MonitorsPublished on Jul 15, 2019
Examining ‘Dollar Bonds’ in the Indian budget, drug trafficking in Myanmar — and other news from South Asia.
South Asia Weekly Report | Volume XII; Issue 28

India: Is ‘dollar-bonds’ option in budget a wise decision?

N. Sathiya Moorthy

Even as Finance Minister Nirmala Sitharaman’s maiden budget of Modi 2.0 has received bouquets and brick-bats like those of her predecessors since Independence, there is one aspect where the Government and the polity should think deeper than already, before implementing the same. The ‘dollar bonds’ way to attracting foreign investments comes with a greater sense of insecurity, both in the economic and political sense.

There is no way this budget, or any specific provision, is going to be defeated in Parliament. True, the ruling BJP-NDA is still short of a majority in the Rajya Sabha but then Modi 1.0 had crossed that hurdle effortlessly. Non-NDA friends of the BJP may support such provisions, as in the past. Alternatively, budget proposals fall under the category of ‘money bills’ anyway, and the Rajya Sabha has only a review/recommendatory role, with no veto-power of any kind.

The ‘dollar bonds’ refer to the Government of India floating 10-year maturity bonds that are floated in the market, to be purchased and paid back in US dollars. The interest too needs to be paid back in dollars, not in Indian rupees. It would mean that as and when repayment comes, there would be a massive outage of forex reserves. At that point, it could harm the nation’s economy in very many ways unless the economy had grown leaps and bounds. Or, else, the government of the day should have alternate plans to face the situation, which at present is unpredictable, to put it mildly.

Unpredictable and worse

Economists have already cautioned the policy-makers, how even in the best of global economic environment, forex market is wholly unpredictable. That is as far as normal forex situations and reserves go. The nation only needs to recall the economic crisis of the late eighties, which was measured in terms of forex reserves available to meet routine expenses like meeting the usual import bills. The more positive Economic Reforms regimen was a result of the forex crisis, but the fact that the nation had to pledge its gold reserves in the Bank of England is a tale that the policy-makers need to remember, even more.

In the modern world, nations run on economy, and economy runs on forex. Yet, the role of a nation’s sovereignty in terms of upholding national pride should not be allowed to be undermined. It is more so in the case of a nation such as India, whose multi-religious, multi-linguistic and multi-cultural aspects to nationhood are unique and yet fragile. Nothing thus should be done to tempt or risk this sovereignty of the nation, including by the way of economic hyper-liberalism.

The nation has to look back only at the past decade of the economic travails faced by some of India’s biggest private sector industrial houses. At least some of them are in irretrievable red, owing to their excess dependence of ‘dollar-loan’ way. When their unilateral planning went bust, so have they too.

As is known, those corporates in particular borrowed when the dollar was on a low-earth orbit (say, on the wrong side of the forties) with a calculated repayment at Rs 32-35 per dollar. In-house economists even patted themselves on the back for making more money/dollar for their companies in the process. Their calculations went wrong, as the dollar sky-rocketed to the other end of the earth’s orbit, and that was it.

As coincidence would have it, some of these bust-companies invested heavily on infrastructure projects, opened up in a big way by the Dr Manmohan Singh-led UPA-1 & 2. Unfortunately for them and nearly unknown to the government, environmental activists, political opponents and the nation’s judiciary and green law bodies joined hands, as if they had ‘conspired’ together. This resulted in delayed commissioning of these projects, or slow progress in many and on most fronts, which is what the economic reforms regimen had promised to do away with. The result is there for everyone to see.

At the end of the day, governments and private corporates stand almost on the same plane when it comes to managing or manipulating forex markets. Certainly, as we can foresee for the coming decade or so, when the proposed dollar-bonds would mature for repayment, India is not expected to be able to command and control the foreign market. Unlike US Fed’s rate-cuts and other investment-initiatives, the RBI’s moves of the kind would not affect or impact on the global investor mood -- then as it is now.

Investor identity

Another crucial aspect of dollar-bonds is the identity of the owner. It is assumed and in good faith that dollar-bonds of the proposed Indian kind are often purchased by professional and/or institutional investors, who look only at his margin and money movements down the years. True enough, some of them at least are governmental institutions, and are often feared for their ability to make and mar third-nation economies, though there are not many known cases of forced surrender of those third nations.

