Aurus Is Russia’s Answer To Rolls-Royce

If you were to ask someone about what came to mind when you say ‘Russian motorcar,’ we bet that 9/10 will think about a Lada, and most probably one that’d broken down. While many have laughed at the former Soviet Union’s attempts at building motorcars, the Russians are back, and their latest attempt is rather serious.

The brand is called ‘Aurus’ and they fashion themselves an ultra-luxury carmaker, a brand you can say in the same breath as Rolls-Royce and Bentley. But we didn’t have to tell you that for you to make the assumption: Look at that grille, those suspiciously-familiar headlights, and the pronounced rear haunches and you know they went on a Goodwood factory tour. 

Perhaps in laughably-Russian fashion, the press materials surrounding Aurus go to pretty decent lengths to talk about the “uncompromising levels of ballistic and explosive protection” that’s fitted to the Senat Limousine, which we’re sure its sole customer, one Mr. Vladimir Putin, appreciates very much. What he probably doesn’t appreciate is the 4.4-litre V8 engine, co-developed by Porsche, mostly because he can’t hear it from so far away. And takeoffs should be swift and silent anyway, given that the power-train is aided by an electric motor to produce a grand total of 440kW.

Not enough zoom? Then you can opt for a 6.6-litre V12 in the unarmored Senat, which will give you no less than 632kW. Happy now?

At 5630mm in length, the Senat is longer than a Bentley Mulsanne but shorter than a standard-wheelbase Phantom, though the 6630mm Senat Limousine trumps all. Beneath all Senats is a unified modular platform, which houses the all-wheel drive power-train. Regardless of the model you’ll find a cabin that’s been designed almost exclusively with rear passengers in mind, with rear seats that tilt up to 45º and set off with soft pillows. You’ll also find a fridge built-in, replete with Aurus-branded crystal flutes, and leather-trimmed fold-out tables to rest them on.

The Aurus lineup may currently consist of the Senat saloon & limousine, but the family is set to grow. An Arsenal minivan (no relation to the football team) and a Komendant SUV will be introduced later, with names inspired by the towers of the Kremlin. Aurus will officially go to market in Q1 2019, while the firm also harbours plans to breach international markets. With a planned initial production run of just 150-cars/year for 2019 and 2020, the company will open a brand-new production facility in 2021 that’ll increase capacity to 5,000-cars annually, with the option to expand further to accommodate as many as 10,000-cars a year.


Erdogan sees China as a partner for the future

Even as a US-Turkey stand-off cools, the Turkish leader is pursuing China as a long-term hedge against the West

By Burcu Karakaş

“We are facing an economic war. Do not worry, we will win it,” Turkish President Recep Tayyip Erdogan said during the presentation of his 100-day action plan in August, as a currency crisis and economic showdown with the United States reached its height.

Erdogan declared that China was the country’s economic partner of the future.

That call resounded with Ismet Oztanık, the chairman of Asiability-Turkey, which seeks to capitalize on China’s Belt and Road Initiative and build new bridges linking the republic on the Bosphorus to the South China Sea.

“The Turkish embassy in Beijing is finalizing the launch of a working platform to bring business people in the private sector from China and Turkey together,” Oztanık told Asia Times.

The platform, which will soon be publicized, is expected to enhance mutual investments.

In August, Oztanık announced that the China Entrepreneur Club – led by Jack Ma, the chairman of Alibaba – was considering a visit to Turkey to check out investment opportunities. It now rests on the Turkish private sector and quasi-government bodies to assemble the relevant counterparts and pave the way for a delegation of billionaires.

A lender and investor

The position of Turkey on the global stage has improved since Erdogan announced he would seek other partners over the summer. The murder of Washington Post columnist Jamal Khashoggi by Saudi operatives in Istanbul has put Turkey in a renewed position of influence, namely with the United States.

But the appeal of China has not subsided – it is gaining influence as a lender and as an investor.

In July, Turkey borrowed US$3.6 billion from the Industrial and Commercial Bank of China for investments in the energy and transport sectors.

A debt-driven approach is bringing the two countries closer, with Chinese investments in Turkey on the rise. Between 2011 and 2016, the Bank of China provided $2.5 billion in financing for local projects and institutional companies in Turkey and more is expected to come.

Over the past year, the number of Chinese companies operating in Turkey rose to more than 1,000. Sixteen of them are among the top 500 companies in China, including Huawei and Bank of China.

As a testament to the growing partnership, the Turkish Industry and Business Association in October was chosen to host the Belt & Road Industrial and Commercial Alliance (BRICA) summit, in cooperation with the China Federation of Industrial Economics.

