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8/13/2019 ROLE OF PEACE IN ECONOMIC DEVELOPMENT
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ROLE OF PEACE IN ECONOMIC DEVELOPMENT
Author 1 Author 2 Author 3
Rambir Noor Ul-ain Rizvi Vikram Gahlawat
Research Scholar Student Assistant Professor
Central university Delhi school of economics Delhi College of arts and commerce
Himachal Pradesh University of Delhi University of Delhi
aryarambir@gmail.com noor.rizvi.91@gmail.com vikramgahlawat.dcac@gmail.com
ABSTRACT
Humanity is currently facing some of the greatest challenges in its history: economic,environmental, social and financial. During the last twenty years humanity has enteredinto a new epoch in its history. This has been brought about by a convergence of manyfactors. Finite environmental barriers are now being reached and on multiple fronts.World population is expected to reach seven billion within a couple of years and in manyplaces in the world it is already at straining capacity. Technology is fuelling change at anever increasing pace which in many ways underpins the growth of globalization. Theworld is connected in ways that were unimaginable even fifty years ago. Wars are nolonger economically viable. Change is occurring so fast that nations are struggling tokeep up with both the legal and social ramifications. Our notions and concepts of peaceare changing with it. Today every developing nation want to develop their resources and
want to provide a better way of life to its citizens, for that peace among different nationplays an important role for the economic development of a nation. This study is all abouthow peace among different nation plays an important role for their economicdevelopment.Keywords: Economic development, Environment barriers, Economic development,
Globalization
INTRODUCTION
The real and lasting victories are those of peace, and not of war.
Ralph Waldo
EmersonAn eye for an eye makes the whole world blind.
Mahatma Gandhi
Humanity is currently facing some of the greatest challenges in its history: economic,environmental, social and financial. Yet such tumultuous change provides a uniqueopportunity for us to reconsider and redefine the issues that are essential to our survival,
mailto:aryarambir@gmail.commailto:aryarambir@gmail.commailto:noor.rizvi.91@gmail.commailto:noor.rizvi.91@gmail.commailto:vikramgahlawat.dcac@gmail.commailto:vikramgahlawat.dcac@gmail.commailto:vikramgahlawat.dcac@gmail.commailto:noor.rizvi.91@gmail.commailto:aryarambir@gmail.com8/13/2019 ROLE OF PEACE IN ECONOMIC DEVELOPMENT
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comparable country with a GPI score of 3. It needs to be emphasized that this is not theresult of a simple correlation, which could be subject to spurious inferences. Rather it isderived from econometric analysis of economic and demographic factors includingwealth, population, international trade and corruption as well as structural factors that arerepresented by the previous years growth rate.This means that peace, as measured by
the GPI, has a relationship with economic growth which is statistically reliable androbust. The PFA identified that there are three core elements of peace and that these threeelements cross the boundaries of the internal and external peacefulness of a nation.The three core elements are: Social and Political Peace; Demilitarization; and State ofNational Security.
GPI may be put for expanding our understanding of peace and our understanding of thecauses of peace. Some of the more notable findings are:
Peace is an important factor in economic growth.
Peace has spill-over effects across national borders.
Democracy can be a potent driver of peace, but only if accompanied by effective
governance.Economic wealth can be a potent driver of peace, but only if translated into thewelfare of a nation in health and education, and international cooperation.
The points mentioned above can be best illustrated by comparing the status of twopresent day states, a detailed study into whose respective fortunes tells its own storyabout the importance of peace.
Somalia
Explanations of Somalias extraordinary 20-year crisis featuring civil war, state
collapse, failed peace talks, violent lawlessness and warlordism, internal displacement
and refugee flows, chronic food insecurity, piracy, regional proxy wars and Islamic
extremism.
