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‘This is all a facade’: Kashmiris vote in staged election



In the frost-kissed hamlet of Chewa in northern Indian Kashmir, residents queue up at a secondary school to vote in local elections. “I have never voted before, this is the first time,” said Mohammed Afzal, 38, a painter.

But rather than exercising his political free will, Mr Afzal was casting the first ballot of his life out of fear. The elections, held last weekend, were for the district development council, a rung of local government introduced to the Jammu and Kashmir region by Narendra Modi, India’s Hindu nationalist prime minister.

New Delhi is trying to cast the election as an unofficial referendum on its efforts to bring the heavily militarised, Muslim-majority region under tighter central control and tried its best to make sure locals voted.

Mr Modi’s government last year stripped Jammu and Kashmir of its special status as a state and placed it under New Delhi’s direct rule as a so-called “union territory”.

His ruling Bharatiya Janata party maintains integrating Kashmir into the rest of the country will help end decades of conflict, a legacy of partition in 1947 when India and Pakistan went to war over the former Himalayan kingdom.

According to the BJP, the polls are proof that normalcy is returning to the valley, with each vote a tacit endorsement of the abrogation of 370, the article of the Indian constitution that gave the Jammu and Kashmir region limited autonomy.

But this is anathema to Kashmiris who say they are being subjugated by Mr Modi’s government. “Our basic demand is we want 370 back,” said Mr Afzal.

The Financial Time was part of a small delegation of international media invited to visit Kashmir last weekend on a tightly controlled, government-organised trip to cover the election. Foreign journalists have been barred from reporting in the region.

Critics said the elections for the 280-seat council, which brings together representatives from Jammu and Kashmir’s 22 districts, are an exercise in propaganda since the state legislature elections have been postponed since 2018 and the region has lost its statehood.

On Monday, the night before results were to be counted, one of the biggest political groups in Kashmir, the Peoples Democratic Party (PDP) said some of its senior leaders were detained. A local government official said about 40 politicians and activists were held by police on Monday evening on security grounds.

“It is a deep irony for India to call itself a democracy,” said Siddiq Wahid, a Srinagar-based visiting fellow at the Centre for Policy Research in New Delhi. “This is no different than Xinjiang in China.” Beijing has been accused of subjugating Muslim Uighurs in Xinjiang.

Voters queue for the district development council polls in Chewa © Stephanie Findlay/FT

Kashmir is “not at all” like Xinjiang, said a regional BJP spokesman. “Of course democracy is strong, we saw a more than 40 per cent turnout in Kashmir, people participated, that’s a fundamental requirement of democracy. Democracy is here.”

It had snowed in Srinagar, the region’s biggest city ensconced by forested mountains, just days before the election. The serenity of its main tourist attraction, Dal Lake, and its majestic chinar trees stood in contrast to the heavy military presence.

Soldiers with armoured vehicles were stationed on street corners, highways and hills, a reminder of the 1990s when an insurgency raged in the valley. Starved of tourists since abrogation, many shops were closed. 

The BJP won three seats in Kashmir — a feat it has never achieved in any of Kashmir’s 10 districts — for a total of 74 in the whole region, according to the latest numbers on Wednesday morning.

The party was up against the Gupkar Alliance, a coalition of the established regional parties that amalgamated after abrogation, which promises to bring back Article 370 and won 100 seats.

Ghulam Mohammad Mir, a regional BJP spokesman, said even one seat in Kashmir would have been seen as victory for the party. “This is a new thing for Kashmir.”

It is dangerous to work in the Kashmir Valley for the BJP, whose policies critics say cater to the country’s Hindu majority, undermining Muslims and tarnishing India’s democratic credentials.

Mr Mir, 68, has four personal guards and seven more protecting his house. He said many party workers have been killed by Pakistan-sponsored jihadi groups.

Still, he said he was determined to “inculcate” Kashmiris with the party’s ideology and promised development to remedy unemployment in the state. Article 370 was never coming back, said Mr Mir. “No one on earth can restore it.”

Mainstream politicians used to straddle the middle ground between separatists and New Delhi. But the shock of abrogation and clampdown on dissent humiliated the local pro-India politicians.

Post-abrogation, the battle lines have crystallised: either you are with New Delhi or against it. “The Indian constitution does not permit separatism,” said BVR Subrahmanyam, Jammu and Kashmir administrator chief secretary. “Technically anyone in India who says Kashmir is a disputed territory is actually committing sedition, there is no doubt about that.”

Facing a powerful state and feeling betrayed by their politicians, Kashmiris are alienated and afraid. On the last day of the district polls, most people were wary of talking to the press, saying they feared retribution.

A mural near Patal Bagh, a village in the Pulwama district of Kashmir © Stephanie Findlay/FT

In some polling stations, there were twice as many soldiers as there were voters and the internet was shut off.

“For now the fight is about 370 but the ultimate goal is freedom from India,” said a manual labourer in Chewa. As he was talking, six troops walked over to monitor the interview, forming a ring around him.