Chinese energy

The largest direct investment of China at present is the EMBA Hunutlu Thermal Power Plant in the Turkish city of Adana, which is expected to contribute significantly to the country’s energy demands.

Consortium investment for the coal-fired plant, a joint venture led by China’s Shanghai Electric Power, has reached $1.7 billion, the Chinese embassy in Ankara told Asia Times. EMBA was granted a 49-year generation license for Hunutlu from the Turkish Energy Market Regulatory Authority, and China holds just over 78% of the shares.

Chinese investors have also expressed interest in the infrastructure, electronics, tourism, logistics and real estate sectors in Turkey. Beijing has become the prime contractor for mega projects such as the Ankara-Istanbul high-speed rail, the Salt Lake Underground Natural Gas Storage Project and the Soda Ash Production Complex in Ankara’s Kazan district.

Since 2001, Chinese companies have amassed project contracts in Turkey worth more than $19.8 billion in total. The two nations are now negotiating for the construction of Turkey’s third nuclear power plant.

“We want to have a new momentum in relations between China and Turkey by completing these negotiations within 2019,” Emin Onen, Turkey’s ambassador to Beijing, wrote in an article for Global Times to emphasize the importance of the current nuclear talks.

Looking to the future, Turkish officials say they will also create special industrial zones – for Chinese investors only.

Beyhan Incekara, an assistant professor of international trade at Istanbul Kultur University, says such steps are mutually beneficial for Ankara and Beijing, with China-led transportation projects in Turkey constituting the most substantial area of bilateral economic relations.

“The US-China trade war is bringing two countries closer. Economic cooperation is important for China and Turkey so this is a win-win situation,” Incekara told Asia Times.

Beijing, the professor believes, has the potential to overtake Europe as Turkey’s top trade partner.

The secret spy dinner behind coordinated assault on Huawei

Five-nation intelligence-gathering bloc steps up campaign to limit China’s reach

The arrest of Huawei executive Meng Wanzhou by Canadian authorities produced attention-grabbing headlines in recent weeks, but the police action is just one part of a coordinated effort to target the Chinese telecommunications giant.

An account in The Sydney Morning Herald on Thursday describes how intelligence chiefs from the Five Eyes nations – the US, the UK, Canada, Australia and New Zealand – hatched a plan to push back on Huawei’s global ambitions.

The debate among the spy chiefs during a dinner in Nova Scotia on July 17 centered on one question, the Herald said: “Should the agencies go public with their concerns about China?”

While not all agreed to speak publicly on the issue, after that meeting, a campaign to block Huawei from supplying equipment for fifth-generation (5G) wireless networks has gained steam.

The UK’s largest mobile network provider announced it would shed Chinese-made gear just days after Meng’s arrest. The US, Australia and New Zealand have already said they will not use Huawei equipment for next-generation mobile networks.

While Ottawa has yet to ban Huawei from 5G networks, Canada’s top intelligence official publicly warned of the dangers of not doing so on the same week that Meng was arrested. The Herald said that “a formal ban on Huawei and ZTE from Ottawa is expected within weeks.”

“A new Great Game was afoot and the West had been slow to act,” went the narrative voiced at the gathering in Nova Scotia. “But it is acting now.”

Either the EU ditches neoliberalism or its people will ditch the EU

John Wight has written for a variety of newspapers and websites, including the Independent, Morning Star, Huffington Post, Counterpunch, London Progressive Journal, and Foreign Policy Journal.

We live in a world fashioned by Washington, and as 2019 approaches the dire consequences remain woefully evident.

In 1948 US State Department mandarin George Kennan – the man credited with devising the policy of containment vis-à-vis the Soviet Union at the end of WWII, – laid bare the focus of US foreign policy in the postwar period:

We have about 50 percent of the world’s wealth, but only 6.3 percent of its population…Our real task in the coming period is to devise a pattern or relationships which will permit us to maintain this position of disparity. To do so, we will have to dispense with all sentimentality and daydreamings…We are going to have to deal in straight power concepts.”

The “pattern of relationships” advocated by Kennan is embodied in the panoply of international institutions that have governed our world and dominated the planet’s economic, geopolitical, and military architecture in the seven decades since.

The World Bank and the IMF came out of the Bretton Woods Conference in 1944, along with the establishment of the dollar as the world’s primary international reserve currency.

The Truman administration’s 1947 National Security Act gave birth to a US military-industrial complex that married the nation’s economy to what was destined to become and remain a vast security and intelligence apparatus.