For years, observers of the Horn of Africa opined that the Somalia crisis could not getany worse. Yet it has, and dramatically so. The country today faces a level ofhumanitarian, social, security and political disaster on a scale that would have shockedpolicy makers of 2006 had they had a glimpse into the future. The evidence speaks foritself. Policies pursued by Ethiopia, the United States and Western donors in the past fewyears have produced outcomes that advance no ones interests, save perhapsa growingnumber of extreme jihadist cells in the country. Throughout the crisis of 2007 and 2008,the international communitys insistence on treating Somalia as a post-conflict setting,with aid programmes for rule of law, security sector reform and key transitional tasks,
appeared increasingly out of touch with grim realities on the ground, and eventuallyreached the point of wilful blindness.
Political pressures from key donor states on aid agencies to downplay the humanitariancrisis, stay silent on TFG (Transitional Federal Government) human rights abuses, andmaintain aid programmes in spite of gross levels of abuse and insecurity to help maintainthe legitimacy of the TFG, were critical in driving this dysfunctional policy approach.Somalia has long faced severe internal challenges to peace building and state-building. In
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recent years it has had to shoulder the additional burden of external policies which haveactually helped to make things worse, not better. Finding innovative and constructivepolicies to confront Somalias intractable crises will not be easy, but it will be impossibleif not based on more accurate and clear-eyed assessment of the situation on the ground. Inthe early years of the Somali disaster, internal factors warlordism, clannism, poor
leadership, economic constraints and others were decisive in perpetuating the civil warand undermining external peace building efforts. External policies in the 1990s at timesmade things worseby failing to provide timely diplomatic mediation when it was mostneeded in 1991, and intervening clumsily in the UN Operation in Somalia in 199394but were not a root cause of the crisis.However, in recent years external actors havecome to play an increasingly central role in perpetuating or exacerbating the Somalicrisis. In some instances, external actors have intentionally set out to cultivate divisionsand lawlessness in Somalia, or to use the country to play out proxy wars against regionalrivals. In other cases, external interventions have been well intentioned but ill-advised,falling victim to the law of unintended consequences and in the process making thingsworse.
Humanitari an Catastrophe
The humanitarian nightmare in Somalia is the result of a lethal cocktail of factors.
The large-scale displacement caused by the fighting in Mogadishu is the mostimportant driver. The displaced have fled mainly into the interior of the country,
where they lack access to food, clean water, basic health care, livelihoods andsupport networks. Internally displaced persons, or IDPs, are among the mostvulnerable populations in any humanitarian emergency. With 700,000 people outof a population of perhaps 6 million in south-central Somalia forced to flee theirhomes, the enormity of the emergency is obvious.
Secondly, food prices have skyrocketed, eroding the ability of both IDPs andother households to feed themselves. Food prices have gone up due to a globalspike in the cost of grains and fuel; chronic insecurity and crime, which has badlydisrupted the flow of commercial food into the country; and an epidemic ofcounterfeiting of the Somali shilling by politicians and businesspeople, which hascreated hyper-inflation and has robbed poorer Somalis of purchasing power.
Thirdly, humanitarian agencies in Somalia are facing daunting obstacles to delivery offood aid. There is now very little humanitarian space in which aid can safely be
delivered to populations in need.( Menkhaus, Ken(2009) 'Somalia: 'They Created aDesert and Called it Peace(building)'', Review of
African Political Economy, 36: 120, 223233)
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Figure 1.1 (Somalia GDP per capita)
Whatever growth has happened has not translated into much development. Povertyremains rampant: 43% and 73% of the population live below $1 and $2 per dayrespectively. In GDP per capita terms, Somalia is close to the bottom of African nations.
On two critical outcomes for health (under 5 years mortality of 180 deaths per 1000births) and education (average primary school enrolment at 22%), it performs dismally.
This is in spite of massive external inflows of cash in the form of remittances, ODA andmilitary assistance. ODA alone was almost nine times the combined estimated budgets ofSomaliland, Puntland and the TFG in 2009. ODA per capita stood at $75 per capita(excluding military aid) against an average of $36 for fragile states. Remittances, whichreached an estimated $1 billion in 2011, represent an inflow of $110 per capita.
Data on Somalia typically does not allow for geographic distinctions. Still it highlights a
few surprising trends and the shortcomings of the current aid model there.