Growing uncomfortable, he took his leave. “This is all a facade,” he said about the polls. “We have been living under oppression for so long and it will continue.” 

With additional reporting by Muhammad Raafi

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Emerging Markets

Brazil poised for biggest interest rate increase since 2003




Banco Central do Brasil updates

Brazil’s central bank is expected to enact its biggest interest rate rise in almost two decades on Wednesday, with economists predicting an increase of 100 basis points to curb the risk of spiralling inflation.

Latin America’s most populous nation is witnessing a sharp acceleration in prices as its economy recovers from the Covid-19 pandemic, pinching households and putting pressure on the Banco Central do Brasil, or BCB, to act.

A weak exchange rate, buoyant worldwide demand for raw materials and rising electricity bills due to the worst drought in almost a century have all contributed to Brazilian inflation that exceeded 8 per cent in the 12 months to June, more than double the official target of 3.75 per cent for 2021.

A majority of economists polled by Reuters expect the BCB’s Selic rate will be lifted from 4.25 per cent to 5.25 per cent, which would be its fourth consecutive rise. The benchmark was at a historic low of 2 per cent until March. The decision is expected on Wednesday evening.

A full percentage point jump would represent a step up from the 75 basis point increases announced after the three previous meetings this year of the rate-setting committee, known as Copom. It would be the sharpest increase since its last 100bp rise in 2003.

As a commodities boom and pandemic-related bottlenecks in global supply chains feed an international debate about whether a return of inflation will be temporary or long-lived, central bankers in some countries are already tightening monetary policy. 

Russia, Mexico and Chile have all recently raised interest rates, while the US Federal Reserve is edging closer to a decision on slowing its massive monetary stimulus.

The BCB, which gained formal autonomy this year, is at the forefront of emerging markets pursuing an aggressive approach, said William Jackson, chief EM economist at Capital Economics.

However, he noted that Brazil’s gross domestic product was still below the level of 2014, before a deep recession struck.

“That would suggest the economy is operating below its potential and that monetary policy should be stimulative,” Jackson said. “But with the inflation threat as it is, there’s a belief that can’t continue for the time being.”

In a country that experienced runaway prices and hyperinflation only a generation ago, monetary policymakers will have to strike a balance between shielding consumers and encouraging growth.

Cristiano Oliveira, chief economist at the business lender Banco Fibra, suggested Copom should accelerate rate increases to bring estimates of future inflation closer in line with its objective.

“In 2022, the centre of the inflation target is 3.25 per cent, but inflation in the previous year should be close to 7.5 per cent. In other words, the central bank has a difficult job ahead of it, which is to reduce the inflation rate by more than 50 per cent”.

Food costs have pushed millions of people into hunger, with unemployment near a record in Brazil since data collection first began in 2012. Transport and housing have also become more expensive lately.

At the same time, low reservoir levels have affected hydroelectricity production, the South American nation’s main source of power, forcing utilities to turn on more costly thermal plants.

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Bolsonaro faces investigation over election fraud claims




Brazilian politics updates

Brazilian president Jair Bolsonaro’s legal problems have multiplied after a court opened an investigation into his unsubstantiated warnings of voter fraud in presidential elections next year, a probe which could lead to him being disqualified from running.

The judicial inquiry comes as the far-right leader’s ratings are on the slide following accusations of his incompetent handling of the Covid-19 pandemic, which has claimed the lives of more than half a million Brazilians.

Rising living costs and allegations of corruption in vaccine procurement within his administration have damaged Bolsonaro’s standing further.

With political pressure building, the populist has increased attacks on the electronic voting system in recent weeks, reiterating calls for the adoption of printed paper receipts in order to avoid manipulation.

Opponents fear the former army captain is seeking to cast doubt on the legitimacy of the vote, in preparation for refusing to recognise a potential defeat. A group of 18 current and former Supreme Court justices have defended the current ballot system, which was introduced in 1996, insisting that Brazil had eliminated election fraud.

The Superior Electoral Court this week opened an administrative probe into Bolsonaro over his claims, for which he has provided no evidence. It also asked the Supreme Court to investigate whether the president had committed a crime by disseminating fake news about the voting system.

The president hit back on Tuesday. “I will not accept intimidation. I will continue to exercise my right as a citizen, to freedom of expression, criticism, to listen, and to meet, above all, the popular will,” Bolsonaro told supporters in Brasília.

The electoral court’s intervention showed the judiciary was striking back against Bolsonaro’s attacks, said Carlos Melo, a political scientist at Insper in São Paulo. “He [Bolsonaro] is harming the rules of the game, of democracy and the institutions,” he added. “It’s not different to what [Donald] Trump did, and demagogues in other countries. His intention is to question the electoral process without proof.”

Both moves by the electoral court could in theory eventually pave the way for Bolsonaro being barred from standing in the 2022 poll.

