$30 billion

$30 billion is the amount of annual subsidies provided by the Governments of various countries to the fishing industry. This is significant because riding on this subsidy, a lot of companies are extending their fishing reach and equipping themselves with highly sophisticated systems that we are in real danger of not having any fish to eat in a few decades. No one has yet understood the dangers and so no one is stopping this Ponzi scheme.  

A great article written by Dr. Daniel Pauly, a professor at the Fisheries Center at the University of British Columbia titled “Aquacalypse Now” in “The New Republic”  has triggered off a debate about the extent of overfishing that is going on in the world and how it can be controlled. The situation has reached such a point that fishing companies have begun to bring newer varieties of fish to your table as the older ones are depleted. The entire ecosystem is in imbalance as a result. The article tries to highlight the differences among scientists and their agendas and why Governments need to get involved.  

Here is the article:

http://www.tnr.com/article/environment-energy/aquacalypse-now?page=0,0

66

That is the number of pages contained in Gen Stanley McChrystal’s (the commander of the US forces in Afghanistan) report that was recently submitted to the President of the United States. In the report, the General is reported to be seeking a troop increase of at least 40,000 or so (this is a guestimated assumption). This entails a near doubling of US troop presence in the country which is not music to any one’s ears. After this report was leaked to the press a fierce debate has ensued with in the US about their occupation of Afghanistan and how to control the runaway situation. The general assessment all the way from Mr. Obama to the various experts is that the war is not going well and a serious rethinking is required. A chorus had been forming in recent months from many well respected commentators and experts that the war in Afghanistan was not going to achieve any aim that the US had when they got into it in the first place eight years ago. The primary aim at that time had been to decimate Al Queda and the method was to bomb their safe haven (Afghanistan) and their enthusiastic hosts (the Taliban) into oblivion so that they would never again be able to raise their head. Well, all that was wishful thinking. The whole approach of the US showed their lack of understanding of the Afghan territory, the resourcefulness  of Al Queda and the geopolitics that encompasses the region. The bombing of Afghanistan helped disperse Al Queda and the Taliban for a short period, but they found their safe haven in nearby Pakistan. The hills of Tora Bora and the vast mountainous territory of Afghanistan is a perfect place for guerillas to hide and wage war. Osama bin Laden (if he is still alive) has retreated to his cave and has successfully dodged any attempts to unearth him, helped not in small measure by his political friends of the region including perhaps Mr. Musharaff. The regime that the US propped up in Afghanistan (albeit through a legitimate election in 2004 and a sham and illegitimate one in 2009) of Mr. Hamid Karzai has not been able to establish any sort of control in the country beyond the area around Kabul. The vast hinterlands have now been recaptured by the Taliban and their writ runs as effectively in those regions today as in the days prior to 2001. The Karzai regime has lost its legitimacy among the people of the country due to the corruption that has been unleashed and the deals that they have tried to strike with the Taliban across various regions in the country. There is also a feeling among several quarters that Afghanistan has proved over and over (first Britain in colonial times and then Soviet Union in the eighties, fought unsuccessful wars) that when it comes to war, they are an undefeatable lot. All in all, the US is in a quagmire and they have only two choices. One would be to plod on knowing fully well that they are in a situation that will increasingly be unpalatable on the ground as well as for the people back home.  It is a war that they probably cannot win. What is also interesting is that winning the war in Afghanistan does not in any way guarantee that the Al Queda would remain obliterated. As a matter of fact, it never existed in one place. Ironically, Al Queda is a very federal organization with high levels of autonomy in the hands of regional leaders who loosely outsource their activities to their cells in various parts of the world. The central leadership sticks to their core competence which is the spread of jihadist ideology. So, winning in Afghanistan in no way saves the US from a terrorist threat from Al Queda.  The second choice would be to simply cut their losses, look for an honourable settlement that will give them a face-saving victory, give up on the nation building exercise by leaving it to the neighbours to sort out. Perhaps the US may want to keep the option of launching air strikes from time to time and fly their drones into the territories in Afghanistan and Pakistan when necessary. Beyond that they may have no interest in the region. This is where India is likely to come in. According to some of the informed experts, the most possible choice that the US Special Representative of Af-Pak  Mr. Richard Holbrooke,  is likely to come up with is to invite India, China, Pakistan and Afghanistan into a quartet responsible for the safety and development of the country with the US acting as the mid-wife. This would mean identifying the “good Taliban” (an oxymoron in itself ) from the “bad Taliban” (there, is a pleonasm for you) and striking deals with the former and perhaps promoting them to power in the country. All this is going to be messy and could blow up in our faces even with all the planning and consensus across various countries with diffeing agendas. But this seems to be perhaps the only way out short of the US entrenching themselves for the long haul and suffering a lot of misery and thereby losing much of the political capital they still hold. It is going to be interesting to see what they will do in the coming 2-3 months. The troop increase may still happen in the short term but that may be just a precursor to massive withdrawals in the mid-term.