India is unique in this respect. It has an economic super-power in China as a continuing adversary, or, that is what the nation and the government have to eternally guard against. Pakistan may not be a big player against India in the imaginable term, even two or three decades away. Yet, the way the government panicked over ‘fake currency’ in Indian hands and cited it as among the main reasons for ‘demonetisation’ under Modi 1.0, policy-makers cannot ignore the ‘nuisance value’ of Islamabad either.

In such a scenario, there is no guarantee that even improved India-China relations could deter Islamabad from not playing mischief with the Indian bond, in any newer way than is known. After all, a nation that had thought of cross-border terrorism as a ‘military tool’ to hurt India the most after convincing itself that a conventional war could not be its cup of tea again, post-Bangladesh, should be credited with better imagination and insensitivity.

It is thus anybody’s guess as to who could be the real owner/holder of the Indian dollar-bonds, and what he could do with it to target Indian economy as an extension of the continuing cyber-war on the nation. Unlike in the case of state-sponsored terrorism and cyber terrorism and war, the rules of the new game may not have been defined, for India to approach international organisations like the UN for relief.

Be it as it may, whatever relief as may be offered at the time may not tantamount to third nation or a global institution rushing to India’s economic help, to retrieve the forex or the economy as a whole. If so, that would come with another price-tag, be it from individual western nations or those like the World Bank and the International Monetary Fund (IMF). India needs to learn from the ‘East Asian fiscal crises’ of the nineties, which happened at a time when the Indian economy was recovering after the limited forex crisis of our own.

Communal harmony

Then there is the smaller or bigger evil of issues such as ‘communal harmony’. International investors are the most sensitive breed under the sun, and they could quiver at the very idea of communal harmony and the like in the host country upsetting marketing/investment climate(s). Labour trouble is another, though over the past decades of economic reforms, there has not been anything huge, as in some European nations, over the past decade or so.

Granting that the government has ways to check the authenticity and credibility of initial investors in the dollar-bonds, as long as there are provisions for bonds-transfer and sale during the interregnum until maturity, there is no way the government can actually undertake background check of the transferees at every turn. At a time when the ‘holier-than-thou’ international NGOs (INGO) have mastered the art of covering the track of their original source(s) of funding, the Indian policy-maker has to provide for the possibility in the case of dollar-investors, too.

The government yet can hope that genuine corporate-investors, be they FDIs, FIIs and even dollar-bond buyers, could become India’s constituency in big, western economies, to smoothen political edges, especially if and when controversies of the communal or other ideologies arise between the two. There is nothing to show that third-nation corporates had intervened on India’s behalf on issues such as these.

Then there is the NRI investor-class, who at one point were expected to boost the Indian economy through direct investments. Again, it is a failed calculation. Their support for India, at best, is political and there again seems to becoming party and ideology-centric. However, they do not have the capacity to influence Indian voters after a point, especially without knowing what the future beholds for the latter.

These are also constituencies, and it is more so in the case of foreign MNCs that beyond a point, whose concerns would be protecting their markets and brand-value, not the Indian or any other host-nation interests in their parent-nations. Thankfully, there is nothing to suggest that it has happened already.

But then a ‘market boycott’ of third nations in their main-markets or investor-country has encouraged MNCs to enforce parent-nation laws and practices, in matters such as child labour, gender-abuse and all positive aspects of social harmony and equality. Extending it to cover other areas of INGO interests may not be too far, if there is a determined individual or nation, out there to use/abuse it as a ‘non-lethal weapon’ on the Indian Union, now or later!

It is in this overall background that the Indian policy-makers may have to re-visit the dollar-bonds proposal, to provide in-built safeguards against all possible and prospective threats to national security and the nation’s economy. Alternatively, allowing the scheme to die a natural death and replacing it with the tested route of further incentivising FDI and FII, where the Government of India can still call the shots, in terms of national crises, be it to the economy or to the security – or, both.

Myanmar: Fighting drug-menace, with Indian help

Sreeparna Banerjee

New Delhi hosted a two-day meeting from 9 July between India and Myanmar on the efforts to curb drug trafficking between the two countries. During the meeting, India explored with Myanmar coordination and solid steps for checking drug trafficking between them.