Somalia appears to have experienced modest economic growth (to the tune of 2-3%)
since the late 1990s. This could be reflecting high levels of activity in Somaliland and/or
good performance in niche markets such as banking, telecoms, security (of the type that
need very little state involvement or infrastructure to prosper). Much of this is growth
comes from consumption, driven by massive inflows of external resources.
Even though Somalia is a major exporter of livestock, exports remain a small fraction
(about a fifth) of total imports. Nonetheless, the existence and persistence of a small but
vibrant private sector suggests that Somalia could very well take-off economically if the
conflict abated and governance improved.
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Figure 1.2 (Somalia consumption)
Humanitarian assistance, which has been mobilized on a massive scale, can also be amixed blessing. Even before the recent famine in the Horn of Africa, humanitarianassistance accounted for 66% of all ODA to Somalia. It has provided life-saving supportto millions of Somali. But it has failed to tackle and possibly even exacerbated the man-made dimension of the crisis.
The opaque governance environment in which it has been planned, allocated anddelivered has benefited those very politicians, warlords and businessmen that have been
the source of the problem. For instance, theft and diversion of food aid which madeglobal headlines in the context of the recent dramatic drought- has been a longstandingissue in Somalia, directly fueling a war economy vested in the status quo.
With improved prospects for political and military stabilization, the development space isopening up in Somalia. But success will depend largely on a better understanding ofSomalias economy including its regional characteristics- and the political ramificationsof aid.
Switzerland
Switzerland is one of the richest countries in the world by per capita gross domesticproduct, and has the highest wealth per adult (financial and non-financial assets) of anycountry in the world. Zrich and Geneva have respectively been ranked as the cities withthe second and eighth highest quality of life in the world. It has the world's nineteenthlargest economy by nominal GDP and the thirty-sixth largest by purchasing power parity.It is the twentieth largest exporter and eighteenth largest importer of goods.The economy of Switzerland is one of the world's most stable economies. Its policy oflong-term monetary security and political stability has made Switzerland a safe haven for
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investors, creating an economy that is increasingly dependent on a steady tide of foreigninvestment. Because of the country's small size and high labour specialization, industryand trade are the keys to Switzerland's economic livelihood. Switzerland has achievedone of the highest per capita incomes in the world with low unemployment rates and abalanced budget. The service sector has also come to play a significant economic role.
Switzerland is mastering the current economic crisis better than its recession-hitEuropean peers. During World War I, Switzerland suffered an economic crisis. It wasmarked by a decrease in energy consumption, energy being mostly produced by coal inthe 1910s, 1920s, 1930s and 1940s. As imports were difficult, attempts were made tostrengthen the Swiss economy. The cultivation of grain was promoted, and the Swissrailway became the first to use electric instead of coal-burning, steam-driven engine.
In the 1920s Switzerland's energy consumption increased. Throughout the 1930s
Switzerland's energy consumption stagnated. In the 1940s, particularly during World War
II the economy profited from the increased export and delivery of weapons to the German
Rich, France, Great Britain, and other neighbouring and close countries. However,
Switzerland's energy consumption decreased rapidly. After World War II, Switzerland'sproduction facilities remained to a great extent undamaged which facilitated the country's
swift economic resurgence. In the 1950s, annual GDP growth averaged 5% and
Switzerland's energy consumption doubled. Coal lost its rank as Switzerland's primary
energy source, as other fossil fuels such as crude and refined oil and natural and refined
gas imports increased. This decade also marked the transition from an industrial economy
to a service economy. Since then the service sector has been growing faster than the
agrarian and industrial sectors. In the 1960s, annual GDP growth averaged 4% and
Switzerland's energy consumption doubled. By the end of the decade oil was
Switzerland's primary energy source
Workforce
The Swiss economy is characterised by a skilled and generally 'peaceful' workforce. Onequarter of the country's full-time workers are unionised. Labour and managementrelations are amicable, characterised by a willingness to settle disputes instead ofresorting to labour action. They take place between trade unions and branch associations,which are themselves often grouped in Union of Employers, like the Fdration patronalevaudoise or the Fdration des Entreprises Romandes Genve. About 600 collectivebargaining agreements exist today in Switzerland and are regularly renewed withoutmajor problems.
