Amid heated national debates on immigration in Europe and the US, economic research is increasingly showing that migration is good both for countries of origin and for countries of destination, and for the global economy. But crucially missing from the current debate is how migration, when increasingly driven by man-made calamities, is sweeping under the carpet underlying problems of environmental destruction, overpopulation and joblessness. While favouring migration on grounds of overall economic well-being, the top priority must be to address these contributing factors.
Consider first the global balance on migration. Some 250m people — 3 per cent of the global population — are migrants, of which 20m are refugees fleeing armed conflicts and persecution, and escaping poverty and, increasingly, the effects of natural disasters. The US, Russia, Germany, Saudi Arabia, UK and India are in the top 10 destinations in terms of numbers of arrivals. Migration helps to lower unemployment rates at home and raises remittances, which are vital economic pillars in many economies such as Bangladesh, El Salvador, Nepal and the Philippines. In 2015, the remittances of overseas workers to developing countries amounted to nearly $450bn, three times official development assistance going to the developing world. Read more
We had incorporated a much better short-term outlook for emerging markets in our EM trade recommendations since the second quarter of this year, essentially on the back of a few important developments.
Firstly, the exhaustion in the USD cycle, particularly supported by the market’s perception of a more tentative US Federal Reserve. Indeed, as highlighted by our team on previous occasions, differently from the period 2013-15, we have been trading “policy convergence in G3″, rather than “policy divergence”. This fundamentally reduced the momentum in the USD bullish cycle seen in the previous years. Read more
We now know that the UK will trigger Article 50 of the Lisbon Treaty by the end of March 2017, giving the country two years to negotiate its exit from the European Union. But while most pundits have focused on the UK’s future policies regarding the EU, the UK must think seriously about how to use the opportunity of Brexit to reconsider its trading relationships with Asia, the world’s fastest-growing region.
Asia is a bright spot in a fragile world economy. While advanced economies are projected to grow at an anaemic 1.4 per cent this year, developing countries in Asia continue to grow at 5.7 per cent, with India leading the way at an impressive 7.4 per cent clip. What’s more, the region is home to a growing consumption-oriented middle class, which will reach over 2bn people by 2030. Read more
The globally-adopted target to double the productivity of small-scale farmers, set by the United Nations’ Sustainable Development Goals last year, remains out of reach for most emerging markets. That is according to a new report by the Global Harvest Initiative (GHI) released at the Borlaug Dialogue in Iowa this week. This raises the question: how will we feed the projected 9.7bn people that will be on our planet by 2050, when more than half of them will live in low and middle-income countries?
The GHI defines productivity as a measure of output per unit of input. Our analysis shows that global agricultural productivity must increase by 1.75 per cent annually to meet demand. While the global average rate of productivity growth is only just missing the mark at 1.73 per cent, low-income countries are lagging far behind, with an average annual rate of just 1.3 per cent. Read more
In Economics 101 we teach students that social “bads” should be taxed and social “goods” should be subsidised. When it comes to jobs, however, this principle is observed in the breach.
In addition to paying taxes on their incomes, as well as on the goods and services they buy on the market, workers and their employers also pay social security, also known as payroll taxes on their salaries. Read more
The election of Antonio Guterres as the next secretary-general of the United Nations looks, on the surface of it, like business as usual. A group of ageing men has chosen another ageing man to lead the world for the next four years. In fact, there are grounds for thinking that something significant and positive may have changed in the way the UN works.
Guterres is the first former head of government to have been given the job. Previous holders have all been mid-ranking ministers or career diplomats rather than senior political leaders. The big powers have been happy to keep it that way because they are jealous of their prerogatives and don’t want the person running the UN to have too many ideas of their own. In the words of one popular quip, they want a secretary, not a general. Read more
By Amal-Lee Amin, Inter-American Development Bank
Four years ahead of schedule, the Paris climate change agreement is expected to enter into force next month. Latin American and Caribbean countries played a major role in the diplomatic push to secure the agreement and are now making progress on ratifying it.
As of today, over a dozen countries from the region have also ratified – including its largest emitters, Brazil and Mexico, and also some of its smallest and most vulnerable, Barbados and Belize.
