet our trade deficit. Of the remaining $ 4 billion we used $ 2 billion to increase our forex reserves and $ 2 billion would have gone into sundry entries such as IMF repayments. The inflow and out flow of foreign exchange is more or less balanced and transparent.

Now consider the parallel figures for China. She received $ 5 billion as remittances from expatriates and $ 42 billion foreign investment. But it did not use this money for financing imports. In 1998 Chinese exports were $ 207 billion while imports were $ 165 billion. There was a further surplus of $ 42 billion. The bank of China received a total amount of $ 89 billion.

Of these China used $ 5 billion to increase her forex reserves. There is no explanation forthcoming as to what happened to the remaining $ 84 billion. They simply vanished into thin air. Clearly some of the figures are fudged because the Chinese hardly have the habit of smoking away their dollars.

It is more likely that Chinese exports are around $ 125 billion and not $ 207 billion as claimed. The correct position of China's external accounts may be somewhat as follows. Receipts are $ 5 billion from remittances, $ 42 billion from foreign investment and $ 125 billion from exports, total $ 172 billion. Expenditures are $ 5 billion towards accretion of reserves and $ 165 billion for imports.

According to a report in Newsweek, Chinese officials use statistics " not as objective indicators of economic results but as targets to be achieved or as numerical proof that things are going well. Economists assumed that after Prime Minister Zhu Rongji set a goal of 8 percent growth in 1998, that poorer areas inflated their economic performance to meet this goal. Since statistics gatherers work for official who misreport figures, the funny numbers are hard to detect." It is quite likely that the officials of the finance ministry in China are grossly misreporting the figures for exports. It is because China is not able to export that she has to subsidize her exports heavily. Where was the need to provide such subsides if the Bank of China's forex coffers were already overflowing with foreign capital inflows?

Chinese PSUs were ordered to export at any price. The result was that they were selling much below their cost of production. The government banks were extending loans to the PSUs to cover these losses knowing full well that there was little chance of those loans getting repaid. In effect , the government was providing huge export subsidies. But they did not appear as 'subsidy' in the government account because the money was given out in the form of loans. It is indeed possible that China may similarly provide subsidies to private exporters.

It seems that China is making the same mistake that Latin American and East Asian countries did and one that we are engaged in too. Only China is making the mistake on a bigger scale. All these countries used foreign capital inflows to finance current imports. It is like a loss-making company issuing new equity to pay heavy perks to its executives; and fudging the Balance Sheet to lure investors into buying its shares. But this model can work only as long as foreign investors can be fooled with bloated statistics of a grand export performance.

The 'cheapness' of the Chinese goods will evaporate as soon as this truth is forced into the open. But China will still beat us with her good governance unless our goovernment sets itself in order. Indian businessmen, therefore, should put pressure on the government for reducing the level of texes, containing government consumption and corruption, removing labour market regidities and increasing government savings. It will not do to seek protection from cheap Chinese imports while leaving these problem unattended.

 
 



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