TerrorismThrough the United States-Swiss Joint Economic Commission (JEC), Switzerland haspassed strict legislation covering anti-terrorism financing and the prevention of terroristacts, marked by the implementation of several anti-money laundering procedures and theseizure of al-Qaeda accounts.
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Economic Policy
Clever policiesSo, how did such a small landlocked country without natural resources and a difficultgeography become so competitive, innovative and prosperous, allowing it to grow into
one of the largest banking centres, shipping powers and commodities players?
For experts, it is quite simple: Continual peace, economic growth of its main exportpartners and successful industries supported by business-friendly legislation has helpedthe worlds oldest democracy to thrive.And, its citizens are committed to diligence, high-quality work and entrepreneurship, Zurich University economic historian TobiasStraumann wrote back in 2010, in a notable article Why Switzerland is a rich country,
published by the State Secretariat for Economic Affairs (SECO).The Swiss FederalInstitutes of Technology are ranked among the top ten universities in Europe, and nuclearresearch laboratory CERN is situated partly on Swiss territory. Switzerlands successmay be due to serendipity, but also to clever policies. In the 1990s for example, the
government introduced policies to stabilise its economy: a debt break, measures tobalance its unemployment insurance, domestic market reforms and restrictions onimmigration. Today 23 per cent of the population are foreigners.Economic policies oriented towards stability and high-quality human capital are two ofSwitzerlands self-made strengths, Straumann wrote, noting that Switzerlands economicsuccess is due to fortune as well as good judgement.
Switzerlandone of the wealthiest nations in the world today with a per capita income ofabout $80,000 (SFr76,000) used to be a poor country, particularly in the Alps, whichremained destitute well into the 19th century, forcing citizens to seek work asmercenaries and families to emigrate to Russia and the New World. The country owns
some main transit routes and water divides, but never had any commodities to speak of.This may have been its fortune. Countries rich in supplies suffer from the resource curse;they tend to struggle with the creation of new jobs and industries because of short-termwealth. In addition, resource exploitation boosts the national currency, bringing down themanufacturing sectora phenomenon which economists call the Dutch disease.
Trade ties
Switzerland has close relations with the European Union on political, economic and
cultural levels. These relations are governed by a whole structure of bilateral agreements
concluded over the years. The union and its 27 member states are by far Switzerland'smost important trading partners: about 60% of Swiss exports go to the EU, according to
the State Secretariat of Economic Affairs. Major non-European trading partners include
the United States with 10%, Japan with 3.6%, China with 3.1% and Turkey with 1.2% of
exports.
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The country also entered bilateral agreements with Asian countries such as India andJapan to lower its dependence on Europe.
Comparison
Figure 1.3 (Source : heritage.org/index.)
Switzerlands economic freedom score is 81, making its economy the 5th freest in the2013 Index. Its score is essentially the same as last year, with modest declines in businessfreedom and the management of government spending counterbalanced by improvementsin monetary freedom and freedom from corruption. Switzerland is ranked 1st out of 43countries in the Europe region. The Swiss economy is diversified and modern, with highlevels of prosperity and institutional strengths that include strong protection of propertyrights and minimum tolerance for corruption. The judicial system, independent and freeof corruption, enforces contracts reliably. Openness to global trade and investment hasenabled Switzerland to become one of the worlds most competitive and flexibleeconomies. Despite some stress in the financial system, the country has emerged from theglobal economic turmoil relatively unscathed.
Figure 1.4 (Source : heritage.org/index.)
The 2013 Index includes Somalia for the first time since 2001. However, Somaliaseconomic freedom is not graded because of a severe lack of reliable data caused by thecountrys ongoingpolitical instability. The last time Somalia was fully graded was in the2000 Index when it received a score of only 27.8. Mired in extreme violence, politicalinstability, and famine, Somalia remains a failed state. The institutions necessary formeaningful economic progress are nonexistent because decades of lawlessness have
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destroyed the foundations of economic freedom. Complete economic collapse hasresulted in massive human migrations, and much of the population remains abandoned tosevere poverty. A humanitarian catastrophe has been unfolding in the devastatedeconomy due to the most severe drought in recent years. Continued civil conflict and thelack of a credible, lasting political settlement have prolonged and exacerbated the tragic
famine triggered by the severe drought. It is estimated that about one-quarter of thepopulation still needs emergency food aid.
