(Established January 1949)

August 4, 1956 Volume VI11—No. 31 Eight annas

EDITORIALS

Suez and Sovereignty 907 Suez and Sovereignty

Supply and Distribution of COLONEL NASSER'S decision to nationalise the Suez Canal Company Electricity 908 may be a political move. Egypt has been provoked to this policial action by the far more political decision of Britain and America to withdraw WEEKLY NOTES their former offer of aid to Egypt in financing the Aswan Dam. Colonel Nasser has some economic justification for nationalising the Suez Canal Pranlal Devkaran Nanjee Jute Company. Economic arguments advanced by Britain and America for —India and Pakistan Book the withdrawal of their former offer of aid are without basis. Cairo had Banks — Canara Bank loans two choices in retaliating against the joint Anglo-American diplomacy. to Students Unitary or In choosing to finance the Aswan Dam partly out of the resources of the Federal 910 nationalised Suez Company, Cairo has won a decisive first, round in the OUR DELHI LETTER diplomatic battle against the West. Its policy of denial of financial aid to Egypt for building the Aswan Dam seems to have been based on the 912 One Society to One Village? assumption-of Moscow's inability or unwillingness to assist. Egypt. This assumption is questionable. Cairo may yet receive aid from Moscow. But A CALCUTTA DIARY Colonel Nasser has shown statesmanship in not obliging the West by any A Profession Under Fire 913 hasty or more active association with the Communist bloc.

BOOK REVIEW Reasons furnished by America and Britain for their withdrawal of For the Investor 915 the former offer of aid are unconvincing. One is Egypt's failure to reach any agreement with the riparian States on the Nile. There are differences FROM THE LONDON END between Egypt and the Sudan on the distribution of the Nile waters. But these differences were in the process of being eliminated since the joint Sterling Dollar Diplomacy 917 offer was first made. This objection is now less tenable, as is evident SPECIAL ARTICLES from Khartoum's enthusiastic endorsement of Cairo's retaliatory action. Both America and Britain have pleaded doubts about Egypt's ability to Technique of Production and finance the Aswan Dam in support of their belated withdrawal of the offer Employment in an Under­ of aid. Egypt's militant attitude to Israel, her mounting defence ex­ developed Economy penditure, her ambitious industrial plans and similar other economic and — D Ghosh 919 financial policies are cited by the British Foreign Minister as evidences The Concept of an Optimum that Egypt is "no longer in a position to devote to the dam project the Pattern of Investment degree of priority necessary to secure its success". — Sushil K Dey 92! It is neither a prejudiced nor an unreasonable presumption that the Dibrugarh Spurs World Bank is a more reliable authority than London or Washington to —Kumud Bhushan Ray 923 judge Egypt's ability or willingness to finance the Aswan Dam. And the World Bank agreed to contribute its quota to the financing of Aswan Dam FROM THE CHAIR after a close scrutiny of the Egyptian budget and of the national econo­ Bombay Suburban Electric my. Colonel Nasser has great political achievements to his credit. He and his associate Army rebels have forced the abdication of Farouk. Supply Ltd. 925 Britain has quitted the Suez Canal. Colonel Nasser's combative policy AROUND BOMBAY MARKETS to Israel has popular support. But he and his regime cannot be unaware that their and Egypt's future depends on elimination of poverty. He has No Lack of Confidence 929 initiated bold industrial projects. He has enhanced his and his regime's AROUND CALCUTTA MARKETS prestige by his personal identification with the Aswan Dam. No govern­ ment or politician in Cairo could be unfamiliar with the supreme necessity Spurt in Equities 931 of conservation and distribution of the Nile waters for the rapid econo­ CURRENT STATISTICS 932 mic progress of Egypt It would, therefore, be absurd to argue or to suggest that Colonel Nasser was not serious or sincere about the Aswan Dam project. The Economic Weekly 15 Tamarind Lane, Fort, Bombay His retaliatory action against the Anglo-American withdrawal of the Telephone : 23406 offer of aid emphasises his awareness of the importance of the Aswan Annual Subscription : Rs 24 Dam to the Egyptian economy. But the legality as well as the morality August 4, 1956 THE ECONOMIC WEEKLY