Drug-trafficking remains an issue of contention between both nations which share a 1643 km long border. Myanmar’s Sagaing region and the Kachin state share the border with the Indian northeast States of Arunachal Pradesh, Nagaland, Manipur and Mizoram. Terrain on the Indo-Myanmar border is semi mountainous with steep slopes covered with dense forest, perennial and seasonal rivers with numerous waterfalls. Cross-country movement is extremely difficult and is restricted to existing tracks only. Thick vegetation restricts both ground and aerial observation. Small villages in the border areas have tribal population, who share affinity with population on both sides of the border. Cross-border ethnic ties have facilitated in the creation of safe havens for various northeast insurgent groups as well as propensity towards drug addiction in and around Myanmar.

Drug capital

It is well known that Myanmar is the world's second-biggest opium producer after Afghanistan. It is an integral part of the Golden Triangle that accounts for the highest percentage of opium cultivation in Asia. The Golden Triangle refers to the region between the borders of Myanmar, Laos and Thailand. Within Myanmar, cultivation of opium is highest in Kachin, North Shan, South Shan and East Shan. It is interesting to know that many farmers rely on the drug business.

By some estimates, drugs once accounted for 50% of the nations GDP. Though the government have taken initiatives in the form of providing incentives to the families growing opium poppies so that they can come out of their age old business but in some quarters the effort seem to have remained futile. Nearly 90% of all the opium is grown in the north-eastern Shan state, where government forces continue to battle ethnic rebels. Myanmar has been battling conflicts in its border regions for decades and the unrest has long underpinned the drugs trade.

In a newer attempt methamphetamine production is reaching new heights as well. The drug lords have turned to manufacturing massive quantities of amphetamines and methamphetamines which can be produced cheaply in small, hidden laboratories, without the need for acres of exposed land.

Related health issue

In 2017, it was estimated that there were 220,000 people living with HIV. The UNAIDS 2017 report estimates that the people who inject drugs (34.9%) to be the chief reason for this epidemic. In 2016, the government has pledged $15 million for HIV treatment including ARVs and other commodities and $1 million for the procurement of methadone. The Myanmar Health Sector Coordinating Committee (M-HSCC), established as a part of the Nay Pyi Taw Accord in 2013, has the broad mandate as the coordinating body for all public health sector issues.

SAW, neighbourhood, drug trafficking, Myanmar, budget, dollar bonds, South Asia Photo: Getty Images

Critically, a large proportion of people living with HIV in Myanmar do not know their HIV status, while stigma, discrimination and late diagnosis present substantial barriers to improving health outcomes. Indeed, approximately half of the people living with HIV are still not receiving life-saving antiretroviral therapy. There are reports of new cultivation areas opening up in Sagaing region that borders with the Indian states of Manipur and Nagaland.

Indian concern

As per India’s National AIDS Control Organisation (NACO) 2017 report, the highest prevalence of the disease has been recorded in India’s North-eastern States, namely Manipur (1.15%), Mizoram (0.80%) and Nagaland (0.78%) which shares border with Myanmar. Injecting Drug Use (IUD) remains the chief driver of HIV AIDS. IUD also remains the chief driver of HIV AIDS in these States, hinting at the deeper social and economic roots of the disease.

Manipur is closer to the drug circuits of Shan Hills and Tiddim Kachin regions of Myanmar. This provides an easy access and means of smuggling drugs to different part of the world, making Manipur the transit State. Manipur has the highest estimated adult HIV prevalence of 1.15%. Also, heroin and other drugs are smuggled into Mizoram from Myanmar while pseudo-ephedrine tablets are being smuggled into Myanmar from India in trucks to Guwahati from where they are taken to Manipur or Mizoram before entering Myanmar. Karimganj and Silchar act as transit points in this regard. In Myanmar they are manufactured into methamphetamine in clandestine laboratories mostly run by militants gaining seed money which is later used to procure weapons in the black market. This leaves a dark mark on the security system and check gates.

