While the world debates climate change at the COP21 talks in Paris, it is worth having a look at how the emerging economies of Egypt and Jordan are taking a lead in stimulating private investment in renewable energy.
The EBRD has just approved a $500m envelope to support Egypt’s new solar programme, following hard on a $250m financing programme for the generation of renewable energy to be sold directly to private consumers in Morocco, Tunisia, Egypt and Jordan (supported by two multilateral climate funds, GEF and CTF). These sums will leverage much more than $1bn of parallel investment – crucially, without putting a burden on government budgets. Read more
By Nathan Dufour, Polish Institute of International Affairs
Europe’s security services are blinded by their quest to prevent terrorism from striking again. The investigation to root out the perpetrators, launched by French security services following the November 13 attacks in Paris, is well-intentioned, but cracking down on Belgium and the district of Molenbeek-Saint-Jean in Brussels are playing straight into the hands of Isis, the Islamic militant group, and its quest for destabilisation.
Molenbeek-Saint-Jean, one of Brussels’s poorest and most Muslim-populated districts, fell under international condemnation for its role as a support base for the Paris attacks. Many accused Belgium of failures, using it to portray the inadequacies of Muslim integration in western Europe. However, to properly consider the issue and investigate durable solutions, shortcut explanations should be avoided. Instead, consider why Belgium and Molenbeek fit so conveniently in Isis’ broader destabilisation plans. Read more
By Chandran Nair, Global Institute for Tomorrow
Last week, Jack Ma called for a new “e-WTO” with the aim of helping small businesses get on the Internet, as the best hope in the fight against poverty. This appeal came after Alibaba’s largest ever “Singles Day” a week earlier, with almost US$14.3bn of merchandise sold in 24 hours. Alibaba’s social media accounts even reported that Premier Li Keqiang called CEO Jack Ma to wish him a successful day. “Singles Day” is now the world’s largest shopping day, dwarfing even the United States’ “Black Friday.”
These are the latest manifestations of a worrying obsession with e-commerce and the Internet in Asia’s largest economies. In March, Beijing announced its new “Internet Plus” plan to expand Internet connectivity. Premier Li, when describing it, brought up the “mobile Internet”, “cloud computing”, “big data”, “intelligent manufacturing” and the “Internet of Things,” in a manner similar to business leaders in America. Nor is this digital obsession restricted to China. Indian Prime Minister Narendra Modi’s meeting with Mark Zuckerberg at Facebook’s headquarters received as much, if not more, media attention as his address on sustainable development to the United Nations days earlier. Read more
The creation of a slavery and human trafficking statement is now compulsory for all UK businesses with a turnover of over £36m, as stated by the Modern Slavery Act. However, unless enforced, this already diluted piece of legislation will have little effect on working practices and is open to abuse.
Modern slavery, although widely condemned as morally indefensible by UK businesses, is still rife in global industry. The International Labour Organisation estimates that over 20m people are trapped in a form of slavery worldwide, a view reinforced by countless exposés of the abhorrent working conditions present in western supply chains. Just last year, a report by NGO Verité suggested that a third of migrants working in Malaysian electronics factories were subject to forced labour. Read more
Education policymakers worldwide often make a pilgrimage of sorts to Finland and Singapore to learn about their high performing education systems. These states consistently do well in PISA tests, which are organised by the OECD every three years to measure and compare the competencies of 15-year-olds worldwide. There is no doubt that their achievements are impressive, but there is more to be said for examining places that are rapidly improving rather than those that are already highly effective. This week, CfBT Education Trust published a report exploring school reform in five world cities including three in emerging markets, where there has been rapid improvement in recent years.
Despite enormous diversity, the report has identified seven common trends that link educational success in each of these places. Strong leadership, commitment to reform and collaboration between schools are among the factors that have driven up standards. These cities have used education to break the link between poverty and attainment in a way that has not be done before and which could have profound implications for social mobility and their social and economic structures. Innovation and creativity have set new standards in these cities which could be applied in emerging markets across the world. Read more
By Spencer Lake, HSBC
China’s recent stock market and foreign exchange developments have drawn the attention away from a major development in another part of the country’s capital markets: the further opening-up of the bond market to foreign investors.
In July, the People’s Bank of China (PBoC) announced that certain foreign institutions – including central banks, sovereign wealth funds and international financial institutions – would have open access to the interbank debt market, where the vast majority of China’s government and corporate bonds are traded.
This is China’s latest measure to integrate its capital markets into the global financial system. Read more
The proposed Trans-Pacific Partnership (TPP) has united 12 nations in the Asia Pacific region and the Americas around a long-awaited trade and investment framework. But it has also accentuated a number of divides – not only within Asia, as the deal excludes China, but also within Latin America. The major Latin American economies that already face the greatest headwinds – Brazil, Argentina and Venezuela – were also the only ones not to sign up to the draft agreement. The others have either joined or, in the case of Colombia, may join soon. In addition to benefiting the latter economies, the TPP is widening Latin America’s divergences.
