The Piracy Bill, 2012

Security / Law / strategic affairs

The Piracy Bill, 2012 was introduced in Lok Sabha on April 24, 2012 by the Minister of External Affairs, Shri S.M. Krishna. According to the statement of objects and reasons, piracy as a crime is not included in the Indian Penal Code (IPC). This has led to problems in prosecution of pirates presently in the custody of Indian police authorities.  The Piracy Bill intends to fill this gap and provide clarity in the law. The Bill prescribes that its provisions shall also extend to the Exclusive Economic Zone of India. The Bill defines ‘piracy’ as any illegal act of violence or detention for private ends by the crew or passengers of a private ship or aircraft on high seas or at a place outside the jurisdiction of any State.  It also prescribes that any act which is held to be ‘piratical’ under international law shall be included in the above definition. The Bill seeks to punish piracy with imprisonment for life.  In cases where piracy leads to death, it may be punished with death.  The Bill also lays down punishments for attempts to commit and abet piracy.   Such acts shall be punishable with imprisonment up to 14 years and a fine. The Bill provides that if arms/ ammunition are recovered from the possession of the accused, or if there is evidence of threat of violence, the burden of proof for proving innocence shall shift to the accused. The Bill empowers the government to set up designated courts for speedy trial of offences and authorizes the court to prosecute the accused regardless of his/ her nationality. It also provides for extradition.

What are perpetual bonds?

What are perpetual bonds?
Perpetual bonds are bonds that do not have a set maturity date. Generally, the bonds cannot be redeemed at any point, but do generate some sort of return as long as the bond is held

and to compensate for the fact that investors can never redeem them – they pay a higher rate than other bonds with a similar credit profile.

The company that issues the perpetual bonds normally has an option to call them which means that they can decide to redeem the bonds at the end of certain time periods say 5 or 10 years
and the Tata Steel perpetual bond issue had a step up option also which means that if the bond is not called within a certain time frame then the company will have to pay a higher rate of interest on them. They issued the bonds at 11.8%, and if the company didn’t call the bonds within 10 years then the coupon rate would increase by 300 basis points.

The basic perpetual bond formula includes a fixed coupon amount that is in turn divided by a discount rate that is predetermined to account in part for economic inflation. This helps to put a cap on the value of the bond over time, even though the return on the bond issue is in the form of interest.

a perpetual bond tends to be a relatively stable investment that will continue to provide small amounts of profit for as long as the bond is active. This makes the bond an attractive option for investors who tend to be very conservative. However, a perpetual bond is never likely to yield a huge profit in a short period of time
These bonds are good for banks and other companies to raise money and shore up their capital and also good for pension funds who would like to lock on to the high interest rates

Lord’s Resistance Army

its notorious leader Joseph Kony

The Lord’s Resistance Army is a rebel group led by leader Joseph Kony. The group originated in Northern Uganda as a movement to fight for the rights of the Acholi people. The group has been fighting the Ugandan army for years and has been driven out of Uganda and is now scattered across Congo, Central African Republic and Southern Sudan, where it conducts brutal attacks on villages.
It came to life as the Holy Spirit Movement in the early 1980s by a woman called Alice Lakwena who claimed that the Holy Spirit had ordered her to overthrow the Ugandan govt because of the atrocities it commits against the Acholi people. The Acholi’s live in Northern Uganda.
A large number of Acholi people flocked to Alice Lakwena, they had a lot of grudge against the Ugandan govt, the Holy Spirit Movement gathered momentum however a battle fought between the movement and the Ugandan army resulted in its defeat and exile of Alice Lakwena from Uganda.
Thus in this time of turmoil for the movement, a man named Joseph Kony, claiming to be the cousin of Alice Lakwena took over as leader of the movement and renamed it as the Lord’s Resistance Army (LRA).
LRA had the aim of overthrowing the Ugandan govt and establishing its own rule based on the Biblical Ten Commandments.
The LRA under Kony’s command has been accused of abducting children and turning them into vicious child soldiers. Most of these children are abducted from various villages, those who do not cooperate with LRA has either killed or mutilated. The able bodied children are taken away and used as soldiers, weapons carriers, cooks, porters and even sex slaves.
Numerous attempts have been launched to reach a peace agreement with the LRA, but Kony has thwarted such attempts, however the Ugandan Army claims that it has weakened the LRA significantly. However the LRA has spread its tentacles to Congo where the MONUSCO is under-staffed and has had problems to contain it.
The International Criminal Court has issued arrest warrants against Joseph Kony and his men but he has not been arrested till now.
Moreover 100 US Special Forces operatives are aiding and advising the armies of 4 African nations which are pursuing the LRA.