Collaborative effort

In mid 2017, Myanmar adopted the National Strategic Plan on HIV and AIDS (2016-2020) which aims for the achievement of global 90-90-90 targets whereby 90% of people living with HIV know their HIV status, 90% of people who know their HIV-positive status are accessing treatment and 90% of people on treatment with suppressed viral loads are met by 2020. The plan also aims to ensure that 90% of key population’s access HIV prevention services and that 90% of people living with and affected by HIV report zero discrimination, especially in health, education and workplace settings.

In India, the National AIDS Control Organization (NACO) has launched National Aids Control Programme (NACP); Phase IV (2012-2017).The State AIDS control societies in Manipur, Mizoram and Nagaland have been implementing prevention programmes that target the MSM, FSW and IUD groups. Governments of both the countries have sought collaboration with non-state actors and international funding agencies.

Myanmar government receives generous support from funding agencies such as the Japanese International Cooperation Agency (JICA) and the National External Quality Assessment Scheme (NEQAS) of HIV while Indian Government has been supported by the Bill and Melinda Gates Foundation.

Notwithstanding such measures being adopted by both the governments in their respective domains, it has been an exemplary step to initiate coordination to stop drug trafficking. But systematic efforts need to be also taken to build a framework for cross border health infrastructure as well as towards developing cross border disease surveillance mechanism.

Country Reports


Aid from Canada

At the G-7 development ministerial meetings held in France earlier this month, the Canadian Minister of International Development and Minister for Women and Gender Equality Maryam Monsef announced Canada’s pledge of 400 million Canadian Dollars in support of the women/girls education in developing countries including Afghanistan. From this amount 12 million has been allotted to ascertain the quality of education to women/girls in remote and rural areas of Afghanistan. The project will be implemented by BRAC Afghanistan.

Russia support

The Ministry of Foreign Affairs of Russia recently announced the Russian government’s support for the outcome of the Second Inter-Afghan Dialogue Conference that was held in Doha from 7-8 July. The participants at Doha have adopted a final statement that shows their intent of brining about intra-Afghan peace. It has also been re-emphasised that the inter-Afghan dialogue must be aimed towards an Afghan led and an Afghan owned peace process as has been approved by the international community.


Hasina slams US law-maker

Expressing her displeasure over US Congressman Bradley Sherman’s proposal to merge Myanmar’s troubled Rakhine state, Prime Minister Sheikh Hasina observed her country is happy with 54,000 sq km territory. Prime Minister Hasina described the proposal as a "flagitious proposition" and asked the law-maker rather to mobilise a campaign for the safe return of the Rohingyas to their homeland. Congressman Bradley Sherman, Chairman of the Sub-committee on the Asia Pacific, during a hearing on the State Department's budget for South Asia, suggested merging the Rakhine state with Myanmar to solve the Rohingya crisis. Around one million Rohingyas from the Rakhine state have taken refuge in Bangladesh after they faced massive crackdown on August 2017 following an attack on the camps of the Myanmar security forces by some militant organisations from the ethnic groups.

Cooperation on China-BRI

Bangladesh and China pledged to deepen their cooperation under Beijing’s flagship Belt and Road Initiative (BRI). The two countries made the commitment during Prime Minister Sheikh Hasina’s meeting with Chinese President Xi Jinping in her recent visit to that country. Additionally,   Bangladesh committed to actively participate in the BRI and accelerate the construction of the Bangladesh-China-India-Myanmar Economic Corridor (BCIM). BCIM started as a quadrilateral initiative to connect Kunming in China with Kolkata in India via Myanmar and Bangladesh. China included it into BRI, which India declined to participate. BRI is investing in various infrastructure projects across the world and has geostrategic underpinning.


Ministry extends loan term for youth in Japan 

The labour ministry has offered loan term extension to Bhutanese youth placed in Japan who are on overseas employment skills development (OESD) programme. Such youth would have an option to extend their loan term they had availed to learn Japanese language, pursue higher education, enroll into vocational colleges or get full time employment there.

Bank highlights risks

Financing the 12th FYP programmes will be a challenge according to World Bank’s latest developmental update. In the 12th Plan period, the government has projected a total financing gap of Nu 29.2 billion. But, accessing the revenues projected by the government will require the development of capital markets for government bonds and improved investment climate to attract PPPs. The World Bank recommended broadening financing options through the implementation of GST in 2020-21 without delay was critical in mobilising domestic revenue. Developing the capital market will help finance the budget and in developing the financial sector.