The US has so far tried to build and shape countries into their mould in three different countries and have come out a cropper in each of those occasions. The first was Vietnam – from where they had to leave in defeat. Iraq is the second, where they have managed to bring in a semblance of democracy but there is no telling how long they will need to be there to provide security and to nurture the country to health while warding off aggressors like Iran. The third one is Afghanistan which is going way out of control. Afghanistan’s history suggests that they have never been conquered by any foreign power so far. Of course, history is only a guide and does not mean that it is meant to be repeated. However, that is a lesson that needs to be taken cognizance of.

20

That is the number of deaths in India since the Swine Flu epidemic began in right earnest in this country about a month ago. Pune has curiously become the Swine Flu epicenter of India for no known reason. So far the schools have been closed, malls and movie theaters shut down and there is talk of the vegetable market and wholesale markets being shut down as well. Masks are out everywhere. It is a very different feeling these days in Pune. When you walk into any public place, you are always suspecting the other person to be carrying the virus. You are looking to see if any one is looking a little run down and about to sneeze or cough. You would rather say “namaste” than shake hands – if you are brave enough to meet any one, that is. Kids are mostly grounded at home. Thankfully my kids are quite resourceful about finding ways to spend their time so they have not yet complained of boredom or wanting to meet other kids. Each time you hear about a death due to the flu or you think the situation is getting out of hand, one begins to wonder whether you are going to be the next victim. Your nose starts tingling and you wonder if you are running a little temperature! I have already decided about keeping my Investment spreadsheet up to date so my family will get to all my money without me being around in an eventuality! Guess these kinds of things have a strange way of making you think about your own mortality and fragility. The fact of the matter is that you are more likely to die of an accident or any other 100 diseases far more than by Swine Flu. But the immediate “Clear and Present danger” hits you like a ton of bricks.   

Here’s hoping that we are going to get over this situation soon….

$825 million

That is the deal size that Anil Ambani’s Big Entertainment has signed with DreamWorks. Perhaps many in India are gloating at the great Indian takeover of Hollywood, what with Spielberg in the kitty. However, the celebrations may be simply premature. The only reason why DreamWorks looked at Ambani as a messiah was because he had the moolah and the earnest wish to get attached to some famous names. As one of the original promoters of DreamWorks mentioned a couple of months ago when news of this impending deal broke, they were stupified to see how little Big Entertainment demanded in return for this largesse. Apparently, as he put it tongue-in-cheek, all that Big Entertainment wants in return for giving this money is a seat with Spielberg at the premier of their movies. Of course, as I said that was tongue-in-cheek, but the point is that the Indian company is overawed by the glamour of Hollywood and probably considers itself gratified to be seen as a big player in the world business of movies. This suits both players perfectly. Big Entertainment simply needs some exposure internationally and wants to build their brand by being seen alongside Spielberg, which would give them legitimacy. DreamWorks simply needs the money with as few strings attached as possible, after being bitten badly by their previous deal with Viacom. So, there is not much to hope that this marriage made in Heaven would survive for a long time. I for one wouldn’t bet on it as once the slump is over, and DreamWorks is able to get on its feet, they wouldn’t need the Ambanis for much longer. This is not to doubt the shrewdness, business sense or the guile of Mr. Anil Ambani. I simply see it as the melding of opportunism between the two sides which is not necessarily a great recipe for partnership for life.

