ATCA Briefings

ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic initiative founded in 2001 by mi2g to understand and to address complex global challenges. ATCA conducts collective dialogue on opportunities and threats arising from climate change, radical poverty, organised crime, extremism, informatics, nanotechnology, robotics, genetics, artificial intelligence and financial systems. Present membership of ATCA is by invitation only and includes members from the House of Lords, House of Commons, European Parliament, US Congress & Senate, G10's Senior Government officials and over 500 CEOs from banking, insurance, computing and defence. Please do not use ATCA material without permission and full attribution.

London, UK - 15 February 2006, 09:11 GMT - ATCA: China heralds new era - 2006 to 2020 - "Nation of Innovation" Response: Sheshabalaya; Leung; Verton; Guptara; ATCA @ Davos: Rising concern about "Chindia"; Howell; Koithara; Bogni

Dear ATCA Colleagues

China heralds new era - 2006 to 2020 - "Nation of Innovation"

China's State Council has issued new guidelines this week for the development of science and technology over the next 15 years, with the centerpiece decision to build China into a "Nation of Innovation." The goal was first mentioned in a keynote speech by President Hu Jintao at the National Science and Technology Conference in early January. He has said, "According to the plan, by the end of 2020, China's science and technological innovation ability will be greatly improved. China's science development will contribute more to the national economic and social progress, as well as the guarantee of national security. The comprehensive ability of China's basic science research, as well as that of the frontier fields, will be considerably strengthened."

The objective is to help China to catch up with most of the world's developed countries, who currently spend more than 2 percent on research and development. The new guidelines stipulate that 2.5 percent of GDP should be spent on research and development by 2020. The aim is for the country's reliance on foreign technology to decline to 30 percent or lower by 2020. The task will be challenging, since China still has to import many key technologies in various fields. Among them, the auto industry, medicine research and medical equipment.

China plans to give priority to technological development in energy and water resources, as well as environmental protection. It will also try to gain intellectual property rights for core technologies in the equipment manufacturing industry and the information industry. In regard to biological technologies, China plans to enhance applications in fields such as the agriculture industry, as well as population management and health. The country will also accelerate the development of space technology, as well as the exploration of the seas and oceans. Meanwhile, China will strengthen research in both basic science and frontier technologies. In Summary, between 2006 and 2020, China will:

1. Place strategic emphasis on Science and Technology Development.
2. Give priority to technological development in energy and water resources, and environmental protection.
3. Try to gain IPRs for core technologies in the equipment manufacturing industry and the information industry.
4. Enhance applications for biological technologies in agriculture as well as population and health.
5. Accelerate the development of space technology and exploration of the seas and oceans.
6. Strengthen research in both basic sciences and frontier technologies.

These are the first new guidelines issued by the China Central Government since the country entered the World Trade Organization (WTO) in 2001. It apparently took a whole year and more than 2,000 top scientists and experts to map out the blueprints. The next decade is regarded as crucial on China's road towards a well-off society. And in the eyes of the central authorities, science and technology should be a powerful driver, therefore, the guidelines set forth strategic emphasis for future science and technology development. This, to help resolve outstanding problems in the country's economic and social development.


-----Original Message-----
From: Intelligence Unit
Sent: 29 January 2006 00:05
To: ATCA Members
Subject: Response: Ashutosh Sheshabalaya; Leung "Comprehending China"; Verton "Boycott Google Now"; Guptara; ATCA @ Davos: Rising concern about "Chindia"; Howell; Koithara; Bogni

Dear ATCA Colleagues

We are grateful to Ashutosh Sheshabalaya for responding to the five key questions posed at Davos. His answers are worth noting from the 'Chindia' perspective. He writes:

Dear DK,

Some thoughts on the questions at Davos below:

1. What should China and India do to maintain sustainable development and preserve the environment?

Broadly, I do not think that either of them will do more than they are at present, that is until they have attained a certain threshold in per capita income/living standards - in order to be able to pay for these goals. At the moment, even adjusted for purchasing power, China and India's per capita incomes are roughly one-third and two-thirds behind the world average (at USD 6,200 - before China's recent GDP revision, and USD 3,400 for India, against USD 9,300 for the world), and of course, very far behind the West. In the meanwhile, of course, the challenge remains - to minimize the environmental impact on the world of this rise, which is of course likely to be substantial, given the sheer size of the Indian and Chinese economies - once again key to the historical uniqueness of their (joint) emergence; these are not countries like Singapore or even South Korea and Japan, whose relative rise had little absolute impact on the world, especially given the often zero-sum realities of history.

Of course, this is not to say that economic growth on the one side, and sustainable development and environmental preservation on the other, are wholly incompatible. For various reasons, however, the perception in India and China - once the debate and discussion has been distilled to its essentials - is that environmental protection is a cost - in the short term. And, in the real world, it is difficult to refute this satisfactorily. It is also important to note that India already does have a very ambitious clean energy program (for example, a massive base of solar PV installations, four times more wind power than China, serious projects in biomass) and, more importantly, an unusually activist Supreme Court, which has taken the lead on environmental questions, both due to internal/institutional dynamics and because of public interest petitions by concerned citizens - very much part and parcel of India's democracy. In New Delhi, for example, which has the world's largest CNG conversion program, there was a clear need to address the growing cases of asthma in middle and upper-middle class schoolchildren in the 1990s, which kicked up a storm in the local press. Likewise, the Court's moves to have foundries in Agra and chemical plants in Gujarat closed down were driven because of its institutional responsiveness to points of need in the public. This kind of check, on the excesses of industrialisation, will go on. One can call it a minimal utilitarianism, but I do not think that India can afford to place anywhere near the same kind of (long-term) value on the environment as the West; it simply lacks the financial resources, and has other priorities.

2. What are the immediate steps needed to address climate change?

One really cannot talk of any more 'immediate' steps - that is other than what is already going on (and has been done for at least a decade). Still, most of the deadlock in international negotiations on climate is because of talks about China and India - as in Davos. This is one side of the picture. One also needs to talk of Chinese and Indians (may I say Chindians?), because, as you know, all calculations on emission are flipped upside down when we move from countries to per capita. On its part, climate change has always been integral to issues of international politics and economics, and I think one of the most immediate steps would be to bring China and India into an expanded G-10, and into the IEA (and by extension, India into the UN Security Council's P-5). It is a fruitless task to expect those whose emergence is of global concern (in this and other respects) to be outside the inner corridors of decision making about the world; the ripple effect of such a step, on, for example, the Indian bureaucracy, would be positive and considerable.

3. How can we create a global educational framework that fosters inclusivity?

With all its warts and blemishes, India's affirmative action program - incidentally, the world's oldest and most ambitious - can at least partly be a model for educational inclusivity.

4. How should educational systems be designed to respond to changing skill requirements?

My gut feeling and something to which I devote the last two chapters of my book Rising Elephant is that this is a question now urgently facing the West. The issue is especially urgent because the Western skills pyramid has begun to already hollow out, and will do this more in the longer term, as demographics begins to add to the pressure.