NATO, an instrument of US imperial power, was established in 1949, the year after the Marshall Plan (European Recovery Program) was rolled out with the objective of creating markets and demand in Europe for US exports; Washington having emerged from the war as a global economic hegemon and creditor nation without peer.  A similar plan was also rolled out to rebuild the Japanese economy on the same basis.

Pausing for a moment, it has to count as a remarkable feat of forward thinking on the part of US policymakers, embarking on a plan to not only affect the economic and industrial recovery of its two defeated enemies, Germany and Japan, immediately after the war, but turn them into regional economic powerhouses.

Subsidizing Europe’s postwar recovery was not only of immense economic importance to Washington, it was also of vital strategic importance in pushing back against Soviet influence in Europe. Immediately after the war, this influence was riding high on the back of the Red Army’s seminal role in liberating the continent from fascism, buttressed by resistance movements across occupied Europe in which Communist partisans had been most prominent.

A portion of Marshall aid money – in total some $12 billion (over $100 billion today) over four years between 1948 and 1952 – was diverted to fund various covert operations under the auspices of the CIA, designed to penetrate and subvert those governments and political parties that elicited a leaning towards socialist and communist ideas. 

In their titanic work ‘The Untold History of the United States’, co-authors Peter Kuznick and Oliver Stone reveal that one of those operations involved “supporting a guerrilla army in Ukraine called Nightingale, which had been established by the Wehrmacht in the spring of 1941 with the help of Stephan Bandera, head of the Ukrainian National Organization’s more radical wing OUN-B. The following year, Mikola Lebed founded the organization’s terrorist arm, the Ukrainian Insurgent Army…made up of ultranationalist Ukrainians, including Nazi collaborators.”

Given the nefarious role of Washington and its allies in aiding and abetting the rebirth of ultra-nationalism in Ukraine in our time, Marx’s dictum – History repeats itself, first as tragedy, second as farce – is hard to avoid.

Another institution that was established with US economic and strategic objectives in mind was the European Coal and Steel Community (ECSC) in 1951, the forerunner of today’s European Union. Yes, that’s right; the original incarnation of the EU was a triumph not of European diplomacy but US diplomacy.

In his 2011 book ‘The Global Minotaur’, left-leaning economist Yanis Varoufakis writes:

Students of European integration are taught that the European Union started life in the form of the ECSC. What they are less likely to come across is the well-kept secret that it was the United States that cajoled, pushed, threatened and sweet-talked the Europeans into putting it together…Indeed, it is indisputable that without the United States’ guiding hand the ECSC would not have materialized.”

He goes on:

There was one politician who saw this clearly: General Charles de Gaulle, the future President of France…When the ECSC was formed, de Gaulle denounced it on the basis that it was creating a united Europe in the form of a restrictive cartel and, more importantly, that it was an American creation, under Washington’s influence.”

Washington’s influence over the European Union continues to this day. Most prominently the economic model that underpins this crisis-ridden economic and increasingly political bloc, neoliberalism, is one made in America.

From inception as the lodestar of Western economic thought in the mid 1970s, prior to its adoption as the economic base of the US and UK in the early 1980s, neoliberalism has functioned alongside Washington’s military might and overweening cultural values as part of an architecture of imperialism to which European elites have signed up as fully-fledged disciples, consciously or otherwise.

De Gaulle, as mentioned, was no slouch when it came to understanding that the major threat to European independence and security lay in Washington not Moscow. He championed a ‘Europe of Nations’ after WWII, not supranational institutions that were established with the primary purpose of servicing US economic and strategic interests. As he famously proclaimed: “From the Atlantic to the Urals it is Europe, all of Europe, that will decide the fate of the world.”  De Gaulle’s great fear was a “Europe of the Americans,” which alas is what transpired with the establishment of neoliberalism as the economic foundation of European integration three decades or so later.

De Gaulle took a dim view of the UK in the postwar period, considering London a proxy of Washington. It was a view that gained common currency within French political circles after the debacle known to history as the Suez Crisis, when in 1956 the French and British entered into an ill-fated military pact with Israel to seize control of the Suez Canal from Egypt and effect the overthrow of the country’s Arab nationalist president Gamal Abdul Nasser.

President Eisenhower forced the British into a humiliating retreat, threatening a series of punitive measures to leave London in no doubt of its place in the so-called special relationship. The French had been eager to continue with the Suez operation and were disgusted at London’s craven climb down in the face of Eisenhower’s intervention.

