Thursday, August 13, 2020

Beirut Port Blast: What lies ahead for Lebanon?

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Charvi Trivedi

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Beirut Port Blast: What lies ahead for Lebanon?

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Global Views 360

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August 13, 2020

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The smoke of the Beirut explosion spread over the sky of Lebanon

The smoke of the Beirut explosion spread over the sky of Lebanon | Source: Mehrnews.com via Wikimedia

The year 2020 will be remembered as the year of disasters in the history of humankind. A devastating tragedy struck Beirut, the capital of Lebanon on August 4, 2020, in the form of a massive explosion which occurred in the port area and ripped a large part of the town .

As per initial estimate the death toll stands at 157 with more than 5000 people severely bruised and thousands displaced from their homes. The incredible force of the blast could be felt as far as Cyprus, which is at a distance of 250 kms from the explosion site.

A giant red cloud of smoke erupted in the clear skies followed by a deafening ‘bang’ and smashing of windows. "First we heard one sound. Seconds later there was a big explosion. All hell broke loose and I saw people thrown five or six metres" said Ibrahim Zoobi, who worked near the port. Satellite images show that warehouses and buildings within a radius of 2km from the site of the blast were completely destroyed, ending up in debris.

The intensity of the blast was equivalent to almost ‘2.2 kilotons of TNT’, according to an analyst and weapons expert. The aftermath included scenes of jam-packed hospitals, running without proper electricity connection, increased demand of blood donations and generators and agonized cries of people searching for their loved ones amongst the rubble filled roads.

Michel Aoun, the President of Lebanon | Source: Wikimedia

American President Donald Trump was quick to tweet about calling the blast a ‘terrible attack’. However, according to Michel Aoun, the President of Lebanon, the actual culprit of the blast was the 2,750 tonnes of fertilizer, ammonium nitrate, stored in one of the warehouses in the port area which caught fire. This explosive material was reportedly confiscated from a Russian cargo ship, back in 2014, when it made an uninformed stop at the Lebanese port.

Ammonium nitrate is a white substance used as a fertilizer as well as an explosive. It cannot explode on coming in contact with air but can detonate immediately as it encounters a flammable substance like oil or fire. Being an oxidiser, it will accelerate the severity of the explosion and also lead to release of toxic gases like nitrogen dioxide.

Boaz Hayoun, one of the top bomb experts of Israel, states “Before the big explosion, in the center of the fire, you can see sparks, you can hear sounds like popcorn and you can hear whistles”, which is a strong indication of fireworks. This might point towards seemingly inadequate warehouse management issues in Beirut, as such substances might have come across the explosive nitrates and instigated the blast. The safety protocols were simply not followed, despite being aware about the presence of a ‘ticking time bomb’ in the warehouse.

As Beirut is fighting the COVID-19 pandemic and a financial crisis, it was definitely not ready for another blow. Beirut’s grain storage tower, the largest in Lebanon, was also engulfed in the flames, hampering the entire country’s food security. "It's an economic crisis, a financial crisis, a political crisis, a health crisis, and now this horrible explosion” says Tamara Alrifai, spokesperson for the UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA).

France, the US, Italy, Turkey, Iran, EU, and OIC came up with the offer of help and show support for the people of Beirut.  Emmanuel Macron, the President of France, was the first foreign leader to visit the crisis-hit Beirut. While he consoled the citizens, their grief turned into anger as they chanted the word ‘Revolution’.

There is great anger among the citizens against the government, whom they accuse of being corrupt, sectarian, unaccountable, and out of touch with the common people. The intense protest by the people on the street forced the Prime Minister Hassan Diab to resign along with his cabinet on August 10, 2020.

The economic cost of the Beirut blast, where over 300,000 people have become homeless after their homes get destroyed, is estimated to be $15 Billion. Lebanon, which was already on the verge of economic collapse before this disaster struck, may find it impossible to withstand such a blow to the economy. It will need the support from the world over to rebuild Beirut.