The 8 economic freedoms
Rule of L aw
Switzerland:
Figure 1.5 (Source : heritage.org/index. 2013 Index of Economic Freedom)
Protection of property rights is strongly enforced, and an independent and fair judicialsystem is institutionalized throughout the economy. Commercial and bankruptcy laws areapplied consistently and efficiently. Intellectual property rights are respected, andenforcement is consistent with world standards. Effective anti-corruption measuresdiscourage bribery of public officials and uphold the integrity of government.
Somalia:
Figure 1.6 (Source : heritage.org/index. 2013 Index of Economic Freedom)
The rule of law as practiced in the West does not exist in Somalia, which is rated as one
of the worlds most corrupt nations. In the absence of a functioning central government,numerous armed groups and militias control different parts of the country. Although localauthorities or elders sometimes enforce laws based on traditional customs, Islamic Sharialaw has become more entrenched in the country since 2009.
Regulatory Ef fi ciency
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Switzerland
Figure 1.7 (Source : heritage.org/index. 2013 Index of Economic Freedom)
The competitive regulatory framework strongly supports commercial activity, allowingbusiness formation and operation to be efficient and dynamic. The pace of improvementsin regulatory efficiency has slowed in comparison to other economies. Labor regulationsare relatively flexible, and provisions concerning work hours have been eased. Monetarystability has been maintained in the face of pressure from the eurozone crisis.
SomaliaPolitical instability, an outmoded regulatory environment, and inadequate infrastructure
significantly deter the formation and operation of businesses. The labor market isdominated by the agricultural sector and informal hiring practices. Agriculture is the mostimportant sector, with livestock normally accounting for about 40 percent of totaldomestic output and morethan half of Somalias limited export earnings.
Open markets
Switzerland
Figure 1.8 (Source : heritage.org/index. 2013 Index of Economic Freedom)
The trade-weighted average tariff rate is zero, and there are relatively few non-tariffbarriers. Switzerland continues to be open to foreign investment, and the investment codeis transparent and efficiently administered. The modern and highly developed financialsector provides a wide range of financing instruments. Despite the challenging externalenvironment, banks remain well capitalized and sound.
SomaliaMuch of the population remains outside of the formal trade and banking sectors, andprivate investment remains extremely limited. Swiss Financial Bank announced in 2011that it intends to open a bank in Somaliland. Swiss Financial is one of three internationalcommercial banks that have applied for licenses to operate in Somaliland in anticipationof the passage of a new banking act.
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GPI (Gross Peace I ndex)
Country GPI rank Internal Peace GDP
dividend
External Peace GDP
dividend
Switzerland 12 $ 12.87 $ 13.75
Somalia 139 $ 2.19 $ 1.00
Iceland being the top on the list ,and Iraq being the last at rank 140.
Exports
Switzerland
Exports Decrease$308.4 billion (2012 est.) Note: trade data
exclude trade with SwitzerlandExport goods machinery, chemicals, metals, watches, agricultural productsMain export partners Germany 19.8%
United States 11.1%Italy 7.2%France 7.1%United Kingdom 5.4% (2012 est.)
SomaliaExports $515.8 million (2010)Export goods livestock, bananas, hides, fish, charcoal, scrap metal
Main export partners United Arab Emirates 50.8%Yemen 19.0%Oman 12.8% (2012 est.)
Other statistics
Switzerland
GDP Increase $362.4 billion (PPP, 2012 est.)GDP growth Decrease 0.8% (Real, 2012 est.)GDP per capita Increase $54,600 (PPP, 2012 est)GDP by sector agriculture (1.3%)
industry (27.7%)services (71.0%) (2012 est.)