tiff his decision to nationalise the tion to violate this Convention. He State to excise it Britain herSelf Sues Canal Company has been has repeatedly assured the world of has got enough precedent and so has questioned. Britain and France, the the freedom of navigation in the the United States of America. One powers directly affected, have im­ Canal. In law, the Suez Canal and has only to go back to the nation­ posed economic and financial sanc­ the Suez Canal Company have not alisation decrees that Britain passed tions against Egypt.- Colonel Nasser the same status. Once this legal and the records of the American has repeatedly emphasised that his position is properly appreciated, the courts, refusing the foreclosure of decision to nationalise the Suez Canal demand for international administra­ mortgages during the years of the Company does not violate either in­ tion of the Canal loses all its force. great depression. It may not be to ternational law or morality. As the To stress the circumstances which a country's interests to apply the Suez Canal Company is an Egyptian have provoked Egypt to nationalise same criterion to its own nationals Company registered in Egypt. Cairo the Suez Canal Company, or to em­ and foreigners in the matter of com­ is within its rights to nationalise the phasise Egypt's sovereign rights to mercial obligations. But this is a property situated within her take the decision, is not to minimise right which sovereign power reserves territory and jurisdiction. Inter­ the possible international consequen­ to itself. It cannot be questioned. national law imposes only one ces of Cairo's move. As Britain sells If Egypt offended against prin­ obligation which Cairo has scru­ more to, than she buys from, Egypt. ciples of commercial propriety by pulously observed. Foreign owners economic sanctions imposed by Bri­ nationalising Suez Canal Company, of the Suez Canal Company have the tain can only harm her trade in­ the lease for which was obtained in right to compensation. Cairo has terests. Colonel Nasser has taken the good old days from a Pasha who announced its decision to pay Toreign elaborate pains to assure the powers was the plaything of the British and owners of the Suez Canal Company concerned that Egypt will maintain the French, surely it would be press­ compensation on the basis of the freedom of navigation in the Suez ing the sanctity of contracts beyond last quoted price of the Company's Canal. Both Europe and Asia are the verge of decency to justify even stock on the Paris bourse bet ore the interested in free and unrestricted such economic reprisal that Britain announcement relating to nation­ traffic through this international thought tit to take against Egypt alisation. waterway. As long as Egypt main­ which was merely asserting the ele­ Neither the Hague Court nor the tains freedom of navigation in the mentary rights of a sovereign power. security Council has any right, if is Canal, the Western Powers can have Judged by the criterion of commer­ now widely appreciated, to discuss no provocation to start military cial principles. freezing of sterling Egypt's decision to nationalise the action. But docs Britain really need assets is an infinitely more reprehen­ Suez Canal Company. Nor does the any provocation? Military prepara­ sible action and how unwise, Britain decision call for or justify any war­ tions, call up of reservists, cancella­ will discover presently. like action by the affected powers. tion of leave of reservationist per­ Much has been made of Anglo- From the London deliberations of sonnel, calling up of bomber squa­ American differences over the Suez the representatives of Britain. France drons, naval movement and all the Canal dispute. For once it is Pulles and America, it would seem that the. rest have followed within a couple who has been accused of pulling back Western Powers are not as much of days of Britain's decision to Britain. Mr Herbert Morrison, the worried about the legality of Cairo's freeze Egypt's sterling balances. The former Foreign Secretary, made no move as the future freedom of navi­ latter is not economic sanction, secret of it. "Our American friends", gation and transport through the though many have called it so. It he complained, "would not listen to Suez Canal, one of the major strate­ is the refusal of the bank to pay a the British who have, after all, been gic international waterways. This trusting depositor. knocking about that part of the is the ostensible argument, and Egypt's exercise of her sovereignty world for a long time''. Too long, justification, behind the clamant de­ in nationalising the Suez Canal in fact. Moussadiq tried and failed mand for international administra­ Company will be regarded as a viola­ with the Anglo-Iranian Oil Company. tion for the Suez Canal. Unknown tion only by those who take a view of Nasser will succeed, because he has to many, the Suez Canal was inter­ contracts which is completely out behind him not only the people of nationalised by the Convention of of date. For such revision of con­ Egypt but Asia and more than half 1888. Colonel Nasser has no inten­ tracts and the right of sovereign the world. Supply and Distribution of Electricity THE reduction in rates for con­ of such wide and topical interest in arose because the Bombay Govern­ sumers in Bombay suburbs this period of rapid development of ment and the power producers never announced by Mr Milne and his ex­ electricity that they deserve the at­ saw eye to eye. The World Bank planation of the paradoxical situa­ tention of many others besides the report keeps one guessing why it was tion which compel the company, consumers of electricity in the so. The facts of the situation ad­ despite larger profits, to draw from Bombay suburbs. mitted of no two interpretations. It its Dividend Equalisation Fund, in- may be difficult to estimate the de­ Bombay has suffered much in the order to maintain its dividend at the mand for power and forecast its past from power shortage. This same old rate, will naturally attract growth with accuracy when develop­ the most attention. These are of situation should never have arisen ments in the area for which power when the whole of India was getting immediate interest to consumers of supply is to be planned are still In so keenly power conscious and power electricity and shareholders of the the womb of the future. This was company. Several other observations 'production was being planned in a certainly not the case in Bombay. in Mr Milne's address to the share­ big way. It was not that Bombay's Mr Milne's warning, therefore, that holders of the Bombay, Suburban claims were Ignored in the planning there should be no "repetition of the Electricity Supply Ltd, however, are of power. The unfortunate situation over-cautious attitude shown by the 908