One-stop shop to make India 20 times richer

Category: About me

I’m afraid I’m 100 per cent sure about what I’m saying, so I’m unable to “appreciate another point of view”

I was given a suggestion:

Sanjeev you have passion, commitment and lots of energy. But if you really want to be influential my humble advice is to try some self analysis. How do you come across to others? In my view you sound completely absolutist in your views, frighteningly akin to the fascists. The true test of the liberal would perhaps be a belief in fallibility which breeds humility and therefore an ability to go out of your way to understand and appreciate another point of view.


Thanks xx, for your suggestions. Liberalism is not about relativism. It is at end of the day about the truth. Not all views are true. Given the vantage point from where I look at the world I have 100 per cent surety about the causes of our problems – and I’m not the only one: all – and I mean without exception – of the economists in the Treasury in the Victorian government (where I work) have exactly the same views about the way the laws of economics work.

Btw, we face similar resistance to these views from departments and ministers who do not understand basic economics, and often take decisions which are detrimental to Victoria’s future prospects. The good thing is that overall, the economic way of looking at everything (including social policy) has led to stupendous results and most policies in Australia are consistent with what a good economist would advise.

This sometimes feels like a physician would feel in the face of people who have taken advice from quacks. Very hard to persuade people to take proper medicine instead of quack medicine. That’s just the way the human mind works.

Liberalism has been a fight against superstition, against statism and an attempt to understand causes. Since the economic/scientific way of thinking is entirely counterintuitive, progress can be very slow.

And yes, institutions are important – but any economist worth his salt knows that institutions are only a set of rules. The nature of rules holds the key. The nature of the rules is all about incentives. That’s where economic analysis kicks in and can make predictions. BFN (my book) is all about the analysis of incentives in India’s institutions, and why these incentives are guaranteed to lead to the mess we see today.

I know it is an uphilll battle to show people why they are wrong. But the good thing is that people finally do get the point. For it is in their own interest and welfare that I speak.

There has been absolutely nobody in India in the past who has understood liberty. There have been some half-baked attempts, of course. But one can’t succeed with half-baked attempts. It requires total clarity.

My job is to influence and radically change the minds of a billion people. It has to start one person at a time. An example of an IITian who has been so influenced here (I’ll also post it separately as text since many people avoid going to a link)

It takes around 2-3 years for someone to change. I’m quite OK with that time frame.

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Copy of my letter to the Minister for Planning, Victoria re: building system issues

Please note: This is not my typical blog post.

I’m publishing below a copy of a letter that I’ve written in my personal capacity to the Victorian Government in relation to gaps in the regulatory system for builders.

While specific to the Victorian system, this letter is also educative. I generally recommend minimal regulation. This letter, however, is a mixed offering. In this I ask for the two following things – one (if implemented) would reduce regulation; the other would increase it:

a) elimination of regulation that blocks reputational effects from operating; and

b) imposing targeted new regulatory requirements to weed out bad builders.

Does this letter have any implications for India? I don’t think so, since the governance system is radically worse in India.

====MY LETTER – as HTML (I will not be posting the Word/PDF copy) ====

From     Sanjeev Sabhlok

To          The Hon Richard Wynne, Minister for Planning, Victoria

Date:  6 February 2017 

Subject:  The problem of builders who do not build

Dear Minister

One would imagine that builders registered in Victoria would do the most basic thing: build. But that’s not always the case.

More than three years and two months after I signed my building contract, my builder has not only not finished the house he contracted to build, he effectively refuses to finish by refusing to respond either to me or to Consumer Affairs Victoria (refer case No. C2016/11/000691 that was closed by CAV on 4 January 2017 after the builder did not respond.  I have thereafter lodged a complaint with the Victorian Building Authority (VBA) on 17 January 2017 – Attachment 1).

The VBA and Department of Environment, Land, Water and Planning (DELWP) are not much help in this regard for, in their view, delays (or even non-completion of work by a builder) are not within their remit. It will not be excessive to suggest that the building system is broken.

In the past two years, I’ve learnt a few things about Victoria’s building system. In this letter I first identify some of the systemic failures that I have found in the system and then make suggestions for improvement. In doing so, I acknowledge that I do not fully understand all aspects of the system and my analysis may need refinement.