5. What should be done to close income disparities?

By what is already going on - faster economic growth for the bulk of the world's population (that is China and India). But then permit me to quote again from my book: "If the world's entire economic output of USD 47.4 trillion in 2002 is redistributed equally (as some anti-globalisation proponents wish for), everyone - Americans and Europeans, Indians, Chinese, Croats, Colombians, Fijians and Ghanaians - would have a per capita purchasing power of USD 7,526, that is, just after Russia's current USD 7,971, but still some way behind Mexico's USD 8,493. Though this would make Americans four times poorer than they now are, it would still be over three times the average Indian's income in 2002. Equal redistribution would of course be hardly desirable: the Soviet Union attempted such a miracle in the early 20th century; the Great Depression partially achieved it less than two decades later. Clearly, the world economy will have to continue growing to make levelling more than a zero-sum game, and part of this growth will involve new centres of productivity and excellence, even at the higher ends of the economic value chain."

But here we come to the crux of the problem (from the Western receiving end), which is something I discussed in Yale Global in August: "Through no fault of their own, Western workers face severe, structural handicaps in the global jobs battle. Their high-cost economies both underpin and reflect high standards-of-living in an increasingly connected and interdependent world. As giants like China and India, with significantly lower living standards than the West - but much faster growing economies - begin to close such gaps, the terms "cheap" and "expensive" will themselves be redefined. So, too, will the global exchange rate system anchoring such yardsticks."

On my part, I have very strong reasons to believe that due to the 'Chindia' phenomenon, the Dollar-Euro-Yen troika, within the next three decades, is going to face the same kind of scenario as Britain's withdrawal of the Pound from the Gold standard in the fateful inter-War years. I am currently writing further on this.





Ashutosh Sheshabalaya is the author of "Rising Elephant" [Common Courage Press, 2004]. Rising Elephant is a heavily-researched book about India's rise and long-term opportunity and challenge to the West. The book, reprinted shortly afterwards by Macmillan, quickly became a bestseller, and in late 2005 it was still in the Top 10 on Amazon.com's India listings and among the Top 25 books on Globalisation, both at Amazon and Barnes & Noble. Described as a "tour de force" by the Director of UBS Bank's Wolfsberg think-tank and as "provocative" by former Indian Deputy Prime Minister LK Advani, Rising Elephant has been reviewed worldwide.

Mr Sheshabalaya is a frequent speaker at conferences and seminars in Europe, India and the US. He continues to write for Yale University's Center for Globalisation and Washington's Globalist think-tank. A winner of the all-India National Science Talent Scholarship, he studied at the leading Indian engineering institution, the Birla Institute of Technology and Science. He went on to win the highly competitive Wien International Scholarship. Mr Sheshabalaya is married to a Belgian and is part of both New and Old India. Well before other analysts had set their sights upon this powerful and (to some) disruptive "India Phenomenon" on the world stage, he published a series of Indian market reports in the US, spotting and analysing opportunities. In total, he has led research projects for over 60 studies covering a wide range of industries. Clients include The Japanese Government, The European Commission, and Invest in Sweden Agency as well as Dow Chemical, DuPont, Ericsson, Fujitsu, Reliance Industries, Rhone Poulenc and St Jude Medical.

-----Original Message-----
From: Intelligence Unit
Sent: 27 January 2006 09:20
To: ATCA Members
Subject: Response: A Leung "Comprehending China"; D Verton "Boycott Google Now"; Prof Guptara; ATCA @ Davos: Rising concern about "Chindia"; R: Lord Howell; Admiral Koithara; Bogni; Sheshabalaya

Dear ATCA Colleagues

We are grateful to Andrew Leung for his submission "Comprehending China" in response to "ATCA @ Davos: Rising concern about 'Chindia'."

Andrew Leung has nearly four decades of experience in senior positions in the Hong Kong Government related to commerce, industry, finance, banking, transport, social welfare and diplomatic representation involving much interface with China. He has qualifications from The University of London, Cambridge University, The Law Society and Harvard Business School. He speaks Cantonese and Mandarin and reads and writes Chinese, including calligraphy. Andrew was invited to brief personally the Duke of York and the Lord Mayor of London prior to their China visits. In 2004 he was sponsored by the Economist as a speaker at the China conference in Berlin with the German Foreign Affairs Institute. Andrew has been invited to address numerous local and international forums on China, including finance houses, banks, institutional investors, large businesses, think tanks, senior officials, and business schools. He was twice sponsored personally by the US Government on month-long visits to brief the Chairmen and CEOs of multi-nationals in regard to China. He was awarded the Silver Bauhinia Star in the July 2005 Hong Kong Honours List. He is a Fellow of the Royal Society of Arts. He writes:

Dear DK

Re: Comprehending China

Amidst Davos's current 'Chindia' speak, I hope the following may enliven further debate.

Shortly before Christmas, the world was shocked with disbelief as China suddenly discovered that her economy was in fact some 17% larger, due to a hidden service economy the size of India. Yet this should not have come as a complete surprise. Many economic analysts, including those in international investment houses and the OECD, had long suspected that the rapidly growing Chinese economy should be much larger than suggested by her earlier statistics.

As there was gross over-reporting in the Maoist days, there appears to be massive under-reporting in recent years. Nevertheless, there has been no overriding reason for any deliberate under-reporting, not the least amongst her career bureaucrats. With China's break-neck growth, her ubiquitous small traders and service providers are notoriously difficult to track. And it has not been too long since China's statistical machinery has become much more professional and open. Her National Bureau of Statistics has a website and its reports are more readily accessible.

So, what lies beneath the dramatic speed of growth? As the awakened Dragon unleashes her economic might after centuries of slumber, there are clear indications that she has reached a major crossroads. 'Letting the few grow rich first' may have worked in the early days of Deng's Open Door Policy, but it has led to alarming unrest amongst the 'have-nots'. A decentralized country of huge opportunities finds itself gripped by seeping corruption at the lower levels, inadequate basic medical provisions, under-employment, water scarcity, environmental degradation, and unsettling regional imbalance.

After all, even at an increased per capita income of USD 1,200, China remains in the same rank as some African nations. 60% of its 1.3 billion population are peasants with income much below the national average.

It has also become increasingly questionable that China's export-led and energy-intensive development model is indefinitely sustainable. In face of the unbeatable Chinese price-quality ratio, jobs are being swept away across the globe, including those in developing countries. International energy rivalry has become more acute. Moreover, the world is not enough if a fifth of mankind should replicate the US pattern of per capita energy consumption.

It is instructive to see China's marked shift in its 11th Five Year Plan (2006-10), towards Balanced Development, Internal Demand, Agrarian Issues, Sustainable Development, Energy Saving, People-based Governance, Harmony and Peaceful Rise. Looked at in their internal and geopolitical context, these are by no means political slogans but recipes for survival.

China is also embarking on what I call its 'Long March for Brands', as heralded by its recent 3-day national conference on science and technology, opened in Beijing on 9 January by President Hu and Premier Wen, pledging to build a Nation of Innovation. China's relative lack of creativity and product piracy are serious hurdles to its long term development. It is salutary to realize that for example, an exported DVD Player priced at USD 32, costs USD 13 to manufacture whereas USD 18 goes to the foreign proprietary owner, leaving USD 1 profit.

As just reported in Newsweek, Professor Yang Fan of Renmin University of Politics and Law made an insightful remark. 'By 2015, China will have entered its 'greying period' (characterized by an aging population profile). This will be a big crisis, and the reason why we need to focus on a knowledge economy.'