9.5%

That is the depressing unemployment rate for June 2009 in the US as per the latest report. That means that more than 400,000 jobs were lost in the US in the month of June. This has come as a rude shock and a depressing development since every one was assuming things to be improving on the economic recovery front. Although this might be a blip before things improve, this latest number makes every one tizzy about whether Dr. Doom (Dr. Nouriel Roubini -refer to my earlier post titled “W”) is right after all. It makes every one ask whether we began to celebrate an impending recovery too soon. Sane voices are however saying that unemployment has ways to go  - more like 12-14%  - before we see a turnaround. However, the real concern is also that if the unemployment numbers turn out to be sticky and hover in the double figures while inflation starts to rear its head up due to all the Government spending of the past few months, then the world is headed for a stagflation that could spiral out of control. Definitely, the last nail in the coffin of this recession has not yet been struck, and we need to wait and watch for further developments before concluding that recovery is on its way and that all the trillions of Government spending of the past few months really did avert a disaster.

1

Yes, “1″ is the number that we hope we converge to once we implement the Unique ID (UID) project. The UID is a massive scheme that the Government wants to implement to give a Unique ID to every Indian citizen much like the Social Security scheme of the US.  One number to identify each Indian citizen and for him/her to avail all publice services and benefits; one card to carry anywhere. I am usually an incorrigible optimist except when it comes to implementation of grand schemes in India. Then, I turn into a pessimist because given the massive scale of such projects and the fact that we are born losers when it comes to the implementation of big projects, it is not likely to be a smooth affair. There are plenty of pitfalls on the way. Imagine a technocrat corporate honcho like Mr. Nandan Nilekani getting into the turf that should have been a politician’s or retired bureaucrat’s playground. They would definitely find ways to trip him if they can. Their motivation would be clearer if you think about the amount of money and power he will wield to make this project happen. How many politicians are going to give that up to an outsider? That in itself could cause several roadblocks for him, not forgetting the massive scale of implementation, technology decisions, data collection and other such issues that he will need to handle. I have always maintained that the Indian IT industry was never invaded by the politico types simply because they never understood technology. The IT industry managed to rid themselves of their bad influence as a result and therefore managed to be a beacon of hope for the entire country in the way they conducted business transparently and treated their employees. Politicians and their goons will mess up any territory that they have some idea about. A great example of this is the cable TV industry. Just look at the mess  the television cable industry is in simply because it is a low-tech industry and these guys can get in and establish themselves to make money. For the Unique ID project, the technology challenges are the easier ones to solve. The other challenges in terms of reliable data collection, policy decisions on exclusion and inclusion of various people etc are much bigger challenges with lot of political ramifications. This project is therefore not immune to raids by the politico types. Therefore, I am definitely worried about it getting implemented properly. And an improperly implemented UID project will kill the goose so badly that no government will ever again try to implement a similar scheme for fear of being ridiculed for backing a white elephant. That is why it is that much more important for this scheme to succeed. I  hope that all the well wishers including the Prime Minister put their combined weight behind this project to make it a success. The country needs this success badly and we cannot afford to fail.

4.8 kms

That is the length of the Bandra-Worli Sea Link in Mumbai – a major infrastructure project – that is finally seeing the light of day today, after 15 years of planning, politics and disputes. This is a project that was conceived in 1995 and was supposed to be finished in 2003. However, true to the way infrastructure projects get executed in India, this was mired in red-tape, delays and cost overruns. The project finally cost about $400 million (original estimate: $100 million) to complete and is at least 6 years behind schedule. However, it is a proud day for Mumbaikars and Indians that we have been able to complete this project and throw it open for public use. This sea link is expected to reduce the travel time between Bandra and Worli to 6 minutes from the previous 40-45 minutes that commuters used to endure during peak hours. Let us hope that some of us learn the right lessons from this project and execute them better in the future although it is a tall order to expect that from our babudom.

And while we gloat, let us keep our Shanghai fetish aside for many more years, as we are a nobody in the infrastructure race compared to China.

20 million hectares

That is the amount of land area that have been outsourced for farming and bought by foreign countries. This is a story I read in “The Economist” recently which made me realize how a new wave is sweeping the world incognito. It is filed under the topic “Third Wave of Outsourcing”. The title attracted me, as I assumed it would be about outsourcing of products and services. But, this was about outsourcing of farming.  The first wave of outsourcing was in Product Manufacturing which was lapped up by South East Asian countries and China in the seventies and eighties. They grew on the back of this phenomenon and became tigers. The second wave was in Services in the nineties and India along with a few others gained and are continuing to gain. This third wave seems to be mostly about Africa. Now, the point really is whether this is good for the host countries or bad for them and the world. The topic in question relates to several big and rich countries negotiating land deals with African countries for cultivation and use of the land in the host country. As such this would have been a good thing if it were to bring prosperity, new technologies and jobs to the host country. However, there are several things wrong with this system:

1. In many instances the workers in these farms are actually people brought in by the purchasing country. So, the benefit of jobs does not entail to the host country

2. The deals are usually very simple in nature and are negotiated secretly with no substantial clauses. The deals are between governments, but are very non-transparent.