A) The many failures of Victoria’s regulation of builders

I am starting, below, with an issue that falls within the remit of the Attorney-General (who is copied into this email), but most of what I have to say is within your purview.

i. Defamation law sabotages reputational effects

Transparency and reputation are a powerful self-regulatory force. Ebay works without regulatory intervention because of reputational effects.

But Victorian laws actively block this essential ingredient of an accountable free market. I don’t quite understand the details of defamation law but note that Section 9(2)(b) of the Defamation Act 2005 allows corporations with fewer than 10 employees to sue. Presumably customers of big building companies can talk about their bad experience but customers of smaller companies cannot. Why should the government shelter bad builders through such restrictive laws?

My builder threatened me with defamation for making the slightest comment on the internet about his work. His many dissatisfied customers are afraid to talk about their case in public. I believe that truth remains a defence, but the average Victorian is not willing to test the law, and would much rather keep quiet – thereby not sharing information in the public domain which can protect future customers of a bad builder.

ii. VBA admit that delays are the primary concern of consumers but argue that these are a contractual matter

The VBA admit (via their email on 17 November 2016 – Attachment 2) that delays are the primary concern of consumers (i.e. even more significant than the quality of the build):

A building delay is a contractual dispute and when a complaint is received about building delays this is referred to Building Advice and Conciliation Victoria (BACV).  This is generally the primary concern of the consumer. Building delays in themselves can be complicated as there are many reasons for a delay, such as other contractual disputes, unforeseen difficulties, failure to make payment, or poor conduct of the practitioner.

The VBA have effectively washed their hands off the matter of delays by putting these into the contractual matters basket.

iii. DELWP believe, surprisingly, that delays are “not specified” in the Building Act

The Acting Executive Director, Planning, Building and Heritage, DELWP wrote the following to me on 14 December 2016 (see Attachment 3 which was forwarded to me by your Office on 15 December 2016):

Section 179 of the Building Act sets out the grounds for which a building practitioner may be subject to disciplinary action. Although delay in completing building work is not specified as a ground, such conduct, especially if repeated, may come within other grounds that are specified, for example, a pattern of incompetence or negligence in a particular matter.

The act of building a house is first and foremost a project management task. Without managing timelines there can be no building, hence such person cannot be a builder. This is implicit in the legislation. One can determine the quality of a building only if there is a building. The quality of a build is a secondary issue, timeliness being the primary one. One can’t keep the act of construction going on for 1000 years.

The second reading speech (available in the Hansard) by the then Minister for Planning on 11 November 1993 to explain the Building Bill says:

The Bill proposes the establishment of a Building Practitioners Board [BPB] to be responsible for the registration, oversight and discipline of a range of building practitioners. It is expected that the combination of the [Building Control Commission] commission’s capacity to oversee the system and the Building Practitioners Board’s inspectorial, inquiry and disciplinary powers will achieve maintenance of the existing high quality of building.

The only way the Building Act can be interpreted as not considering delays (given that delays are acknowledge by the VBA as being the primary concern of consumers) is if it specifically excluded delays.  For that, the then Minister for Planning would have had to say:

  • “I want anyone who claims to be able to build to be registered in Victoria, regardless of whether he actually builds anything”; or that
  • “Victorian builders are to be allowed infinite time to build. Delays are specifically not of any concern to the Government, and should not concern the BPB”.

Now, DELWP’s interpretation of the Building Act may well be the legal interpretation given to the matter by courts. If so, the government can fix this by specifying delays as a key disciplinary matter in the Building Act.

iv. The VBA seems to be a captured regulator

The VBA doesn’t much care for consumers but rolls out the red carpet for builders and is solicitous about any red tape it might impose on them.

The Team Leader of Complaint Services from the VBA informed me over the phone in November 2016 that since a builder might potentially build many houses, the VBA doesn’t impose information requirements on them. Apparently, asking them about the work they are undertaking, whether it is being completed in a timely manner, or even whether any of it has been ever completed, would make these poor friends of the VBA get burdened with red tape.

But not all regulatory requirements are red tape. Electricians in Victoria are required – for good reason – to provide certificates to the regulator for even small electrical work. It would definitely not be unreasonable for the VBA to ask essential information from builders. As far as imposing a burden is concerned, that’s a red herring. Someone who takes hundreds of thousands of dollars from customers can surely be asked to provide basic information to confirm whether he is doing his job.