Even in China’s absence, the TPP members form a significant club, accounting for 40 per cent of world GDP and one third of global trade. The main objectives of the treaty are to eliminate import tariffs and to implement common rules on intellectual property, environmental standards and the labour market. Recent studies suggest that the deal should boost trade and long-term investment among member nations. According to the Peterson Institute, the agreement could increase world income by close to $290bn a year by 2025, although these benefits would accrue only gradually and could vary considerably. Read more
The Pan American Health Organization (PAHO), the World Health Organization’s agency for the Americas, recently voted unanimously to adopt a Regional Plan of Action on Dementia. It obliges governments in every country in the region, in both North and South America, to take further action to help people living with dementia.
The plan comes at a much needed time, with 9.4m people living with dementia in the Americas. This number is expected to rise to nearly 30m by 2050. With the commitment of every country in the Americas, from the most southerly point of Argentina to the tip of Canada, the plan could go a long way to ensuring millions more people can live well with dementia at all points of their dementia journey. Read more
The steady economic growth that Africa has enjoyed over the past decade is now waning. Global commodity prices, particularly oil, have weakened and China, Africa’s largest individual bilateral trading partner, has slowed considerably as it rebalances itself away from investment and growth. According to the IMF, a 1 percentage point decrease in China’s investment growth is associated with an average 0.6 percentage point decrease in Africa’s export growth rate. The depth of the China-Africa trade relationship explains why this month, the World Bank, in its annual Africa’s Pulse report, downgraded Africa’s growth projections from 4.6 per cent in 2014 to 3.7 per cent in 2015 – the lowest growth the region will have seen since the ripples of the global economic crisis hit it in 2009. A new period of slow growth demands new and creative responses from African leaders.
While the commodity climate and China’s slowdown are certainly a challenge for African policymakers, they also present a unique opportunity. Relying on the beneficial economic climate that has fostered complacency with market inefficiencies is now no longer an option. Necessity will demand that African governments adapt to unfavourable global trends by squeezing greater productivity from the structures and systems that are already in place. East Africa is already quietly making strides in eliminating economic inefficiencies and the progress has much to teach the rest of the region. Read more
The mounting economic difficulties of many emerging markets – notably China, Russia, Brazil, South Africa and Turkey – are contributing significantly to a deteriorating 2016 global growth outlook and to mounting risks in financial markets. Indeed, the likelihood is rising of an international recession accompanied by deflation.
This is exacerbated by the rout in commodity prices and the decline in world trade growth, which is a key indicator on the state of the world economy. The World Trade Organization has revised downwards its 2015 forecast to a historically low 2.8 per cent from 3.3 per cent, and this is probably still an optimistic number. Read more
The plight of tens of thousands of Middle East refugees pouring daily into eastern and western Europe has prompted EU and UN emergency action to raise billions of dollars for unmet previous pledges as well the historic fresh influx. But the funding model that relies on governments supplemented by private donations has long been unable to keep pace with the global spread of internal and external displacement now affecting 60m people, 80 per cent in developing countries, according to the UN’s latest figures.
Financial markets, both debt and equity, could be mobilised for emerging economy frontline states to provide a new, long-term source for immediate infrastructure and social needs and future professional training and employment entry. Sovereign refugee bonds would be a logical start, building on existing investor local and foreign-currency portfolios across emerging market regions. Issues could carry partial guarantees from the World Bank and other development lenders, but more creditworthy governments are in a position to continue normal borrowing on commercial terms that could be discounted with a commitment to carefully track the proceeds for a range of refugee hosting and resettlement purposes. Read more
Friday, October 16, marks World Food Day, an annual moment to reflect on humanity’s ability to nourish itself. Making sure people have enough to eat – and, crucially, the right nutrients – is not only a moral imperative but an essential foundation for our economies to thrive.
A hungry child cannot concentrate at school and a malnourished child may not reach her full potential, physically or mentally. While proper nutrition can be lifesaving – for example, a child who is exclusively breastfed has a six times higher chance of survival than one who is not – achieving zero hunger boosts prosperity, too. Read more
Like thousands of viewers and many critics worldwide, I have a new addiction: the Netflix series Narcos, depicting the building of a transnational criminal empire run from Colombia by the world’s most notorious criminal, Pablo Escobar. It is hard not to be baffled by the power and audacity wielded during the 1970s and 1980s by Escobar, played with a heavy Brazilian accent by Wagner Moura. But interested as I am by urban security studies, I am also fascinated by the series’ portrayal of Medellín, the Colombian city that was formerly the regional hub for transnational drug trafficking and Escobar’s headquarters. Read more
If there’s something weird / And it don’t look good / Who you gonna call? For many people in emerging markets, that question, coined 30 years ago in the movie “Ghostbusters”, might be painfully relevant.