Political crisis in Karnataka

As 16 Congress and Janata Dal-Secular (JD-S) legislators have submitted their resignation, a political uncertainty is hovering over the alliance government formed by Congress and JD(S) under Chief Minister H.D. Kumaraswamy. A case related to the resignation of the MLAs is pending in the Supreme Court and the hearing has been deferred till Tuesday. Today, the Chief Minister has also expressed willingness to prove his majority on the floor of the house to ensure smooth functioning of his government.

Achieving the unachievable

The 2019 global Multidimensional Poverty Index (MPI) from the UN Development Programme, the Oxford Poverty and Human Development Initiative was released recently which revealed that India has lifted 271 million people out of poverty between 2006 and 2016. The findings of the report suggest that there has been considerable improvement in the socio-economic conditions of the people due to better accessibility to nutrition, cooking fuel and sanitation facilities over the last one decade.


Drug conduit to India

Indian security agencies have taken up with their Maldivian counterparts, three instances of Maldives and Sri Lanka being used as conduit to smuggle narcotic drugs from Pakistan to India. This follows the mid-sea arrest of Maldivian fishers by Sri Lanka Navy mid-sea and their interrogation. It is as yet unclear who the Pakistani sender was or the motives behind such transactions.


Project on track

The construction of Sittwe’s sea-port and the inland-water terminal in Paletwa has been completed. The sea-port and water terminal forms part of the US$484 million Kaladan multi-modal transit transport project that would link Kolkata in India to Sittwe in Rakhine State and then link Sittwe via a river route to Paletwa in Chin State and from Paletwa by road to Zorinpui in India’s northeastern state of Mizoram. The Indian government has also invited companies keen to operate and maintain the sea-port and water terminal.

Rains hit Rohingyas

Monsoon-triggered landslides in Rohingya refugee camps in Bangladesh have killed one person and left more than 4,500 homeless. About 35 centimetres (14 inches) of rain fell in 72 hours before the landslides began on 6 July in camps around Cox's Bazar that house more than 900,000 of the Muslim minority who fled Myanmar. Trees there have been torn up to build huts and for firewood, leaving the terrain unstable. Twenty-six landslides were reported in makeshift camps built on hills near the border with Myanmar.


PM tenders apology

Prime Minister K. P Sharma Oli recently came forward with an apology to the people of Nepal regarding the recent ‘pesticide issue’. The primary matter revolved around halting the pesticides residue tests on fruits and vegetables at the customs point. A letter from India on the matter was not acknowledged by Oli before. However, he rectified himself. In this course, bilateral understanding between the two countries has been under question.

Tatopani transit ‘activated’

The Tatopani Transit is the main checkpoint between Nepal and China. Despite its importance, the point remained closed for four years, due to Nepal earthquake of 2015. However, the passage has become functional again with goods starting to enter from China. This is a great breakthrough in the Sino-Nepal relations.

Kailali Industrial Project still in ‘halt’

The Kailali Industrial Project in Dudejhari has been stalled for over four years now. In this regard, the people of the area have been waiting for jobs in the project. The local industrialists have also shown interest. In spite of this, no progress has been witnessed. Given the present ambition of Nepal to become economically stronger, the circumstance comes across as a negative reflection.


Denied airspace

The Pakistani Aviation Secretary Shahrukh Nusrat stated that Pakistan has declined the Indian request to open air space until India withdraws its fighter planes first. Addressing further queries on profitable and loss making routes of Pakistan International Airlines (PIA), Nusrat pointed out that seven new routes have now been marked to earn more profits and five loss incurring routes have been closed. Moreover PIA has also saved Rs 35 million after earning from excess baggage in two months.

Media ‘not curtailed’

In response to a question about the recent decision to take three television channels off air, growing concerns about censorship and the arrest of journalists, the Pakistan Foreign Minister Shah Mehmood Qureshi clarified that there are no questions of gagging or controlling the media. This comes as Pakistan’s record had recently been challenged at a media freedom conference in London. Concerns remain as Pakistan continues to rank as one of the world’s most dangerous places for media persons.