Further, the VBA does not undertake even the most basic regulatory oversight. It does not coordinate with either CAV or the VCAT to pro-actively identify bad builders. As one of my builder’s many unhappy customers wrote to me:

… it was confirmed to me by a VCAT representative that there are no systems set up at VCAT to monitor repeat offenders. … they informed me that a builder can appear 100 times a year at VCAT … and it will not be flagged … as a public concern.

The [VCAT] representative said they do not have the systems in place to search a name, unless the person enquiring knows both parties names.

I also asked about why the cases I’d discovered do not show on the VCAT online searches and was told that not all cases via VCAT are registered online. So how would you know that you are about to enter into a contract with a complete rogue and financial robber with no access to important & relevant records?! VCAT confirmed “You wouldn’t know”. Surely this proves added onus on VBA to protect the public.

v. Insufficient ‘penalty’ for delays, and difficulty in accessing insurance

Accountability requires that if someone doesn’t perform his job, he should feel a financial pinch. But the system doesn’t even rap bad builders with a feather for delays, leave alone penalising them. The only ones who feel a severe financial (and psychological) pinch are honest Victorians.

In my case, the build cost around $600,000 but damages were set at around 3 per cent (on an annualised basis). This is less than the interest I’m paying on the mortgage, even excluding the many severe inconveniences caused by delay. To call this amount “damages” is a play on words, pure deception.

Further, there is the issue of the VMIA and insurance. I understand that even if a builder is deregistered by the VBA, customers of bad builders are not likely to get any relief. Insurance only kicks in if a builder dies or disappears, or becomes insolvent. For policies issued on or after 1 July 2015 (mine was in early 2014, so this doesn’t apply), if a builder fails to comply with a VCAT or court order, that, too, could allow some relief. But even for those who go to VCAT or court, there is a huge associated legal cost.

As you can now see clearly, everything in the system is stacked against consumers. Builders are kings and can do no wrong. I would have imagined that mere deregistration should suffice to get some relief, but that’s not the case.

As a result of all these factors, getting a good builder in Victoria is now a matter of pure luck. It is unclear why the government is going to such great lengths to protect bad builders at the expense of honest Victorians.

B. Consequence: Hell on earth for some Victorians

Once someone gets a bad builder, life becomes hell and there is no recourse, no remedy. My builder has been so emboldened that a few months ago he wrote to me: “let the games begin”.  Indeed, it would seem that it is the government that is playing games with honest Victorians.

Builders like mine have a simple strategy: they extract as much money as they can from customers and then stop work. Customers then run from pillar to post, and are ultimately forced to seek cancellation of the contract at great personal and financial expense.

This also makes a mockery of the alleged “statutory” warranty. When such builders don’t respond even to an email or phone call and the government is totally supportive of such builders, what hope can there be of getting them to fix defects in the portion of the house that they did build? There are many defects in my house (in addition to the fact that there are a number of incomplete issues) but the VBA are not impressed. Not only have I brought this builder to the VBA’s notice over the course of more than a year, at least around ten customers of my builder have repeatedly complained about him but the VBA feel that my builder is fit and proper.

C. Here’s how you can help

I believe your intervention, and the intervention of other relevant Ministers, has now become imperative. I’m outlining specific suggestions below:

i. Use the “fit and proper” and renewal provisions of the forthcoming Building Regulations 2017 to eliminate VBA’s discretion

The Victorian Auditor General (VAGO) has, through his May 2015 report, Victoria’s Consumer Protection Framework for Building Construction, advised you of some of these issues. The VAGO recommended that DELWP and the BPB (now VBA) “review the practitioner registration and discipline regimes and advise government accordingly, so that:

  • only qualified, competent and suitable practitioners are allowed to trade
  • disciplinary systems and sanctions ensure that there is sufficient disincentive to engage in misconduct and that registered practitioners who do so can be excluded from trading
  • data from registration and discipline regimes is collected and analysed to inform system improvements.”