In 1958, two years after the Suez debacle, De Gaulle entered the Elysee Palace as French president. Thereafter, the humiliation of Suez still raw, he embarked on an assertion of the country’s independence from Washington that contrasted with Britain’s slavish and unedifying subservience. The French leader withdrew France from NATO’s integrated command and twice blocked Britain’s entry into the European Economic Community (EEC) – the previous incarnation of today’s EU – on the basis that London would be a US Trojan horse if admitted.

There is, given this history, delicious irony in the fact that the country responsible for injecting the poison of neoliberalism into the EU – the UK under its fanatical leader Margaret Thatcher – is currently embroiled in a messy divorce from the bloc.

The EU in its current form is a latter-day prison house of nations locked inside a neoliberal straitjacket and single currency. Not only can’t it survive on this basis, but it also does not deserve to. Ultimately, either Europe’s political establishment decouples from Washington and its works – the Trump administration notwithstanding – or its peoples will decouple from them and theirs.

As things stand, the latter proposition is far more likely.


How the New Silk Roads are merging into Greater Eurasia

Russia is keen to push economic integration with parts of Asia and this fits in with China’s Belt and Road Initiative


The concept of Greater Eurasia has been discussed at the highest levels of Russian academia and policy-making for some time. This week the policy was presented at the Council of Ministers and looks set to be enshrined, without fanfare, as the main guideline of Russian foreign policy for the foreseeable future.

President Putin is unconditionally engaged to make it a success. Already at the St Petersburg International Economic Forum in 2016, Putin referred to an emerging “Eurasian partnership”.

I was privileged over the past week to engage in excellent discussions in Moscow with some of the top Russian analysts and policymakers involved in advancing Greater Eurasia.

Three particularly stand out: Yaroslav Lissovolik, program director of the Valdai Discussion Club and an expert on the politics and economics of the Global South; Glenn Diesen, author of the seminal Russia’s Geoeconomic Strategy for a Greater Eurasia; and the legendary Professor Sergey Karaganov, dean of the Faculty of World Economy and International Affairs at the National Research University Higher School of Economics and honorary chairman of the Presidium of the Council on Foreign and Defense Policy, who received me in his office for an off-the-record conversation.

The framework for Great Eurasia has been dissected in detail by the indispensable Valdai Discussion Club, particularly on Rediscovering the Identity, the sixth part of a series called Toward the Great Ocean, published last September, and authored by an academic who’s who on the Russian Far East, led by Leonid Blyakher of the Pacific National University in Khabarovsk and coordinated by Karaganov, director of the project.

The conceptual heart of Greater Eurasia is Russia’s Turn to the East, or pivot to Asia, home of the economic and technological markets of the future. This implies Greater Eurasia proceeding in symbiosis with China’s New Silk Roads, or Belt and Road Initiative (BRI). And yet this advanced stage of the Russia-China strategic partnership does not mean Moscow will neglect its myriad close ties to Europe.

Russian Far East experts are very much aware of the “Eurocentrism of a considerable portion of Russian elites.” They know how almost the entire economic, demographic and ideological environment in Russia has been closely intertwined with Europe for three centuries. They recognize that Russia has borrowed Europe’s high culture and its system of military organization. But now, they argue, it’s time, as a great Eurasian power, to profit from “an original and self-sustained fusion of many civilizations”; Russia not just as a trade or connectivity point, but as a “civilizational bridge”.

Legacy of Genghis Khan 

What my conversations, especially with Lissovolik, Diesen and Karaganov, have revealed is something absolutely groundbreaking – and virtually ignored across the West; Russia is aiming to establish a new paradigm not only in geopolitics and geoeconomics, but also on a cultural and ideological level.

Conditions are certainly ripe for it. Northeast Asia is immersed in a power vacuum. The Trump administration’s priority – as well as the US National Security Strategy’s – is containment of China. Both Japan and South Korea, slowly but surely, are getting closer to Russia.

Culturally, retracing Russia’s past, Greater Eurasia analysts may puzzle misinformed Western eyes. ‘Towards the Great Ocean’, the Valdai report supervised by Karaganov, notes the influence of Byzantium, which “preserved classical culture and made it embrace the best of the Orient culture at a time when Europe was sinking into the Dark Ages.” Byzantium inspired Russia to adopt Orthodox Christianity.

It also stresses the role of the Mongols over Russia’s political system. “The political traditions of most Asian countries are based on the legacy of the Mongols. Arguably, both Russia and China are rooted in Genghis Khan’s empire,” it says.

