Ayala’s path to an ESG driven business | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

With several ESG-backed initiatives in recent years, the Philippines-based conglomerate Ayala has solidified its commitment to sustainability. Operating across verticals including energy, finance, infrastructure, and real estate, Ayala has committed to net zero greenhouse emissions by 2050. The conglomerate’s energy wing ACEN recently created the world’s first energy transition mechanism (ETM) in November 2022, backed by BPI and RCBC.

On the social front, Ayala’s GCash app and BPI’s BanKo have  played pivotal roles in financial inclusion for unbanked Filipinos and small to medium size enterprises. BPI and Globe are currently reviewing their framework to consciously focus on these areas.

When it comes to governance, Ayala’s boards are working towards an appropriate level of diversity and independence. This involves maintaining high standards when it comes to transparency and disclosure.

The 190-year-old company’s social and sustainability initiatives have a long history. Albert de Larrazabal, CFO at Ayala Corporation said, “We have always aligned ourselves to national interest and had very high standards of governance and stewardship. As we must be mindful of the ecosystems we operate under, ESG in various forms has always been part of our value proposition.”

Ayala’s approach to ESG

Today, ESG-based financing is a priority for Ayala. Apart from ACEN’s implementation of the world’s first ETM, Ayala has issued a social bond with the IFC in support of its cancer hospital. Larrazabal said, “We are looking to do KPI-linked social and ESG financing, which incorporates targets into the commercial terms and conditions of the loan.”

Even during the M&A process, the conglomerate is mindful of integrating new acquisitions into its ESG framework. Ayala has also taken steps to ensure that ESG is a priority that is ingrained at the highest levels of the organisation, leveraging its membership with the World Business Council for Sustainable Development (WBCSD). The conglomerate’s board has received training which ensures they can play an active role in tracking and monitoring developments in the ESG space.

Corporates making public commitments to sustainability draw a lot of attention, not all of it positive. Asked how Ayala approaches concerns about greenwashing, Larrazabal said, “Sometimes it happens inadvertently because of incorrect measurements. That’s why we brought in South Pole. We have taken steps to ensure we are on the right track by committing to independent verification, to give people a degree of reassurance.”

Building a model for the APAC region

While the need for sustainable leaders is strongly felt across APAC, many countries in the region have a minimal contribution to emissions — the Philippines emits half the global average on a per capita basis. Larrazabal said, “Between 80% to 88% of our emissions — depending on individual businesses — are scope 3.” These emissions are defined as the result of activities from assets not owned or controlled by a reporting organisation, but which are a part of its value chain. Larrazabal said, “Our scope 3 is somebody else’s scope 1 and scope 2. We need an environment that enables, incentivises, and if that fails, penalises those who disregard scope 1 and 2.”

Many emerging markets grapple with issues similar to those facing the Philippines — adopting renewable energy, while meeting the demands of a growing population and economy. As a result, ETM-like arrangements may be embraced to a greater extent. Asked for his advice on managing such a transaction, Eric Francia, president and CEO at ACEN said, “It is important for investors to reconsider their position on coal, so long as the principles are well understood. One may be investing in a coal plant, but for a good purpose, which is enabling its early retirement.”

Offering a financial perspective on the ETM, TG Limcaoco, president and CEO Bank of Philippine Islands added, “We provided lending and brought in other institutions. We took reduced rates of returns for equity and debt exposure, which allowed us to shorten the life of the plant by 10 to 15 years. It is a big win for everyone involved.”

For more on Ayala’s adoption of ESG and a deeper insight into the world’s first ever ETM, please watch the accompanying video.

 

 

¬ Haymarket Media Limited. All rights reserved.

Continue Reading

Is the worst over for Sri Lanka’s economic crisis?

By:
On:
In: Asia
People gather to buy clothes on the busy street market of Maharagama, near Sri Lanka's capital ColomboGetty Images
By Archana Shukla
BBC News, Colombo

At first glance, life in Sri Lanka’s financial capital Colombo looks deceptively normal.

Roads are packed with traffic, public spaces and restaurants are full of both locals and tourists, while shops are bustling.

It is hard to imagine that just a year ago, this was a country struggling with massive shortages after it ran out of foreign currency.

With no money to buy fuel, roads were empty with even public transport at a standstill. Sri Lanka had to go back to pandemic-era measures such as online classes and working from home. But even this was not practical because of power cuts – some of which went on for up to 13 hours a day.