Yet ratification is only an initial step towards implementation. Fortunately, the region has made progress on designing the policies and institutions to implement the agreement. Peru, Brazil, Mexico and Costa Rica were among the first developing countries to put forward voluntary emission reduction pledges starting in 2008. Read more
By Simon Currie and Laura Kiwelu, Norton Rose Fulbright
Harnessing abundant and free solar energy has long been regarded as the obvious solution to Africa’s persistently low electrification rates. After a sluggish start due to unproven technology and high capital costs, we are now witnessing a solar revolution which will transform Africa’s energy landscape over the next decade.
In February 2015 the first solar photovoltaic (or PV) grid connected plant in Africa outside of South Africa was inaugurated at the Agahozo-Shalom Youth Village in Rwanda, a refuge for those orphaned during and after the 1994 genocide.
With a layout resembling the Africa continent, its ramifications have spread far beyond the 8.5MW it exports to the grid, attracting visitors such as Bono and members of the US Senate. In Africa the usual development period for power plants is nine years from inception. Yet this project was generating power barely two years after completion of the feasibility study. Read more
The Amazon rainforest harbours about 10-15 per cent of all the world’s biodiversity on land and stores an estimated 150-200bn tons of carbon. Its rainfall generates approximately 15 per cent of the fresh water that flows into the Earth’s oceans. The people who live in the Amazon or on its borders include so many ethnic groups and speak so many languages that the region is one of the most culturally diverse places on the planet.
It is the last place you would expect an industrial revolution to take place. Read more
By Chris Humphrey, Overseas Development Institute
As officials prepare to fly to Washington for the IMF and World Bank’s 2016 fall Annual Meetings, the financial capacity of the World Bank and other multilateral development banks (MDBs) will be at the forefront of their thoughts.
The two topics of the October 8 Development Committee meeting — proposed changes to World Bank capital structure and a vision for how the Bank can remain relevant in the next 15 years — both revolve around the Bank’s financial resources.
Governments around the world are grappling with how to meet the July 2015 UN Conference on Financing for Development’s call to move from “billions to trillions” of investing to put our planet on an environmentally and socially sustainable growth path. Read more
Tourists steer clear of Brazil, Russia, India and Nigeria because of onerous visa requirements, EM Squared reported last week. But even with easy tourist visas in place, these emerging market giants won’t reach their full potential. The real key lies in enhancing the ease of doing business and developing adequate infrastructure.
Visa policies are certainly a real barrier to tourist arrivals. No matter how beautiful or intriguing your country is as a tourist destination, if you make it too complicated for tourists to visit, they will stay away. That problem is not limited to emerging markets. A few years ago, US Travel Association estimated that the US lost the equivalent of 467,000 jobs due to the difficulty for citizens of primarily Brazil, India and China to obtain a visa. Read more
Political systems in the developed world are processing the economic challenges of globalisation and technology in dangerous ways. Although it’s happening with distinct local flavors, the recent phenomena of fringe parties and extreme personalities rising to power (or getting close) in places like Greece, France, Spain and even the US are all part of the same global trend.
It is nothing new to the world that inward-looking populism and confrontational nationalism become a growing force after episodes of economic disruption. While Brexit may be the most important global political event since the fall of the Soviet Union, it’s also a reminder of the popular mood in sophisticated and prosperous places like the UK.
In this context, the question has to be asked: When and how will this political tsunami hit emerging economies? And why haven’t emerging markets (EM) yet experienced the type of neo-populism seen in developed markets (DM) in a serious way? Read more
We have reached the second anniversary of the Great Unwinding of policymaker stimulus. Almost inevitably, this now seems likely to be followed by a Great Reckoning, a consequence of the policy mistakes made in response to the 2008 financial crisis.
The Great Unwinding began with China’s decision to move away from the stimulus policies adopted by the previous leadership. Since then, those who expected stimulus to return have been disappointed. The leader of the Populist faction in the Politburo, Premier Li Keqiang, has attempted to manoeuvre in this direction several times, most notably with last year’s failed stock market rally. But in the end, strategy has continued to be set by President Xi Jinping and his Princeling faction, who has consistently focused on the need for structural reform with his New Normal economic programme. Read more
As political jostling continues about the future of Europe, it is important to remember that there are six countries in the Western Balkans that have firmly tied their colours to the European mast.
Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Montenegro and Serbia are all actively working towards the ultimate goal of EU membership. All six have a formal contractual arrangement with the EU through Stabilisation and Association Agreements which are all now in force.
