Tuesday, March 26, 2013

Silver linings of Cyprus bailout; End of India IT staffing as we knew it; Wearable computing is nearer; Fixing India's broken education system

1 Silver linings of Cyprus bailout (Sony Kapoor in The Guardian) Most recent commentary on the Cyprus bailout has been remarkably negative. Not without reason: the excruciating process of reaching this deal was deeply flawed and will impose large additional and unnecessary costs on Cyprus and other eurozone economies. However, the deal does have some redeeming features which should not be underestimated.

First, the deal provides a template for Europe's unforgivably delayed bank resolution regime. The shotgun approach used in Cyprus, which was forced to adopt and apply such legislation in less than a week, now means that the long-overdue EU-wide approach to bank resolution is imminent.

Second, the deal would enhance the confidence of depositors in the EU-mandated scheme wherein those with less than €100,000 in bank deposits were guaranteed. The original Eurogroup deal, which violated the spirit of this guarantee, was replaced by one that upheld its sanctity. This is hugely important as most deposit guarantee schemes are unfunded – so ultimately rely on the trust that depositors can place in governments that they will honour the guarantee.

Third, events in Cyprus convincingly demonstrated the perils of having an oversized banking system. While the origins of problems in Ireland, Iceland and Cyprus were all very different, it was the disproportionate size of their banking systems in relation to the underlying economy that brought the three countries to their knees.

Fourth, events in Cyprus would have rudely woken up those who had become complacent about the eurozone crisis. The reality is that the political, social, economic and financial aspects of the crisis all continue spiralling downwards and only a grand political bargain can stem the descent. The farcical decision-making surrounding Cyprus has shown how unlikely such a bargain is.

Importantly, Cyprus has once and for all demonstrated that those hoping that a "banking union" will be the panacea that gets us out of this mess are deluding themselves. The dream that the European Stability Mechanism will come to the aid of banks in troubled economies without invoking guarantees from the sovereign is dead. Better to face harsh reality than live in cloud cuckoo land.

2 End of India IT staffing as we knew it (Dawn) India’s IT outsourcers are promoting “mini CEOs” capable of running businesses on their own, while trimming down on the hordes of entry-level computer coders they normally hire as they try to squeeze more profits out of their staff. The shift by Infosys Ltd and others is symptomatic of a maturing industry that wants more revenue from its own intellectual property instead of providing only labor-intensive, lower-margin information technology and back-office services.

For young graduates who see the $108 billion IT industry as a sure pathway to modern India’s growing middle class, the transformation is unsettling. Just 20% of the 5,000-6,000 campus recruits offered HCL jobs in 2011 have been taken on board since graduation last summer, and HCL said it made no offers in 2012 to students who would graduate in June 2013. Slower growth, fewer people leaving, greater demand by customers for experienced staff, and increased productivity through automation and software have put pressure on all recruits, according to HCL, which said it expects to accelerate bringing entry-level staff on board from August.

India’s IT services industry grew in large part because of the availability of cheap skilled labor, an advantage that is eroding as wages and other costs in India rise. In years past, it was cost-effective for IT companies to hire new graduates by the thousands and keep a portion on the “bench” awaiting deployment on a client project.

But budget-constrained clients now demand shorter lead times. IT vendors that might have hired people six months in advance of an expected contract are now working with a one- or two-month window, said Surabhi Mathur Gandhi, senior vice president at TeamLease, a staffing consultancy. Traditionally, about 30% of Indian IT services industry staff are on the bench at any given time, often in training, as they await deployment to client work.

3 Wearable computing is nearer (Straits Times) Google has picked 8,000 people in the US who will have a chance to wear the company's new Internet-connected glasses, which are being described as the next breakthrough in mobile computing. Google began notifying contest winners on Tuesday.

The winners will have to pay $1,500 apiece if they want a test version of the product, called "Google Glass". They also will have to travel to New York, Los Angeles or the San Francisco Bay area to pick up the device, which isn't expected to be available on the mass market until late this year or early next year.