If the current Russian political system may be deemed authoritarian – or, as claimed in Paris and Berlin, an exponent of “illiberalism” – top Russian academics argue that a market economy protected by lean, mean military power performs way more efficiently than crisis-ridden Western liberal democracy.

As China heads West in myriad forms, Greater Eurasia and the Belt and Road Initiative are bound to merge. Eurasia is crisscrossed by mighty mountain ranges such as the Pamirs and deserts like the Taklamakan and the Karakum. The best ground route runs via Russia or via Kazakhstan to Russia. In crucial soft power terms, Russian remains the lingua franca in Mongolia, Central Asia and the Caucasus.

And that leads us to the utmost importance of an upgraded Trans-Siberian railway – Eurasia’s current connectivity core. In parallel, the transportation systems of the Central Asian “stans” are closely integrated with the Russian network of roads; all that is bound to be enhanced in the near future by Chinese-built high-speed rail.

Iran and Turkey are conducting their own versions of a pivot to Asia. A free-trade agreement between Iran and the Eurasia Economic Union (EAEU) was approved in early December. Iran and India are also bound to strike a free-trade agreement. Iran is a big player in the International North-South Transport Corridor (INSTC), which is essential in driving closer economic integration between Russia and India.

The Caspian Sea, after a recent deal between its five littoral states, is re-emerging as a major trading post in Central Eurasia. Russia and Iran are involved in a joint project to build a gas pipeline to India.

Kazakhstan shows how Greater Eurasia and BRI are complementary; Astana is both a member of BRI and the EAEU. The same applies to gateway Vladivostok, Eurasia’s entry point for both South Korea and Japan, as well as Russia’s entry point to Northeast Asia.

Ultimately, Russia’s regional aim is to connect China’s northern provinces with Eurasia via the Trans-Siberian and the Chinese Eastern Railway – with Chita in China and Khabarovsk in Russia totally inter-connected.

And all across the spectrum, Moscow aims at maximizing return on the crown jewels of the Russian Far East; agriculture, water resources, minerals, lumber, oil and gas. Construction of liquefied natural gas (LNG) plants in Yamal vastly benefits China, Japan and South Korea.

Community spirit

Eurasianism, as initially conceptualized in the early 20th century by the geographer PN Savitsky, the geopolitician GV Vernadsky and the cultural historian VN Ilyn, among others, regarded Russian culture as a unique, complex combination of East and West, and the Russian people as belonging to “a fully original Eurasian community”.

That certainly still applies. But as Valdai Club analysts argue, the upgraded concept of Greater Eurasia “is not targeted against Europe or the West”; it aims to include at least a significant part of the EU.

The Chinese leadership describes BRI not only as connectivity corridors, but also as a “community”. Russians use a similar term applied to Greater Eurasia; sobornost (“community spirit”).

As Alexander Lukin of the Higher School of Economics and an expert on the SCO has constantly stressed, including in his book China and Russia: The New Rapprochement, this is all about the interconnection of Greater Eurasia, BRI, EAEU, SCO, INSTC, BRICS, BRICS Plus and ASEAN.

The cream of the crop of Russian intellectuals – at the Valdai Club and the Higher School of Economics – as well as top Chinese analysts, are in sync. Karaganov himself constantly reiterates that the concept of Greater Eurasia was arrived at, “jointly and officially”, by the Russia-China partnership; “a common space for economic, logistic and information cooperation, peace and security from Shanghai to Lisbon and New Delhi to Murmansk”.

The concept of Greater Eurasia is, of course, a work in progress. What my conversations in Moscow revealed is its extraordinary ambition; positioning Russia as a key geoeconomic and geopolitical crossroads linking the economic systems of North Eurasia, Central and Southwest Asia.

As Diesen notes, Russia and China have become inevitable allies because of their “shared objective of restructuring global value-chains and developing a multipolar world”. It’s no wonder Beijing’s drive to develop state-of-the-art national technological platforms is provoking so much anger in Washington. And in terms of the big picture, it makes perfect sense for BRI to be harmonized with Russia’s economic connectivity drive for Greater Eurasia.

That’s irreversible. The dogs of demonization, containment, sanctions and even war may bark all they want, but the Eurasia integration caravan keeps moving along.