I asked DELWP through a Freedom of Information request about what thinking they had put into these matters, particularly in relation to delays. I asked for information regarding:

(A) any official advice received by DELWP (either upon request or suo moto) from the VBA or CAV in relation to (1) the habitual practice of registered builders not completing domestic buildings in time, and (2) any suggestions received by DELWP from these entities in relation to options to address this systemic shortcoming, such as (but not limited to) through making it a requirement for renewal of the registration of a builder by the VBA, for the VBA to require proof of satisfactory and timely completion from all customers of buildings that were due for completion during the year before the date of registration renewal.

(B) summary of any research in this regard (i.e. specifically related to the nature and extent of this chronic problem of incessant delay by builders and use or lack thereof of the renewal system of registration to identify such delinquent builders, and any options identified in this regard) undertaken by the DELWP to potentially inform the forthcoming new Building Regulations 2017 which allow the Minister, under s. 172AA of the Building Act, to prescribe such requirements

The answer was: Nothing! I received a nil response (Ref. FI/03/4237 dated 28 November 2016 – see Attachment 3). DELWP have neither received any advice from anyone (such as the VBA) nor conducted any research of their own in this regard.

Please note that VAGO had asked DELWP to “review the practitioner registration and discipline regime”. Presumably, DELWP were required to do something about this mater. And given delays are the primary concern of consumers, it stands to reason that they’d have found something to say about this issue. But nothing.

One would have imagined that a competent regulator would identify the pattern of complaints it receives and advise government on remedies for these causes, but the VBA do not undertake even such basic analysis.

On 17 November 2016, the VBA wrote to me via email (Team Leader’s email, Attachment 2):

As a result of recent legislative change requiring 5 year registration renewals, the VBA will consider whether a practitioner continues to be a fit and proper person to practise as a building practitioner, when it receives an application for renewal. The VBA would consider a practitioner’s disciplinary history in that process. Practitioners will be transitioned to a 5 year registration progressively over the next 5 years. The fact that a complaint has been made against a practitioner may not on its own mean the VBA refuses to renew that registration.

The last line says it all. It would seem that the VBA are likely to go to any length to protect builders. They intend to use their discretionary power purely for the benefit of builders. It is not a far-fetched statement to make to suggest that they are a captured regulator.

To resolve this matter you will need to provide the VBA with specific directions and eliminate their discretionary powers. Fortunately, there is now a pathway available for you to use.

In response to the VAGO’s report, the Government has enacted (through you) the Building Legislation Amendment (Consumer Protection) Act 2016 No. 15 of 2016 on 19 April 2016. Section 172AA (Renewal of registration) of the new Act empowers you (through the anticipated Building Regulations 2017) to require the VBA to grant renewal of registration of a builder subject to applicant complying with “any other renewal criteria or conditions” beyond those that relate merely to payment of the fee.

I request you to (a) mandate the meaning of “fit and proper” and (2) specify the renewal conditions. In particular, the following requirements should be inserted into the regulations:

a) that the VBA require registered builders to specify, in the relevant contract, the completion date for each stage of construction that they undertake (this requirement should be supported through changes to the Domestic Building Contracts Act 1995, although it may not be necessary to do so);

b) that the VBA ask all registered builders to provide an annual declaration (a tick a box would suffice) to the effect that:

  • all their domestic building work is being undertaken in accordance with contractually agreed timelines for each stage. Where any stage has slipped, the guilder should provide details and reasons for slippage; and
  • all work that needed to be completed during a previous year/s has been completed within 1.5 times the contractually agreed timeline.

c) that the VBA require builders to not sign up any new work if there has been any slippage in the completion at any stage of any existing work, till such existing work is completed and the project reverts to its planned timelines;

d) that the VBA automatically deregister any builder who has not completed any domestic building work within 1.5 times the contractually agreed duration (in this regard, the duration should be allowed to be amended in writing by both parties: this would allow for legitimate variations); and

e) once a builder is deregistered, the builder’s company should be delicensed as well, else in some cases I understand things get prolonged and consumers get no relief. Basically, as soon as the builder is deregistered, the consumer should have the right to go to the insurer and get the remaining works completed (this is a rather important requirement and needs relevant legislative change. It may lead to increase in insurance premiums, but consumers would much rather pay more for such insurance as part of the building process, than suffer bad builders).

