Mali: Is France entering a desert quicksand?

This conflict could prove far more intractable than Western powers and West African backers anticipate.

As French troop reinforcements pour into Mali, there is concern in Western capitals that the engagement in this vast desert country could be more difficult and more protracted than many imagine.

At present the French have deployed 1,400 troops. France’s defence minister, Jean-Yves Le Drian, told journalists: “There was combat yesterday, on the ground and from the air. There was more overnight and it is continuing at this moment.”

Their troops have the backing of the United Nations, as well as the West African regional grouping, ECOWAS.  Soldiers from the region are – after considerable delay – finally being deployed. Some 2,000 are promised by Chad and the first of Nigeria’s contingent of 900 troops are expected to arrive on Thursday.

When they can be readied, 3,300 West African troops should join the French in bolstering the poorly motivated, poorly led Malian army in their fight against the rebels. A range of European countries, Britain among them, have promised logistical support and training.

This appears to provide the French with the overwhelming force needed to take on the Islamists rebels, who now control Northern Mali.  But some in the diplomatic community worry that this may prove illusory.

The three rebel movements, Ansar Dine, Movement for Unity and Jihad in West Africa (Mujao) and al-Qaeda in the Islamic Maghreb (Aqim) are tough, mobile and well-versed in desert warfare.

They have also considerable resources at their disposal.  Between them they are estimated to have extracted €40m over the last three years from a series of kidnappings.  Tobacco smuggling has bolstered their funds. This has provided them with the funds to purchase weapons from international suppliers.

It is not clear which source they turned to, but the usual channels are suspected. Former Eastern block countries head this list. These include Ukraine and Belarus. Vladimir Peftiev, who previously headed the Beltech Holding, a group of Belarusian arms producers and traders, last year had his assets frozen in Europe and was barred from entry. Iran, recently named as an exporter of ammunition to Africa, could be another source.

Military analysts are concerned about the downing of a French helicopter in Mali. The French military have so far refused to explain how it was destroyed, but there are suspicions that it was hit by a surface-to-air missile. If this is true, then the rebels pose a threat to French air-superiority.

But perhaps the most worrying element of the rebel strategy is their ability to blend into the local population. There are suggestions that the Islamists have begun to move families out of their homes in areas they control, so that they can assume the guise of local civilians, if the towns and villages are overrun.

Islamist fighters are deploying child soldiers and using the population as a shield against the offensive, a Malian army source told Agence France Presse. These people (the Islamists) have two strategies: using the population as a shield and child soldiers as fighters," the military leader said on condition of anonymity.

The vast wastes of the Sahara and the mobility of the fighters will make the rebels a tough enemy to dislodge. France, and its Western and West African backers, may have to prepare themselves for a long, difficult conflict.

 

A picture taken with a mobile phone reportedly showing Islamist insurgents in Gao. Photograph: Getty Images

Martin Plaut is a fellow at the Institute of Commonwealth Studies, University of London. With Paul Holden, he is the author of Who Rules South Africa?

Ralph Orlowski / Getty
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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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