Non Alignment 2.0

Non Alignment 2.0

India has been criticized for not having a grand strategy for meeting the demands of an emerging world order. Therefore a group of prominent policy makers and analysts, supported by senior officials in the Govt of India have created a policy document called Non Alignment 2.0 which identifies the basic principles which should guide India’s strategic and foreign policy. The report has recommended the adoption of a new version of Non Alignment which should enhance the strategic autonomy of India, without aligning it with a specific nation or bloc of nations. India should enhance it strategic autonomy by pursuing a new version of Non Alignment.

Important features of the report
India must retain maximum strategic autonomy in order to enable it to pursue its developmental goals because it is unlikely that there will be enduring coalitions: these would require artful management.

Thus the report cautions India against having a close relationship with the US. Moreover a close relationship with the US will limit India’s freedom of action and provoke China against India. Moreover it doubts the reliability of American partnership in an event of conflict with China. Instead it advises India to play both China and US with aligning with them.


India's great advantage is that, barring in its immediate neighbourhood, it is not seen as a threatening power

Non Alignment 2.0 lays special emphasis on India’s economy. Proposing India’s reliance on strategic autonomy which is rooted in both internal and external strength- the report considers the proposition that external strength is rooted in the nation’s economic prowess.

Since its economic growth requires deepened economic engagement with the world, India must strive to maintain an open global order.
The report lays special emphasis in engaging with Asian nations, especially South Asia. Therefore the report looks at 3 different areas of Asia- South, East and West and discusses these three areas separately.

India must put in place operational concepts and capabilities to deter China since the latter will be a significant foreign policy and security challenge for it

The report surprisingly does not dwell too much on India’s relationship with the US. Indo-US relationship is only discussed within the realm of India’s economic growth and its relation with China. However no new paradigm of Indo-US relations has been explored by the report.
India should bolster its nuclear weapons capability, especially the maritime leg of the nuclear triad.

Criticism  of the report

A major shortcoming in the report is its failure to clearly spell out a vision for what India should aspire to be and how precisely should these aspirations be realised.

The name non alignment is a misnomer because it was an appropriate doctrine for a world divided into 2 blocs. However with the changed global environment today, the conceptual validity of the report- which divided the world into blocs has been questioned by various analysts.

The report claims to represent a strategic consensus among India’s strategic thinkers and policy makers. However this point is debatable because the report seems more of an outcome of a centre-left deliberation and therefore does not represent a consensus.

The report is against an Indian military strategy based on deep penetration into Pakistani territory in the event of a war. Moreover it advocates non suspension of talks between India and Pakistan, even in the event of another 26/11 Mumbai style attacks.

The report advocates a ludicrous military strategy of countering China- creation of insurgencies by India in Chinese territories and providing covert support to separatist elements in China.

The report suffers from an unseemly fear of China and therefore advocates an equidistant relationship with both China and the US because close Indo-US ties could antagonize the DRAGON.

India’s core security interests like its territorial sovereignty is contested by China and not by the US. Moreover the US is more sympathetic to India’s cross border terrorism problem than China. Thus a close Indo-US relationship would be a better strategy to counter China than going all alone.