I could have added that the limited time horizon is one of the reasons why China needs to grow fast in a stable environment, both internal and external, in order to build up in time the foundation for long-term survival. This also explains China's allergy towards the so-called 3 Ts (Tiananmen, Tibet and Taiwan) and its measured development path towards what I term 'Democracy with Chinese characteristics'.

China's stellar growth with stability has underlined its rightful claim that never in the history of mankind have so many people been lifted out of poverty in so short a time. This has come about not through aid but international trade and globalization in an increasingly interdependent world. Such interdependence appears even more important in addressing many of the transnational, global challenges facing individual nations and the world today.


Andrew K P Leung, SBS, FRSA


-----Original Message-----
From: Intelligence Unit
Sent: 26 January 2006 16:48
To: ATCA Members
Subject: Response: Dan Verton "Boycott Google Now"; Prof P Guptara; ATCA @ Davos: Rising concern about "Chindia"; Response: Lord Howell; V Admiral Koithara; R Bogni; A Sheshabalaya; Rise of Asia...

Dear ATCA Colleagues

We are grateful to:

1. Dan Verton from Virginia, USA, for his submission "Boycott Google Now" over censorship collusion with China; and
2. Prof Prabhu Guptara from Wolfsberg, Switzerland, queries the accuracy of China's GDP and growth statistics.

Dan Verton is Vice-President and Executive Editor of the Homeland Defense Journal in USA. He is also the author of two highly acclaimed books, "The Insider: A True Story" (Llumina Press, 2005) and "Black Ice: The Invisible Threat of Cyber-Terrorism" (McGraw Hill Osborne Media, 2003). Verton is the first-place recipient of the 2003 Jesse H Neal National Business Journalism Award for Best News Coverage for a series of reports on wireless network security threats at some of USA's largest airlines and airports. Verton has presented his research into the high-tech future of terrorism to the Department of Homeland Security, Air Force War College, US Secret Service, Library of Congress, NASA's Counterintelligence Division and colleges and universities across the country. Verton is a former senior writer for Computerworld magazine and Federal Computer Week in Washington, DC. His work during the past eight years has featured regularly on CNN, The History Channel, PC World, USA Today etc. Prior to becoming a journalist, he was an intelligence officer in the US Marine Corps. From 1994 to 1996, he served as senior briefing officer and analyst in charge of the Balkans Task Force for the Second Marine Expeditionary Force during the crisis in Bosnia-Herzegovina. He is also a former imagery intelligence analyst with the US Army Reserve. He writes:

Dear DK and colleagues

Boycott Google Now... This is a topic that I think is worth your time. The company has done more than agree to censor the search results of Chinese citizens. It has adjusted its technology to return search results that are only inline with official Chinese propaganda on topics such as Tiananmen Square and Taiwan independence.



Boycott Google Now

It's official. The last of the US's Internet search giants has opted to become a firewall to freedom. And that deserves a boycott. Google Inc, one of USA's greatest success stories and a technology company that has become almost synonymous with the Internet and all of the benefits of knowledge sharing the Internet has brought to the world, has put profit ahead of social responsibility by cooperating with one of the world's most repressive governments.

Google today launched a search engine in China that the company proclaimed would help bring more and broader categories of information to the desktops of China's 100 million Internet users [Google to launch censored results in China]. There's a slight problem, however, with Google.cn: Users won't find anything in their search results dealing with the 1989 Tiananmen Square uprising, exiled Tibetan leader the Dalai Lama, issues surrounding Taiwan's independence, or the terms democracy and independence.

But as one astute reader recently pointed out, Google's agreement with the Chinese government is even more insidious. The China version of Google not only filters out many so-called controversial topics, but for many topics it returns only official Chinese government propaganda. This is a brutal assault on the truth, and Google is complicit in this crime.

In case you haven't already guessed, the search engine's limitations aren't due to any technical glitch. And it certainly has nothing to do with any dubious Bush administration policy on electronic surveillance. To the contrary, this was a policy decision reached solely by Google executives, with the eager help of the tyrannical Chinese government.

Google is certainly not the first Internet company to lend a helping hand to the Chinese government's centralized and coordinated program to squelch freedom of speech and online information sharing. Google competitors Microsoft Corp and Yahoo Inc agreed to work with the Chinese government on public censorship more than two years ago. But the Google decision to lend tacit (and I would argue explicit) support to China's repressive human rights policies may prove to be more important and longer lasting. The one company that could have made a difference in the lives of 100 million Chinese citizens by standing up and speaking out against online repression has instead solidified the position of US online search giants as the firewalls to freedom.

Mickey Spiegel, a senior researcher in the Asia division of Human Rights Watch, agreed that the entry of Google into the exclusive China club has demonstrated the company's lack of social responsibility. The official party line espoused by Microsoft, Yahoo and Google "has been that this is the cost of doing business [in China]," said Spiegel. "But what's the next step? Censorship creates its own momentum. And they've all capitulated. You can either be a gateway to information or a gatekeeper. Google has chosen to be the gatekeeper."

I asked Google how it could morally defend such a business decision. Apparently, my search for a response was filtered.

It's also sadly ironic that the company whose corporate philosophy includes the self-proclaimed truth that "Democracy on the Web works," has decided to abandon everything the Internet and the Information Age stand for by cooperating with a regime that has imprisoned at least 69 people in the past 20 years for their activities supporting a free press or freedom of online expression. OK, Google founders Larry Page and Sergey Brin aren't exactly chips off the old Saddam Hussein block. But I think it's more than fair to say the company should revise No. 4 on its Top 10 Things Google Has Found to Be True to read "Democracy on the Web works: Unless you live in China."


Professor Prabhu Guptara is Executive Director, Organisational Development, at the Switzerland based Wolfsberg - The platform for Business and Executive Development, a subsidiary of UBS, one of the largest banks in the world - where he organises and chairs the famed Wolfsberg Think Tanks and the Distinguished Speaker series of events. Prof Guptara has professional experience with a range of organisations around the world, including Barclays Bank, BP, Deutsche Bank, Kraft Jacob Suchard, Nokia, the Singapore Institute of Management and Groupe Bull. A jury member of numerous literary competitions in Britain and the Commonwealth, he has been a guest contributor to all the principal newspapers, radio and TV channels in the UK, as well as media in other parts of the world. Professor Guptara supervises PhD work at the University of Fribourg, Switzerland and is Visiting Professor at various other international universities and business schools. He is a Freeman of the City of London and of the Worshipful Company of Information Technologists; and Fellow of the Institute of Directors. He writes:

Dear DK

Can anyone amongst ATCA members comment on the reliability of Chinese government figures? Am I right in thinking that, if the US, UK, Indian or Japanese government issues statistics, those can be checked by independent agents? But that this is not so in the case of China?

Further, can anyone comment on how the Chinese government calculates "growth"? For example, how does the Chinese government put into its books the question of "overcapacity" raised by Min Zhu, of the Bank of China, as you note below.

