There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Fiftieth Edition we are covering the following news:

  1. 1ST QUAD Summit
  2. What’s behind Hong Kong election law changes
  3. Will the lifting of IBC suspension turn out to be a damp squib?
  4. New norms for telecom companies
  5. Anti – China protests in Myanmar

1ST QUAD Summit

A significantly important geopolitical activity has taken place , as after nearly 16 years, the strategic alliance of 4 countries-Japan, US, Australia and India called Quad organized its first prime ministerial level summit in the virtual mode. This development carries huge weight as all the four countries issued a joint-statement defining the goals and objectives of the alliance and are speaking in one voice. It is even important in the Indian context since there had been apprehensions with regards to India joining the Quad as an active member, given its tensions with the neighboring country China.
The opening remarks touched upon the issues of securing free and open access to Indo-Pacific region, the supply of vaccines and resilient supply and production chains. Most of the activities proposed in the summit strongly aimed at curbing the bullying behavior of China. For example, China maintained an aggressive military stance in Indo-pacific region: the border of Ladakh, Taiwan, South China Sea and Senkaku islands near Japan. China is also trying to push for its vaccines which are rather unreliable. In present times, China has the control of supply chains all across the world, which poses a big threat to the dependent nations. Quad aims to balance out the powers and diversify the operations to reduce the world dependency on China.
The summit laid down four major future operations which will act as its guiding principle. First, is maritime security and co-operation. Continuing on the Malabar naval exercises which took place last year, the cards for this year point at expansion by inviting non-Quad countries like France and UAE as well.
The second area of collaboration is on COVID-19 related issues. Quad is looking to launch an expansive vaccine program where vaccines will be developed in the US, manufactured in India, financed by Japan and supported by Australia.
The third area of cooperation is climate change, which has been gaining momentum under Joe Biden’s policy agenda. This is one area where the quad will try to corner china into delivering more. Working groups for climate change are expected to be announced soon.
The last area of economic and technological cooperation, indirectly recognizes China as a threat. The countries aim to break the monopoly of China, which produces 60% of the world’s rare earths, by focusing on increasing its procurement to diversify the production and supply chains across countries.

What’s behind Hong Kong election law changes

China’s rubber-stamp parliament, the National People’s Congress (NPC) approved a resolution to alter Hong Kong’s election law that many see as effectively ending the city’s already weakened local democracy and reducing the proportion of those directly elected.
A new vetting and screening committee will ensure Hong Kong institutions will be filled only with “patriots,” a term which China says includes people who love the country in its present-day form, led by the Communist Party. The move expands the size of both the Legislative Council, known as LegCo, and the Election Committee, a strongly pro-Beijing body responsible for electing Hong Kong’s chief executive.
The change will give Beijing-appointed politicians a greater say in running the Hong Kong Special Administrative Region (HKSAR), marking the biggest change since the handover in 1997. An increased number of pro-Beijing officials would weaken the power of the opposition to influence the city’s leadership. It will erode the political freedoms that distinguished Hong Kong from the mainland under the “one country, two systems” model.
The change is non-compliance with the Sino-British Joint Declaration according to China’s basic policies regarding Hong Kong “will remain unchanged for 50 years” and ensured a high degree of autonomy to Hong Kong. All major economies such as the USA, UK and Australia have condemned the act.  The G7 group of nations  have also expressed grave concerns at what they said was China’s decision to fundamentally erode democratic elements of the electoral system in Hong Kong.
Beijing was perturbed by violent anti government protests in 2019. Repressive measures have already hamstrung the Hong Kong opposition, with almost all of its major figures either in custody or self-exile. Remaining pro-democracy lawmakers quit and other activists have been arrested under the national security law on subversion charges that carry a possible maximum penalty of life in prison.
The change has been seen as a final nail in the coffin for Hong Kong’s pro-democracy movement and an erosion of autonomy. China must act in accordance with its legal obligations and respect fundamental rights and freedoms in Hong Kong.

Will the lifting of IBC suspension turn out to be a damp squib?

The insolvency invocation sections of the Insolvency and Bankruptcy Code (IBC) were suspended by a notification dated 5th June 2020, effective 25th March 2020. It is widely expected that the suspension will be lifted on 24th March 2021. However, a mere withdrawal of suspension without the implementation of additional frameworks that are under discussion i.e., Prepacks and Micro Small & Medium Enterprises (MSME) Regulations under section 240A, will make IBC a toothless tiger; several companies will get excluded from its ambit. The provision to Section 10A of the IBC states that no application shall ever be filed for initiation of the corporate insolvency resolution process (CIRP) of a corporate debtor (CD) for defaults during the Covid period. Thus, all defaults of the Covid period will be outside the purview.
The budget of 2021-22 had provided for the establishment of an asset reconstruction company i.e., a bad bank and an asset management company (AMC). Statement of several senior officials in the Government as well as the Indian Banks Association (IBA) indicates that loans greater than Rs 500 crore which have not been declared fraudulent will be transferred to the bad bank. It is highly likely that the underlying companies would not be subjected to IBC in the first instance, rather the AMC will try and either revive these companies or package the loans to an investor.
MSME will be outside the scope of IBC pending notification of the designated framework. The revised classification of MSME will preclude a plethora of companies from IBC. Additionally, the new criterion may result in litigation vis-à-vis MSME that is pending admission at National Company Law Tribunal. MSME as per definition is enterprises with plant & machinery up to Rs 50 crore and turnover up to Rs 250 crore. It is to be noted that the written down value of plant and machinery at the end of the previous year is to be considered (not original cost) and definition excludes land, buildings, furniture & fittings. Also, the turnover criterion does not include export sales. More than 99% of companies in India have a turnover of 250 crores or less, albeit the ones where the written down value of plant and machinery is greater than 50 crores and in distress will be amenable to IBC. Creditors of several companies had signed the Inter Creditor Agreement (ICA), pre-suspension, under Reserve Bank of India’s (RBI) June 7th Prudential Framework. Some of these corporates will continue negotiation under the framework of roping distressed asset investors. Also, most of the ICA cases will have loans greater than Rs 500 crore, resulting in their exposure being transferred to a bad bank.
Finally, the Hon’ble Supreme Court order states that “the accounts which were not declared as NPA till 31 August 2020 shall not be declared as such till further orders”. This has enabled several CDs to shift cash flows, from servicing lenders to payment of operational creditors, and thus the risk of a filing by an operational creditor has reduced substantially. The aforesaid probable exclusions will result in a significant reduction of filings under IBC. The endeavor of the Insolvency and Bankruptcy Board of India should be to introduce all the frameworks simultaneously on 25th March 2021. A number of judgments from the Hon’ble Supreme Court have lamented about the situation prior to the introduction of IBC. It is Important that the IBC updates its regulations time by time to ensure a safe and competitive market at all times for all businesses.