Naresh Chandra Committee: National Security Review Task Force

Naresh Chandra Committee is a Task Force on National Security set up under former Cabinet Secretary, Naresh Chandra.
This committee has been set up 10 years after the Kargil Review Committee (under Late K Subramaniyam).
Soon after the Kargil conflict of 1999, the then government had set up the Kargil Review Committee whose recommendations were reviewed by the Group of Ministers in 2000-01.
With the help of four task forces, this GoM made 350 recommendations, several of which were accepted by the government and implemented, but over the years the speed of implementation of reforms has died down. The Defence Intelligence Agency and National Technical Research Organisation, Defence Procurement Board and Defence Acquisition Council were created after a comprehensive review of national security then.
The Kargil Review Committee submitted its report on the basis of which four sub committees or task forces were appointed by the government: -
(1) Sub Committee on Defence Management- Arun Singh
(2) Sub Committee on Border Management- Madhav Godbole
(3) Intelligence- G.C. Saxena
(4) Internal Security- N.N. Vohra

The members of the National Security Review Task Force are : -
(1) Naresh Chandra (former Cabinet Secretary)- Chairman
(2) Admiral Arun Prakash
(3) Air Chief Marshal S. Krishnaswamy
(4) P.C. Haldar (former IB Director)
(5) K.C. Verma (former Secretary R&AW)
(6) Radha Vinod Raju (former DG NIA)
(7) V.K. Duggal (former Union Home Secretary)
(8) Brajeshwar Singh (former civil servant)
(9) Suman K Berry (economist)
(10) D Sivanandan (Indian Police Service officer)
(11) Lt Gen V.R. Raghavan (former DGMO)
(12) Manoj Joshi (journalist)
(13) G. Parthasarthy (former Indian Foreign Service officer)
(14) Anil Kakodkar (former Chairman AEC)
(15) D Raman , advisor to Naresh Chandra


Main Recommendations of the Committee
1. It recommends the creation of the post of the Chairman of the Join Chief of Staff Committee
2. A Special Operations/Special Forces Command for Special Forces of the armed forces
3. Deputation of armed forces officers up to Director level to the Ministry of Defence for greater Civil-Military synergy
4. The committee wants amendment in the Prevention of Corruption Act to protect officers involved in defence purchases, in case they make 'an error of judgement'
5. It has recommended the creation of a National Intelligence Grid
6. Creation of a National Defence University and a separate think-tank on Internal Security and formulation of a National Security Doctrine
7. Greater priority to be given to strengthen our capabilities against China without impairing our capabilities against Pakistan and terrorism
8. Measures to augment the flow of foreign language experts into the intelligence and security agencies, which face a severe shortage of trained linguists
9. It has also suggested creation of a National Counter Terrorism Centre. However it should not have the powers to arrest and search under the Unlawful Activities Prevention Act. It should be under the IB
10. A full time advisor called the National Coordinator of Intelligence in the National Intelligence Board, chaired by the NSA to be appointed to oversee various intelligence agencies and coordinate their work and ensure that there is no overlapping of intelligence and no turf battles between different agencies

"exclusive economic zone" and "UNCLOS"

An exclusive economic zone (EEZ)
  
is a sea zone prescribed by the United Nations Convention on the Law of the Sea over which a state has special rights over the exploration and use of marine resources, including energy production from water and wind. It stretches from the seaward edge of the state's territorial sea out to 200 nautical miles(370 KM) from its coast

        The sovereign rights of the coastal state within the EEZ relate only to the natural resources of the sea; the coastal state cannot interfere with the other traditional freedoms of the high seas, in particular the right of navigation and overflight. In other words, special economic rights and jurisdiction over the resources and installations are granted to the coastal state, whilst the traditional freedoms of the high seas, including in particular the right of navigation and overflight, are maintained”.