The excitement stems from the belief that Google Glass is at the forefront of a new wave of technology known as "wearable computing". Google, Apple Inc and several other companies also are working on Internet-connected wristwatches, according to published reports that have cited anonymous people familiar with the projects.

4 Fixing India’s broken education system (Rakesh Mani in The New York Times) India’s school enrollment rates have risen but there are many other flaws. First, it has not even dented the issue of child malnourishment. Also, it not been accompanied by an increase in the number of trained teachers, resulting in unwieldy class sizes and low-quality instruction.

Although the government raised salaries to attract talented teachers, they have often lacked adequate training and have remained largely unaccountable. Finally, the enrollment rates distract from the fact that dropout rates are alarmingly high. In Mumbai, for example, enrollment rates surpass 95%, but only a small fraction of students will graduate.

The situation across the rest of the country is not much different – according to recent figures, 4% of Indian children never start school, 57% don’t complete primary school and almost 90% — around 172 million — will not complete secondary school. These numbers should deeply anger Indians and force them to question society’s priorities and values.

For several years, important voices have waxed eloquent on the sheer economic potential of India’s young population. Around 30% of the country – close to 350 million children – is under the age of 15. Given this, statisticians predict that India’s labor force will grow by a staggering 100 million over the next decades, over 10 times the corresponding figure in China. By some estimates, over 25% of the global workforce will be Indian by 2030.

These numbers make one thing clear: the entire world has a social and economic stake in ensuring that India provides top-quality education to its children. But the harshness of the inequity suggests that the debate ought to be more about what is morally right. Despite India’s dazzling economic growth, the bigger growth story over the last two decades has been that of inequity, which is growing faster today than at any time since independence. Underinvestment and ineffective governance in health and education services have played a key role. In just a few more decades, the implications of India’s apathy will have profound implications – not just within the country, but around the world as well.

Monday, March 25, 2013

UK big five banks' profits 'wiped out'; Devastating rescue of Cyprus; India's leaderless democracy; Teen turns tech millionaire

1 UK big five banks’ profits ‘wiped out’ (BBC) The major UK banks saw a 45% rise in core profits in 2012, but that hike was wiped out by a mix of regulation and their own mistakes, a KPMG report says. Its performance report looks at Barclays, HSBC, Lloyds Banking Group, RBS and Standard Chartered. It says the banks' combined core profits last year were £31.5bn. But this was eliminated by the "cost of past mistakes and increased creditworthiness of their own debt", the audit firm's report says.

This development meant that the major banks actually saw their statutory profits slump 40% on the previous year, at £11.7bn, KPMG added. The banks, it says, were hit by PPI costs of £7.4bn - up from £5.7bn in 2011. In addition, there were other fines and penalties from regulators and "redress provisions" of £4.7bn, and a £12.8bn accounting hit for losses caused by the revaluation of "own debt'", "reflecting the credit markets' more positive view on bank issuers and interest rate movements". 

2 Devastating rescue of Cyprus (Robert Peston on BBC) Although eurozone governments and the International Monetary Fund have rescued Cyprus, it probably won't feel like much of a rescue. The second largest bank, Laiki, is being closed. Losses from its closure, which will be substantial - billions of euros - will be absorbed by holders of its bonds and those with deposits over 100,000 euros ($130,000). So at a stroke, one important source of credit to the economy will be eliminated.

There is some relief for those with savings of 100,000 euros or less, because their cash will be transferred to the Bank of Cyprus, the country's biggest bank, and kept intact. But Bank of Cyprus too is being reconstructed. And the costs of making sure it has enough capital to operate safely in the future will also fall on its deposits greater than 100,000 euros. So these depositors too will incur losses running to billions of euros.

In the long term as well, prospects for this economy will be extremely challenging: the country's important offshore banking industry, the business of looking after the tax-escaping cash of Russian businesses and individuals, is in effect being closed down forever. All those losses being heaped on large depositors are reason enough for anyone with a choice about where to place their cash to stay away from Cyprus forever.

So here is the Cyprus "rescue" in a nutshell: 1 An economy that will be starved of credit, and will therefore shrink rapidly and very painfully for citizens. 2 An economy whose main industry, offshore banking, is being shut. 