By the way, it is striking that no one seems to be able to tell how much of Pudong is rented out profitably. [Lying to the east of the city of Shanghai and at the east edge of the Yangtze river delta, Pudong New Area, is referred to as Pudong.]

yours sincerely




-----Original Message-----
From: Intelligence Unit
Sent: 26 January 2006 10:45
To: ATCA Members
Subject: ATCA @ Davos: Rising concern about "Chindia" - Asia's new economic might; Response: Lord David Howell; Vice Admiral Dr Verghese Koithara; Rudi Bogni; Ashutosh Sheshabalaya; Rise of Asia...

Dear ATCA Colleagues

The main opening theme at The World Economic Forum 2006 summit in Davos appears to be: The threat to the West from "Chindia" -- China and India -- referring to the increasing collaboration between the two countries on critical common issues including energy procurement, software, technology, mutual outsourcing and markets development.

China leapfrogs to become 4th largest

Adding depth to the core argument of the proceedings is Chinese government data released earlier in the day that suggests China has leapfrogged several European powers to become the world's fourth-largest economy, after the United States, Japan and Germany, leaving the UK, France and Italy behind. While the UK's gross domestic product (GDP) growth was below trend at 1.8% in 2005, China's economy continued its impressive rate of growth of recent years, up 9.9% over the year. That means Chinese GDP for 2005 was USD 2.23 trillion, officially larger than the UK's USD 2.0 trillion output. It is highly likely that China has leapfrogged France as well, though the latter's official GDP figures for 2005 have yet to be released. HSBC economist John Butler estimates France's output was around USD 1.95 trillion. With a population of over 1 billion, several times the population of France and the UK combined, it is only natural for China's economy to outgrow those of its European rivals.

Big five global challenges focus on "Chindia", Climate Change, Education and Radical Poverty

The big five questions facing the world which emerged from the 50 or so tables for submission to electronic vote were:

1. What should China and India do to maintain sustainable development and preserve the environment?

2. What are the immediate steps needed to address climate change?

3. How can we create a global educational framework that fosters inclusivity?

4. How should educational systems be designed to respond to changing skill requirements?

5. What should be done to close income disparities?

"I think the questions that emerged are the right questions," Laura Tyson, Dean of the London Business School, concluded. "The issue is solutions coming from the business community."

Integration of Poor majority with Rich minority

As one of the most important moments in history unfolds -- Asia's new economic might -- the issues that arise from it is what global society must confront and learn to navigate, according to Harvard University President Lawrence Summers. "What is happening in India and China ... the integration of four-fifths of the world where people are poor with the one fifth of the world where people are rich, has the potential to be one of the three most important economic events in the last millennium, alongside the renaissance and the industrial revolution," Summers said. He cautioned, "I fear that we have too much hope and too little fear."

Professor Jagdish Bhagwati at Columbia University spoke in stark terms as well, "Twenty percent of the population of the world has 80 percent of the income ... India and China are no longer willing to sit on the margins," he warned, calling for a more equitable distribution of wealth. "We have 40 percent of the world's youth."

"Chindia" debate reflects diverse Views and Dimensions

. China and India are outgrowing their stereotypes as simply sources of cheap labour for offshoring.

. Mr O'Neill, Chief Economist at Goldman Sachs, cited calculations that a third of total domestic demand in the world economy over the past five years has come from the so-called BRICs countries (Brazil, Russia, India and China), above the contribution from Europe - suggesting they could take up the slack if American consumers cut back their spending. "The world could cope with a US slowdown better than at any time over the past decade."

. The vigour of the world economy in 2005, bolstered by strong growth in India and China, has convinced many economists present that output will continue to rise healthily in 2006 and 2007. However, as to the prospects of China offsetting any weakness in the US, Min Zhu, of the Bank of China, worried about existing overcapacity in the Chinese economy.

. Stephen Roach, chief economist of Morgan Stanley, said the absence of a crisis in 2005 did not solve the basic problems of overstretched US consumers. This was, he said, "the year to look out for the end of the great American spending binge".

. Cheng Siwei, vice-chairman of the standing committee of China's National People's Congress, told participants that China's growth was on a sure footing. China saves around half its national income, much more than do comparable countries.

. Indian business representatives said the country had outgrown its reputation as simply an offshore back-office and software service centre, adding that China did not have a monopoly on manufacturing. "IT can't employ a billion people," said Anand Mahindra, vice-chairman of the Indian automotive company Mahindra & Mahindra.

. There was a realization amongst many that global integration and the technological advancements of recent years could bring traumatic change to Western countries that have grown comfortable and perhaps a little complacent.

. By embracing market principles, China and India have added hundreds of millions of inexpensive workers to the global labour market at precisely the moment when technology has rendered geographical location less important. "Downward pressure on real wages or employment (in the West) for a period to last up to 25 years," according to Laura Tyson.

. There was Concern at CEO level that the world may be breaking apart as opposed to coming together. For example, Peter Brabeck-Letmathe, chief executive of food giant Nestle SA, was downbeat, saying that he once hoped for a truly global society but "the dream is over." He said regions of the globe were drifting apart, separated by competition over oil and water, by differing attitudes and age demographics.


-----Original Message-----
From: Intelligence Unit
Sent: 05 January 2006 18:02
To: ATCA Members
Subject: Response: Lord David Howell; Vice Admiral Dr Verghese Koithara; Rudi Bogni; Ashutosh Sheshabalaya; The rise of the Asian Superpower - India - as a counter balance to China and Russia

Dear ATCA Colleagues

We are grateful to The Lord Howell for his personal views in regard to "The rise of the Asian Superpower - India - as a counter balance to China and Russia".

The Right Honourable Lord (David) Howell of Guildford, President of the British Institute of Energy Economics, is a former Secretary of State for Energy and for Transport in the UK Government and an economist and journalist. Lord Howell is Deputy Leader of the Opposition in the House of Lords and Conservative Spokesman on Foreign Affairs. Until 2002 he was Chairman of the UK-Japan 21st Century Group, (the high level bilateral forum between leading UK and Japanese politicians, industrialists and academics), which was first set up by Margaret Thatcher and Yasuhiro Nakasone in 1984. In addition he writes a fortnightly column for The JAPAN TIMES in Tokyo, and has done so since 1985. David Howell was the Chairman of the House of Commons Select Committee on Foreign Affairs, 1987-97. He was Chairman of the House of Lords European Sub-Committee on Common Foreign and Security Policy from 1999-2000. In 2001 he was awarded the Grand Cordon of the Order of the Sacred Treasure (Japan). He writes:

Dear DK,

I read your fascinating brief on your visit to India with a mixture of enthusiasm and unease. Enthusiasm because it is so good to see India rise to greatness again and take its place at the centre of the world scene. Unease because I see every sign that the Americans are going to mishandle the renaissance.

India cannot, and must not be patronised. I find quoted American remarks about 'binding India' into an American-dominated scheme of things, or 'helping India become a leading nation', or trying to line up India as some sort of counter-weight to Russia or China, both ominous and indeed very patronising, and therefore almost certainly counter-productive.

What mighty America needs today is not lackeys or lapdogs but true and trusted friends - and such friends mean people and nations which can be not only supportive but also candid, frank, occasionally restraining and dealt with as complete equals. America is slowly realising that it cannot go it alone and that its size and massive military strength by no means guarantee its invulnerability, nor qualify it to walk round the world trying to organize it on pre-conceived American lines. On the contrary.