A donor conference for rebuilding Beirut received a total pledge of about $300 million. Though it is a minuscule figure as compared to the destruction in Beirut, it will help to tide over the immediate humanitarian crisis. Apart from this Turkey has offered to help rebuild the port of Beirut and many countries are sending relief supplies.

The days ahead for the citizens of Beirut are going to be challenging as the country navigates the sectarian divide during the formation of a new government. It will be keenly watched by the citizens as well as the international community, whether Lebanon will discard its entrenched ruling elite and reject the toxic sectarian divide to elect an inclusive government or continue to perpetuate the misery on the common citizens.

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April 13, 2021 7:47 AM

Are India's Antitrust laws effective at controlling monopolies?

On 15th of July 2020, Reliance Industries Ltd (RIL) held its annual general meeting of the shareholders. The chairman and managing director Mukesh Ambani, announced that global tech giant Google would be investing $4.5 billion in Jio Platforms. Facebook also has acquired a 9.99% stake in Jio Platforms. This is the first time in the world that both the global tech giants have invested in the same entity. These investments have boosted the confidence for Jio Platforms and also for India’s growth but there have been questions and speculations about the potential anti-competitive makeup of these deals.

The objective of this article is to explore the interpretation and the effectuality of Antitrust laws in India.

Anti-competitive practices are those business practices which firms engage in to emerge as the or one of the few dominant firms, who will then be able to restrict inter firm competition in the industry in a bid to preserve their dominant status. The Collins English dictionary defines antitrust laws as those laws that are intended to stop large firms taking over their competitors by fixing prices with their competitors, or interfering with free competition in any way. These laws focus on protecting consumer interests and promoting a competitive market. The word ‘Antitrust’ is derived from the word ‘trust’. A trust was an agreement by which stakeholders in several companies transferred their shares to a single set of trustees.

In present-day India, talking about market dominance Reliance Industries Ltd (RIL), resembles American company—John D Rockefeller's Standard Oil Company—of the early 20th century. Mukesh Ambani holds the highest ability to influence markets and policy in every sector in which RIL is present—petrochemicals, oil, telecom, and retail. Many industry experts and critics suggest that Ambani has used his political clout to twist the regulatory framework in his favor.

Gautam Adani, founder of Adani Group | Source: Twitter

Furthermore, economic power in aviation infrastructure is clustering into a few hands as well. In 2019, the Adani Group bagged the 50-year concession to operate all the six Airports Authority of India-operated airports—Lucknow, Jaipur, Guwahati, Ahmedabad, Trivandrum, and Mangaluru—which were put up for auction. The company also obtained a controlling stake in ‘The Chhatrapati Shivaji Maharaj International Airport, Mumbai’ from GVK Airports. Moreover, Adani Group is now set to construct the Navi Mumbai International Airport. The group is now eyeing Indian Railways while they have already established an alarming monopoly in green energy and sea ports. While Airports are natural monopolies, one private company controlling more than 8 important airports is not good news to airlines.

India has established antitrust laws to promote competition. For 40 years, India followed the Monopolies and Restrictive Trade Practices Act 1969 (MRTP). This act was based on principles of import substitution and a command-and-control economy. However, over time several amendments had to be made to the act. In 2002, the Indian approved a new comprehensive competition legislation. This is called the Competition Act 2002. The act focused on regulating business practices in order to prevent practices having an appreciable adverse effect on competition (AAEC) in India. The act primarily regulates three types of conduct: anti-competitive agreements (vertical and horizontal agreements), abuse of a dominant position, and combinations such as mergers and acquisitions. The act lists out the cartel agreements that it intends to prevent. This list includes price-fixing agreements, agreements between competitors seeking to limit or control production, market-sharing agreements between competitors and bid-rigging agreements. These agreements are called “cartel” arrangements.