Food, medicine and other essentials were also in short supply, exacerbating the crisis. People had to stand in such long queues in the brutal heat, that at least 16 people – mainly the elderly – died.

But now, just a year later, food, fuel and medicine are available again, offices, schools and factories are all open, and public transport is back up and running.

Restaurants, especially high-end ones, are bustling.

A vendor deals in rupee notes on March 21, 2023, in Colombo, Sri Lanka.

Getty Images

“Last year this time I was on the verge of selling my restaurant. We had to close for a few days as the shortage of fuel meant no customers were coming. But now footfall has gone up nearly 70%,” said Chathura Ekanayake who runs a fine dining restaurant in Colombo.

The country’s main source of foreign currencies – tourism – is also witnessing a revival. The industry has recorded a 30% jump in revenue from the previous year.

“The recovery has been magical for us. Last year we didn’t even know if the country would survive”, said Hiran Cooray, CEO of Jetwings Symphony, a leading travel and hospitality player in Sri Lanka.

Despite these good news stories, Sri Lanka’s economy is still in a precarious place.

The country still has more than $80bn (£61.1bn) of debt – both foreign and domestic. In the worst of the crisis last year, the country defaulted on its foreign debt for the first time in its history.

Ranil Wickremesinghe who took charge as President after widespread protests saw then-ruler Gotabaya Rajapaksa resign, has managed to secure a lifeline of $2.9bn from the International Monetary Fund (IMF).

This has been crucial to opening other funding channels and easing shortages, but the money came with strict economic and governance policy reforms. The country is now seeking to restructure terms of its debt payments with both foreign and domestic lenders, as mandated by the IMF.

The main focus has been on restructuring its $36bn of foreign debt. This includes more than $7bn of loans from China, Sri Lanka’s largest bilateral creditor.

However, it is the restructuring of domestic debt that is likely to have a much bigger impact on the Sri Lankan people. Domestic borrowing accounts for around 50% of the country’s total debt. Sri Lanka’s cabinet recently approved a domestic debt restructuring proposal, but it has drawn massive criticism as it aims to cut workers’ pensions, while banks will not be affected. There have been protests against the proposals in Colombo.

It highlights that while life may seem to have returned to normal, in reality people are still struggling.

Protesters chant slogans during the protest on July 12, 2023, in Colombo, Sri Lanka. The Inter-company Employee Union held a protest in front of the Labour Department. This protest was held, asking not to touch the Employees' Trust Fund and Employees Provident Fund.

Getty Images

Essentials are available, but unaffordable for many. Things are more expensive than ever before. Almost half of all Sri Lankan families spend about 70% of their household income on food alone. And prices of food, clothing and housing are continuing to rise.

To add to the burden, income tax has been hiked to as much as 36% and subsidies on everything from food to household bills have been removed.

One area where this has had a huge impact is electricity bills, which have soared by 65% after the subsidy was removed.

“Many families from the middle class have now slipped below the poverty line,” said Malathy Knight, a senior economist with private think tank Verite Research.

And according to the World Bank, this is likely to continue for a while.

“Poverty is projected to remain above 25% in the next few years due to the multiple risks to households’ livelihoods,” it said in a report. The organisation has extended a $700m loan to Sri Lanka for budgetary support, including $200m for the poor and vulnerable.

This is a dramatic fall for a country that was long held up as an economic success story and had one of the highest average incomes in South Asia. The quality of its infrastructure, its free public health and education systems and its high levels of social development have all been held in high regard.

So how did things get so bad?

The government blamed the crisis on the Covid pandemic, which badly affected tourism. However, although the pandemic was a factor, disastrous economic policies were more to blame. Populist moves like big tax cuts in 2019 cost the government $1.4bn in annual revenues. And a move to ban imports of chemical fertilisers in 2021 caused a domestic food shortage.

Police used batton to disperse the university students during an anti-government demonstration by university students in Colombo On June 7, 2023.

Getty Images

In order to cut expenses further the government has proposed privatising state-owned enterprises like Sri Lankan Airlines, Sri Lankan Insurance Corporation and Sri Lanka Telecom. This has triggered a fresh wave of protests – this time by trade unions.

“The government should not put the burden of the reforms on the salaried class and middle class who are already affected by the economic crisis,” said Anupa Nandula, the Vice President of the Ceylon Bank Employees Union.