The price for Cyprus of staying in the eurozone will be as great as for the people of any of the currency union's over-indebted nations. What should give the eurozone's leaders some pause for thought is that at some point the people of countries in financial difficulty may begin to wonder whether they are right to be paying this steep bill to preserve the euro.

3 India’s leaderless democracy (Nilofar Suhrawardy in Khaleej Times) Despite there being too many leaders in almost every domain, India suffers from the severe problem of being a leaderless country. Though Manmohan Singh heads the government as Prime Minister, prospects of him being hailed as a national leader remain as low today as they were a decade ago. Sonia Gandhi has established herself as the Congress chief and head of the coalition, the United Progressive Alliance (UPA), but her foreign birth remains an obstacle to her ever heading the country. All eyes are set on her son Rahul Gandhi taking over the reins of government, yet there still remains doubt on whether he is ready for the task or not. 

The leading opposition party, Bharatiya Janata Party (BJP) is confronted with the same problem in a more taxing manner. Veteran L K Advani has been marginalised in his own party by the saffron brigade. The key decision making process in the BJP is now being controlled by the present party head Rajnath Singh, former party chief Nitin Gadkari, Gujarat Chief Minister Narendra Modi, leader of the opposition in Lok Sabha (Lower House) Sushma Swaraj and leader of opposition in Rajya Sabha (Upper House) Arun Jaitley.

The recent political history has witnessed a rise in self-acclaimed leaders identifying themselves with the common man. Arvind Kejriwal heads this list, who has also formed a political party called the Aam Indian Party (AAP). The truly common Indian, from rural as well as urban areas, has little time for most political distractions, whether they are Rahul Gandhi’s speeches, Kejriwal’s demonstration or BJP’s rally. They can, of course, be ‘bribed’ to participate in these gatherings, which they usually agree to out of their material interest and not because of their political leanings.  

On one hand, numerous leaders as well as parties at national stage and at regional levels may be viewed as a very strong reflection of this country’s democratic political fabric. Yet the tragedy is that stretching in too many directions — regional, religious, caste and creed are weakening the same political fabric. The only relief is that these barriers are not stretched to violence and conflict at grassroots level. Thus, in essence, despite India being virtually a leaderless country, the Indian voters’ conscience has not let this weakness prove fatal.

4 Teen turns tech millionaire (Brian Stelter in The New York Times) One of Yahoo’s newest employees is a 17-year-old high school student in Britain. As of Monday, he is one of its richest, too.  That student, Nick D’Aloisio, a programming whiz who wasn’t even born when Yahoo was founded in 1994, sold his news-reading app, Summly, to the company on Monday for a sum said to be in the tens of millions of dollars. Yahoo said it would incorporate his algorithmic invention, which takes long-form stories and shortens them for readers using smartphones, in its own mobile apps, with Mr. D’Aloisio’s help.

Mr. D’Aloisio, who declined to comment on the price paid by Yahoo (a technology news site pegged the price at about $30 million), was Summly’s largest shareholder. “They took a gamble on me when I was a 15-year-old,” Mr. D’Aloisio said, by providing seed financing that let him hire employees and lease office space. The fund read about Mr. D’Aloisio’s early-stage app on TechCrunch, the Silicon Valley blog of record, found his e-mail address and startled him with a message expressing interest. 

Other news-reading apps have attracted corporate attention as of late, reflecting the scramble by media companies to adapt to skyrocketing traffic from mobile devices. The social network LinkedIn was said to be pursuing an app called Pulse earlier this month. Still, the eight-figure payday for a teenage entrepreneur on Monday struck some as outlandish and set off speculation that Yahoo was willing to pay almost any price for “cool.”

Wednesday, March 20, 2013

Cyprus keeps banks shut to avert disaster; 'Days' of our lives; No easy job for new Pope; Rapes raise a stink for India

1 Cyprus keeps banks shut to avert disaster (Angelique Chrisafis & Miriam Elder in The Guardian) Cyprus ordered its banks to remain closed until next week as the cabinet held emergency talks in an effort to strike a deal with the EU or Russia to avert financial meltdown and stave off bankruptcy. After the country’s parliament rejected a plan to provide €5.8bn by seizing a portion of bank deposits from anyone with a bank account, Cyprus is struggling to come up with a plan that will let it access an EU bailout to stop its banks failing.