Sri Lanka

No-trust vote defeated

With the Tamil National Alliance (TNA) backing the government, the JVP-sponsored no-trust vote against the leadership of Prime Minister Ranil Wickremesinghe was defeated in Parliament. In turn, the TNA demand for creating a separate Tamil-centric divisional secretariat has been created in eastern Kalmunai, much to the chagrin of the Muslim parties from the Province who are all supporters of the Government but are opposed to the new division.



Opinion Pieces

Thomas Gibbons-Neff, “General Calls Rushed Troop Withdrawal From Afghanistan a ‘Strategic Mistake’”, The New York Times, 12 July 2019

Mohammad Zahir Akbari, “The Economic Decline is Rooted in Lack of Human Capital in Afghanistan”, Daily Outlook Afghanistan, 9 July 2019


Daily Outlook Afghanistan, “Pessimism and Optimism about Intra-Afghan Dialogue”, 11 July 2019

Afghanistan Times, “Violence amidst talks becoming obstacle”, 8 July 2019


Opinion Pieces

Nahela Nowshin, “A recipe for a public health disaster”, The Daily Star, 9 July 2019

M Shahidul Islam, “The PM’s China visit”, Daily Star, 8 July 2019


Opinion Pieces

Needrup Zangpo, “Whither the Bhutanese media”, Kuensel, 6 July 2019


The Bhutanese, “The Zhemgang Mistake”, 6 July 2019


Opinion Pieces

S.Y. Quraishi, “A Welcome debate on electoral reforms”, The Hindu, 12 July 2019

Rama Bijapurkar, “First, Let there be investment”, The Indian Express, 12 July 2019


The Times Of India, Reaching home safely: Motor Vehicles Act needs a reset. Road safety matters to people and parliamentarians must act, 11 July 2019

The Indian Express, “Crisis and Opportunity”, 9 July 2019


Opinion Pieces

Sonu Shivdasani, “How the Maldives can lead the world on plastic”, The Edition, 14 July 2019

N Sathiya Moorthy, “Homework needed to make India ferry service, successful”,, 9 July 2019


Opinion Pieces

San Yamin Aung, “Ignoring Ethnic Parties will Hurt NLD in 2020”, The Irrawaddy, 10 July 2019


Opinion Pieces

Mahabir Paudyal, “As they clash to conquer”, Republica, 11 July 2019

Amish Raj Mulmi, “India and Nepal finally agree on something: imposing tax on imported books”, The Kathmandu Post, 11 July 2019

Babu Ram Neupane, “Changing storytellers”, Republica, 8 July 2019


The Himalayan Times, “Cut cost of expressway”, 12 July 2010

The Kathmandu Post, “Migrant workers trapped abroad”, 11 July 2019

The Kathmandu Post, “Only a strong opposition can keep the ruling party on its toes”, 8 July 2019


Opinion Pieces

Ash’ar Rehman, “Do-or-die measures”, Dawn, 12 July 2019

Pervez Tahir, “Adjustment with a stern face of reform”, The Express Tribune, 12 July 2019


Dawn, “Taxes and business”, 12 July 2019

The Express Tribune,A dangerous path”, 12 July 2019

Sri Lanka

Opinion Pieces

C A Chandraprema, “Totally inadequate Sixth Amendment”, The Island, 12 July 2019

Ameen Izzadeen, “Disaster militarism and proposed US deals with Lanka”, Daily Mirror Online, 12 July 2019

Kelum Bandara, “US, China increase wooing Sri Lanka”, Daily Mirror Online, 11 July 2019

N Sathiya Moorthy, “Fending off China, the belated American way”, Ceylon Today, 9 July 2019

N Sathiya Moorthy, “Distorted flags, deceptive nationalism”, Colombo Gazette, 8 July 2019


Kelum Bandara, “Opportunity cost of bond scam is as high as Rs 2,000 billion: Bandula”, Daily Mirror Online, 11 July 2019


Daily Mirror Online, “In search of a leader to lift the nation”, 12 July 2019


Afghanistan & Pakistan: Sohini Bose

Bangladesh: Joyeeta Bhattacharjee

Bhutan: Mihir Bhonsale

India: Ameya Kelkar & Ambar Kumar Ghosh

Maldives & Sri Lanka: N Sathiya Moorthy

Myanmar: Sreeparna Banerjee

Nepal: Sohini Nayak

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