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The People’s Bank of China has ended a two-year peg to the dollar and manage the yuan or renminbi (RMB) with reference to a basket of currencies. As a result of this the currency closed at its strongest level since 1993. The Yuan is permitted to rise or fall 0.5 per cent from daily reference rate. It has been felt that Yuan has been kept at an artificially low level and has significantly contributed to the global financial crisis. 

In order to mitigate the possibility of third recession, the Asian Development Bank (ADB) has proposed the Yuan as an alternative to the US dollar.The ADB study, entitled “The Future Global Reserve System — An Asian Perspective”, recommended having Asia’s vast currency reserves play a more important role in stabilising the global financial system, through swap lines, the International Monetary Fund’s Special Drawing Rights (SDRs) and other borrowing. As per the ADB report undertaken by 11 economists including Joseph Stiglitz and Barry Eichengren, once the Yuan becomes more convertible, it can gradually grow to become an international currency and by 2035, it can be expected that Yuan may share about 3 to 12 per cent of international reserves. ADB says that a new global reserve system is absolutely essential if the global economy could be restored and sustained to prosperity.

A stronger yuan should boost consumption in China, while reducing its dependence on exports, thus helping the process of “global rebalancing. China is the world’s second largest oil consumer, using one in every 10 barrels produced. China is also the top consumer of iron ore, copper and aluminum and the world’s largest buyer of soybeans. As per the data of IMF, since 2000, global foreign exchange reserves have grown by staggering $6.15 trillion and stood at $8.09 trillion at the end of 2009, or 14 per cent of the world’s gross domestic product. China and Japan together hold about 43 per cent of global reserves. It has been understood that a stronger Yuan would also mark the end of an epoch for the Bretton Woods II strategy of governments trying to use a depreciated currency to facilitate export-led growth. 

It is pertinent to point out that China had let the Yuan to rise by about 20 per cent beginning in 2005, but halted its rise in 2008. China has kept the Yuan at
about 6.83 per dollar since July 2008, aiding the nation’s exporters and fuelling tensions with trade partners. 

Argument against Yuan as global reserve currency:
1. China has only $4 trillion economy whereas the USA has a $14 trillion. 
2. Yuan still is a pegged currency and dollars are free-float. China would continue to “manage” its currency through its heavy intervention by its central bank. It is necessary to go all-out for free-float for a global reserve currency. It is important to note that without full capital account convertibility, the currency cannot be called fully convertible. 
3.China cannot be accepted as a super power like USA and mutual political relations and equations with most of the countries with China would not permit the global transaction in the form of Yuan.
4. Most of the countries are capitalist and they would never trust Chinese socialist government in major developments and at the theoretical level they still view their economic interests as diametrically opposed to the socialist countries.
5. There is an absence of a large market for yuan-denominated bonds. One key sign of acceptance as a reserve currency would be if Western countries such as the U.S. purchased bonds denominated in yuan and sold at market rates. Until now, yuandenominated bonds have been sold only by Chinese banks, along with multilateral banks such as the Asian Development Bank and International Finance Corpor-ation, and the bonds have been sold only in China.

Argument for Yuan as global reserve currency:

1. The dominance of US has been considerably reduced and the relevance of Bretton Woods system needs to be re-evaluated. It has to be mentioned that Bretton Woods system had provided the basis for US dollar as the reserve currency. The world needs an alternative reserve currency. The U.S. trade deficit with China reached $71 billion for the first four months of the year, up 5.8 percent from the same period of 2009.
2. The US dollars ravaged by the global economic recession, despite the fiscal stimulus package of Obama administration, still not able to retrieve its old position.
3. There has been a perceptible trend in shifting the trends of economic dominance from West to East. 
4. China has maintained a growth rate of 8.5 per cent despite the global recession and this indicates the strong foundation of Chinese economy. China’s economy surged 11.9 per cent in the first quarter of this year and exports jumped to almost 50 per cent over a year earlier despite the Greek crisis. China is the biggest trading partner of European Union.
5. China holds as much as $2 trillion in reserves and recent step to permit Yuan to appreciate signals towards Chinese ambition of making Yuan as global reserve currency. China has unleashed an era of flexible currency. 
6. It has been argued that a world in a frequent phases of slowdown needs multi-currency reserve structure.
7. Noble Laureate Joseph Stiglitz has opined that if China goes for improved and flexible monetary regime, then Yuan may play a role a stabililizing role at the global and regional level. Commodities and oil also surged, as a stronger currency would give the world’s third-biggest economy more purchasing power to buy foreign goods, which would be positive for world trade, especially for commodity exporters such as Australia, Brazil, Canada and New Zealand. Crude rose more than 1 per cent, while copper and zinc traded in Shanghai both rose by their daily limits.
8. World Bank President Robert Zoellick has said in 15 years the Chinese yuan can become an alternative to US dollar as a global reserve currency, with China’s fast economic growth and efforts to internationalise the currency. Robert Zoellick, agreed: “Ultimately, that’s a good thing. And ultimately it’s good if you’ve got, I think, some multipolarity of reserve currencies to create, to make  sure that people manage them well.” 
9. Since mid-December 2008, Beijing has signed currency swap contracts worth 650 billion yuan (about $95 billion) with central banks in South Korea, Malaysia, Belarus, Indonesia and Argentina and Hong Kong. These swap accords allow other overseas central banks to sell yuan to local importers who want to buy Chinese goods.

“The test of our progress is not whether we add to the abundance of those who have much. 
It is whether we provide enough to those who have little.”- Franklin D. Roosevelt
By Kartik

The main aim of every Government is to ensure the welfare of all its citizens. To achieve this end, the Government constantly works and reworks its overall policy objectives to meet various demands and changing environmental situations. Among other policies objectives, one of the important being the Fiscal Policy, which implies a policy with regard to the revenue, expenditure and borrowing programme of the  Government. This Policy has four major objectives, namely, Growth, Stability, Allocation of resources and Reduction of inequalities. The fiscal reforms were initiated in the 1990’s as a part of the economic liberalisation. These reforms included expenditure reforms, tax reform measures, public sector restructuring and systematic reforms in the government’s borrowing process. The reforms were aimed at raising the rate of savings and investments, which further enhances the productivity of public expenditure. Fiscal consolidation (a policy aimed at reducing government deficits and debt accumulation) began in the 1990s with fiscal deficit declining from 6.6 per cent of the GDP in 1990-91 to 4.1 per cent in 1996-97; however, the situation took an ugly turn during 1997-98 and reached a level of 6.2 per cent of the GDP in 2001-02. It was in this backdrop that the Fiscal Responsibility and Budget Management Act of 2003 (FRBMA) assumed significance. This Act has been emulated from the successful experience of a similar legislation in New Zealand. The FRBM Act was enacted by Parliament in 2003 to bring in fiscal discipline and the government had notified the FRBM Rules in July 2004. The  rules included:

India and Canada : From Suspicion and unease to a strategic partnership

After breaking a jinx of almost 36 years of nuclear isolation, both India and Canada have signed a civil nuclear cooperation agree ment. Prime Minister Manmohan Singh, the first Indian Head of the Government to visit Canada after IK Gujral’s trip here 16 years ago, and his counterpart Stephen Harper, signed the agreement. The agreement has paved the way for supply of uranium and cooperation in research, development and radiation safety. Both countries have had a long but rocky relationship on nuclear cooperation after the nuclear test at Pokhran in 1974. Both the sides have also agreed to try and take the bilateral trade up to $15 billion in the next five years, up from the current level of around $5 billion. India has favoured for the early signing of the foreign investment promotion and protection agreement to facilitate its ratification and implementation. Other areas in which they agreed to increase cooperation are earth sciences and mining, transportation, natural resources, infrastructure, agriculture and agri-food cooperation and higher education.