The country's eurozone partners and the International Monetary Fund are ready to provide €10bn in an emergency bailout if Cyprus comes up with an extra €7bn itself. Most of the bailout money is needed to shore up the country's oversized banking sector, with the rest for government finances.

No clear "plan B" had emerged after meetings between politicians and representatives of European partners and the IMF. The Cypriot cabinet was said to be discussing ideas including the nationalisation of pension funds of semi-government corporations, which hold €2bn-€3bn, and another form of levy on deposits. Another option debated may have been natural gas bonds linked to hydrocarbon reserves discovered off Cyprus, which remain uncertain and will not be exported until at least 2019.

2 ‘Days’ of our lives (PG Bhaskar in Khaleej Times) Even as a kid growing up in secular, must-please-everyone, democratic India, remembering ‘days’ was tough. It wasn’t just Independence day and Republic day. There was Children’s day, Teachers’ Day, Eid Days, Hindu festive days, Parsi Navroz, Mahavir Jayanti, Guru Nanak’s birthday, Christmas and a host of Indian ‘new year’ days — almost one for every state. Then there were harvest festivals, days in commemoration of various events related to deities, leaders etc. But what made it easy to remember them was that most of these days had a school holiday attached to them.

Then life started getting complicated. Someone out there in the West came up with Mother’s Day and Father’s Day. This took root and spread its wings eastward, as young Asians migrated to the West. Slowly, the concept caught on till parents started feeling hurt if their kids didn’t wish them on this particular day. Having tasted success, the marketing devils then focused on the youth. Valentine’s Day was the next big thing. Eager college students were an easy target. Suddenly teddy bear dealers, chocolate sellers and card makers were doing more business in February than in most other months.

It didn’t stop there. The concept of a special day to focus attention on something caught on. A series of other ‘days’ followed. Grandparents’ day has been celebrated in the US since 1978, but is now known in several other countries as well. Secretaries the world over began to sulk if their bosses or employers forgot about Administrative Professionals’ Day (Secretaries’ Day) which comes up in April. And if we can have a Secretaries’ Day, can Boss’ Day be far behind? No, so we have that too, to add to our arsenal.

Over time, the WHO, keen to capitalise on the ‘day’ fever and creating awareness, proclaimed World Health Day (April 7). The World Heart Federation declared the 29th of September as World Heart Day and the Dental Federation quickly grabbed the 12th of the same month as Oral Health Day. The UN World Tourism Organisation has claimed for itself the 27th of September as World Tourism Day and UNESCO considers September 8 International Literacy Day.

Who is authorised to usurp these ‘days’? To the best of my knowledge, everyone is. It doesn’t have to be governments or international organisations, though of course, they carry more weight. See what I mean? I wonder if there is any ‘day’ at all that has not been taken?

3 No easy job for new Pope (Khaleej Times) The world is particularly impressed by the new pontiff’s penchant for helping the poor. Taking the name of Francis, after the St Francis of Assisi —the 13th century son of an aristocrat who shunned wealth and luxury and strived to help the destitute — the new pontiff is renowned for being a champion of the needy.  In fact, his populist words — “A poor Church for the poor” — have struck a chord with people all over the world, especially those from Latin America.

The 266th pontiff’s humility has definitely won accolades worldwide, but his job will not be easy. The religious leader has assumed leadership of the church at a rather difficult time. With falling membership, damning sexual abuse scandals and lack of inter-faith dialogue, the institution has been recently plagued by a number of problems.  Christians, therefore, are expecting Pope Francis to revive the Church; his fellow Latin Americans particularly have very high hopes from him. The world is patiently waiting to see whether the new pope will live up to his historical namesake’s reputation.