But who will the Americans listen to? Not the EU which they regard, with some justification, as a basically anti-American combine. The best hope for a healthy and fruitful trans-Atlantic dialogue is to bring together the nations which are fundamentally friendly to America, pro-democracy and the rule of law but not just compliant tick-the-box followers of Washington's will. The best future role for India should be at the centre of such an alliance and strangely enough the infrastructure for just this already partly exists in the form of the 54-nation Commonwealth, which now contains at least six of the world's fastest growing and most dynamic economies, stretching across most of the continents and many faiths, with India at its very heart. India is indeed emerging as the jewel not in the Crown but in the 21st Century Commonwealth network.

I say 'partly' because I believe the Commonwealth, if it is to be an effective platform for handling globalisation (in a way that 20th century institutions are failing to be), will have to bring in by association other nations who share the same values. My surprise choice would be Japan, anxious now to be a 'normal' nation and to have a good, but less one-sided, relationship with the USA.

So imagine an alliance or coalition which included Japan, India, the UK and other key Commonwealth players like Australia, Malaysia and Singapore. That would be a grouping (with a third of the world's population and quarter of its GNP) to which Washington would both want to listen to and have to listen to. The world would then be a very much more balanced and stable place, I believe, and better positioned than it is now to deal with all the 21st century problems of terrorism, violent Islam, rogue states, proliferation, Chinese prickliness, and all the rest.


David Howell


-----Original Message-----
From: Intelligence Unit
Sent: 05 January 2006 09:20
To: ATCA Members
Subject: Response: Vice Admiral Dr Verghese Koithara; A Sheshabalaya; Rudi Bogni; Ashutosh Sheshabalaya; ATCA: The rise of the Asian Superpower - India - as a counter balance to China and Russia

Dear ATCA Colleagues

We are grateful to Vice Admiral Dr Verghese Koithara from Kerala, India, and Ashutosh Sheshabalaya from Belgium for their individual responses addressing strategic future alignment of India and corruption challenges respectively.

Vice Admiral Dr Verghese Koithara of the Indian Navy, now retired, is often described as India's finest strategic thinkers. He is the author of two important books: Crafting Peace in Kashmir - Through a Realist Lens [2004, Sage] and Society, State and Security - The Indian Experience [1999, Sage].

"Crafting Peace in Kashmir" presents a completely new perspective on the Kashmir conflict, this book argues that resolving the situation can be brought about through a 'peace strategy' rather than a 'war strategy'. Through an analysis of the conflicts in Northern Ireland, Sri Lanka and Palestine, Vice-Admiral Koithara draws parallels between the India-Pakistan conflict. He also presents reasons why a durable peace - based on the Line of Control becoming the settled border and the two parts of Jammu and Kashmir being given parallel and substantial autonomy - can be achieved in today's conditions. The book concludes that peace between India and Pakistan is possible based on political realism and that strategic solutions that safeguard the interests of both countries are available.

"Society, State and Security" asks: Can the Indian state reconcile the demands of human and national security? In a well-documented and wide-ranging analysis, Vice-Admiral Koithara contends that there is more to security than territorial integrity and the preservation of state sovereignty. He traces the development of the Indian state since independence, examines the impact of the external environment on the country, and contrasts the experience of India, China and Indonesia in their handling of security concerns. He examines the contemporary situation, impacts of the global system, and assesses the military and non-military dangers India is likely to face in the future. He delineates areas that are important for the security of both India and its people and recommends that in managing national security both the politico-military and socio-economic dimensions must be considered. He writes:

Dear DK,

I read with great interest your views on the future of India-US relationship after your visit to India. While I am very bullish on the economic, political and societal dimensions of the relationship, I believe it is misleading to think that there is going to be a great security partnership, a perception that could leave to mutual disappointment later.

Common interests underpin all strategic partnerships. In the India-US context these include economic relations, energy, terrorism, non-proliferation and Asian power balance. Economic relations is an arena where there is great scope for mutually beneficial expansion. Energy is of vital interest to both countries. There is a scramble today to build gas and oil pipelines, not only to achieve cheaper transportation but also to create strategically advantageous pathways of flow. Interests of countries, except of neighbours, often do not coincide here. Nuclear electricity generation is different, and here there is certainly good scope for India-US co-operation provided the NPT (Non-Proliferation Treaty) hurdles get sorted out.

India and the US have a vital interest in combating terrorism and WMD proliferation, and given Pakistan's involvement in both activities, the two countries have considerable scope for co-operation, especially in the intelligence field. Raising the quality of shared intelligence and its action-cycle speed have become critical. At the same time, military action in this context, except when integral to intelligence operations, is not seen as important as it was till recently.

Asian power balance is now the code phrase for managing China. The US strategic community is acutely sensitive to China's rise and the difficulty in engaging it economically while confronting it politically. The position of the US as the dominant Asian power is under growing threat. With Japan in relative decline and South Korea's dependability in question, the US wants to increase India's weight in the Asian power equation. However, views such as "Washington must not only acquiesce but support the active development of India's strategic deterrent" and that "India's nuclear weapons at some point could become an asset to the United States" (as a noted US analyst has recently argued) do not reflect broad strategic thinking in the US.

Today, the security establishments of India and the US share a largely common negative view of China, but this may not last very long. For one, India's problems with China are not structural. Growing power and self-confidence will gradually open many options for India relative to China, particularly since both are operating within a common international economic system. India's fastest growing foreign trade for the last three years is with China. While India needs US political support in the current unipolar phase, it cannot afford to get locked into a 'follow-the-US' line vis-à-vis China or any other country. A prominent US South Asian observer recently commented, "They (Indians) will ride our bus to the point where they think they can ride their own bus".

The US-India defence agreement of June 28, 2005 and the heads of government statement of July 19, 2005 are seen by many as not only presaging India's freedom from NPT, NSG (Nuclear Suppliers Group) and MTCR (Missile Technology Control Regime) constraints, but also as constituting an historic strategic realignment that would stand India well during the decades of US supremacy many see ahead. Some Indians also think that "the US will need India more to sustain its pre-eminence than India would need the US to (raise) its ranking in (the) international hierarchy".

I would like to suggest that, while India-US relations shall no doubt strengthen on the basis of economic and political fundamentals, the dramatic upturn in strategic relations, and its subset defence co-operation, that many predict is improbable in the long run. The US wants more than the limited partnership India once had with the Soviet Union, but India's national interests and domestic politics are unlikely to permit that. Moreover, serious practical problems exist in boosting nuclear, defence-industrial and military ties beyond a point.

If the July 19, 2005 statement is translated into action, not only will India's civilian nuclear industry escape its stagnation but India's defence industry, including its nuclear and missile sectors, will get a big boost. India's separation of its nuclear weapon programme could release not only it but also the missile programme from quarantine. This, in turn, could lower technology transfer barriers considerably in other defence fields. But can the Bush administration square the NPT circle for India? Domestically, there is the need to modify legislation including the 1978 Nuclear Non-proliferation Act. Today India enjoys considerable support within US Congress, but how Congress will act when it comes to changing major legislation, crafted after long consensus-building, remains to be seen.