3. The deals seem to be essentially protectionist in nature, in that countries are trying to be self sufficient in food needs thereby reducing interdependencies and there fore potential conflicts in the future.

I was completely blindsided by the size of these deals – for instance China’s deal in Congo is for 2.8 million hectares of land. The Chinese bring in their own peasants to farm this land and the output is then sent straight back to China with no benefit for Congo. The only benefit that Congo would get is that some of their government leaders would line their pockets pretty well. Another interesting aspect of  it is also that essentially, as per the report, these are deals for water rather than land. Water has become an increasingly difficult commodity to get in many countries – especially Saudi Arabia and some parts of China – and this means there is going to be a lot of hue and cry about water shortages in Africa in the future. It has already been predicted that the next world war is going to be on Water. This new wave of outsourcing seems to hasten that war.

Here is a link to that article:

http://www.economist.com/world/international/displaystory.cfm?story_id=13692889

10.8%

That is how much the IT/ITeS industry in India is expected to grow in 2009, accoording to IT advisory firm IDC’s estimates. The industry will contribute Rs 3,09,573 crore to the country’s ($61.88 billion) GDP. The domestic market is estimated to grow at 10.2 percent, to touch Rs 1,09,406 crore ($21.88 billion) and at the same time, exports are expected to grow at 11.2 per cent to cross Rs 2,00,000 crore ($40 billion). This is the slowest growth of the industry in five years. It will be a while before we get back to the heady days of 30%+ growth. But then, when the rest of the world is struggling with negative growth, isn’t this still good? My take is that expert estimates (even the long term 5-year estimates) just take into account the current sentiment and political correctness into account to come out with their predictions. There were so many estimates  including IDC and Gartner that came out with rosy predictions of 2008-2009 for the world a few years ago. They have all tucked their tails and gone back into hiding. So, it is not necessary to dwell on these predictions any more than going by your own estimate of what you see around. Of course these predictions sort of shape those feelings, but one should not be carried away one way or another by these estimates.

12,000

This is what I believe the Sensex will settle at, for some time to come. Although I am neither a talking head at CNBC nor a market pundit, I believe that the Market rally that the BSE and NSE have witnessed recently has been overdone. People decided that all our problems had been solved once the Congress came to power without the ball and chains of the Left. The talking heads of CNBC and moneycontrol.com started seeing visions of Sensex 20,000 all over again. The recent rise was largely fuelled by irrational optimism brought in by higher flow of FII investments. This is money that is looking for a parking spot around the world. Currently India and China are the only ones where there is some substantial growth. Although a lot of the markets around the world have risen to higher levels in the past three months (some higher than India), only India nad China present a solid story of sustainable growth. However, as soon as other nations – especially US and Western Europe – begin to come out of their stupor and start showing postive signs of growth, the money will find its way into those markets, perhaps at the peril of the emerging markets. This will put a lot of pressure on the market indices of emerging markets. Although the recovery prospects of the Western capitalist economies is still quite some distance away, stock markets smell blood a lot earlier, and will begin to rally. So, my guess is, if not with in the next couple of months, rational behavior is sure to return to Indian stock markets within the next 6-9 months.   We could then be testing 12,000 levels for the Sensex. Another reason for this is also the fact that the Congress government on the one hand, needs to provide for its “aam admi” agenda, and on the other, has to drive the economy away from the recessionary trend. This will require a lot of money to be pumped in. This cannot be done without finding those resources of funds – meaning some taxes somewhere in the budget. That could dampen some of the spirit floating around today. An interesting aspect to consider is that although India has a robust domestic market that is standing up to be counted, that in itself is not enough to propel the GDP forward into the 9-10% growth rate. The domestic market in today’s situation can probably account for 5-6% of growth in the GDP. The remaining 3-4% has to come from exports which is sluggish. Until that picks up - which means the US and Europe have to recover – we may not see the heady days of 2003-07 returning. Thus, it would be irrational to expect the markets to reach 20,000 levels when profits of the underlying companies are unlikely to reach those heady levels.  So, my guess is that we will hit 12,000 before we hit 20,000.