Upon receipt of a builder’s declaration, the VBA should:

  • publish the declaration and any associated explanations on its website. This information is of great public interest, being of concern both to current and future customers of the builder. The information asymmetry prevalent today – whereby consumers know next to nothing about someone to whom they entrust their entire lifetime savings – can only be addressed through transparency. Reputational effects are the best cure for this disease of bad builders;
  • re-register the builder unconditionally where work is proceeding within contractual timelines; and
  • issue conditional re-registration if any delay has occurred beyond the contractual completion date/s for any stage; then, cause an inquiry and publish its findings; where necessary, the VBA should terminate the registration of a builder even though he has not yet reached 1.5 times the contractual period for completion where it becomes obvious that the work simply cannot be completed in time. The key is to weed out the bad elements from the system as soon as possible.

ii. Issue a Statement of Expectations that requires the VBA to create an early warning system

A good regulator must implement a risk-based approach to address market failures. In this case the gaping information asymmetries in the system are being exacerbated by significant government failure (namely, defamation laws to sabotage reputational effects). The VBA needs to develop the capability to distinguish good from bad builders.

The regulatory requirements above will provide the VBA with the data and tools to develop a robust early warning system.

I request you to issue a Statement of Expectations to the VBA to require the development of an early-warning system based on information obtained from: (a) regulatory requirements; (b) the CAV; (c) the VCAT; (d) through VBA’s random inspections; (e) through VBA’s interviews with consumers; and (f) through the internet (where customers sometimes do express some of their experiences even with small builders). The VBA should also engage with building surveyors to proactively identify whether a builder continues to be fit and proper.

This will increase the VBA’s workload and costs. I believe customers will be willing to pay a higher building permit fee in order to get a higher quality service from the VBA.

Alternatively, the VBA can charge extra from those consumers who want a higher level of scrutiny of their builder. I would have happily paid 1 per cent of my build cost to VBA (i.e. $6,000) to supervise my builder more actively. Doing so would be so much cheaper than going through the hell created by my builder.

iii. Amend the Domestic Building Contracts Act 1995

The Domestic Building Contracts Act 1995 has a number of lacunae and should be amended to:

  • require builders to specify the time taken by each stage of building, from the day the building permit is approved (this should be the unambiguous legal date of commencement of construction); and
  • require weekly damages for delay at an annualised rate of 10 per cent over and above the standard indexation rate for government fees (set by the Treasurer of Victoria each year).

There is also an urgent need to reform the insurance system for homes so it becomes easy to access insurance once a builder is deregistered.

iv. Amend the defamation law

While this matter is not within your portfolio (hence I’m copying the Premier), the defamation law in Victoria needs to let Victorians freely express their views on the performance of all businesses –  regardless of their size

D.Concluding request

I would like to see the system fixed. I am keen to work through any practical obstacles and identify cost-effective solutions that balance the cost of increased regulatory oversight with social benefits.  To progress this, I’d be happy to discuss details with your designated representative (and the designated representative/s of other relevant Ministers).

I am copying this letter to others concerned and will also publish it on my personal blog for the benefit of the many affected customers of my builder and for the benefit of other Victorians who are currently suffering from the effects of this ill-designed system.



Sanjeev Sabhlok

Copy (I’m excluding attachments in the interest of privacy) to: The Premier; the Attorney General; the Minister for Consumer Affairs; the Secretary of DELWP; the VBA.



Someone found this article:

Clearly this is not a new issue.
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Half a million unique visits to this blog this year – update on website statistics

I used to run Jetpack statistics but found these slow down the website. I’ve therefore shifted to Quantcast, which is super-accurate.

I took a minute to check last year’s data. It appears that I’ve now crossed 500,000 unique visits over the year.

Roughly half the visits are from India (blue area below), half from the rest of the world (grey). Visits have increased over the past few weeks given the interest in demonetisation, and should drop off to normal levels thereafter.

Unfortunately, my google ad earnings are on a steep decline. After at one stage nearly reaching $200AUD in a month, these are now tracking well below $100AUD per month. I suspect a lot of people are using ad blockers. Further, most ad earnings don’t come from sabhlokcity anyway (which is of interest only to Indians) but from a couple of my subdomains which contain information of interest to people from developed countries. These earnings are pivotal to my continued engagement with liberty in India.  I have spent just too much of my own money for the past 20 years – with huge opportunity cost as well – and this drip feed of funds ensures I don’t continue to lose big money while engaging with reforms in India.