It is important to note that Canada, which is the world’s largest producer of uranium, has become the eighth country with which India has reached civil nuclear agreement since the NSG lifted a 34-year-old ban on India to join global nuclear trade in September 2008. Other countries with which India has signed a nuclear deal are the 1. USA, 2. France, 3. Russia, 4. Kazakhstan, 5. Argentina, 6. Namibia, 7. Mongolia, and 8. Canada. The ninth one is likely to be Britain Four out of India’s 19 reactors are at Tarapur in Maharashtra with a capacity of 1,400 MW. Six are at Rawatbhata in Rajasthan with 1,180 MW, three at Kaiga in Karnataka with 660 MW and two each at Naroda in Uttar Pradesh, Kakrapar in Gujarat and Kalpakkam in Tamil Nadu, with 1,320 MW. These apart, six new reactors are also under construction, some at advanced stages, with a capacity of 2,720 MW. These are two at Kudankulam in Tamil Nadu with 2,000 MW, one at Kalpakkam with 500 MW and one at Kaiga with 220 MW. Canada has said that nuclear material supplied to India will be fully safeguarded in terms of agreement signed with International Atomic Energy Agency (IAEA). Besides that, the two Prime Ministers solemnly observed the occasion of the 25th anniversary of bombing of Air India flight 182 ‘Kanishka’ on June 23, 1985 that killed 329 people on board. The two Prime Ministers looked forward to the early signing followed by ratification and implementation of the Social Security Agreement. They noted that the Foreign Investment Promotion and Protection Agreement was under negotiation and looked forward to its early conclusion. These two agreements will make a significant contribution to the commercial and economic interaction between the two countries.

The Prime Ministers welcomed the signing of a Memorandum of Understanding on Earth Sciences and Mining and looked forward to signing a Memorandum of Understanding on Transportation, noting the scope for bilateral collaboration, trade and investment in the natural resources and infrastructure sectors. Agriculture
and agri-food cooperation represent another area of enhanced exchange and both leaders looked forward to the progressive implementation of projects identified under the MoU signed in January 2009. The Prime Ministers also noted initiatives to link Canadian and Indian universities and colleges, including in curriculum development and the creation of Chairs and Centres for Indian studies at a number of Canadian universities, such as, for example, those in the process of being
established at Carleton University and McGill University.

They also welcomed the initiative to organize the Festival of India in Canada in 2011. It would present a comprehensive range of Indian culture through performing arts, exhibitions, film festivals, food festivals, among others, as well as the upcoming exhibition of masterworks of Inuit Art from the National Gallery of Canada. It will be presented at the National Museum in New Delhi at the end of 2010.

Good for India:
1. The nuclear pact would cover areas of research and development in nuclear energy, nuclear waste management, radiation safety and environment protection. This will enable India to ensure better nuclear-energy safety norms. In this regard, it is important to note that Cameco, the Saskatoon-based uranium giant with mines in Saskatchewan and Kazakhstan, established a sales office in Hyderabad in September 2009.
2. India currently has 19 nuclear reactors at six locations, all operated by the state-run Nuclear Power Corp of India, with a capacity to produce 4,560 MW of electricity. The plan is to quadruple this capacity to 21,180 MW by 2020,  taking the share of nuclear energy in India’s total installed electricity-generation capacity of around 150,000 MW, from around 3 percent to a little over 10 percent. The ensured way for supply of uranium and cooperation in research, development and radiation safety would definitely contribute these nuclear installations for producing nuclear energy. 
3. Considering the growing needs, India’s needs for nuclear energy “are enormous” and it requires a lot more energy to make its development process a success.

Good for Canada:
1. The “agreement will provide access for Canada’s nuclear industry to India’s expanding nuclear market”. The Canadian industries would be benefited in India. Canadian companies are already looking to capitalise on this emerging market.
2. The pact has paved the way for Canadian firms to take part in India’s $40 billion nuclear energy business over the next 10 years.

The tension once again marred the peace in the region when Israeli, code named Operation Sea Breeze or Operation Sky Winds, intercepted the six ships Gaza Freedom Flotilla carrying some 10,000 tons of aid for the isolated seaside territory. Activists aboard the flotilla’s largest ship, the MV Mavi Marmara, clashed with Israeli Shayetet 13 Special Forces as the commandos abseiled onto the deck of the vessel. Nine IHH activists were killed by the Israeli troops and seized 682 persons. The flotilla, organized by the Free Gaza Movement and the Turkish Foundation for Human Rights and Freedoms and Humanitarian Relief (IHH) was carrying humanitarian aid. IHH is a Turkish NGO established in 1992 and officially registered in Istanbul since 1995. 