The Battle over Huawei

BERLIN/WASHINGTON/BEIJING(Own report) – With the USA escalating its measures against Huawei Technologies, Berlin is faced with deciding whether to continue its cooperation with that Chinese telecommunications company. Until now, the competent German administrations have been considering cooperating with Huawei for the development of the important 5G mobile communications standards. With its experience, the Chinese company could reliably set up the German network rather quickly and at favorable costs. For German business, it is of utmost importance not to fall behind even further in the development of future state-of-the art technologies. Washington, however, is pushing for the Chinese company to be excluded. The Trump administration – without any evidence, according to experts – is accusing it of having close ties to the Chinese government and intelligence agencies. Washington is indeed seeking to damage Huawei seriously – the world’s largest network provider and second largest smartphone producer – to halt China’s ascendance. Berlin must decide whether it wants to join that battle against Huawei in the economic war against Beijing.

The US Boycott Campaign (I)

US measures designed to damage China’s Huawei Company are anything but new. Already back in October 2012, the House Intelligence Committee of the US Congress concluded that Huawei Technologies and a second Chinese company ZTE Inc. were “a national security threat” to the United States and explicitly warned against using Huawei products.[1] In the meantime, the CIA and FBI have officially seconded that warning, asking private consumers to refrain, as comprehensively as possible, from buying Huawei smartphones. Washington is also applying pressure to private enterprises not to conclude deals with the Chinese group – and companies, such as AT&T and Verizon, have decided not to sell Huawei products in the USA. The US government is also urging its close allies to join the boycott against Huawei. Australia, for example, had banned the use of Huawei technology in its development of the new 5G mobile communications standard. It was recently announced in New Zealand that the intelligence service had issued a corresponding ban. In Canada, identical demands are being raised. British Telecom has announced that Huawei products will, at least, be excluded from the core of the 5G network it is establishing. Yesterday, Japan joined this trend. The Japanese armed forces and all segments of the government have been banned from using Huawei and other Chinese products.

Suspicion Rather than Evidence

The growing Huawei boycott is also noteworthy because it is entirely imposed on the basis of unverified suspicions from anonymous intelligence sources. They allege that the Chinese company creates a backdoor access for Chinese intelligence services or even Chinese cyber attacks. “There is no evidence of the company having ties to Chinese state or party structures,” admitted a specialist of one of Germany’s leading dailies.[2] In fact, experts even praise Huawei’s candidness, unusual for the branch. For example in mid-November, Arne Schönbohm, President of the Federal Office for Information Security (BSI) commented in relationship to that company’s newly inaugurated “Security Innovation Lab” in Bonn, that this “enables a broader and deeper technical exchange between Huawei and the BSI,” permitting the “challenges of future cyber security” to be addressed.[3] The fact that important political and a growing number of economic decisions are based, not on evidence but on the suspicions grumbled by intelligence services, has, in the meantime, been promoted to the standard for western powers in key questions of international policies.

“A Sort of Kidnapping”

Washington has now increased pressure on Huawei, with an arrest warrant against Meng Wanzhou, the group’s chief financial officer. This procedure generally demonstrates that now, the Trump administration has not only insisted that all countries abide by its national sanctions, but even called on the judiciary of allied countries to enforce its legal interpretation. If this succeeds, anyone who continues to do business with Iran, in spite of US sanctions imposed this year, can expect an indictment in the United States and an extradition demand from the US Department of Justice. The procedure also demonstrates that in its battle against Huawei, Washington is not above direct attacks against the company’s managing staff. “It starts to feel sort of like kidnapping somebody and holding them for ransom,” says Mark Natkin, founder of Beijing-based IT research firm Marbridge Consulting.[4] The very wide-ranging significance of Meng’s arrest was immediately understood by US subsidiaries in China. Friday, apparently, under the assumption that Beijing may decide to retaliate in the same way, the US company, Cisco restricted “all non-essential travel” by its US-based employees to China. Other U.S. firms including Google, Facebook and PayPal have reportedly discussed similar action.[5]

The US Boycott Campaign (II)

Washington has already launched the next round of the trade war escalation against Huawei. The Fiscal 2019 National Defense Authorization Act, passed last Summer, ban US government entities from procuring products from not only Huawei and ZTE and three other IT companies,[6] it includes products containing components made by these companies, even if the finished products are manufactured by others. The law will also ban products from other Chinese companies, but their names have yet to be announced.[7] Beginning August 13, 2020, US government entities will also be banned from procuring any equipment from companies using any of the products produced by the named Chinese companies in their enterprise.[8] If, for example, it should happen that even a single employee of one of the US government suppliers uses a Huawei smartphone while on the job, this would be illegal, the head of that company could possibly be indicted in a US court and immediately arrested and brought to the United States on an extradition demand.