4 Rapes raise a stink for India (Shreya Shah in The Wall Street Journal) The UK has reviewed its advisory for British travelers to India after a Swiss tourist was allegedlyraped by a group of men in the central Indian state of Madhya Pradesh. The travel advisory mentions that more cases of sexual assault against women and girls are being reported in India, noting that there have also been recent sexual attacks against foreign tourists. It asks women to be “cautious” when travelling in India and suggests women “respect local dress codes and customs and avoid isolated areas, including beaches, when alone at any time of day.” It also asks them to avoid travelling alone on public transport, or in taxis or auto rickshaws, particularly at night.

The caution is the latest to cast India’s treatment of women in a poor light since the December gangrape in Delhi of a 23-year-old physiotherapy student, an incident that attracted attention worldwide. On Tuesday, a British tourist said she jumped out from the balcony of her hotel room in the northern city of Agra to escape sexual harassment, according to local police.

Sachin Chauhan, the hotel’s manager, has been arrested by police. He has been charged with sexual assault. Mr. Chauhan couldn’t be reached for comment. Pawan Kumar, superintendent of police in Agra, said she doesn’t wish to continue her trip and will return to UK.

Other countries also ask female travelers to India not to travel alone. A US travel advisory says that “eve-teasing,” an Indian term for sexual harassment, can occur anytime anywhere, especially in crowded areas like a market place or in the street. It says that “rape is the fastest growing crime in India,” and foreign women should be vigilant. It asks women to keep their hotel room number confidential and make sure that room doors have chains, deadlocks, and spy-holes.

Monday, March 18, 2013

AstraZeneca to cut over 2,000 jobs; Reading writing and video games; World's biggest solar panel maker defaults; A woman's world; India's recurring nightmare

1 AstraZeneca to cut over 2,000 jobs (Rupert Neate in The Guardian) AstraZeneca is cutting 2,150 jobs in George Osborne’s constituency just five months after the chancellor helped the drugs group secure a £5m government grant to develop its Alderley Park research and development centre. The UK's second-biggest pharmaceutical company said it was closing down the Alderley Park R&D facility with the loss of 550 jobs there and 150 elsewhere in the UK over the next three years.

A further 1,600 jobs will be moved from the facility to Cambridge, where Astra is relocating its headquarters and creating a new $500m (£330m) R&D centre. It is just over a year since the company announced 7,300 job cuts as part of its last cost-cutting drive. The new cuts by one of the biggest employers in Osborne's constituency come just two days before the chancellor delivers a budget aiming to avoid a triple-dip recession.

2 Reading, writing and video games (Pamela Paul in The New York Times) The concepts of work and play have become farcically reversed: schoolwork is meant to be superfun; play, like homework, is meant to teach. There’s an underlying fear that if we don’t add interactive elements to lower school curriculums, children won’t be able to handle fractions or develop scientific hypotheses — concepts children learned quite well in school before television. 

Technology firms are understandably eager to enter the lucrative school market and acquire customers at the earliest age. Alarmists warn that schoolchildren won’t excel in the i-economy if they aren’t steeped in technology. Many schools boast of their iPad-to-kindergartner ratio on the theory that children should learn early on how to use a touch pad. Really? Any parent with an iPhone can tell you how long it takes a small child to master the swipe. 

How’s this for a radical alternative? Let children play games that are not educational in their free time. Personally, I’d rather my children played on my iPhone while waiting for the subway to school than do multiplication tables to a beep-driven soundtrack. Then, once they’re in the classroom, they can challenge themselves. Deliberate practice of less-than-exhilarating rote work isn’t necessarily fun but they need to get used to it — and learn to derive from it meaningful reward, a pleasure far greater than the record high score. 

3 India pledges to clean Yamuna river – again (Hari Kumar in The New York Times) Confronted with thousands of angry protesters, the Indian government promised this week to clean up the filthy Yamuna River, which flows through Delhi. India’s minister of water resources, Harish Rawat, has promised that the government will have a blueprint for a river cleanup program and to map out construction of sewage interception drains within two months. 

More than half of Delhi’s sewage flows untreated into the Yamuna, ruining it for farmers and wildlife downriver. The 22-kilometer (14-mile) stretch of the river that flows through Delhi has a dissolved oxygen content, a measure of a river’s health and ability to support life, of zero in some areas. Aside from its agricultural importance, the Yamuna is first and foremost considered a holy river for Hindus, who call it Jamuna-ji, using the honorific.