Mr Nandula and his union participated in a recent demonstration against the proposal to privatise the Sri Lankan Insurance Corporation. He believes privatisation will lead to massive job losses and further burden the working class.

Ever since last year’s demonstrations were violently broken up, Sri Lankan authorities have been using force – such as tear gas, water cannon and even beating protesters. But experts warn that this is not a tactic that can work.

Rather than using force, the government needs to be transparent and explain that reshaping the economy will be tough, says Bhavani Fonseka, a constitutional lawyer working with Centre for Policy Alternatives.

“I think people since the crisis has happened have gotten used to a harder lifestyle. But in the absence of information coming, in the absence of answers being given, there is growing uncertainty and fear that we will go back to a crisis point.”

Related Topics

Continue Reading

Delhi-Dhaka ties a pivot to steer India’s Indo-Pacific vision

By:
On:
In: Asia

India has long parted from the centrality of Pakistan in its foreign policy and as the assertiveness of China started growing into the waters of the Indian Ocean in the last decade, India looked from the West to the eastern shore of the Bay of Bengal.

With a rapidly growing economy backed by a stable government and the other countries of South Asia having a larger dependency on China, Bangladesh became an important element in India’s neighborhood policy. 

With a shared history and culture, the ties between India and Bangladesh were natural and there has been significant progress made in multiple areas including bilateral trade, which has increased with Indian investments.

Bangladesh is one of the largest recipients of Line of Credit funds from India, and India’s exports to Bangladesh in 2022 amounted to US$13.83 billion while the imports stood at $2 billion.

The hallmark of present-day relations, however, is energy-sector cooperation, connectivity, and engagement in areas of science and technology.

Bangladesh has currently imported 1,160 megawatts of power from India and the 2017 agreement with Adani Power Ltd will provide 1,496MW of electricity from a coal-based power plant in Jharkhand for 25 years.

Bangladesh has also shown interest in procuring military equipment from India, including the Tejas light combat aircraft and Dhruv light helicopters, apart from protective gear such as bulletproof jackets and helmets. 

Bangladesh’s Indo-Pacific outlook

Historically, Bangladesh’s foreign policy has been based on a collaborative approach to avoid being dragged into any geopolitical tensions where it has no vested interests. Although it cannot fully embody the strategic interests of Bangladesh, the idea of “friendship for all and malice to none” became a guiding principle of its foreign policy.

The Indo-Pacific Outlook (IPO) document unveiled by Bangladeshi Foreign Minister A K Abdul Momen on April 24 followed a similar pattern and called for a “free, open, peaceful, secure and inclusive Indo-Pacific,” which was linked to its “Vision 2041” of being a knowledge-based developed country.

The IPO of Bangladesh aligns with India’s vision, which has also been in support of a free and rules-based Indo-Pacific, and though the document claims to be neutral, it has a Western slant.

The West has been trying to include Bangladesh in its Indo-Pacific strategy and bring it closer through key trade and investment partners. Bangladesh’s strategic location serving as a gateway to both South and Southeast Asia and having friendly relations with the Quadrilateral Security Dialogue members makes it an ideal partner for the West and India to engage in their Indo-Pacific vision.

India’s interest in maintaining security and access to the volatile northeastern part of the country and having direct access to the Bay of Bengal can only be possible by engaging Bangladesh. This is in addition to the interest of further strengthening the Act East Policy and containing the military rise of China in the region.

New Delhi is aware of this and has been actively engaging Bangladesh through the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) after the shift from the South Asian Association for Regional Cooperation (SAARC) for regional outreach. 

India’s G20 presidency and Bangladesh 

As India holds the presidency of the Group of Twenty summit this year, it has followed tradition and invited non-member countries including the only South Asian country, Bangladesh, to the summit. This speaks volumes of the importance that India has attached to its eastern neighbor and the role of Bangladesh in its Indo-Pacific vision.

India will be looking to cooperate with Bangladesh in the area of climate change, especially after the visit by Prime Minister Sheikh Hasina to Delhi last year and also collaborate in a smoother transition to cleaner sources of energy.

Apart from this, India and Bangladesh will look to sign the Comprehensive Economic Partnership Agreement (CEPA) that will further boost connectivity and future trade through Asian Network routes (AH-1 and 2), and BIMSTEC.

Since the dominance of the US dollar has been in decline, India and Bangladesh have decided to cut their dependency on the dollar for transactions and have their trade settlements in Indian rupees.