The Price of Boycott

This could have serious consequences for the German economy. Until now, the Deutsche Telekom had relied on Huawei technology. The Chinese company is a favorite candidate in the decision, as to who should expand the 5G network. Observers note that Huawei has the most experience and can offer the best prices. Higher prices can be easily handed down to the consumer, but any sort of delay in expanding the network, due to a lack of experience, would be a painful loss to the German economy. According to one study, in Europe, Germany ranks 32 – out of 36 – in the current 4G LTE standards, “right behind Albania.”[9] If this also happens with 5G, it could mean missing the boat on state-of-the-art technology. In addition, of course German companies are otherwise using Huawei products as well as those of other Chinese companies. It would be very costly for German companies to make the change to the required non-Chinese equipment, to be able to continue to pursue US government contracts.

Facing a Decision

However, open opposition to US demands, threatens consequences for companies doing business in the US, business that is indispensable for many German companies doing business abroad.[10] According to experts, Washington seems to begin to unhitch western hi-tech from China, to halt the People’s Republic of China’s ascendance. If Berlin wants to maintain alliance with Washington, considering its profits from business with the United States and the advantages of military cooperation within NATO, Germany is facing the decision whether to go along with this unhitching. This would include billions in losses from its current business with China.[11]

[1] Michael S. Schmidt, Keith Bradsher, Christine Hauser: U.S. Panel Cites Risks in Chinese Equipment. 08.10.2012.

[2] Carsten Knop: China handelt. Frankfurter Allgemeine Zeitung 07.12.2018.

[3] Friederike Böge, Reiner Burger, Majid Sattar: Von Entspannung keine Spur. Frankfurter Allgemeine Zeitung 07.12.2018.

[4], [5] Charlie Campbell: It’s Hard to Overstate How Big a Deal the Huawei CFO’s Arrest Could Be. 10.12.2018.

[6] Neben Huawei und ZTE betrifft das Gesetz Hangzhou Hikvision Digital Technology, Dahua Technology und Hytera Communications.

[7], [8] Shunsuke Tabeta, Takeshi Kawanami: US strikes at heart of ‘Made in China’ with Huawei arrest. 07.12.2018.

[9] Frank Sieren: Sierens China: Das Netz ist ausgeworfen. 05.09.2018.

[10] See also Im nationalen Interesse.

[11] See also Deutsche Autobosse in Washington.


Starting from the bottom: a tale of the informal economy and inequality

By Namira Samir

Of the five administrative cities of the Special Capital Region (DKI Jakarta), East Jakarta has the second-highest number of people living below the poverty line, according to the Central Bureau of Statistics. My minibus trip to East Jakarta has taught me about poverty and inequality more than books and lectures have ever done.

The journey turned out to be an experience that is likely to endure through time. I was the first passenger to make my way inside the bus. I waited for about 15 minutes, and it was still only me, no one else.

Then a middle-age woman, possibly in her early 50s, joined me. She was carrying quite a lot of shopping bags. I presumed she came from Tanah Abang Market, the largest and possibly one of the cheapest textile markets in Asia.

From our brief chat, I learned that she was a frequent user of the minibus. I asked her when the bus would depart, because it was way behind schedule. She said, “It will not depart until the bus is at least half full, my dear.”

I was disappointed, because I had decided to take the bus to avoid traffic and it was the most efficient option available, or at least that was what I thought based on my Internet research.

Five minutes later, the driver stepped in and we finally left the station. Throughout the journey, I beheld people from different professions and backgrounds. But here’s the thing: They all were people who struggled to meet their basic needs.

There were fruit and vegetable sellers who I believed were on their way to another market where they would sell their products. There were beggars who despite seeming physically healthy, kept asking for easy money. There were elderly people who were hardly capable of walking on their own feet but had no other choice.

There were also food and goods vendors marketing their products during the journey until the bus reached its final destination. None of us paid even the slightest attention to the vendors. One man optimistically elaborated the perks of the product he was selling, pointing to the price, which was significantly lower than if we were to purchase such products in the retail shops or shopping malls.

I suppose the ending of the story is predictable. None of us passengers bought the product. He left the bus empty-handed.

That was and still is the reality of the Indonesian economy that most of us fail to recognize. Our attention and interest are only on how to create grand programs, tackling unemployment with projects that eventually fail to reach the right beneficiaries.

Pericles, a prominent and influential Greek statesman, once said, “There’s no shame in poverty, only in not doing something with it.” The vendor that I met, despite living in hardship, chose not to give up on his situation. Shouldn’t we be ashamed of doing nothing to help transform their situation into something better?