There are other difficulties too. Many countries including China may not agree to the idea of NPT, IAEA and NSG treating India and Pakistan differently. On the other hand, if Pakistan comes in, there will be serious proliferation worries. There will also be concern that if NSG (and MTCR) guidelines are bent for India, then countries like China and Russia may exploit them for their own strategic and commercial advantage. Moreover, while the Bush regime may have a cavalier attitude towards NPT, most European countries, and indeed many influential quarters within the US, consider a strong NPT vital to contain WMD risk.

India too will face difficulties in keeping to its end of the bargain. Splitting civilian and military nuclear facilities shall not be easy. If India designates large chunks of reactor and reprocessing plant as military, they cannot feed into the power generation programme thereby hurting the latter's economic viability. If it designates too little, there may not be adequate fissile material for an uncapped weapon programme. Dividing R&D capabilities will be difficult too, considering that India has major R&D missions ahead, including ongoing weapon development, uranium enrichment, fast breeder development and thorium exploitation.

As for defence industrial co-operation, the June 28, 2005 agreement effectively states that each defence transaction between the two countries is to be looked at not only from the angle of its intrinsic worth but also from the angle of its contribution to strengthening the strategic partnership. This has major implications for India, as the beneficiary of this logic will be the seller which is the US. It will be argued that mutual privileging will help India too by paving the way for easier technology transfer. But to judge whether technology gain shall match purchase costs one must look at the scope there is for each.

With its military geared to operate in every part of the globe, the US has interest in developing military-to-military ties with as many countries as possible. The US has such ties, of varying intensity, with nearly 150 countries. India is particularly attractive because of its size and potential, the competence and infrastructure of its military, and its geographic position within Asia and relative to the Indian Ocean. India's establishment and strategic community understand this and have assessed that military co-operation will secure for India valuable US support in political, economic and technological domains. But domestic opposition to participation in 'coalition' warfare, especially if it involves 'boots-on-ground', is extremely strong, a fact inadequately reckoned with by many.

There is also the fact that Indian armed forces cannot be equipped anywhere near the US pattern. The US defence budget is 23 times the size of India's and its equipment budget over 50 times as big. This has clear equipping implications, considering that, in manpower numbers, India's armed forces is close to the US's in size. Moreover, the operational requirements and resultant hardware needs of the two countries vary considerably. Spending money on things like BMD (Ballistic Missile Defence) is affordable to the US and Japan, but not to India, especially since India cannot make technological gains relevant to its needs through such spending. The defence industrial co-operation road before the two countries is more boulder-strewn than many imagine today.

The US wants military sales to promote inter-operability and garner commercial benefits. US firms are keen to gain as big a share of India's defence market as possible, elbowing out the Russians and the French particularly. What they want to sell most are complete systems like F-16, F-18, C-130 and P-3C aircraft. Because of far bigger production runs, US companies can sell such systems, especially multi-decade old ones like those cited, cheaper than West European ones. On the other hand, new sub systems, which add considerably to weapon potency, will cost disproportionately more from the US and can also get mired in protracted clearance tangles. This is also true of 'current' major systems like PAC-3 Patriot missiles.

US defence firms do relatively little co-production. India, which is accustomed to progressively expanding local content in major weapon deals with Russians and West Europeans, will find the US harder to bend. US firms, in turn, will find dealing with the Indian public sector, which has a near monopoly of Indian defence production, arduous work. Despite much talk, there is little likelihood of Indian private companies entering the defence sector in a big way. Structural barriers are considerable both to their entry and to making attractive enough profits.

While the production sector of Indian defence industry will be happy with a reasonable amount of local production, the sights of India's defence R&D establishment are set higher. It wants the transfer of high-end technology and the sale of sub systems and components that would enable it to produce its own major weapon systems. But here US companies and the US government, for commercial and security reasons, are likely to be much less forthcoming than Russians or even West Europeans. A Brahmos (India-Russia supersonic cruise missile) type joint development and production deal is difficult to conceive with the Americans. No doubt, technologies approaching shelf life will be passed on, but that will be of little help.

Many in the two security communities see a window of opportunity today to forge a lasting US-India strategic partnership. The paralleling of a US desire to bind India quickly on its side vis-à-vis China and an Indian desire to use the US's current omnipotence as a ladder to move up globally is seen as having created this window. This is, however, a somewhat monocular view. India and the US are both choppy democracies containing many powerful interests and points of view. An objective analysis of the socio-political makeup of the two countries would show that while there is plenty of common ground to support a strong politico-economic relationship, there is not enough to sustain one centred on security interests.

With good wishes,


Verghese Koithara
Vice Admiral (Rtd), Indian Navy

The response to The ATCA comments of Rudi Bogni in regard to corruption in India follows from Ashutosh Sheshabalaya:

Dear DK,

I know I am diving into a bear's lair.

However, I believe, strongly, that one of India's problems has been the obsession of some of its elites with correcting "corruption", rather than seeing it (if not necessarily accepting it) as a fact of life. This is all the more true when corruption is closely linked to a pluralistic, multi-ethnic and multi-cultural country, burdened on the one side by the deadweight of massive poverty and the Sisyphus-like challenge of coupling the uphill task of massive economic development to a vibrant democracy - itself, of course, a historical first. But things are changing.

Without plunging too far into the philosophy of Edward Westermarck (or the lessons from Jack Abramoff), what I wish to point out is that a great part of India's corruption is connected simply to upward mobility - which has seen the lower middle classes enter the highest ranks of the administrative apparatus and the rural poor into political life; the assets of the much romanticized "Bandit Queen", for example, would have entitled her to a numbered Swiss bank account. The Indian system, with its unbelievable (and outside India, still barely-understood) excesses of social engineering has made sure of this. In other words, India's corruption is part of its commitment to equity, even if this has been at the price of (higher) efficiency - as in the case of China. But then, there is also the question of sustainability. Who can guarantee that the brisker and more "efficient" corruption of China will make its success more durable than, say, any of the erstwhile "miracles" of southeast Asia, who made the same kind of choice ?

I do not say corruption is good. I just say that, in India's case, looking at it through the lens of Gandhian purism on the one side and values of the rich West on the other, as India's elites have done, has simply been a systemic exercise in self-flagellation. Corruption has not gone away, or even been reduced. Instead, too much energy has been expended on "fighting" a losing battle. This, in several senses, has served to simply sap the collective Indian self-confidence and self-image.

What is now important is the fact that, thanks to the "virtual" (that is, the largely government license- and permit-free) infrastructure of India's IT and BPO sectors, and the other knowledge-based industries emerging in their wake - including those in higher-value manufacturing - there is a growing separation of power, certainly at the higher levels of bureaucracy, from the capacity to obstruct efficiency. In other words, corruption in India is becoming more discrete and less obstructionist, rather like it is in the West, and the gap will narrow as India reduces the tenfold gap with the West in average standards of living.

However, I think it will be some time before an Indian journalist (of the kind who have been mercilessly pursuing the Bofors case for the past two decades) sees fit to come on TV like one of their counterparts here in Belgium, who argued against a corruption trial for a former Belgian NATO Secretary General, whose resignation from that post was seen as having made him "suffer enough".