Last, the CEPA will also open up opportunities to create a joint production hub and uninterrupted supply chain.

This regional connectivity, however, needs to be translated into business avenues that can foster growth. With the two governments sharing good relations and Bangladesh’s willingness to be a part of India’s Indo-Pacific relationship, New Delhi has to go the extra mile to offer incentives in terms of Indian investments to Dhaka to steer its own Indo-Pacific vision. 

Continue Reading

Delhi river reaches record high in monsoon floods

By:
On:
In: Asia

NEW DELHI: The river running through India’s capital New Delhi has reached a record high due to monsoon floods, authorities said on Friday (Jul 14) as army engineers were deployed to try to contain the waters. The Yamuna River was flowing in an “#EXTREME FLOOD SITUATION”, India’s central water commissionContinue Reading

Death toll rises to 66 in India’s monsoon mayhem

By:
On:
In: Asia

At least 12 people were killed in neighbouring Uttarakhand state, including nine on Tuesday when debris fell on their vehicles on a national highway, officials said. A popular pilgrimage to the state’s Kedarnath temple, home to a revered shrine of the Hindu deity Shiva, was suspended due to heavy rains.Continue Reading

SUSTAINABLE FINANCE POLL 2023: Asian debt markets sharpen ESG focus | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

It’s looking increasingly like the time for sustainable finance to shine. After a fall in the year-on-year volume of green, social and sustainability (GSS) instruments globally during 2022, a rebound is forecast this year – to around US$1 trillion in issuance, forecasts S&P Global.

Asia Pacific (APAC) is well-placed to capitalise on this upswing. S&P Global’s projections, for example, are that GSS issuance volume in the region will jump by as much as 20%, to reach US$240 billion, roughly a quarter of the global landscape.

The longer-term story looks promising, too, especially amid ambitious climate goals. Even in South-east Asia alone, about US$180 billion needs to be invested in clean energy projects every year until 2030 to keep the transition journey on track, based on the International Energy Agency’s Sustainable Development Scenario. Putting this in context, from 2016 to 2020, investment in clean energy was $30 billion per year, on average.

Adapting to climate change is certainly a key driver. But according to more than 100 investors and borrowers in APAC who took part in the 6th annual poll by ANZ and FinanceAsia in April and May 2023, multiple dynamics indicate an ever-bigger role for GSS instruments.

Among the key factors is a mix of policy and regulatory initiatives to foster greater transparency. This should, in turn, boost investor demand and issuer appetite. At the same time, as this segment of the region’s capital market continues to mature, active GSS bond investors and issuers can expect greater potential for newer formats of issuance to help bridge social and environmental priorities such as biodiversity and gender equality.

10 top takeaways from the survey

  1. 92% of all respondents have integrated GSS factors within their strategy, with 77% confirming that the market volatility over the past 12-18 months either hasn’t changed or has increased their focus on GSS.
  2. Nearly half (49%) of investors now have their own in-house ESG research and analysis capability, a notable increase from the 42% poll finding 12 months ago.
  3. 70% of investors have some type of experience with sustainable finance, with bonds much more popular than loans.
  4. While just under one-third of investors have exposure to transition finance instruments, another 45% are interested in investing in them, either in the next year or over the medium to long term.
  5. Although 92% of investors haven’t yet invested in Orange (gender equality) bonds, half of them say they would do so if they were more widely available.
  6. 88% of investors and 90% of borrowers believe further regulation of sustainability and sustainable finance would have a positive impact on the market overall.
  7. 49% of investors and 41% of issuers say a ‘greenium’ of at least 4 bps is typically priced-in to new GSS bond issues.
  8. Alignment with sustainability objectives, better access to capital and investor diversification are the top three drivers for issuers of GSS instruments.
  9. Time, availability of targets and set-up cost are the biggest hurdles to issuing GSS instruments.
  10. Only 19% of borrowers have never issued a GSS instrument – compared with 64% in last year’s poll.

Read more survey findings and analysis here

 

¬ Haymarket Media Limited. All rights reserved.

Continue Reading

FinanceAsia Volume Two 2023 | FinanceAsia

By:
On:
In: Asia, Finance, South-East Asia

By now, most of our subscribers will have received print editions of the latest FinanceAsia Magazine: Volume Two 2023. 