GDP per capita in Indonesia averaged US$3,877 in December 2017. The poverty rate fell to 9.82% of the total population in the first quarter of 2018. Yet Indonesia still has very high income inequality, and the unemployment rate rose from 5.13% in the first quarter of 2018 to 5.34% in the second quarter.

In addition to high unemployment, many of the existing jobs, especially those in the informal sector that absorb the largest proportion of the Indonesian workforce, are of low quality, which constitutes a major drag on workers’ well-being.

Looking at this issue, the scholars David Simon and Sarah Birch in their 1992 paper “Formalizing the Informal Sector in a Changing South Africa: Small-scale Manufacturing on the Witwatersrand” suggested the formalization of the informal sector in South Africa. The idea is often repeated in various research and reports such as in “Transitioning the Informal to the Formal Economy,” a 2014 report by the International Labor Organization.

There is no doubt that the informal sector in Indonesia is characterized by acute shortages of decent jobs. It is where the majority of the destitute make a living, although it hardly offers reasonable livelihoods and incomes. They are prone to inadequate and unsafe working conditions, and have high illiteracy levels. They are not able to benefit from social-security schemes or labor protection.

But proposing to formalize the informal economy is not the appropriate policy response. Doing so would require workers to obtain a license, register and pay taxes, which would add costs to the people whose livelihoods depend on this sector.

People who work in the informal sector lack the education and skills necessary for a more sustainable means of livelihood. Data from Statistics Indonesia (BPS, 2015) demonstrate that about 80% of employment in the informal sector is for those who are junior-high-school graduates or below.

The formal sector, such as office work, requires administrative or analytical skills. Therefore, without improving human-resources quality, those working in the informal economy will always be excluded from better job opportunities.

As such, policymakers must address this issue in order to improve the welfare of the workers in the informal economy as well as improving the overall national economy.

There are several things that government can do to solve this problem. First, local and national governments can design programs that can directly reach this layer of society, for example by providing training and providing easier access to education for workers who are still at compulsory school age.

Improving the quality of human resources needs to start from the bottom. Imagine the powerful impact it would create if the quality of human resources in the informal economy, which makes up 60% of the workforce of Indonesia, were escalated.

As documented in the ILO’s World Social Protection Report (2017), 61.1% of people in Asia and the Pacific remain without social protection. Such underinvestment in social protection or so-called exclusionary policy will jeopardize workers’ well-being and prevent Indonesia from achieving sustainable economic growth.

Therefore, in addition to enhancing the quality of human resources in the informal sector, macroeconomic policy needs to ensure that labor rights are protected. Referring to a report by the Organization for Economic Cooperation and Development (OECD, 2016), policymakers need to develop social protection system which can reduce labour market insecurity.

Second, the Indonesian government needs to provide workers in the informal economy access to financial services, since low financial inclusion may pose threats to both the societies affected and the country’s overall economy.

To illustrate this, the relationship among financial inclusion, real output and interest rates might be provided as an example. According to the neo-Keynesian macroeconomic model, an increase in policy interest rates contributes to lower private expenditures, which reduces real output, and vice versa.

However, the model is flawed in the way it assumes that all consumers as private agents have access to financial services. This would certainly ring false in a lower-middle-income country like Indonesia, where more than 60% of the total population are excluded from accessing financial services. Hence these financially excluded private agents would weaken the elasticity of private spending and reduce the monetary transmission mechanism through interest rates that might affect aggregate demand.

According to a 2015 analysis by Aaron Mehrotra and James Yetman, accessibility to saving or borrowing is the essential characteristic of financial inclusion. Since financial inclusion helps smooth consumption, increased financial inclusion will increase the incentive to buy of the workers, propel the demand for goods and services, hence causing gross domestic product to rise.

Seeing that the degree of financial inclusion is associated with the outcome of monetary and fiscal policies whose underlying motives include financial and economic stability, and seems to reduce inequality, the government needs to put more emphasis on improving financial inclusion in Indonesia.

The government can utilize technology to facilitate credit for workers in the informal sector who want to develop businesses or want to become entrepreneurs so that they can get more secure jobs while the government progressively reforms the human capital of the country.

Poverty and inequality are the biggest threats to the world’s sustainability, and only if we attempt to address the core issues we would all live happily and peacefully.


Namira Samir Namira Samir is an economist and consultant specializing in Islamic finance, multidimensional poverty and women’s empowerment. She holds a master’s degree in Islamic finance and management from Durham University in the UK.