2 JULY 2015: US to open embassy in Cuba

Ø  Top corporates on Wednesday pledged investments of Rs. 4.5 lakh crore for initiatives to support Prime Minister Narendra Modi’s pet project ‘Digital India’, while also promising to create about 18 lakh jobs. Investments of about Rs. 4.5 lakh crore have been committed for Digital India by industrialists here and employment for approximately 18 lakh people will be generated. Of the investments, which are led by Indian companies, Reliance Industries committed to invest “Rs. 2,50,000 crore across Digital India pillars”, including roll-out of wireless broadband infrastructure and manufacturing of mobile handsets.

Ø  The United States and Cuba have agreed to open embassies in each other’s capitals, the biggest tangible step in the countries’ historic bid to restore ties after more than a half-century of hostilities. Welcoming the move as historic step, U.S. President Barack Obama on Wednesday said reopening of embassies in Havana and Washington is another demonstration that the U.S. doesn’t have to be imprisoned by the past. Secretary of State John Kerry will travel to Havana over the summer to raise the American flag over the embassy. The U.S. and Cuba have been negotiating the re-establishment of embassies following a surprise December announcement that secret talks had led to an agreement to restart ties. Ending the U.S. freeze with Cuba is central to Mr. Obama’s foreign policy legacy as he nears the end of his presidency. He has long promoted the value of direct engagement with global foes and has argued that the U.S. embargo on the communist island just 145 km south of Florida was ineffective.

Ø  The launch of the $100-billion Asian Infrastructure Investment Bank, within two years of its conception, signals the arrival of a new multilateral institution on the world stage. It also represents a challenge to the older such institutions. Mooted by Chinese President Xi Jinping in October 2013, the AIIB took shape with 50 members, including Australia, India, Russia and the United Kingdom. The articles of agreement were initialled at a gathering in Beijing of representatives of the 57 founding-members. The remaining seven are likely to sign in by the end of the year. China will be the largest shareholder (at 30.34 per cent), followed by India (8.52 per cent) and Russia (6.66 per cent). Though one among the Asian giants, Japan has chosen to stay out of the Beijing-initiated AIIB. The Philippines, which has territorial issues with Beijing in the South China Sea, has held itself back from signing, for now. And Indonesia has sought to have the bank housed in Jakarta. These spell geopolitical roadblocks to the success of the China-led initiative, which in a way is meant to counter the purported bias among existing multilateral institutions, that are perceived to be driven largely by the diktats of the U.S. and Europe. Indeed, the AIIB is a culmination of China’s incessant articulation of the concerns of the emerging economies, which felt they were not being given an adequate say in institutions such as the International Monetary Fund and the World Bank. Again, the AIIB is the consequence of the inability of these institutions to undergo change to suit changing times. It is also essential to see the AIIB and China’s ambitious plans for the ‘Belt and Road’ project as being complementary. The AIIB as envisaged by China is clearly meant to use its financial resources and surplus to invest in projects in the Asian neighbourhood, which is suffering from a massive infrastructure funding gap. The infrastructure projects in the neighbourhood, nevertheless, are a way of allowing Chinese companies (among others) to participate and invest in them at a time when there is a situation of industrial overcapacity. The participation of many countries from Europe and elsewhere in the AIIB attests to their understanding of the potential of the projects for which the investments could be used, especially the Belt and Road schemes. India’s participation in the AIIB, too, indicates that New Delhi is keen on a balancing act to suit its interests – to engage with the West and the dominant international finance order, at the same time exploring options with new financial institutions. This is a prudent strategy. Will the AIIB be different from the likes of the IMF and the World Bank? That will depend largely on how Beijing manages the cooperation game.

Ø  India’s relations with the Maldives have been under considerable strain over the Maldivian government’s actions against former President Mohamed Nasheed. Prime Minister Narendra Modi cancelled his visit to the island neighbour in March 2015 at the last minute. And in June, he extended Ramzan greetings to leaders of all Muslim countries in the SAARC region, but notably ignored Maldivian President Abdulla Yameen. Even so, with the possibility of a U.N. Human Rights Council (UNHRC) Presidential statement censuring the Maldives, India is caught in a familiar bind, between its own disapproval of the Maldivian government’s undemocratic moves and its resistance to action against a sovereign neighbour — much like it was some years ago over the situation in Sri Lanka.

Ø  Greek Prime Minister Alexis Tsipras vowed on Wednesday to push ahead with a controversial bailout referendum despite pressure from European leaders, and urged creditors to accept a fresh reform offer by Athens. Hours after Greece became the first advanced economy to default on the IMF, Mr. Tsipras used a televised address to tell Greeks to vote ‘No’ on Sunday to creditor austerity demands. European Ministers were due later on Wednesday to consider a new proposal from Athens but German Chancellor Angela Merkel has already insisted there can be no new deal before the referendum.

Ø  The World Bank has approved an additional loan of $650 million for the Eastern Dedicated Freight Corridor (DFC), which is aimed at the faster delivery of goods between the northern and eastern parts of the country. This round of loans to the Eastern DFC follows two other loans by the World Bank. The Cabinet last week approved the revised cost estimate of Rs. 81,459 crore for the Eastern and Western Dedicated Freight Corridor (DFC) Project. The third round of World Bank funding, announced on Wednesday, will build the 401 km Ludhiana-Khurja section in Uttar Pradesh, Haryana and Punjab. The project will “help increase the capacity of these freight-only lines by raising the axle-load limit from 22.9 to 25 tonnes and enable speeds of up to 100 km/hr. It will also help develop the institutional capacity of the Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) to build and maintain the DFC infrastructure network,” An analysis of the projected greenhouse gases that are expected to be generated by the Eastern freight corridor project found that it would be 55 per cent lower than the levels of gases released without the project. The Eastern DFC project is expected to release 10.5 million tonnes of greenhouse gas emissions up to 2041-42, compared to a whopping 23.3 million tonnes in the absence of the freight corridor.