The European Bank for Reconstruction and Development (EBRD), an international financial institution that sees cross-border integration as one of its priorities, fully supports this goal. For the countries of the Western Balkans, EU approximation does not just mean reform and investment. It also represents a vision of lasting peace and prosperity – goals that the EU itself has achieved for its member countries. Read more
After months of speculation, the race to become the next UN Secretary-General has reached the point at which support for the official contenders is being tested where it really counts. Two rounds of straw balloting, in which countries are invited to “encourage” or “discourage” the candidacy of each nominee, have already been held by the Security Council. Another is scheduled for next week. Perhaps surprisingly, at a time when the UN is under pressure to appoint its first woman head and recognise the principle of regional rotation by giving priority to candidates from eastern Europe, the apparent frontrunner is neither a woman nor from eastern Europe. He is Antonio Guterres, the former prime minister of Portugal who completed his second term as UN High Commissioner for Refugees last year. Read more
By Chandran Nair, Global Institute for Tomorrow
At a recent World Economic Forum in Kuala Lumpur, the opening panel was invited to debate one of the leitmotifs of our age – the way in which technology and digital disruption are reshaping destinies in the Southeast Asian region.
Guided by the anchor of a global media channel, the panelists dutifully paid homage to this new religion and its scriptures. There were no questions about what the region’s biggest challenges are, how we got here in the first place, no questioning of the mindless activities that have sprung from the internet, no alternatives that did not involve “the cloud”.
The only worry about the future they discussed was the threat of cybercrime. They did not ask how many passwords are we going to need to protect our bank accounts and our data from the rewarding world of cybercrime, nor how children could be protected from the effects of on-demand pornography, nor who will buy the things made by robots when there are no more jobs to speak of. Read more
By Dorthe Fredsgaard Nielsen, GAM
This year began with a rather pessimistic macroeconomic backdrop for emerging market (EM) countries, influenced mainly by deflating of the global commodity bubble, China’s seemingly endless malaise and growing geopolitical risks.
From a micro-economic perspective, the picture was just as bleak. Since the end of the financial crisis, EM corporates had been increasing their debt loads to fund future growth in anticipation of continued strong pricing power and high growth rates. However, both pricing power and profitability were lower than expected, leaving many companies, particularly in the mining and energy sectors, highly leveraged.
This is now stabilising. Balance sheets of EM corporates look much healthier than those of their US counterparts and the strength differential is likely to increase further as US companies continue to add to their debt (figure 1). Read more
A century from now, will students of world history agree that the norms of 20th Century global finance were turned on their head early in the 21st Century?
The most obvious evidence of this is in bond markets, where some 30 per cent of the global issuance of sovereign bonds have negative yields. The bond markets of most of the eurozone, Denmark, Sweden and Japan are in negative territory. Indeed the entire Swiss bond market is now underwater. Read more
A hundred years from now, will students learning 21st Century history be taught that the Brexit vote – which saw an already sceptical Britain decidedly turn its back on the dream of a United States of Europe – was a watershed event, part of the West at large turning its back on its 200 year-long role of being the global economy’s star player, exiting that stage and leaving it to new actors from the emerging Rest?
And will those students of tomorrow also learn that, irony of ironies, Britain, the original architect of the liberal democratic capitalist house, having ruled the waves of free-flowing global trade and capital for much the 18th and 19th Centuries before amicably passing the baton onto the US in the 20th, then became the first major Western nation to waive those rules in the 21st? Read more
At a July 20 news conference announcing charges that a group – allegedly linked to Malaysian Prime Minister Najib Razak – had siphoned approximately $1bn from Malaysia’s sovereign wealth fund, deputy FBI director Andrew McCabe said that “the Malaysian people were defrauded on an enormous scale.” Mr Najib has repeatedly denied any wrongdoing.
In the coming months we will learn more about the lavish and colourful ways in which the alleged perpetrators of this massive heist spent that money. But, if this latest example of illicit global financial flows follows a familiar pattern, we will hear little about the painful and unaddressed tragedy of the very people Mr McCabe cites. Indeed, when such cases are resolved, too often the recovered assets are merely transferred back to the control of the government of a source country. That usually means the people who lost out – the real victims – are unlikely to see any benefit. Read more