WHAT IS UNCLOS
United Nations Convention on the Law of the Sea (UNCLOS),
is the international agreement that resulted from the third United Nations Conference on the Law of the Sea (UNCLOS III), which took place from 1973 through 1982
it is signed on  december 10,1982
members 60

it defines the rights and responsibilities of nations in their use of the world's oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources.

why it is in news
Several countries have made competing territorial claims over the South China Sea

• Indonesia, China, and Taiwan over waters NE of the Natuna Islands
• The Philippines, China, and Taiwan over the Malampaya and Camago gas fields.
• The Philippines, China, and Taiwan over Scarborough Shoal.
• Vietnam, China, and Taiwan over waters west of the Spratly Islands. Some or all of the islands themselves are also disputed between Vietnam, China, Taiwan, Brunei, Malaysia, and the Philippines.
• The Paracel Islands are disputed between the PRC/ROC and Vietnam.
• Malaysia, Cambodia, Thailand and Vietnam over areas in the Gulf of Thailand.
• Singapore and Malaysia along the Strait of Johore and the Strait of Singapore.

Kala Azar

 India and the US have jointly started human trials of a new and powerful vaccine against kala azar.
    The LEISH-F3 + GLA-SE vaccine will be tested on healthy Indian adults in collaboration with the Banaras Hindu University later this year. The vaccine is a highly purified, recombinant and incorporates two fused parasite proteins and a powerful adjuvant to stimulate an immune response.

 What is Kala azar?

     Also known as black fever- The infection causes visceral leishmaniasis that attacks liver and spleen, causing irregular bouts of fever and substantial weight loss. Kala azar tends to recur after every 15 years.

 Is it fatal?

    The disease is the second-largest parasitic killer in the world (after malaria), responsible for an estimated 500,000 cases each year worldwide. In developing countries, where patients generally have poor nutrition and compromised immune function, it is 100% fatal without treatment.

 Endemic areas in India:

     Kala azar is endemic in 48 dists in Bihar, Jharkhand, UP, W Bengal. About 65.4 million people are at risk in these four states WHO's deadline to eliminate kalazar from Southeast Asia expires in 2016. Kala azar tends to recur after every 15 years.

 WHO deadline:

     WHO's deadline to eliminate kalazar from Southeast Asia expires in 2016

    India missed the National Health Policy target to eliminate kala azar by 2010, and has now set a new target to eliminate or reduce the number of cases to one per 10,000 people by 2015.
    Elimination means reducing number of cases to one per 10,000 people

What is" LIBOR"

1)  what is libor ???

devised in 1980
LONDON INTERBANK offered rate or libor is an average of how much it would cost banks to borrow from one another
set each day and it effect the cost of everything from business account draft to credit card to mortgages

it is derived from survey of banks by british banker association
it is not a actual transaction
it is done in dollar euro yen swiss frank

2)  why is the rate important $$$


trillions of dollars of bond derivatives and other financial transactions are bench marked to libor

manipulating by even 0.01 % could lead to millions of dollar in profit or losss

3) alternative

     10 years usa treasuries bonds or other such liquid securities


4) what is happening now ???

      barcley in turmoil regulators are probing USB ,HSBC,ROYAL        BANK OF SCOTLAND

5 ) SHOULD WE WORRIED IN INDIA

       INDIAN CORPOARTES  who borrowed based on libor       need       not to worry
a benchmark will remain at all times  since more then $350 trillion worth securities trade with libor as benchmark

history of Credit Rating Agencies and How They Work

credit rating agencies have been around for the better part of the 20th century, and have played a key role in the financial world by providing ratings on the creditworthiness of bonds and other debt instruments. These ratings are invaluable tools for investors looking to get a better sense of whether a debt instrument is worth investing in. Therefore, when assessing the level of risk associated with a bond,  investors will typically look at its credit rating.

Since most investors are looking for a tradeoff between risk and return on their investments, they are typically going to demand a higher interest rate for bonds that have poorer credit ratings. As a result, rating agencies play an important role in setting interest rates on debt securities.

History of Credit Rating Agencies

The concept of using rating agencies to assess the level of risk associated with a debt arose around the beginning of the 20th century when three major credit rating agencies were formed. Although additional rating agencies were formed in subsequent years, the original rating agencies – Fitch, Moody’s, and Standard and Poor’s – are the most prominent.