4 World’s biggest solar panel maker defaults (BBC) China's Suntech Power Holdings, the world's biggest solar panel maker, has defaulted on its debt. The firm said it had failed to repay $541m worth of bonds due on 15 March. That triggered cross-default clauses on its other loans as well. The failure to make payments on the bonds could lead to potential lawsuits against Suntech. However, the firm said it was in talks with the bondholders and was unaware of any legal proceedings being initiated. 

The firm has outstanding loans from International Finance Corporation as well as Chinese domestic lenders. Suntech, which emerged as a leader in China's green energy sector, has seen its fortunes plummet in recent times. It posted four consecutive quarters of losses through the first quarter of 2012. The firm has not released its quarterly earnings since then.

Global solar panel makers such as Suntech have been hurt by a sharp decline in prices in recent years. However, US and European panel makers have blamed Chinese firms for playing a big role in that. They have accused the Chinese companies of flooding the market and of selling the panels below fair price, a practice known as "dumping". There have also been allegations that China provides subsidies to its firm, which helps them keep their costs low and as a result sell goods at a cheaper prices. However, China has denied these allegations.

5 A woman’s world (Shivani Mohan in Khaleej Times) The Indian Union Budget 2013 announced recently has come up with some big-ticket incentives for women. The most significant amongst these is Women’s Only Public Sector bank to encourage entrepreneurship. Surprisingly, there was much sneering amongst women at the prospect of ghettoising women through a women’s-only bank. Keeping in mind the nation-wide outrage at the horrific Delhi gang rape, the government announced a proposal to set up a Nirbhaya Fund with an allocation of Rs1,000 crore. Other than empathetic polity, change has to happen at many levels.

After the recent Nirbhaya case, all unauthorized buses were taken off the roads of Delhi. But have they been replaced by any other alternatives to public transport? No. She has to now start one hour earlier from home and board overcrowded DTC buses. She is the working woman who gets up at 5 am, cooks meals and packs lunch boxes for the entire family before setting off for work. When she gets back home at 8 pm, she is famished, tired. This too is the reality of India. Whatever we do to facilitate them is less. So the criticism about ghettoizing women through a women’s-only bank is unwarranted.

Yet there are many stereotypes that try to put hard-working women at a disadvantage. If you don’t drink and smoke, you aren’t edgy enough. If you wear sarees, you’re old-fashioned. If you’re a mother, you’re not ruthless. If you want to get married, you’re not ambitious. If you’re pretty, you’re not intelligent. If you’re financially secure, you don’t need to be emotionally secure. We want to tell the world that we can be all of these and then some. At a time and place of our choice!

6 India’s recurring nightmare (Khaleej Times) Three months after the Delhi gang-rape case, the Indian public vividly remembers its grisly details. Now, another rape case in India has sparked a furore in media circle, yet again highlighting the economic giant’s struggle with ensuring women’s security and safeguarding their rights.

Last Friday, a Swiss tourist was gang raped in India’s central state of Madhya Pradesh, as she camped with her husband near a village in Datia district. The 39-year-old victim and her husband had been cycling from the town of Orchha to Agra, to see the Taj Mahal, when they decided to camp for the night in a woodland. But during that time they were attacked by men, who overpowered the victim’s husband by beating him with sticks and subsequently committed the heinous crime. The state police have arrested six people in connection with the rape. Parading the alleged culprits in front of the media, the authorities have promised speedy justice for the couple.

This new case has further tarnished the country’s image worldwide at a rather sensitive time for the Indian government. Faced with immense public pressure before the forthcoming elections, the government is in the midst of negotiating the contents of anti-rape legislation.  But the public’s impatience with poor enforcement of law — the reason why sexual offences continue unabated in metropolitan areas — has been clear during the recent protests and demonstrations. 

Instead of squandering all their energy in drafting bills and passing them in the parliament, Indian leaders need to strengthen law-enforcement institutions. Because a rule, no matter how well-intentioned, is defunct if its stringent imposition is absent.