Over the course of the summer, we look forward to sharing online our in-depth magazine features, including the detailed rationale behind our jury’s selection of winners across our recent flagship FA Awards process.

You can access the full online edition here.

To whet your appetite, read on for our editor’s note.

Positive predictions

As a snake (according to the Chinese zodiac), I have so far fulfilled my Year of the Rabbit prophecy in securing opportunity for career growth within the Haymarket Asia business. A successor will soon have the good fortune to step up as editor in my place, as I become content and business director and oversee the editorial strategy of our finance publications: FinanceAsia, CorporateTreasurer and AsianInvestor.

It is said that those born in 2023 will be blessed with vigilance and quick-mindedness. Very useful personality traits, I would think, as artificial intelligence (AI) advances globally, at pace. We are witnessing great development in this field in Hong Kong – and across the wider Asian economy, as emerging tech becomes the next positive disruptor and the capital markets work to respond through evolving regulation and new listing regimes.

In this summer issue, Christopher Chu delves into the value disruption put forward by generative AI, with consultants estimating its worth to breach $16 trillion by 2030. He explores its sophistication and how its potential is interwoven with political factors, while questions are posed around data ownership.

Also intertwined within the realm of transformative technology, is this edition’s flagship interview with BNP Paribas’ CEO for Asia Pacific, Paul Yang. He shares his journey navigating a career path that has taken him from IT coding in Paris, to leadership of the bank’s Asia Pacific business. He offers insights around his accomplishments to date and details plans to progress the bank’s 2025 Growth, Technology and Sustainability (GTS) strategy.

Reviewing activity across Southeast Asia, Liza Tan inspects the market’s prominent position in the ongoing start-up story, through assessment of the current venture capital (VC) fundraising landscape. Her discussion with experts asserts that fintech is inherently fused with human approach and that quality conversations and connections are key to future success.

Indeed, as FinanceAsia’s recent in-person awards celebration underlined, we have much to look forward to in the second half of the year and it is the human elements involved in dealmaking that have capacity to shape the road ahead. I think we all agree that recognising and nurturing talent is vital and so I hope you enjoy reading our evaluation of market resourcefulness, ingenuity and skill that informed the jury’s selection of award winners, amongst truly outstanding competition.

Finally, Sara Velezmoro and I explore the outlook for Asia’s debt capital markets – investigating what opportunity is on offer alongside the changing environment; and whether the momentum surrounding Japanese equities can be sustained, if the government were to reverse yield curve control.

Amid uncertainty we must focus on potential, so please join me in acknowledging the positive strides being taken by Asia’s market movers.

Ella Arwyn Jones

(Please feel free to send feedback or suggestions to [email protected])

 

¬ Haymarket Media Limited. All rights reserved.

Continue Reading

At least 15 dead in India monsoon floods: Local media

By:
On:
In: Asia

NEW DELHI: At least 15 people were killed in floods and landslides triggered by monsoon rains that battered northern India, with New Delhi receiving the most rainfall in decades, reports and officials said on Sunday (Jul 9). Roads in several parts of the capital were submerged in knee-deep water as itContinue Reading

Decoupling not on Europe’s agenda, Li visit shows

By:
On:
In: Asia

MUNICH: Chinese Premier Li Qiang’s European tour last week made clear that Europe is not about to decouple from China. If anything, Sino-European cooperation will deepen on technology and, critically, on development issues in the Global South

Li is not only China’s second-ranking official but also Xi Jinping’s closest political associate since the time when the two worked together in Zhejiang Province, more than two decades ago. As Shanghai party chief, he expedited the Tesla Motors mega-factory that helped make China the world’s top auto exporter.

His visit included meetings with Chancellor Olaf Scholz and top German industrial leaders, as well as the up-and-coming prime minister of the state of Bavaria, and finished with an address to a Paris conference on development financing convened by President Emmanuel Macron.

President Macron with Li Qiang. Photo: CGTN

Li called for a “global development partnership” to provide more resources to developing countries, and for “liberalization and facilitation of trade and investment” to “inject fresh growth impetus into developing countries,” rather than “trade protectionism and decoupling and severing supply and industrial chains in any form,” according to a Chinese government statement.

The 27 leaders of the European Community meanwhile will “resort to a soft tone on China” at their June 28-29 EU Council summit in Brussels, according to a draft resolution leaked to Politico.