Inflation (CPI) Decrease-0.7% (CPI, 2012 est.)Populationbelow poverty line Increase7.9% (2010)Gini coefficient Decrease 29.6 (2010)Labour force 4.91 million (2012 est.)Labour force
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by occupation agriculture (3.4%)Industry (23.4%)services (73.2%) (2010)
Unemployment Increase2.9% (2012 est.)Main industries machinery, chemicals, watches, textiles, precision instruments,
tourism, banking, insuranceEase of Doing Business Rank 28th
Somalia
GDP $5.896 billion (2010)GDP growth 2.6% (2010)GDP per capita $600 (2010)GDP by sector agriculture (60.2%), industry (7.4%), services (32.5%) (2009)Labour force 3.447 million (2007)
Labour forceby occupation agriculture (71%),industryservices (29%)
Main industries sugar refining, textiles, livestock, money transfer,telecommunications
These above comparisons clearly show that the economy of Switzerland is far ahead ofSomalia.
Summary
The total Area of Somalia is 637,657 km2 i.e 246,200 sq mi and that of Switzerland is41,293.2 km2 (15,943.4 sq mi) that is more than 10 times, that of Switzerland. Thenatural resources of Somalia can be generally divided into 1) Marine resources (fish andsalt) 2) surface resources (e.g., forests, wild life, frankincense and Myrrh, surface water,etc), and subsurface resources (e.g., rocks and minerals, fossil fuels, and groundwater).Rocks and minerals that are known to exist and available for exploitation include Tin inthe Majiyahan - Dhalan area (south of Bosaso - Ceelayo costal strip), Uranium in theGalgadud and Bur Hakaba areas, Sepiolites of Ceel Bur, Iron-ore in the Dinsor district,quartz, granite, marble, limestone and gypsum in different regions of the country. Thesenatural resources include primary row materials for various kinds of industry, e.g, cementindustry, industry for prefabricated walls, roofing, floor and wall tiles, aggregates andconcrete production, and industrial minerals. Minerals with high potential include gold,zinc, lead, manganese, aluminum, and graphite. Existence of good petroleum indicatorshas been known for a while, and recent data highly encourage the exploration potential ofthe country.
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On the other hand Switzerland's mineral resources are limited. There are small iron andmanganese deposits in the Jura but no known deposits of coal. A variety of materials isworthy of commercial exploitation. Among them are lime, salt, sand, gravel, clay, andmarble. Switzerland's lack of mineral resources is largely counterbalanced by its greatestassetwaterpowerwhich is harnessed by huge dams that produce hydroelectricity for
industry. So, how did such a small landlocked country without natural resources and adifficult geography become so competitive, innovative and prosperous, allowing it togrow into one of the largest banking centres, shipping powers and commodities players?For experts, it is quite simple: Continual peace,economic growth of its main exportpartners and successful industries supported by business-friendly legislation have helpedthe worlds oldest democracy to thrive.And, its citizens are committed to diligence, high-quality work and entrepreneurship.
Conclusion
Peace creates the environment in which other activities that contribute to growth can takeplace. In this sense, it is a facilitator of growth, making it easier for workers to produce,
businesses to sell, consumers to buy, entrepreneurs and scientists to innovate, andgovernment to regulate. This concept could be labelled as normal growth dynamics.The assumption is that normal activities which contribute to growth and prosperity can behindered by war and violence, even if the productive capacity itself exists. Thus, humancapital, good infrastructure and open markets may be important factors in growth, buttheir contributions will be diminished or even eliminated if they are subject to violenceand serious societal conflict Peace also frees up resources for productive activities whichwould otherwise be diverted to controlling or creating violence. This is true for materialand human resources as well as for investment capital. Finally, peace creates a stableenvironment that is congenial to confidence and long-term planning. This then supportsrational risk-taking, investment, employment, borrowing, and strategic planning, all of
which are important to produce highly productive activity.
References
2009 DISCUSSION PAPER , INSTITUTE FOR ECONOMICS & PEACE
Stabilizing Somalia - the development momentby Aurelien Kruse
How Switzerland is weathering the storm by Chantal Britt, swissinfo.ch
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