The Gaza area has been blockaded by Israel for three years. The Israeli government had urged the flotilla not to try to breach the blockade before the ships set sail from waters off Cyprus and offered to take some aid in for them. The Gaza Strip has land borders with Israel and Egypt, and a sea border on the Mediterranean. Egypt and Israel largely keep their borders with the territory sealed. After the Hamas takeover of the Gaza Strip in 2007, Israel tightened the blockade of the Gaza Strip. Israel argues that the blockade is necessary to limit Palestinian rocket attacks from the Gaza Strip on its cities and to prevent Hamas from obtaining other weapons. This act of Israel has been condemned by most the nations of the world. Israeli Prime Minister Benjamin Netanyahu had to abruptly cancel his planned meeting with President Barack Obama in Washington to rush home. Israel established the inquiry after a widespread international condemnation against the raid, but rejected a United Nations proposal for an international probe. Israel has named its own threemember “Independent Public Commission”, all of them Israelis, along with two international “observers”, Lord David Trimble, a Nobel Peace laureate from Ireland, and Brigadier General Ken Watkin, a former judge advocate general of the Canadian military forces. The military investigation, headed by retired Major-General Giora Eiland, is examining the operational aspects of the takeover of the flotilla. An internal Israeli military investigation into the takeover of an aid flotilla to the Gaza Strip has revealed flaws in operation planning, and in the way naval commandos were used to seize the ships and criticised the faulty pre-raid intelligence.

Implications:
1. The global reaction appeared likely to increase pressure to end the embargo that has plunged Gaza’s 1.5 million residents deeper into poverty. As a result of this the key regional ally Turkey withdrew its ambassador, the U.N. Security Council held an emergency session, the British foreign secretary demanded an end to the blockade of Gaza, and Jordan called Israel’s raid a “heinous crime. Britain has said that Israel’s restrictions on access to Gaza must be lifted in line with Security Council Resolution 1860.
2. Obama voiced “deep regret,” over the raids. Clinton has said that ultimately, the solution to this conflict must be found through an agreement based on a two-state solution negotiated between the parties. 
3. Russia has said that Israel’s deadly raid on an aid flotilla for Gaza was a tragedy that demands detailed investigation and must not be repeated.

Israeli contention and action:
Those who are attacked in the raids are part of the IHH, which is a radical Turkish Islamist organization which has been investigated by Western governments and by the Turkish government itself in the past for their links with terrorist organizations. On the directions of UN, Israel has released the 620 of the 682 detainees and deporting them back to their countries. 

Overall impact: 
It is a sad event in the light building peace in the region. The tension in West Asia is bound to escalate and the peace process is going to be adversely affected. The concerned powers must realize that without sacrifice of pieces CURRENT INTERNATIONAL of land, the peace cannot be restored back in the region and if instability continues then the whole purpose of life is over. The policy of appeasement must be analyzed under this background. It is not going to yield any major results and a peaceful solution to such an intricate problem is bound to be found beyond the pale of policy of appeasement, and alignment and realignment.

The history has shown merciless trends of ethnic violence and for the parochial interests humanity has suffered a lot. An ethnic violence has a long-drawn history of mutual grievances. The sudden riots in Osh, an extension of Ferghana Valley, and Jalalabad had a long background mutual discomfort. The Ferghana Valley, where the violence occurred, is a tinderbox of ethnic conflicts. The borders of the three Central Asian states – Kyrgyzstan, Uzbekistan and Tajikistan – that converge in the fertile valley were arbitrarily drawn by Joseph Stalin more than 80 years ago. 