“Despite their different political and economic systems, the European Union and China have a shared interest in pursuing constructive and stable relations, anchored in respect for the rules-based international order, balanced engagement and reciprocity,” the draft reads, adding that Europe “does not intend to decouple or to turn inwards” or adopt policies “to harm China, nor to thwart China’s economic progress and development.”

The draft language echoes Scholz’s comments to the German Bundestag.

China’s exports to the Global South have doubled since 2020 and now exceed its total exports to developed markets for the first time. China is also the largest lender to developing countries. As central banks in developed markets tighten credit conditions in response to inflation, bank lending in dollars and euros to developing countries has shrunk. Many countries of the Global South are turning to China’s renminbi for trade and development financing as a substitute.

China’s exports of digital and physical infrastructure to the developing world have enabled the Global South to increase its exports to developed markets. According to a forthcoming World Bank analysis, China’s exports of intermediate goods to East Asia-Pacific countries have risen in tandem with the exports of EAP countries to developed markets. That is the virtuous cycle of globalization of which Li Qiang spoke in his Paris address.

China’s role in building infrastructure in the Global South is important for Europe’s exporters, but European governments have a more urgent reason to cooperate with China. Immigration from the world’s poorest economies from Africa to South Asia is Europe’s most sensitive political issue. Without stabilizing the economies of the poorest countries, Europe can’t stop a tidal wave of migrants from seeking refuge on its shores. China is the only economy with sufficient resources and technology – especially in digital infrastructure – to make a difference in the Global South.

After Li departed for Paris, Scholz told the German Bundestag that he is striving for “a geopolitical Europe” – that is, a Europe that plays an independent geopolitical role – together with French President Macron.

Scholz also announced a November conference of the Group of 20 Compact with Africa in Berlin, to “strengthen economic cooperation with our neighboring continent.” In addition, the EU is scheduled to hold a summit meeting with the countries of Latin America and the Caribbean in July.

The German Chancellor added that before Li Qiang’s visit, he had held intensive exchanges with other European leaders in preparation for the European Council’s discussion of EU-China policy in the coming week. In this context, he stressed China’s role in food security, in helping heavily indebted states, in investing in future technologies, in the fight against poverty, and in the fight against climate change.

Li Qiang’s visit marked the first formal government consultation between Germany and China since 2018. Consultations of this kind are reserved for Germany’s closest partners, and the visit’s protocol was a clear indication that the German chancellor seems to have little interest in dismantling relations with China

Washington has urged Europe to “de-risk” its economic relationship with China – a euphemism for decoupling – but the facts on the ground point toward a deepening economic relationship with China

With its economy in recession, Germany’s economic relationship with China has taken on additional importance. China is Germany’s most important trading partner. Much more than other European countries, Germany has built up its trade relations with China over the last 20 years. The exchange of goods between China and Germany amounted to almost EUR 300 billion in 2022 – well ahead of the volume of EUR 249 billion exchanged with the United States. Conversely, Germany is also China’s most important trading partner in Europe.

Germany’s automakers—the country’s largest industry—sell nearly 40 percent of the 14.2 million cars they make annually in China,

Li Qiang with BMW boss Oliver Zipse. Photo: Xinhua

China also supplies indispensable intermediate products on which German chemical and electronics manufacturers depend. In addition, China has a quasi-monopoly on rare earths. These are required for batteries, solar modules or electric cars.

Germany’s business community, understandably, has expressed frustration with the hostility towards China of leaders of the Green Party and its ministers in the coalition government. Volker Treier, head of foreign trade at the German Chambers of Industry and Commerce (DIHK), recently said: “The business community is very angry about this ambiguous communication on the China strategy, given the importance of China for our economy.”

Li Qiang’s visit marked a departure from a confrontational tone that had been set by Green Party German Foreign Minister Annalena Baerbock in recent months. Baerbock’s trip to China in April raised political debates in Germany, with her critical remarks on issues such as Russia, Taiwan, and human rights drawing strong reactions from Chinese officials. Foreign Minister Qin Gang retorted, “We don’t need condescending lectures.” Baerbock characterized her trip as “shocking in parts” and claimed that China had become more aggressive internationally and repressive domestically, viewing it as a rival rather than a partner.

As the senior cabinet member for the Green Party, the second largest party in Berlin’s three-way coalition, Baerbock’s influence has waned along with support for the Greens, who won 22% of the national vote in last year’s federal elections but are now polling at just 13.5% of the voters.