New norms for telecom companies

The Department of Telecommunications (DoT) has amended licensing conditions for telecom companies by including defence and national security as parameters in the purchase of telecom equipment for trusted sources. This means telecom companies can use telecom products only from trusted sources in their network and must take permission from the designated authority (National Cyber Security Coordinator) if they plan to upgrade their existing network using telecom equipment that has not been designated as a trusted product.
Hence this also means that the telecom companies will not be able to use equipment from non-trusted sources for the setting up or expanding of the network to utilise the 4G spectrum that they bought in the recently concluded spectrum auctions.
More specifically this new move aims to include defence and national security as parameters when purchasing ‘trusted telecom products’ and sourcing equipment from ‘trusted telecom equipment sources’. The trusted telecom products/trusted telecom equipment source is simply a product, a company, or a technology that has been deemed safe by the government of a nation for use in its crucial and critical infrastructure. This new policy could potentially make it more difficult for Chinese telecom equipment vendors like Huawei and ZTE to supply equipment to Indian telecom players in the future as both Huawei and ZTE have been under global scrutiny for allegedly installing ‘backdoor’ or ‘trapdoor’ vulnerabilities and spying for the Chinese government and have been banned by several countries. And of the three telcos, almost 30 per cent of Bharti Airtel’s existing network comprises Chinese telecom equipment, it is as much as 40 per cent for Vodafone Idea. State-run telcos Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) to have equipment from Chinese vendors, including Huawei and ZTE, in their 3G and older networks.
These new norms will be implemented in June as lately, the Union cabinet approved the Production-Linked Incentive (PLI) scheme for the telecom sector to reduce imports and move towards self-reliance. Moreover, telecom equipment plays a vital role in telecom connectivity and data transfer, which has a direct impact on the national security of India therefore this change will help in strengthening the national security of India as well as demand for local equipment will rise which will further promote the vision of Make-in-India and Atma Nirbhar Bharat.

Anti – China protests in Myanmar

Ever since the military coup has taken over the democratically elected government of Myanmar, the people have been protesting over demand for restoration of the latter. At the same time, protestors have started expressing their anger towards China’s alleged support in the military’s action. With this, an unfortunate incident took place on Sunday, as many Chinese staff were injured and trapped in arson attacks by unidentified assailants on garment factories in Hlaingthaya suburb of Myanmar’s main city. Chinese embassy described the situation as “very severe” and it urged Myanmar to take further effective measures to stop all acts of violence, punish the perpetrators in accordance with the law and ensure the safety of life and property of Chinese companies and personnel in Myanmar. Security forces took a tough call and killed at least 22 anti-coup protesters in the poor, industrial Hlaingthaya. A further 16 protestors were killed in other places, the Assistance Association for Political Prisoners (AAPP) said, making it the bloodiest day since February 1 coup against elected leader Aung San Suu Kyi. As plumes of smoke rose from the industrial area, security forces opened fire on protestors in the suburb that is home to migrants from across the country. Martial law was imposed in Hlaingthaya and another district of Yangon, Myanmar’s commercial hub and former capital.
Army-run Myawadday television said security forces acted after four garment factories and a fertiliser plant were set ablaze and about 2,000 people had stopped fire engines from reaching them. The latest deaths would bring the toll from the protestors to 126, AAPP said. It said that more than 2,150 people had been detained by Saturday.
China is viewed as being supportive of the military junta that has taken power. Tatmadaw, the armed forces of Myanmar, has been relying on Beijing to shield them from the inevitable consequences in the UN from the Western nations, and possibly also offset incoming sanctions by expanding economic ties between the two neighbors. China has also played an increasingly important role in Myanmar. Chinese President Xi Jinping has vested interest in dozens of infrastructure projects key to his Belt and Road ambitions. During the Rohingya crisis, China was one of the few countries that stood behind the government. If it were to support the military government now, it could in fact help to get several stalled projects off the ground. Anti-Chinese sentiment has risen since the coup that plunged Myanmar into turmoil, with the opponents of the army takeover noting Beijing’s muted criticism compared to Western condemnation. One of the protest leaders even threatened the Chinese companies with future attacks if they did not respect the sovereignty of Myanmar people.

 

 

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