But lacking the option to call on actor Bill Murray in a boiler suit, hard-pressed families in emerging markets are increasingly relying upon the assistance of relatives who have emigrated in search of work to the US, Europe and elsewhere.
But does the money remitted back home by migrant workers from emerging markets comprise a meaningful source of relief for recipient families and the economies they live in. Or are these remittances merely a phantom solution?
In his new book “Migrating into Financial Markets”, Matt Bakker looks for the answer. Read more
Almost every week, a new infrastructure project is announced in Latin America. Roads, wind farms, hydroelectric dams, rapid transit systems, water and sanitation plants, you name it. How many of these become a reality? Sadly, only a few. The reason: while the region’s ambitions and needs are vast, government budgets are tight (falling commodity prices such as soy and oil don’t help) and the private sector is not playing an important enough role in these projects.
Latin America invests roughly 2 to 3 per cent of its gross domestic product in infrastructure. We need at least double that to reach the region’s infrastructure goals. Part of the solution lies in finding new and better ways to promote private sector participation. There are vast sources of private funding to be leveraged, not to mention technical and managerial expertise. By some accounts, pension funds, an essential source of domestic savings in Latin America, are investing only 1 per cent of their portfolios in infrastructure around the world. Similarly, only 2 per cent of global insurers’ assets are allocated toward infrastructure. Read more
How do large-scale economic and political transformations, such as the collapse of communism in the former Soviet bloc, affect perceived welfare? In a new working paper, we show that income gains in the post-communist region have failed to translate into convergence in life satisfaction.
Although scholars have acknowledged that transition has been an unhappy process, the expectation was that economic and political reform would eventually be rewarded. This prophecy has not come true yet. For example, Ukraine and Russia are consistently found near the bottom of rankings of life satisfaction, with scores lower than those of countries like Bangladesh and Senegal. Armenians, Bulgarians, Georgians, Moldovans and Serbians are less happy than Peruvians and Indians. Hungarians are less happy than Kosovars and Mongolians. Why, then, as economic advancements are materializing for most countries, are the psychological benefits lagging behind? Read more
The decline in global foreign exchange reserves thus far in 2015 may add to macro-economic pressures on emerging markets (EM), but it does not directly risk a “quantitative tightening” effect on developed markets (DM).
EM sovereign foreign exchange reserves fell by US$189bn between end-December 2014 and end-June 2015, according to IMF and Chinese data compiled by Fitch. The biggest declines were in China (down US$149bn) and Saudi Arabia (down US$60bn), partly offset by increases in other countries, led by India (up US$35bn). More timely data from some countries, including notably China suggest the drain continued in July and August.
Fitch estimates about US$100bn of the decline to June may have been caused by valuation effects, based on the 4.3 per cent trade-weighted appreciation of the US dollar in the first half of the year. Nonetheless, some of the decline will reflect genuine draw-down by EM central banks. Read more
By John Heathershaw, University of Exeter
Central Asian democracy was dealt another critical blow this month, in open defiance of Western efforts and engagement.
It is clear that the United States and Western powers have abandoned political engagement in Central Asia in the face of a resurgent Russia and the increasing significance of China as creditor, investor and patron.
If ever there were evidence that Western states’ calls for development and democracy in Central Asia are now only heard in an echo chamber, the story of the demise of Tajikistan’s Islamic Revival Party (IRPT) is it. Read more
One of the hottest topics for discussion at the United Nations General Assembly this week isn’t even on the official agenda. By the time of next year’s annual gathering the UN is expected to have chosen a new Secretary-General to replace Ban Ki-moon, who completes his second and final term shortly afterwards. The names of potential candidates, the qualities expected of them and even the rules of selection are now part of an intense debate that will take months of horse-trading to resolve.
Among those with a major stake in the outcome are the countries of Eastern Europe, the only one of the UN’s five regional groupings never to have held the job. Sidelined during the long decades of the Cold War and the post-communist transition, these countries feel that they deserve recognition for their success in transforming themselves into strong and independent nation states. What better way to throw off the past and confirm their new status than for one of their number to claim the World’s top diplomatic post? Read more
Commodity prices could well have further to fall, now China’s business model has changed. It is no longer aiming to achieve high levels of economic growth by operating an export-focused development model, supported by vast infrastructure spending. Instead, its New Normal policies aim to boost domestic consumption, by creating a services-led model based on exploiting the opportunities created by the power of the internet.
The only problem is that markets have failed to notice this change. They have fallen victim to the phenomenon of “anchoring” as identified by Nobel Prizewinner Daniel Kahneman, and assume the New Normal is similar to the Old Normal. Thus, much analysis on commodity markets still focuses on guessing “when will the rally begin?” Read more