By contrast, Li Qiang’s meeting with Bavarian Prime Minister Markus Söder in Munich underscores the political dynamics within Germany, where the governing parties face increasing pressure. Söder, a potential beneficiary of an early end to the governing coalition, previously aspired to the chancellorship in 2021. He organized for Li to meet with the heads of Siemens and BMW, leading German firms based in Bavaria, and arranged a gala dinner in the Munich Residence in Li’s honor.

Li Qiang with Bavarian Prime Minister Söder, Photo: bayern.de

Influential voices inside Scholz’s Social Democratic Party are urging more cooperation with China. The Seeheimer Circle, an official think tank inside the SPD, released a paper last April on Germany’s relationship with China calling for a “multi-dimensional” – that is, open – policy towards the Asian giant.

Within the center-left SPD, the Seeheimer group emphasizes the interests of industry and labor; it forms part of the personal support base of Chancellor Scholz. The Seeheim Circle has gained in importance within the SPD in recent months. It is known within the center-left SPD as a conservative group more interested in economic policy.

An “abrupt end to trade relations with China” would be “an economic disaster,” the paper argued, rejecting an “anti-China strategy.”

Before Li’s arrival, the German government rejected de facto a call from the European Commission to exclude Chinese companies like Huawei and ZTE from Germany’s telecommunications architecture.

In March, Germany’s Economics Ministry, controlled by the Green Party, warned of risks to the network from a future Chinese retrofit, but the Interior Ministry, under the aegis of the Social Democrats, announced only that it was monitoring the situation. Germany’s largest mobile phone provider Deutsche Telekom categorically rejected the charge that Chinese providers represented a security rest, stating that it had tested its networks exhaustively for such vulnerabilities.

Diego Fassnacht is an international economist and an investment advisor to individual clients and institutions. Prior to his work in finance, he served on the governing council (Deutschlandrat) of the youth organization (JU) of the main German opposition party, the CDU.

Continue Reading

Mystery of ‘missing’ Indus Valley ruling class

By:
On:
In: Asia

A little over a century ago, British and Indian archeologists began excavating the remains of what they soon realized was a previously unknown civilization in the Indus Valley.

Straddling parts of Pakistan and India and reaching into Afghanistan, the culture these explorers unearthed had existed at the same time as those of ancient Egypt and Mesopotamia, and covered a much larger area.

It was also astonishingly advanced: sophisticated and complex, boasting large, carefully laid out cities, a relatively affluent population, writing, plumbing and baths, wide trade connections, and even standardized weights and measures.

What kind of a society was the Indus Valley Civilization, as it came to be known? Who lived there and how did they organize themselves? Archeologists and other experts ask these questions to this day, but the first explorers were already noticing some unique features.

In Mesopotamia and Egypt, “much money and thought were lavished on the building of magnificent temples for the gods and on palaces and tombs of kings,” observed Sir John Marshall, who supervised the excavation of two of the five main cities, Harappa and Mohenjo-daro, “but the rest of the people seemingly had to content themselves with insignificant dwellings of mud.”

In the Indus Valley, “the picture is reversed, and the finest structures were those erected for the convenience of the citizens. Temples, palaces and tombs there may of course have been, but if so, they are either still undiscovered or so like other edifices as not to be readily distinguishable from them.”

Egalitarian society

In its heyday, from about 2600 to 1900 BC, the Indus Valley Civilization created what may have been the world’s most egalitarian early complex society, defying long-held presumptions about the relationship between urbanization and inequality in the past.

Its large cities were expansive, planned, and boasted large-scale architecture, including roomy residential houses, and smaller settlements in the surrounding areas appeared to support a similar culture with a similar standard of living.

The most tantalizing feature of the ancient Indus Valley remains is what they appear to lack: any trace of a ruling class or managerial elite.

This defies the longtime theoretical assumption that any complex society must have stratified social relations: that collective action, urbanization, and economic specialization only develop in a very unequal culture that takes direction from the top, and that all social trajectories evolve toward a common and universal outcome, the state.

Yet here was a stable, prosperous civilization that appeared to remain that way for centuries without a state, without priest-kings or merchant oligarchs, and without a rigid caste system or warrior class. How did they manage it?

Unfortunately, in the early decades of exploration and research, archeologists tended to assume that lack of evidence of a top-down, hierarchical society in the Indus Valley remains meant only that they had not yet been found.