Ashutosh Sheshabalaya


-----Original Message-----
From: Intelligence Unit
Sent: 04 January 2006 20:53
To: ATCA Members
Subject: Response: Rudi Bogni; Ashutosh Sheshabalaya; ATCA: The rise of the Asian Superpower - India - as a counter balance to China and Russia

Dear ATCA Colleagues

We are grateful to Rudi Bogni for his personal views in regard to the impact of corruption on "The rise of the Asian Superpower - India - as a counter balance to China and Russia".

Rudi Bogni is the Chairman of Medinvest and lives between London and Basel. He is the former CEO, Private Banking and Member of the Group Executive Board of UBS AG, the largest bank in Switzerland. At present, he is a non-executive director of Old Mutual plc; trustee of the Prince of Liechtenstein Foundation; Accomandataire of Bertarelli & Cie; Director of America Cup Management and Kedge Capital; Chairman of the International Advisory Board of Oxford Analytica; Director of the International Council for Capital Formation and of Prospect Publishing; Member of the Governing Council of the Centre for the Study of Financial Innovation; and of the Development Council of Shakespeare's Globe Theatre. He writes:

Dear DK,

throughout my life I listened to politicians and political philosophers advocating the supremacy of politics and to economists and businessmen advocating the supremacy of economics.

From my early exposure at the age of 16, thanks to my hosting American family, to the heart of the US democratic process, I derived a strong conviction that sustainable economic development and the role of an influential global power can be achieved only through the right mix of democratic political vibrancy, economic freedom and non-denominational ethical practices.

You accurately pointed out the huge potential of the Indian democracy, as others have pointed out the potential of China. I put it to you that such potential will be converted into an actual and sustainable role of global power, only if ethics in government will become an entrenched foundation.

The Soviet Union had immense potential. It was not brought to its knees by external pressure (as some would have us believe), but it imploded under the pressure of the corruption of its administrators and of its system of government.




-----Original Message-----
From: Intelligence Unit
Sent: 04 January 2006 13:29
To: ATCA Members
Subject: Response: Ashutosh Sheshabalaya; ATCA: The rise of the Asian Superpower - India - as a counter balance to China and Russia

Dear ATCA Colleagues

We are grateful to Ashutosh Sheshabalaya, based in Belgium, for his personal views in regard to "The rise of the Asian Superpower - India - as a counter balance to China and Russia."

Ashutosh Sheshabalaya is the author of "Rising Elephant" [Common Courage Press, 2004]. Rising Elephant is a heavily-researched book about India's rise and long-term opportunity and challenge to the West. The book, reprinted shortly afterwards by Macmillan, quickly became a bestseller, and in late 2005 it was still in the Top 10 on Amazon.com's India listings and among the Top 25 books on Globalisation, both at Amazon and Barnes & Noble. Described as a "tour de force" by the Director of UBS Bank's Wolfsberg think-tank - Prof Prabhu Guptara - and as "provocative" by former Indian Deputy Prime Minister LK Advani, Rising Elephant has been reviewed worldwide.

Ten years before the market value of India's Infosys surpassed American giants EDS, Computer Sciences Corp, Unisys and Accenture combined, Mr Sheshabalaya explicitly predicted Indian software firms becoming "world leaders." He backed this up with a path-breaking 243-page study on Indian information technology published in New York in 1997, which not only forecast five-year export and revenues within a margin of 5%, but also profiled five of the eight branded product companies listed in a recent Indian Institute of Management study as trailblazers to a USD 7 billion market by 2010. Well before other analysts had set their sights upon this powerful and (to some) disruptive "India Phenomenon" on the world stage, Mr Sheshabalaya published a series of Indian market reports in the US, spotting and analysing opportunities ranging from IT and pharmaceuticals, retailing and auto-components to ethnic foods and today's hottest (new) topic - medical tourism. Alongside, he quantified and explained India's mysterious "middle-class", and saw rural consumer markets becoming the "real driver of (Indian economic) growth". In total, he has led research projects for over 60 studies covering a wide range of industries. Clients have included Dow Chemical, DuPont, Ericsson, Fujitsu, Reliance Industries, Rhone Poulenc and St Jude Medical as well as the Japanese Government, the European Commission, Invest in Sweden Agency and Find-SVP.

Mr Sheshabalaya is a frequent speaker at conferences and seminars in Europe, India and the US. He continues to write for Yale University's Center for Globalisation and Washington's Globalist think-tank. A winner of the all-India National Science Talent Scholarship, Mr Sheshabalaya studied at the leading Indian engineering institution, the Birla Institute of Technology and Science. He went on to win the highly competitive Wien International Scholarship. His schooling was at Rishi Valley, a top Indian residential school. Mr Sheshabalaya is married to a Belgian and is part of both New and Old India. He hails from an erstwhile family: both his parents were university Vice Chancellors - his mother a Fulbright Scholar at Minnesota and Wisconsin and his father an alumnus of Harvard, Columbia and Christ Church, Oxford. His granduncle was a Minister in the Nehru government, and then Governor of Bihar and Gujarat. He writes:

Dear DK

Happy New Year to you, too, and to all ATCA colleagues.

I agree wholeheartedly that 2006 will be a watershed year for India's relations with the outside world. For the US, aside from the growing political clout of the Indian-American community (now for some time the country's wealthiest ethnic group, and catalysts for business/economic links with India), a turning point in its approach to India was the Iraq War.

In the run-up to the Iraq conflict, several American experts (among others, from the Brookings Institution) brought into focus the advantages of a potential alliance with India, especially in terms of what traditional American allies lacked, namely military manpower and materiel, heavy-lift capability, and above all, combat experience - demonstrated decisively in UN peacekeeping operations in Sierra Leone, now in the Congo, and lest one forget, also in Somalia - when an Indian tank formation came to the rescue of the beleaguered Americans, who had been turned down by the Italians. Whatever be the eventual verdict about the shock 9-1 defeat inflicted on the USAF by the Indian Air Force during aerial exercises in February 2004, the US security establishment has certainly been convinced about the capabilities and professionalism of the Indian military. This is one reason why Americans (seldom agreeing to be "trained" outside) have begun enrolling in earnest at the Indian Army's Counter-Insurgency warfare school in Mizoram.

I believe that India's strategic engagements with other Powers will be multi-faceted, and multi-speed. They will be intrinsically reactive in relations with Europe and Japan, in other words, dependent on leverage-able reference points in US's own equations with the latter. In some senses, it is up to the Europeans and Japanese, both latecomers to the Indian Opportunity, to initiate and accelerate their engagement with an India whose hands - as it leapfrogs from the 19th to the 21st century - are already full. The price of non-engagement will become steeper in the future.

For example, in May 2005, one latecomer to Indian outsourcing, France's engineering giant Alstom, was forced to make up for lost time by committing as much as 20 percent of its 600 million Euro global R&D budget in one go to India. Its motive was a bid to catch up with GE, whose Bangalore R&D operations are now larger than at its "Global Headquarters" in the US, and whose Indian staff supply a full-sweep of services from back-office work to analytics and algorithms, advice on productivity enhancement for GE's factories in Europe, and computational fluid dynamics for jet engines.

