June-2012-International

INTERNATIONAL AFFAIRS

Morsy is elected President of Egypt
In a reversal of fortunes unthinkable a year and a half ago, an Islamist jailed by Hosni Mubarak has succeeded him as President of the biggest Arab nation. The victory of Muslim Brotherhood candidate Mohamed Morsy has historic consequences for Egypt and Middle East.

Mohamed Morsy will, however, not enjoy the extent of modern, paranoiac powers exercised by Mubarak; those have been curtailed by a military establishment which will decide just how much he will be able to do in government. Still, the US-trained engineer’s victory in the country’s first free Presidential election breaks a tradition of domination by men from the armed forces, which have provided every Egyptian leader since overthrow of the monarchy 60 years ago.

President Morsy has promised a moderate, modern Islamist agenda to steer Egypt into a new democratic era, where autocracy will be replaced by transparent government that respects human rights and revives the fortunes of a powerful Arab State long in decline.

The bespectacled 60-year old appears something of an accidental president: he was only flung into the race at the last moment by the disqualification on a technicality of Khairat al-Shater, by far the group’s preferred choice. Questions remain over the extent to which Morsy will operate independently of other Brotherhood leaders once in office.

Greece: Narrow victory for pro-bailout parties
Euro zone was relieved on June 18, 2012, at a narrow election victory for Greece’s pro-bailout parties. However, financial markets’ relief that the 17-nation European currency area had avoided plunging deeper into crisis was mitigated by concern about unresolved problems in Greece, the lack of a comprehensive plan for the Euro zone as a whole and weakness in the world economy.

German Foreign Minister Guido Westerwelle said the substance of Greece’s austerity and economic reform programme, agreed in exchange for a second EU/IMF rescue, was non-negotiable, but the timing could be adjusted. Giving Athens an additional year to achieve its deficit reduction goals would mean increasing the size of the Euro zone’s bailout, raising the commitment by countries such as Germany, the Netherlands and Finland where voters are deeply reluctant to approve further funding.

Greece is in the fifth year of a crippling recession that has driven unemployment to a record 22 per cent - including one in two young people—and caused widespread hardship. Although sufficient voters cast their ballots out of fear of a disastrous euro exit to give mainstream parties a working majority, a majority of electors, angry over austerity and corruption, voted for a range of anti-bailout fringe groups.

There is little sign so far that austerity is working in Greece. Public wage, pension and spending cuts have exacerbated economic contraction, shrinking revenue needed to service the debt mountain, while bureaucracy, corruption and a lack of confidence have held back private sector investment. Many citizens in a fractured society have responded by sullenly refusing to pay bills and taxes out of disgust with their political leaders and fury at seeing the rich evading tax and parking money abroad.
Even if the economy began to recover, economists argue the demands being made of Greece to reduce its public debt to a sustainable trajectory are unrealistic.

Japan, South Korea and India launch dialogue to counter China
Against the backdrop of Beijing’s aggressive posturing on the South China Sea issue, India, Japan and South Korea launched a trilateral dialogue on June 29, 2012, expressing their commitment to maintaining freedom of the seas, combating terrorism and promoting inclusive growth.

While kick-starting the dialogue, the three countries also took note of the fact that they were all democracies of Asia which shared a commitment to democratic values, open society, human rights and the rule of law.

The dialogue was held in pursuant of the joint declaration between India and South Korea during Prime Minister Manmohan Singh’s visit to Seoul in March 2012. The common objective of India, Japan and South Korea is to see that the seas and oceans became regions of cooperation instead of competition, particularly since every nation’s energy security and trade depended on them.

A range of views were expressed on the role of ASEAN and Russia in the Asian structure. It was also felt that India, Japan and South Korea should cooperate in developing the security architecture in Asia pacific by engaging China thoughtfully to fight the menace of piracy in the sea and mitigating natural disasters like earthquake and tsunami.

G-20 Summit
The 2012 G-20 Summit was held at beach resort of Los Cabos, Mexico. The dangers that Europe’s escalating debt crisis would drive the global economy back into recession for the second time in less than four years dominated the summit of G-20 leaders of industrialized and developing nations, which represent over 80 percent of world output.

Among commitments in a draft communiqué was a pledge to consider concrete steps towards a “more integrated financial architecture” in Europe that would include common banking supervision, resolution of failed banks and guarantees for bank depositors.

These steps would help break the link between government debt and banking problems. Combined with fiscal discipline, measures to support growth and financial stability, they represent “important steps toward greater fiscal and economic integration that lead to sustainable borrowing costs,” the draft communiqué said.

G-20 leaders left little doubt that Europe is critical to stabilizing the global recovery. US President Barack Obama, at the discussion on the global economy, carefully spelled out to fellow G-20 leaders the risks to growth in an interlinked globe, diplomats said. He showed how each region is heavily dependent on demand from the European Union, the world’s largest economic bloc, for their exports and for investment.

Europe won support from world leaders for an ambitious but slow-moving overhaul of the euro zone, even as pressure built in financial markets for quicker solutions to its debt crisis that threatens the world economy.

European countries at the Summit said that they were considering concrete steps to integrate their banking sectors, a major reform long sought by the United States and other nations to break the cycle of highly indebted countries trying to rescue banks, which only pushes governments ever deeper into debt.