Some have argued that lack of evidence of inequality only indicates that the region’s ruling class was very clever at disguising the boundaries between itself and other social strata.

Pointing to the fact that Indus Valley burial sites contain no monumental tombs, some researchers suggest that the rulers may have been cremated or deposited in rivers, as was the practice in other imperial cultures.

But cremation is not archeologically invisible; the remains of other cultures often include evidence of it.

More recently, archeologists have been willing to go back to the original explorers’ observations and use the evidence directly in front of them to develop theories about ancient life in the Indus Valley Civilization.

Improved data

Archeological data from South Asia have improved greatly, and there is much more information. Numerous Indus sites are now known to archeologists that decades ago were not, and the environmental contexts that enabled urbanization in the region – climate, natural resources – are now much clearer.

Archeologists have also honed a strong set of tools for identifying inequality and class divisions: from mortuary data, palace assemblages, aggrandizing monuments, written records, and soon, possibly, from household data.

Yet in a century of research, archeologists have found no evidence of a ruling class in the Indus Valley that is comparable to those recovered in other early complex societies.

In the late 1990s, Indus archeologists started to consider a new concept that seemed to fit the facts better. Heterarchy asserts that complex political organization, including cities, can emerge through the interaction of many different, unranked social groups, rather than from top-down decisions by an elite: that cooperation, not domination, can produce collective action.

It is now widely argued that multiple social groups contributed to the construction of Indus cities and the economic activities that took place in them, and that none seemed to dominate the others.

Bolstering this argument, no evidence exists that any group of Indus producers was excluded from the use of scarce materials that craftspeople had to obtain from long distances away, or that particular groups limited access to those materials to seize a higher position for themselves in Indus society.

One of the most distinctive and technically dazzling products of the Indus culture are stamped seals engraved with imagery and text; more than 2,500 have been found at Mohenjo-daro alone. But the seals were produced by many different groups of artisans in many locations, and there is no evidence that a ruling class controlled production.

Technological styles tended to cross-cut different groups of artisans, indicating a great deal of openness and knowledge sharing.

Indus city-dwellers built large- and small-scale public buildings; the Great Bath at Mohenjo-daro is a massive structure that contained a large paved bath assembled from tightly fitted baked bricks, waterproofed with bitumen and supplied with pipes and drains that would have allowed control over water flow and temperature.

At Mohenjo-daro, non-residential structures were built atop brick platforms that were as substantial as the structures erected on top of them, and would have required a great deal of coordinated action. It has been calculated that just one of the foundation platforms would have required 4 million days of labor, or 10,000 builders working for more than a year.

Public buildings

Yet at both Harappa and Mohenjo-daro, these large non-residential structures were relatively accessible, suggesting that they were “public,” as opposed to palaces or administrative centers restricted to a privileged class.

Some of these may have served as specialized spaces for exchange, negotiation, and interaction among different groups clustered in neighborhoods or along important streets and roads.

These spaces may have helped the city-dwellers maintain a high degree of consensus on planning and policy and ensured that no one group was able to accumulate wealth at the expense of the rest.

The Indus Valley remains have yet to yield all of their riches. The Indus script has yet to be deciphered, and we still don’t know why the civilization started to decline in the 2nd millennium BC.

One of the most positive recent developments has been a dramatic increase in data and interest in the civilization’s small-scale settlements, which may shed light on the question whether these settlements were qualitatively different from one another or from the cities – and how far Indus egalitarianism extended across its broader landscape.

What we have already found, however, suggests that egalitarianism may have been a boon to collective action: that distinct social groups may have been more willing to invest in collective action if the benefits were not restricted to a subset of elites. That suggests that heterarchy may act as a kind of brake on coercive power among social groups, and across society as a whole.

If this is the case, and after a century of research on the Indus civilization, archeologists have not found evidence for a ruling class comparable to what has been recovered in other early complex societies, then it’s time to address the Indus Valley’s egalitarianism.

Urbanization, collective action, and technological innovation are not driven by the agendas of an exclusionary ruling class, the evidence suggests, and can occur in their total absence.

The Indus Valley was egalitarian not because it lacked complexity, but rather because a ruling class is not a prerequisite for social complexity. It challenges us to rethink the fundamental connections between collective action and inequality.

The priest-king is dead – or, in this case, most likely never existed.

This article was produced by Human Bridges, a project of the Independent Media Institute, which provided it to Asia Times.

Continue Reading