“There is a long way until this can bring actual legal consequences against the president which might affect his eligibility,” said Rogério Taffarello, a partner in criminal law at Mattos Filho and professor at the Getúlio Vargas Foundation. “[This] does not mean, of course, that the existence of such investigations cannot generate political consequences”.

The president is already the subject of a criminal investigation into whether he failed to act on warnings about alleged irregularities by public officials in negotiations over vaccine purchases. Bolsonaro and the government deny any wrongdoing.

Protesters have taken to the streets in cities over the past two months calling for the impeachment of Bolsonaro, who in polls is trailing former leftwing president Luiz Inácio Lula da Silva, also a likely frontrunner in next year’s election.

Bolsonaro had long promised to present evidence of cheating in elections, even claiming that the 2018 ballot he won was tampered with. Yet last week he admitted to not holding any proof, only “indications”.

Despite his falling popularity, Bolsonaro retains backing in Congress from an amorphous grouping of centre-right political parties known as the Centrão, or “Big Centre”. Analysts said for now this support appeared to be holding.

Additional reporting by Carolina Pulice

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South Korea looks to fintech as household debt balloons to $1.6tn




South Korea Economy updates

After her family business of ferrying drunk people home was hit by closures of bars due to Covid-19 curfews and social distancing, Lee Young-mi* found herself juggling personal debts of about Won30m ($26,000).

The 56-year-old resident of Suncheon in South Korea was already struggling to pay off or refinance four credit cards, but now faces the prospect of those debts rapidly multiplying after her husband was diagnosed with cancer.

“We’ve had little income for more than a year as not many people are out drinking until late into the night,” said Lee. “Now my husband won’t be able to work at all for the next three months after his surgery.”

Lee’s story is playing out across Asia’s fourth-largest economy as self-employed workers, who make up nearly a third of the labour force, have seen their incomes reduced sharply due to coronavirus restrictions. Now, after struggling for years to keep a lid on household debts that hit a record Won1,765tn ($1.6tn) in March, Seoul is looking to fintech companies and peer-to-peer lenders for answers. 

Chart showing increase in South Korea's household debt

Among them is PeopleFund, which touts tech-based investment products backed by machine learning that allow borrowers to refinance their higher-interest loans from banks and credit card companies.

The company has loaned at least $1bn to more than 7,500 customers since it was established in 2015. Its products allow borrowers to switch their debts to fixed-rate, amortised loans at annual interest rates of about 11 per cent, a change from the riskier floating rate, interest-only loans common in South Korea. 

PeopleFund has received about Won96.7bn in financing from brokerage CLSA, and along with Lendit and 8Percent is one of the first among the country’s 250 shadow banks to win a peer-to-peer lending licence. 

“The country’s most serious household debt problem is with unsecured non-bank loans, whose pricing has been too high. We can offer more affordable loans to ordinary people unable to receive bank loans,” Joey Kim, chief executive of PeopleFund, told the Financial Times.

The proliferation of digital lenders and fintechs in South Korea, where higher-risk borrowers are often cut off from bank financing, has been encouraged by the country’s government.

“We hope that P2P lenders will help resolve the dichotomy in the credit market by increasing the access of low-income people to mid-interest loans,” said an official at the Financial Supervisory Service.

South Korea’s household debt situation has become more pressing since the onset of the pandemic, with increases in borrowing for mortgages, to cover stagnating wages and to invest in the booming stock market. South Korean households are among the world’s most heavily indebted, with the average debt equal to 171.5 per cent of annual income.

South Korea’s household debt-to-GDP ratio stood at 103.8 per cent at the end of last year, compared with an average 62.1 per cent of 43 countries surveyed by the Bank for International Settlements.

Much of the new debt has been risky. Unsecured household loans from non-bank financial institutions were Won116.9tn as of March, up 33 per cent from four years ago, according to the Bank of Korea, much of it high interest loans taken out by poorer borrowers.

Getting on top of the problem has taken on national importance. In a rare warning in June, the central bank said the combination of high asset prices and excessive borrowing risked triggering a sell-off in markets and a rapid debt deleveraging.

“If financial imbalances increase further, this could dent our mid-to-long-term economic growth prospects,” BoK governor Lee Ju-yeol said in July.

The country’s economic planners, however, are struggling to contain debt-fuelled asset bubbles without undermining South Korea’s fragile economic recovery.

The government has attempted to address the danger by tightening lending rules. Regulators in July lowered the country’s maximum legal interest rate that private lenders can charge their customers from 24 to 20 per cent.

Economists caution that rising debt levels increase South Korea’s vulnerability to an economic shock. 

They also warn that the asset quality of financial institutions could be hit by a jump in distressed loans when the BoK rolls back monetary easing, expected in the fourth quarter.

“Monetary tightening is needed to curb asset bubbles but this will increase the household debt burden, holding back consumption further,” said Park Chong-hoon, head of research at Standard Chartered in Seoul. “The government is facing a dilemma.”

For Lee Young-mi, however, the 11 per cent rate offered by the PeopleFund is still too high. “I am not sure how to pay back the debt.”

*The name has been changed

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