1. Fitch

The Fitch Publishing Company was founded in 1913 by John Knowles Fitch, a 33-year-old entrepreneur who had just taken over his father’s printing business. Fitch had a unique goal for his company: to publish financial statistics on stocks and bonds.

In 1924, Fitch expanded the services of his business by creating a system for rating debt instruments based on the company’s ability to repay their obligations. Although Fitch’s rating system of grading debt instruments became the standard for other credit rating agencies, Fitch is now the smallest of the “big three” firms.

2. S&P

Henry Varnum Poor was a financial analyst with a similar vision to John Knowles Fitch. Like Fitch, Poor was interested in publishing financial statistics, which inspired him to create H.V. and H.W. Poor Company.

Luther Lee Blake was another financial analyst interested in becoming a financial publisher. In order to achieve this dream, Blake founded Standard Statistics in 1906, just a year after Poor’s death. Standard Statistics and H.V. and H.W. Poor published very similar information. Hence, it made sense for the two companies to consolidate their assets, and they merged in 1941 to form the Standard and Poor’s Corporation.

Today, Standard and Poor’s not only provides ratings but also offers other financial services, such as investment research, to investors. They are now the largest of the “big three” rating agencies.

3. Moody’s

John Moody founded the financial holding company, Moody’s Corporation, in 1909. Although Moody’s provides a number of services, one of their largest divisions is Moody’s Investor Services. While Moody’s has conducted credit ratings since 1914, they only conducted ratings of government bonds until 1970.

Moody’s has grown significantly over the years. Presently, Moody’s is the second largest of the “big three” firms.

Purpose of Credit Rating Agencies

Credit rating agencies assign ratings to any organization that issues debt instruments, including private corporations and all levels of government. Due to the fact that investors need to know they are receiving adequate compensation for the risk they are taking by holding an investment, the ratings the agencies issue are essential to the financial industry.

The interest rate attached to a debt is inversely related to its level of risk. Therefore, since investors use the opinions of rating agencies as metrics for the level of risk attached to a debt instrument, credit ratings play a key role in the interest rates of different debt securities.

How Credit Rating Agencies Work

Debtors want investors to have a good idea of how creditworthy their securities are. Of course, investors are looking for an unbiased idea of a company’s ability to repay debt. Therefore, companies will often hire a credit rating agency to rate their debt.

After the company solicits a bid, the credit rating agency will evaluate the institution as carefully as possible. However, there is no magic formula to determine an institution’s credit rating; the agency must instead conduct a subjective evaluation of the institution’s ability to repay its debts.

When conducting their assessment, the credit rating agencies will look at a number of factors, including the institution’s level of debt, its character, a demonstration of its willingness to repay its debt, and its financial ability to repay its debt. Although many of these factors are based on information found on the institution’s balance sheet and income statements, others (such as an attitude towards repaying debt) need to be scrutinized more carefully.

For example, in the recent national debt ceiling debacle, S&P downgraded the U.S. sovereign debt rating because they felt the political brinkmanship of the federal government was not consistent with the behavior of a AAA institution.

When they assess an institution’s credit rating, the agencies will classify the debt as one of the following:

1. High grade
2. Upper medium grade
3. Lower medium grade
4. Non-investment grade speculative
5. Highly speculative
6. Substantial risks or near default
7. In default

High grade investments are considered the safest debt available. On the other hand, investments that are listed as in default are the riskiest debt instruments, as they have already demonstrated that they are unable to repay their obligations. Hence, investments in default will need to offer a much higher interest rate if they intend to invest money in them.

Advantages of Credit Agencies

1. They Help Good Institutions Get Better Rates
Institutions with higher grade credit ratings are able to borrow money at more favorable interest rates. Accordingly, this rewards organizations that are responsible about managing their money and paying off their debt. In turn, they will be able to expand their business at a faster rate, which helps stimulate the economy’s expansion as well.

2. They Warn Investors of Risky Companies
Investors always want to know the level of risk associated with a company. This makes rating agencies very important, as many investors wish to be forewarned of particularly risky investments.