Four days of rioting left an estimated 2,000 people dead and some 4,00,000 displaced, of whom about 1,00,000 fled to neighbouring Uzbekistan. Seventy per cent of the buildings in Osh, second largest city of Kyrgyzstan with a population of 2,50,000 people, were torched. The recent genesis of the ethnic violence can be traced back to the second “Tulip Revolution.” President Kurmanbek Bakiyev, who came to power as a reformer in the post-Soviet state, was overthrown and took refuge in Belarus under Alexander Lukashenko. Roza Otunbayeva has assumed as the interim leader of Kyrgyzstan. Many expected Moscow to respond with the same resolve to the crisis in Kyrgyzstan, where it has a military base; Kyrgyzstan is also its ally in the Collective Security Treaty Organisation (CSTO), a defence bloc of seven former Soviet states, which also unites Armenia, Belarus, Kazakhstan, Tajikistan and Uzbekistan. The clashes were the worst ethnic violence to hit impoverished Kyrgyzstan since it gained independence with the collapse of the Soviet Union nearly two decades ago.

Background: There are between 700,000 and 1,000,000 Uzbek residents in 5.5-million-strong Kyrgyzstan, but in the Ferghana Valley they form the dominant and fastest growing ethnic group, prompting Kyrgyz fears of a Kosovo-like situation. The growing disparities between the two ethnic groups have created a sense of deprivation. Kyrgyz residents resent the fact that their enterprising Uzbek compatriots dominate the local economy, while the Uzbek community complains of discrimination in official jobs and language rights. There is a deeper distinction that contributes to animosities: the Kyrgyz are traditional nomads, while the Uzbeks are farmers. Uzbeks and Kyrgyz in the north mostly supported the interim government, while Kyrgyz in the south largely backed Bakiyev.

The recent causes of violence are not very certain but a number of theories are assumed and they may be enumerated as:
1. The role of Bakiyev is seen as his political and family base is located in the conflict zone.
2. During both the 2005 “Tulip Revolution” and the April 2010 events – which culminated in President Kurmanbek Bakiyev being driven out of the country – criminal groups took an active part in the change of government, providing detachments of storm troopers to the politicians.
3. Russian role has been also seen as it was annoyed of the U.S. base at Manas airport near Bishkek, the Kyrgyz capital. It is to note that the US-led coalition in Afghanistan has used the Manas base since US military operations in Uzbekistan ended five years ago.
4. The nascent stage of state formation, chronic problems of poverty and economic disarray, gross mis-governance, rampant corruption and cronyism, incessant clan struggle, weak regional integration processes, and so on have also contributed a lot to the sense of insecurity of the people.
5. Both Afghanistan and Kyrgyzstan suffer from the absence of any regional security architecture. There has been no regional initiative to address the Kyrgyz crisis. And the role of Shanghai Cooperation Organisation (SCO) is limited and far from effective in resolving the contentious issues.
6. Besides that neither the Collective Security Treaty Organisation (CSTO) nor the North Atlantic Treaty Organisation (NATO) — in sum, neither Russia nor the U.S. — has shown willingness to depute peacekeeping forces to Kyrgyzstan despite the desperate cry from Bishkek for intervention by foreign forces to put down the violence. 
7. It is only through patient economic reconstruction that the roots of instability can be eliminated in Kyrgyzstan and Afghanistan. Whereas the Afghan economy was devastated by three decades of modern war, the Kyrgyz economy got derailed with the disintegration of the Soviet material supply system. In both the countries, the viable economic system has not created and as a result of this a lot of speculation and deviant tendencies use to cripple the law and order of the country. Kyrgyzstan’s vote for parliamentary form In order to resolve the on-going crisis the more than 90 per cent of Kyrgyz voters backed radical changes from a presidential to a parliamentary form of government. Basically four issues were involved in the referendum: 
(a) a new constitution, which would reduce the powers of the President and make Kyrgyzstan Central Asia’s first parliamentary republic; 
(b) the interim government. If endorsed, Roza Otunbayeva will remain interim President until December 31, 2011; 
(c) abolition of constitutional court, which the interim government claims was heavily influenced by allies of an ousted President; and 
(d) the constitutional court’s powers, will now be transferred to the Supreme Court. The Constitution approved would devolve power from the President to Parliament. This will make Kyrgyzstan the first state in Central Asia with a parliamentary form of government. Kyrgyzstan will adopt the new political system this year itself after elections to Parliament are held within the next few months. Roza Otunbayeva, the interim President, called the referendum a success. Otunbayeva has said members of her interim government will continue to pass necessary legislation until October 2010, when voters elect a parliament.