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Draft musings – highly risky to publish – of 1992: DIFFICULTY IN CONTROLLING THE WIFE

Following on from here, here is something I’m publishing at great personal risk of being misunderstood. It is something I wrote on 14 April 1992. This is to be taken as pure tongue in cheek with no real expectations to the effect expressed here.


One of the most difficult things I am finding in life is to control my wife.

By nature I prefer obedient wives.

I have generally been used to obedience from my mother and  sister.

The problem has been how to make my wife equally obedient.

Her problem is that being in the IAS she has a large full sized ego. She does try from time to time to be suitably subservient to me, but prefers to call it “being a wife” rather than the more appropriate word “subservience” which I prefer.

At times she loses her sense of subservience much to my detriment.

Her quote at such times is “If you prefer obedient wives, you can keep trying to get them.”

Obviously such a quotation can be a difficult thing to act upon. For one, I do not know where obedient wives are to be sought. Even the newspapers advertise for wives, but no one mentions whether they are the obedient variety or not.

I do not believe in any bar whatsoever in terms of human relations. Hence I have married as objectively as I could. But I did not know how to test a wife for subservience. In fact, I feel that this is the major test a man should impart to a wife before marriage. Not that it is an assurance that her ego would not inflate after marriage due to the attention she receives from the husband.

Now, sometimes I feel that there is some shred of imperfection in my wife, which needs rectification, especially relating to the size of her ego.

The other day I decided that I would return her back to her home for her ego to cool down. But she decided that she would not go. Now, it is indeed very difficult to ensure that a wife is regularly sent back to her original home for refresher courses in subservience. If she does not go and violates even this directive, then what are the alternatives left to a person?

Therefore I say, one of the most difficult things I am finding in life is to control my wife.

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Here’s something penned on 25 October 1992. I’d broadly agree with this even today.


      The impression which one keeps on having of India is of a psychologically depressed country, with very little self-confidence and trust in its own abilities. Perhaps the fact that it has done so badly in comparison to almost any other country, in almost every sphere of life, make the average India desolate and without hope.

In India we believe that our greatest period is past. Our great men are no more. Our present is a rotten, stinking, deterioration of our past. Let anyone criticise some aspects of Mahatma Gandhi or Nehru and see what is the response. Such is our slavishness to dead men that we become hollow and puerile in comparison.

But the whole issue is that unless we have the fundamental confidence in our abilities, no one will give this to us in a platter.

I have a hypothesis therefore that I – a common citizen of India – must learn to aspire to be great. If every common citizen of this great country aspires to be great, then there is definitely a hope of India’s salvation. How can we compete – against anyone, even Cameroon – unless we are all aspiring for greatness.  We will not reach great heights unless  we are all of us aspiring for greatness individually in our respective fields, we learn to respect ourselves about some people who are dead and gone, we learn to criticise everything we see around us, and try to find out how to improve it, to take reasonable risks in our personal lives, and seek self-actualisation. Greatness has to be a way of our life.

On reading recently about Korea and Japan, I was struck by the emphasis many authors put on the sense of patriotism of these countries. The businessmen of Japan were determined to do good for Japan, and the Koreans were determined to make Korea great. The politicians also repeated this great ambition at every opportunity, and this sense of patriotism has thus stood Japan and Korea and many rapidly growing South-East Asian countries in good stead through the tough times when they were very backward and had a long way to go.

I believe that India can learn a lot from this. We were a great country at one time. Much greater the primitive white peoples. Just because a couple of millennia of wars, disruption, and colonialism have intervened in the middle, we cannot lose our sense of destiny. `Each Indian has the seed of a great man lying latent in him or her. All that is required is to let this seed grow and for the society to nourish this seed.

We need to encourage efforts by those of us who are determined to develop their potential. The government has got mixed up in many cases with corruption and preventing good work from being done, in favour of work where money is made available to politicians. The general mood of the people is helpless and pessimistic. No one believes that India can do much in anything.

But I do believe that we have the potential and the capacity. There are no ifs and buts attached to it. Each of us has to work strongly to give his best to this nation. Each of us has to love this country. That should set the background for our progress.

Watch out, Japan! Here we come!

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