BANGLADESH FORCES MICROCREDIT PIONEER OUT OF BANK

[Fellow Nobel laureates, former world leaders and global celebrities have spoken out in support of Mr. Yunus. Mindful of the international attention, a Finance Ministry official said that the government planned to meet with representatives of the major foreign embassies and theWorld Bank in Dhaka to discuss the decision on Thursday.]

By LYDIA POLGREEN and VIKAS BAJAJ

Muhammad Yunus

NEW DELHI — Muhammad Yunus, the Nobel Peace Prize laureate who pioneered microcredit as a way to fight poverty, has been forced out of the bank he founded, the government-appointed chairman of the bank said on Wednesday.

But Grameen Bank disputed the assertion by the chairman, Muzammel Huq. In a statement, the bank said Mr. Yunus was “continuing his office” while it sought legal advice.

Mr. Huq said that Mr. Yunus had been terminated as managing director by the central bank, Bangladesh Bank, because of a technical violation of the law that created the bank. His appointment should have been approved by the central bank, Mr. Huq said, but was not. “He was relieved of his duties for noncompliance,” Mr. Huq said.

Bangladesh Bank sent a letter to Grameen outlining what it said were violations of the law that governs the bank. Grameen’s board discussed the letter on Monday, but the bank insists that the board did not act on the letter. The dispute over Mr. Yunus’s position as managing director is the latest skirmish in a protracted battle to diminish the influence of Mr.Yunus, a celebrated figure on the global stage who has come under harsh scrutiny at home.

Government officials have been examining the bank’s books for months, saying that it lacked proper oversight and governance. But Mr.Yunus’s allies have argued that the government was simply trying to discredit a critic. Mr. Yunus briefly floated a political party in 2007 and had criticized Bangladesh’s politicians as corrupt.

A Norwegian documentary alleged that the bank had improperly transferred $100 million donated by the Norwegian government for housing loans to another nonprofit affiliate of Grameen. A government investigation in Norway confirmed that the money had been improperly moved but said that it was returned to its rightful place and that no money had been stolen or misused.

Bangladesh’s prime minister, Sheikh Hasina, seized on the accusations and in December accused microlenders of “sucking blood from the poor in the name of poverty alleviation.”

A senior financial regulator in Bangladesh, who spoke on the condition of anonymity, said the Bangladesh Bank had notified Grameen Bank and the government that they had to seek the central bank’s permission for Mr. Yunus to remain the managing director of Grameen. But those notifications were routinely ignored by both Grameen and the government.

“Someone like him should have been mindful of the legal pitfalls,” the regulator said. “I feel very sorry about it.”

The dispute is all but certain to plunge Grameen Bank into a period of turmoil. In an interview in January, Mr. Yunus said that he wanted to step aside but that his presence as a steady hand at the bank was necessary to ensure its stability. His sudden departure could trigger a run on the bank, he said. With its 8.3 million borrowers, almost all of them poor women, and $10 billion in loans, Grameen plays an outsize role in Bangladesh’s economic and political life.

Its borrowers own more than 95 percent of the bank, and the government owns the rest. Foreign allies of Mr. Yunus have pressed the Bangladeshi government hard to stop what many see as harassment of a saintly figure who devoted his life to the poor.

Fellow Nobel laureates, former world leaders and global celebrities have spoken out in support of Mr. Yunus. Mindful of the international attention, a Finance Ministry official said that the government planned to meet with representatives of the major foreign embassies and theWorld Bank in Dhaka to discuss the decision on Thursday.

The move against Mr. Yunus comes as microcredit, the idea he helped popularize, has come under increasing scrutiny. Some economists have argued its effectiveness as a tool to fight poverty is overstated. In Latin America, lenders have been accused of charging usurious rates, prompting repayment strikes. In India, government regulators in the state of Andhra Pradesh cracked down on the industry after a spate of suicides that they claimed were caused by strong- arm collection tactics and overindebtedness by microfinance customers.

“It is certainly a sign of the bad times for the microfinance sector as a whole,” said Vijay Mahajan, who heads Basix, an Indian lender. “In country after country, what was considered a very useful and hopeful thing for poor people — and indeed financially sustainable — is now being reviled as something that is either exploitative or worse.”

Whatever happens to Mr. Yunus, his legacy seems secure, his allies say. “His contribution to humanity is huge,” Mr. Mahajan said. “He singlehandedly proved the veracity of one sentence: the poor are creditworthy.”

@ The New York Times

INDO-CHINA BORDER ISSUE: THREAT LOOMS LARGE FROM THE NORTH

[China has settled land borders with all 14 countries except India. The road and rail infrastructure in Tibet has developed phenomenally with the railway to be extended to Shigatse from Lhasa by 2014 and thence venturing into the Chumbi valley. One third of China’s nuclear and missile arsenal is deployed in Tibet and India is the only country not covered by Beijing’s nuclear ‘No First Use’ policy. China has refused to engage India in nuclear conversations as it does not recognise India’s nuclear weapon power status. ] 

By Ashok K Mehta

Defence Minister AK Antony should issue an operational directive for the defence forces to prepare and equip for a two-and-a-half front war.