I would be watchful about Indo-Russian relations. As argued in my book 'Rising Elephant', Russia's high-technology military machine is increasingly dependent for its existence on Indian orders; India is deploying more Russian-built state-of-the-art T-90 tanks and Krivak class frigates than Russia itself, and also uses the most advanced MKI version of the vectored-thrust Su-30 warplane (integrating French, Israeli and Indian avionics); the best example, however, is Brahmos - the world's only supersonic cruise missile, which uses Russian hardware and Indian software.

On the India-China front, too, I believe there will be considerable autonomous dynamics, that is, other than in a US-directed sense. One sign of this is the announcement by Onkar Kanwar, President of the Federation of Indian Chambers of Commerce and Industry, that China is on course to replace the US as India's largest trading partner within "the next two or three years" (UPI, December 15, 2005).

What is interesting here is the symbiotic workings of the Old and New India. The former is symbolized by the closely-knit Indian diplomatic (Indian Foreign Service) and bureaucratic (Indian Administrative Service) establishment, veterans at playing the Soviet Union and the US in the heady days of non-alignment. The latter, New India - consists not only of IT behemoths such as Infosys, TCS and Wipro, each of which had more market value at the end of 2005 than EDS, Accenture or Europe's four largest IT service firms combined - but also by the tightly-knit Indian-American international investor community, counting among them several doyens of the Forbes Midas list. Thus, while Microsoft saw fit to take an Indian IT partner within its first Chinese joint venture and Infosys announced investments which will make it China's largest IT services firm in the near future, India and China's oil/gas giants have announced plans to make joint bids where possible for upstream assets overseas.

In any event, it is getting to be India's time, and if this be as a counterbalancing force for peace in the 21st century, more than the pacifistic traditions of Mahatma Gandhi, it would be in keeping with those of Kautilya, a 3rd century BC Indian guru of precisely the "realistic statecraft" described by Secretary Rice.

Kind regards,


Ashutosh Sheshabalaya


-----Original Message-----
From: Intelligence Unit
Sent: 03 January 2006 20:23
To: ATCA Members
Subject: ATCA: The rise of the Asian Superpower - India - as a counter balance to China and Russia

Dear ATCA Colleagues

Happy New Year!

ATCA: The rise of the Asian Superpower - India - as a counter balance to China and Russia

The year 2006 is likely to be a watershed in India's foreign policy and international status. India will in all probability be recognised as one of the six balancers of power in the international system along with The US, European Union, China, Russia and Japan.

I have just returned from a fact-finding mission to India, which included various high level meetings with senior officials in the Central Government, National Security and Defence, Central Bank and large financial institutions. We also looked at a number of large scale local set-ups of foreign banks, insurance and reinsurance houses as well as multi-nationals, which are increasingly active through their captive subsidiaries. These subsidiaries are incorporated in India to exploit the growing market opportunities as well as to utilise the cost effective high quality English-speaking skilled-labour force - as a global back office - for their operations worldwide. Outsourcing is giving way to Captive Subsidiary In-sourcing.

The shifting status of India as a counter-balance to other regional powers is hinted in an article by The US Secretary of State, Dr Condoleezza Rice in the Washington Post on December 11, 2005. She has written, "For the first time since the peace of Westphalia in 1648, the prospect of violent conflict between great powers is becoming ever more unthinkable. Major states are increasingly competing in peace, not preparing for war. To advance this remarkable trend the United States is transforming our partnerships with nations such as Japan and Russia, with the European Union and especially with China and India. Together we are building a more lasting and durable forum of global stability, a balance of power that favours freedom."

In discussions with various Indian leaders, strategists and policy makers, the perception in India appears to have largely been that in recent years the international system has been sole superpower-dominated. However, The US Secretary of State now asserts that it is a balance of power, with India as one of the emerging economic and strategic six balancers. It is this new US realisation of India's potential which has led to its declaration that it will help India in its moves to become a world class power in the 21st century.

President Bush's visit to India in 2006 may herald US support for India's candidature to permanent membership of the UN Security Council, although hurdles remain. If the US recognises India and Japan as balancers of power in the international geo-political and economic systems - vis-a-vis China, Russia and The EU - it would logically follow that both those countries should also find a place in the permanent membership of the UN Security Council.

As a hard-headed practitioner of "real politik", the American moves in favour of India are not the outcome of altruistic motivations on the part of The Bush Administration but the result of cold economic and geo-political calculations. It would appear that behind these moves is President Bush, strongly influenced by his Secretary of State and strategic advisors. Their move towards India is comparable to those of the strategy of containment proposed by George Kennan at the outbreak of The Cold War and adopted by Secretary of State Dean Ackeson and Kissinger's secret visit to Beijing in 1971 to wean China away from the Soviet Union and also to persuade it to shed its Communist ideology. Now the purpose is to cultivate India as a strategic partner in the global balance of economic and geo-political power.

In the present balance of power China would appear to be an ultimate rival of The US and The EU, in economic and technological terms, which could only be counter-balanced by bringing India in their fold. Since war is no longer an option to sustain primacy, the US and the EU need a partner which will help them to sustain their primacy technologically and economically, ie, their cost-effectiveness, access to a skilled-base, productivity and innovation.

It is not difficult to infer that the US, and to some extent the EU, appear to have concluded that English-speaking India, which is multicultural, democratic, and federal with the largest skilled labour force in the world and with a relatively youthful demographic profile, in the near future is the most appropriate partner to deal with the rivalries posed by China and Russia. A rapidly growing India as a partner would help The US and The EU to sustain their primacy and their technological edge.

Though this has not been spelt out in so many words one can discern this plan in the pronouncements of Rice and Under Secretary Burns, according to the Indian elite we have spoken to. When such bold and near revolutionary initiatives are taken, the moves are with a small group as happened in the case of The Kennan plan or Kissinger's China opening. If India is to respond positively and constructively to the Rice initiative and take full advantage of it, to its own advantage as the Chinese leadership did in the nineteen seventies, there must be clear understanding in India about US plans which have been formulated to advance US interests. This process has already begun in 2005, under the expert leadership of Dr Manmohan Singh, The Prime Minister, and is likely to be consolidated further in 2006.

Institutions and Multi-Nationals which take early advantage of this opportunity will be the harvesters, whilst sustaining their long term competitive advantage.

Rice says in her article that at periods of unprecedented change "we must transcend doctrines and debates of the past and transform the volatile status-quos that no longer serve our interests. What is needed is a realistic statecraft for a transformed world." This advice, offered to her fellow Americans is equally useful to members of the European Union, India and to us at ATCA.


We look forward to your further thoughts, observations and views. Thank you.

Best wishes

For and on behalf of DK Matai, Chairman, Asymmetric Threats Contingency Alliance (ATCA)

ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic initiative founded in 2001 by mi2g to understand and to address complex global challenges. ATCA conducts collective dialogue on opportunities and threats arising from climate change, radical poverty, organised crime, extremism, informatics, nanotechnology, robotics, genetics, artificial intelligence and financial systems. Present membership of ATCA is by invitation only and includes members from the House of Lords, House of Commons, European Parliament, US Congress & Senate, G10's Senior Government officials and over 500 CEOs from banking, insurance, computing and defence. Please do not use ATCA material without permission and full attribution.

Intelligence Unit | mi2g | tel +44 (0) 20 7712 1782 fax +44 (0) 20 7712 1501 | internet www.mi2g.net
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