The competition Act is enacted by the Competition Commission of India (CCI), which is exclusively responsible for the administration and enforcement of the Act. It comprises a team of 2 to 6 people appointed by the government of India. The CCI has previously handled high-profile cases. In 2018, CCI imposed a fine of Rs135.86 crore on Google on the grounds that Google misused its dominant position and powers to create a search bias. In another important case, the CCI, ordered a probe into Idea, Vodafone and Airtel when Reliance Jio owner Mukesh Ambani lodged a complaint against the three for forming a cartel and denying Jio the POI required for network connection, causing multiple call failures. The Cellular Operator Association of India was also probed for encouraging the same.

In some cases, the Competition Commission has been successful in tackling activities that are against the free competitive market. However, critics and economists believe that the act is now unable to adapt to the changing business environment in e-commerce, telecom, technology and the government’s role in distorting competition. Demonetization and GST drove the formalization of the economy. One consequence of them was that bigger, better organized players gained at the cost of smaller ones with lesser resources. The Insolvency and Bankruptcy Code (IBC) was designed to solve the problem of non-performing assets (NPAs) of banks. But consequentially, it has also led to a consolidation in many sectors.  

However, CCI has expressed inability to consistently adjudicate punitive measures due to obligation in several cases. This points to the loopholes in the very provisions of the Competition Act 2002. In an Economic and Political Weekly (EPW) article, Aditya Bhattacharjea—an Economist—argues that even though the 2002 Act represents an improvement from the MRTP Act which was extremely restrictive, the present act also remains riddled with loopholes and ambiguities. According to Bhattacharjea, this creates unnecessary legal uncertainty, which acts in advantage of lawyers and law firms. For instance, the act allows the CCI to leave some scope of flexibility for “relative advantage, by way of contribution to the economic development.” Bhattacharjea argues that this may allow large firms to justify their anti-competitive practices in the name of development.

Mark Zuckerberg and Mukesh Ambani having online interaction after Facebook invested in Jio Platforms | Source: NDTV

Data portability plays a significant role in determining market power of certain firms. In 2017, the CCI closed cases against both WhatsApp and Jio involving allegations of predatory pricing and privacy violations. In both these decisions, the regulator did not consider the restrictions around data portability as a competitive advantage. The possible data leveraging advantage for the attempted monopolization could be the ‘portfolio effect’. Portfolio effect refers to increasing the range of brands, by bundling of telecom or messaging service and other service offerings or illegal vertical restraints, even predatory pricing. This in turn may lead to greater ability of further leveraging, deterring innovation and results in degradation of quality. Another possible advantage is explained as the theory of leveraging. The best example of leveraging is when Microsoft entered the media-player market by extending its quasi-monopoly on the operating systems market by taking advantage of the indirect network effects. In case of Facebook acquiring 10% of Jio’s shares, it is a concern that both entities could potentially use WhatsApp’s market dominance in telecom and social networking services and establish dominance in e-commerce market through anticompetitive acts.

There was a consensus among Indian policymakers at the time of the 1991 economic reforms that economic liberalization would eliminate the nexus between the business elites and the policymakers. On the contrary, the relationship between these two groups got further strengthened.

On the other hand, few critics and industrialists argue that extreme restrictions on growing companies hampers the progressive growth of the national economy. While RIL’s Jio looks like a cause for concern, the company has also saved Rs. 60,000 crores for annual savings in India. In addition to that, the entry of Jio to the telecom industry has led to a rise in data consumption and improved accessibility and affordability of the internet across the nation.

However, the concern still lingers as the question of whether this growth is a result of actual innovation or crony capitalism remains unsolved.

However, the fact that telecom, organized retail, ports and airports have two or three players controlling the bulk of the sector needs to be addressed. A healthy competition is quintessential for long-term growth and innovation. Harmful trade practices and cartelization does not only affect small manufacturers but also the general public.

The government, CCI and other lawmakers must closely examine the present laws and provisions and need to see if they are required to amend the act.

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