3. They Provide a Fair Risk-Return Ratio
Not all investors are opposed to buying risky debt securities. However, they want to know that they are going to be rewarded if they take on a high level of risk. For this reason, credit rating agencies will inform them of the risk levels for every debt instrument and help ensure that they are properly compensated for the level of risk they take on.

4. They Give Institutions an Incentive to Improve
A poor credit rating can be a wake-up call for institutions that have taken on too much debt or haven’t demonstrated that they are willing to be responsible about paying it back. These institutions are often in denial of their credit problems, and need to be alerted of any potential problems from an analyst before they make the necessary changes.

Disadvantages of Credit Rating Agencies

Unfortunately, although credit rating agencies serve a number of purposes, they are not without flaws:

1. Evaluation Is Highly Subjective
There are no standard formulas to establish an institution’s credit rating; instead, credit rating agencies use their best judgement. Unfortunately, they often end up making inconsistent judgments, and the ratings between different credit rating agencies may vary as well.

For example, there was much talk about the S&P downgrade when the United States lost its AAA credit rating. Regardless of the S&P decision, the other two major credit rating agencies still give the U.S. the highest grade rating possible.

2. There Can Be Conflict of Interest
The credit rating agencies usually provide ratings at the request of the institutions themselves. Although they sometimes conduct unsolicited evaluations on companies and sell the ratings to investors, they usually are paid by the very same companies they are rating.

Obviously, this system can lead to serious conflicts of interest. Since the company pays the rating agency to determine its rating, that agency might be inclined to give the company a more favorable rating so as to retain their business. The Department of Justice has started investigating the credit rating agencies for their role in the mortgage-backed securities that collapsed in 2008.

3. Ratings Aren’t Always Accurate
Although credit rating agencies offer a consistent rating scale, that does not mean that companies are going to be rated accurately. For many years, the credit ratings of these agencies were rarely questioned. However, after rating agencies provided AAA ratings for the worthless mortgage-backed securities that contributed to the recession, investors don’t have nearly as much faith in them. Their ratings are still referenced by almost everyone, but their credibility has taken a serious hit.

Interestingly, when the United States had its debt downgraded, the financial community was surprised that more investors flocked to U.S. treasuries than ever before. This was a clear sign that they weren’t taking the credit rating agencies’ opinions as seriously as analysts would have expected.

Final Word

Credit rating agencies have played a significant role in the financial community over the past century. Throughout their existence, they have helped investors identify levels of risk; otherwise, the investing community would be in a world of chaos as it tried to determine risk levels and appropriate interest rates. However, at the end of the day, rating agencies’ evaluations need to be taken with a grain of salt. Although their opinions are based off of highly educated professionals, they are still opinions.

Investors should take a credit rating under advisement, but they should also use their own judgment when they decide whether to purchase a debt instrument at a certain price or interest rate. If you are investing in a security, consider how much debt the firm holds, its revenue, and the assets it has withstanding. Although these are some of the same factors a rating agency looks at, investors should come to their own conclusion on the level of investment risk associated with a security.

Bio-piracy

Bio-piracy

• India has successfully foiled a bio-piracy bid by a Swiss multi-national firm to patent an age-old Indian home remedy - milk as a laxative.
• Nestec SA had filed a patent application at the European Patent Office (EPO) on May 12, 2009, claiming the usefulness of cow milk for the treatment of constipation and as a laxative to be its unique finding. 

 India’s response

• Cow milk is being used alone or in combination with other ingredients for treating constipation and as a laxative in traditional Indian medicine systems for hundreds of years. 
• The Council for Scientific and Industrial Research (CSIR) and the Union health ministry's department of Ayush sent the EPO references of the remedy from several ancient Indian texts dated between 5th century and 20th century.
• This led to the applicant withdrawing its claim and patent application on January 24.

 Books used as evidence by India:

1. Astanga Hridaya (5th century),
2. Vangasena (12th century),
3. Rasendracintamanaih (16th century),
4. Siddhabhesajamanimala (19th century)
5. Khazaain-al-Advia (20th century).