Reactions:
Russia: It has expressed doubts about the viability of the new political system. Russian President Dmitry Medvedev has expressed bewilderment at how a country ravaged by bloodletting and instability would transform itself into a democracy. Kyrgyzstan’s neighbours as well as China and the United States are afraid that the parliamentary republic will completely finish off the Kyrgyz state.  China: Chinese trade with Kyrgyzstan has been affected. China’s involvement in the crisis has far been limited to offering 5 million yuan ($732,000) worth of medicine, medical equipment, food, drinking water, blankets, and tents, while flying out almost 1,300 Chinese nationals from the battle-scarred city of Osh.

Impact of the violence: It holds out grave implications for regional security and India cannot  remain impervious to them. Kyrgyzstan too is a land-locked country like Afghanistan that at once becomes highly susceptible to foreign interference. Further, the deepening  crisis in Kyrgyzstan contains a mirror image of almost all the elements associated with the Afghan civil war. The international diplomacy over the issue of ethnic violence will have a direct impact on the politics of Afghanistan. India must be watchful under these circumstances and any major change in the power equation has a direct bearing on the stability of the region.

CONFERENCE THEME NOTE

International Arbitration is the preferred choice of multinational business entities to resolve their commercial disputes. Arbitration is increasingly becoming popular with parties in India to settle their international as well as domestic commercial disputes. It is believed that claims ranging to several thousand Crores of Rupees are locked up in construction disputes alone in India. Given the mammoth investment that has been proposed for infrastructure projects in India (which would include substantial foreign investment), the next decade will see a tremendous increase in infrastructure related disputes arising from India being resolved through International Arbitration.

With a view to providing a focus on the emerging trends in International Arbitration, the Construction Industry Arbitration Council (CIAC) under the patronage of Construction Industry Development Council, India (CIDC) and with the support of United Nations Commission on International Trade Law (UNCITRAL), Asian-African Legal Consultative Organization (AALCO), and the Singapore international Arbitration Centre (SIAC) will be organizing a conference on “Emerging Trends in International Commercial Arbitration” from 18th to 19th December 2010 at New Delhi. This conference will not only deliberate on the emerging trends in International Arbitration but will also focus on best practices in this area.

The topics to be discussed will include a comparative analysis of institutional arbitration versus ad-hoc arbitration, a discussion on the new UNCITRAL Arbitration Rules 2010 (which replaces the 1976 edition of the Rules), the new SIAC Rules to be adopted in the latter half of 2010, the new IBA Rules on taking of evidence in international arbitration that was adopted in May 2010, documents-only arbitration and the legal issues that arise in the context of Online Dispute Resolution / Cyber Arbitration.

The session on Online Dispute Resolution would be of particular interest as it is a relatively new topic in India. While dispute resolution processes are required or are in place for disputes that arise out of usage of Internet or in Electronic Commerce, Online Dispute Resolution for all kinds of disputes (including infrastructure related disputes) is something that might become very popular in the future. The legal issues that might arise in this context would be discussed during the Conference.

Online Dispute Resolution is likely to present a convenient platform for a large number of SMEs and individuals to pursue their claims online and get a binding decision in a cost efficient and less time consuming manner. It might also assist in the Government’s and the Judiciary’s mandate for speedy resolution of commercial disputes.

The development of Online Dispute Resolution in India would find legislative support in the Information Technology Act, 2000 which provides for recognition of electronic records and digital signatures. The legal issues in this context would also be deliberated at the Conference.

Apart from Online Dispute Resolution, other emerging trends in International Arbitration as enunciated above would also be discussed and debated.

Who should attend the conference?

Arbitrators, judges, lawyers, in-house counsel, legal officers, engineers, project managers, senior government officials, Small medium enterprises, Bankers, Insurance agencies, academicians, policy makers and all those involved in dispute resolution, especially professionals associated with the construction industry as well as the IT Industry.