Recently one of the television channels reported that Defence Minister AK Antony had asked the armed forces to be prepared for a two-front war. Lately he has cautioned on China’s Defence Budget, PLA modernisation and burgeoning infrastructure in Tibet, but at the same time he has noted that all this is not a worry. This kind of ambiguous talk on China has become the style and substance of this Government when Chinese assertiveness in respect of India is getting conspicuously sharp.

Of the many stories about Chinese arrogance, two are pointed. The ruling CPC’s official magazine has warned countries on China’s periphery, including India, that it is prepared to go to war to safeguard national interest. The more entertaining story is of a Chinese seminarist who, while in Washington, DC, said that “India was an indisciplined country where plague and leprosy still exist. How a big and dirty country like that could rise so quickly has amazed us.” Taken together, they reflect the astonishing decline in India-China relations when our diplomats who were posted in that country continue to paint a rosy picture.

The operational directive to the services has not come a day too soon and was well timed to coincide with Monday’s Defence Budget which has made no additional provisions for operational enhancement on the China front. In December 2009, the previous Army Chief, Gen Deepak Kapoor, at a seminar had said that the Army has to be ready to fight on two fronts — Pakistan and China. This created ripples in Pakistan followed by China, both all-weather allies whose strategic collusion is historic. Officers joining the Army were told that while Pakistan is the immediate threat, China is the long term challenge. This threat perception has survived for six decades. One scenario envisioning a joint or simultaneous offensive called ‘Operation Brass Board’ was to have been war-gamed in the late-1980s but its author, Gen K Sundarji, left office before it could be tried out.

During the 1965 India-Pakistan war, the Chinese were expected to keep Indian forces engaged to prevent switching of assets from east to west. A secret cable A-37, sent on October 13, 1966 by US Consul-General William K Hitchcock to the US State Department reported that he had had a conversation with Lt Gen Sam Manekshaw, GoC-in-C Eastern Command, on a flight from New Delhi to Calcutta. He noted that Gen Manekshaw was convinced that the Chinese would not move but the Army Chief, Gen JN Chaudhuri, was not sure. Gen Manekshaw wanted the war to go on for two to three months more (so that forces could be switched). But regrettably India allowed China, through a few “menacing sounds”, to pin down more than 3,00,000 troops.

In the 1971 war, Gen Manekshaw was the Army Chief. India had signed a Treaty of Peace and Friendship with the USSR and operations were launched only when the northern passes were closed. Yet there were apprehensions the Chinese would intervene once hostilities broke out to prevent troop withdrawal from the border. The same Gen Manekshaw who was keen to move troops in 1965 was excessively cautious in 1971 but allowed three Brigades to be withdrawn from the Chinese front. In both wars with Pakistan, China was a constraining factor.

If India-China relations are at the lowest today, China-Pakistan relations have climbed to new heights and there will be more than menacing sounds in the event of conflict. The speed of Chinese defence modernisation is in sharp contrast to India’s lethargic response. The PLA’s first aircraft carrier, Shi Lang, will take to sea four years ahead of schedule at the end of the year and five more will follow in a decade. China’s submarine fleet will reach 100 vessels in the next three to five years and its stealth fighter has been tested. A new anti-ship missile is also reported operational. Technology and fire power at the disposal of the PLA have grown fast and thanks to the Chinese economic miracle, the Defence Budget has been boosted five-fold in the last decade, touching nearly $90 billion though the actual figure could be as high as $150 billion. China has sent a general warning to keep off South China Sea, Taiwan and Tibet.

China has settled land borders with all 14 countries except India. The road and rail infrastructure in Tibet has developed phenomenally with the railway to be extended to Shigatse from Lhasa by 2014 and thence venturing into the Chumbi valley. One third of China’s nuclear and missile arsenal is deployed in Tibet and India is the only country not covered by Beijing’s nuclear ‘No First Use’ policy. China has refused to engage India in nuclear conversations as it does not recognise India’s nuclear weapon power status.

The PLA’s capacity for a military build-up against India has increased five-fold in the last 20 years. Chinese think-tanks have warned India “not to forget 1962” and talked about the difficulty in the bilateral relationship which our diplomats describe as “complex”.

India is no walkover, the PLA knows. That still does not bridge the military capability and infrastructure gap with China. India has been so pre-occupied with Pakistan that Mr Antony put a figure on the decline in modernisation to lagging behind by 15 years. In the late-1980s the Defence Perspective Plan 2000 had recommended narrowing the capacity gap with China, especially on infrastructure. What we do now will be too little, too late.

The Indian Army’s study on ‘Transformation’, which should have been a tri-service defence capability review, has done some useful work. Among other things, it has recommended the formation of a strike command, including an offensive corps for Tibet. Such a capability ought to have been created a decade ago, instead of mollycoddling the Chinese.

The Army Chief, Gen VK Singh, said recently that we are prepared for all contingencies. The ‘Transformation’ idea, which is being examined by an Experts' Group, aims to shift from adversary-specific to capability-based forces, dovetailed into the concept of theatrisation with adequate strike forces. But pause to ponder. India has specific adversaries.

Unless done, Mr Antony must issue an operational directive to the Chairman of the Chiefs of Staff Committee and individual Service Chiefs to prepare and equip for a two-and-a-half front war which will include a full-blown insurgency. It’s time to prepare and stop hedging the China threat.
@  The Pioneer