 What is Bio-piracy?

• Biopiracy is a situation where indigenous knowledge of nature, originating with indigenous people, is exploited for commercial gain without permission from and with no compensation to the indigenous people themselves.

 What is Bio-prospecting?

• Bio-prospecting is an umbrella term describing the discovery of new and useful biological samples and mechanisms, typically in less-developed countries, either with or without the help of indigenous knowledge, and with or without compensation. In this way, bio-prospecting includes bio-piracy and also includes the search for previously unknown compounds in organisms that have never been used in traditional medicine.

 Bio-piracy problem in India:

• Till a decade ago, around 2,000 wrong patents regarding Indian medicine systems were being granted annually at international level due to lack of evidence provided by India.
• Ø  On an average, it takes five to seven years to oppose a granted patent at international level that may cost $0.2-$0.6 million. 

 Worldwide opposition to biological piracy' is rapidly building up as more and more groups and people become aware that big corporations are reaping massive profits from using the knowledge and biological resources of Third World communities. There is growing public outrage that these companies are being granted patents for products and technologies that make use of the genetic materials, plants and other biological resources that have long been identified, developed and used by farmers and indigenous peoples, mainly in countries of the South. Whilst the corporations stand to make huge revenues from this process, the local communities are unrewarded and in fact face the threat in future of having to buy the products of these companies at high prices.

The International Monetary Fund and the World Bank at a Glance

International Monetary Fund

• oversees the international monetary system
• promotes exchange stability and orderly exchange relations among its member countries
• assists all members--both industrial and developing countries--that find themselves in temporary balance of payments difficulties by providing short- to medium-term credits
• supplements the currency reserves of its members through the allocation of SDRs (special drawing rights); to date SDR 21.4 billion has been issued to member countries in proportion to their quotas
• draws its financial resources principally from the quota subscriptions of its member countries
• has at its disposal fully paid-in quotas now totaling SDR 145 billion (about $215 billion)
• has a staff of 2,300 drawn from 182 member countries

World Bank

• seeks to promote the economic development of the world's poorer countries
• assists developing countries through long-term financing of development projects and programs
• provides to the poorest developing countries whose per capita GNP is less than $865 a year special financial assistance through the International Development Association (IDA)
• encourages private enterprises in developing countries through its affiliate, the International Finance Corporation (IFC)
• acquires most of its financial resources by borrowing on the international bond market
• has an authorized capital of $184 billion, of which members pay in about 10 percent
• has a staff of 7,000 drawn from 180 member countries

PARTICIPATORY NOTES

•  Setting at rest the uncertainty about overseas investments, finance minister Pranab Mukhrjee has said those investing in stock markets through participatory notes (P-notes) will not have to pay tax in India, an assurance that pushed up the markets.

 What are Participatory Notes? 

•  Participatory notes (P-Notes) are derivative instruments issued by FIIs on Indian shares, but at a location outside of India.
• The investors, who buy P-Notes, deposit their funds in the US or European operations of the FII, which also operates in India. The FII then uses its proprietary account to buy stocks in India.
• Other types of P-Notes include equity-linked notes, capped return note, participatory return notes and investment notes. 

 Why do investors use P-Notes? 

• While one reason for using P-Notes is to keep the investor's name anonymous, some investors have used the instrument to save on transaction costs also. Such investors look for derivative solution to gain exposure in individual, or a basket of, stocks in the relevant market.
• Sometimes, investors enter the Indian markets in a small way using P-Notes, and when their positions become larger, they find it advantageous to shift over to a full-fledged FII structure. 

 What is the problem with the instrument? 

• It is difficult to establish the beneficial ownership or the identity of the ultimate investor, and hence cannot be taxed. It is feared that FIIs, which have to comply with know-your customer norms, know the identity of the investor to whom P-Notes are issued.
• Tax officials also fear that P-Notes are increasingly becoming a favourite among a host of Indian money launderers, who use the instrument to first take funds out of the country through the hawala route, and then get it back using P-Notes.