G-20 leaders and the International Monetary Fund have pressured Europe, the world's richest region, to throw more support behind indebted euro-zone members and lay out a clear timeline for building financial, fiscal and political union—steps they view as crucial to saving Europe's monetary union.

China offered $43 billion to the IMF’s crisis-fighting reserves, rounding off a global push to nearly double the Fund’s war chest to $456 billion to help protect countries from fallout from the euro zone debt crisis.

China's contribution was part of a pledge by G-20 countries made in April to supply the International Monetary Fund with extra firepower. These resources are being made available for crisis prevention and resolution and to meet the potential financing needs of all IMF members. They will be drawn only if they are needed as a second line of defence, when other IMF loans have been depleted.

Brazil, Russia and India each pledged $10 billion, while South Africa offered $2 billion. G-20 host Mexico also contributed $10 billion.

Rio+20 Summit on Sustainable Development
In a huge victory for emerging countries like India and Brazil, the world leaders adopted “The Future We Want” declaration on sustainable development on June 22, 2012, the final day of Rio+20 conference, as the UN obtained pledges worth $513 billion from governments and private companies for projects that cut fossil fuel use, boost renewable energy, conserve water and alleviate poverty.

The Rio+20 was held exactly 20 years after the landmark 1992 Earth Summit, which had put environmental issues on the world table for the first time.

In what may have major implications for India, the summit ended with a commitment that the developing countries needed additional resources for sustainable development and no extra conditions be imposed on them for financial aid from rich nations.

The Rio+20 document clarifies that the eradication of poverty is the top priority and shifting to green economy can’t put extra financial burden on the emerging and developing economies, a point pushed very hard by the Indian delegation, who worked closely with China and summit host Brazil.

In an important development the United Nations obtained pledges worth $513 billion from governments, private companies and multilateral agencies for projects aimed at reducing the strain on the planet’s resources. “The 692 individual commitments from governments are for projects that cut fossil fuel use, boost renewable energy, conserve water and alleviate poverty,” said Sha Zukang, secretary-general of Rio+20.

According to UN officials, the voluntary pledges are the most important legacy of the Rio+20 meeting, marking two decades since the first Earth Summit. They may accomplish more than the official agreement from the meeting.

In addition to these pledges, major development banks have committed $175 billion to the development of sustainable transport systems and private-sector companies have committed $50 billion to a UN-backed programme to provide energy to the world's entire population by 2030.

Though the European countries have been critical of the document for not pushing hard enough on the issue of green economy, the Rio+20 declaration reflects the concerns of countries like India as it clearly states that developing countries need additional resources for sustainable development and that “unwarranted conditionality on Official Development Assistance (ODA) and finance should be avoided”.

World to have 440 rising global cities in 2025
Urbanisation will lead to the creation of one billion new city consumers by 2025, according to a study by McKinsey Global Institute (MGI). The study said these will live in some 440 dynamic emerging market cities (the ‘Emerging 440’), that are set to generate close to half (47 per cent) of expected global GDP growth between 2010 and 2025. Among these, 36 cities are from India.

The report says that while China is right in the middle of its sweeping urbanisation, India is in the early stages of the process.

The study pointed out that growing consumer classes will accelerate growth in demand for many goods and services. It explained that many large emerging economies, including China and India, were seeing higher shares of their populations moving into income segments where the consumption of many goods and services takes off rapidly. Indian cities alone are expected to contribute nearly 10 per cent of global growth in residential and commercial floor space demand to 2025.

To cater to their new urban consumers’ needs, cities will have to invest heavily in infrastructure. “Cities will require annual physical capital investment to more than double from nearly $10 trillion today to more than $20 trillion by 2025.”

By 2025, municipal water demand in large cities is expected to have to rise by 40 per cent from today’s level—a rise of almost 80 billion cubic meters, more than 20 times what New York consumes today. The top two cities by expected growth in municipal water demand between 2010 and 2025 globally are Mumbai and Delhi.

The report said companies need to take a more scientific approach to locating the most promising markets for their businesses and then allocating resources pro-actively to capture the opportunities they offer. Identifying fast-growing segments in emerging cities not currently on the radar will be a necessary skill.

Drug abuse kills two lakh people a year
Some 27 million people worldwide are problem drug users, with almost one percent of them dying every year from narcotics abuse, according to the 2012 World Drug Report of the UN Office on Drugs and Crime (UNODC).

Global production and use of illegal drugs remained relatively stable in 2011, the report found. However, this masked shifts in trafficking and consumption that were “significant and also worrying... because they are proof of the resilience and adaptability of illicit drug suppliers and users,” the UNODC warned.

Cannabis remained the most widely used drug with up to 224 million users worldwide, although production figures were hard to obtain.

Europe was the biggest market for cannabis resin, most of it coming from Morocco, although Afghanistan is becoming a major supplier and domestic production in Europe is also rising.

Opium production in Afghanistan, the world’s biggest producer with 90 percent of the global share, meanwhile jumped by 61 per cent in 2011, to 5,800 tonnes, from 3,600 tonnes in 2010, when the crop was hit by disease.