Global

Robert F Kennedy once said that a country’s GDP measures “everything except that which makes life worthwhile”.

Understanding how people feel or do not feel included in the benefits of economic growth is now more important than ever. Across the globe, citizens are taking action to articulate a feeling of disconnectedness from globalisation and capitalism. Turning growth into gains in well-being matters. Read more

Oil market volatility has reached near-record levels in the first half of this year, as the first chart shows. It has averaged nearly 10 per cent a week, and over the past quarter-century its three-month average has only been higher during the Gulf War and the subprime crash. Yet there have been no major supply disruptions or financial shocks to justify such a dramatic increase. Instead, July’s report from the International Energy Agency reminds us that:

“OECD commercial inventories built by 13.5 mb in May to end the month at a record 3 074 mb. Preliminary information for June suggests that OECD stocks added a further 0.9 mb while floating storage has continued to build, reaching its highest level since 2009.” Read more

If a week is a long time in politics, how does one gauge the tumultuous days in Westminster following the Brexit vote?

The unprecedented sequence of events in the wake of the EU referendum has culminated in mass resignations followed by leadership battles at Britain’s two main political parties. This, coupled with the extraordinary electoral contest unfurling across the Atlantic, has bred a greater sense of economic and political uncertainty in Europe and the US than many can remember.

For those of us at Actis, with a legacy of over 70 years of investing exclusively in emerging markets, the post-Brexit, pre-Trump landscape of the developed world makes us wonder whether our growth markets should now be regarded as a relatively safe haven for investors’ capital. Read more

Smart investors are recognising that China intends to lead the US and other countries in the race to develop green technologies as part of its ambitious new strategy for economic growth.

China’s 13th Five-Year Plan, for the period from 2016 to 2020, is guided by five principles: innovation, coordination, greening, opening up and sharing. When Zhang Gaoli, vice-premier, described these principles this year to a group of overseas business and academic leaders at the China Development Forum, he spent longest on ‘greening’, providing a clear indication of the importance being placed on green development for China’s future growth. Read more

Emerging equity markets have cumulatively underperformed developed equity markets by 70 per cent over the past six years. Most investors are now underweight EM equities as a result. But, based on the record number of queries we are receiving from institutional investors, it appears that large asset owners around the world are looking to rebuild these positions. We encourage investors to maintain a strategic allocation to the asset class.

It’s possible that emerging markets are finally poised to outperform: growth opportunities are superior and valuations less demanding. More importantly, we believe that EM is amongst the richest of all equity markets in alpha opportunities, or the potential to generate excess return. Read more

On my way to the second morning of the 2016 Global Entrepreneurship Summit (GES), I took an Uber. Originally from Bolivia, my driver had fully embraced the Silicon Valley ethos — even its extraordinary “valley-centricity.” My evidence: as we were discussing Facebook founder Mark Zuckerberg, who was scheduled to speak the next day at GES, he looked into the rearview mirror and earnestly asked, “Can you imagine that Facebook was started so far away, like in Massachusetts, right?”

My surprise at his amusing myopia was only magnified later that day by comments from a venture capitalist in the Valley, who seemed summarily — and surprisingly — to dismiss social entrepreneurship as “meaningless” in a public session. When discussing social entrepreneurship, he said that it conjured images of “investing a million dollars to build a well in the Congo,” which, he argued, “could never be sustainable.” Read more

Timothy AshA few comments on Brexit from a British/EM perspective:

First, on the idea that somehow Brexit can be avoided. Frankly, I just don’t buy that. It was made crystal clear that this was an in-out decision, and we all voted on that assumption. It is patronising to the electorate to think we can change the rules because the majority voted the wrong way, at least in some peoples’ view. Read more

What once seemed impossible happened in Paris last December, when 195 nations agreed on a framework for maintaining the level of global warming at or below 2° Celsius. In Paris, CEOs from industries as far ranging as cement, transportation, energy and consumer goods manufacturing announced their own climate commitments to decrease their carbon footprints, adopt renewable energy and improve natural resource management.

Keeping the world on a low-carbon path, however, will not come cheap and is counted in the trillions of dollars. Just for having in place low-carbon, climate resilient infrastructure, an estimated $93tn in cumulative investments is needed globally from 2015 to 2030. Read more

By Dimitris Tsitsiragos, International Finance Corporation

Climate change is not just an environmental challenge— it is a fundamental threat to development in our lifetime. Without immediate action targeted at emissions reductions by the international community, climate change could result in an additional 100m people living in extreme poverty by 2030 and reverse many of the development gains of the last decade. A 2007 United Nations study projected adaptation finance needs for developing countries would start at $28bn annually by 2030.

The costs for this cannot be borne by the public sector alone. There is a key role for the private sector, including the financial industry, to play in the struggle for a greener future. In fact, the private sector is the largest source of climate finance, devoting $243bn in 2014 to climate-related investments, according to the Climate Policy Initiative’s Global Landscape of Climate Finance 2015. Read more

By Felipe Calderón, Global Commission on the Economy and Climate

Over the next fifteen years, the world needs to invest more in new infrastructure and upgrades than everything that exists today. This means we have a crucial window of opportunity to build it right, reflecting the new international priorities of the Sustainable Development Goals and the Paris Climate Agreement.

If we continue on our current high-carbon economic model, the world will need to invest more than $90tn in infrastructure. But it won’t cost much more to build our energy, transport, water, and telecommunications systems in a low-carbon way. Making our infrastructure cleaner and more sustainable could add as little as 5 per cent to upfront costs, which could be fully offset by lower operating costs. It would also make our economy cleaner, more efficient, and more productive. Plus, it would reduce the enormous costs of adapting to climate change. Read more

Matthew Blake, World Economic Forum and Gloria M. Grandolini, World Bank

Maria owns a tiendita, a small local shop on a side of the road in Medellin, Colombia, where she sells various items, including local soft drinks. But some potential customers are unable to buy anything at this tiendita — Maria’s shop is a cash-only operation. This scenario is not unique to this store: it demonstrates the omnipresent role cash has across the globe.

We estimate that in 2015, global cash and cheque payments among micro, small, and medium-sized retailers (MSMRs) stood at $19tn, compared to total payments to MSMRs – including those from various types of card – of $34tn. The majority of these cash transactions happen in emerging markets.

This first estimate of the size of the cash-based economy reveals the prevalence of cash in the global economy and suggests the size of the opportunity for electronic payments, which include swiping a card or tapping a smartphone. To put $19tn into context, it is larger than the GDP of the United StatesRead more

The European, regional and global economic and political spillovers from the Middle East-Africa refugee crisis continue to defy lasting solutions, particularly in financing the absorption and resettlement of displaced millions where immediate costs reach billions of dollars.

The main UN refugee agency was chronically underfunded before the outbreak of the Syrian civil war and the Islamic State menace, which have caused additional lost output of $35bn in frontline countries according to development agency estimates. Read more

By Chandran Nair, Global Institute for Tomorrow

In April this year, Kenya’s President, Uhuru Kenyatta, burned over 105 tonnes of elephant ivory to protest the continued poaching of elephants. The Associated Press quoted President Kenyatta as saying that “…for us ivory is worthless unless it is on our elephants.”

At the same time, he hosted the “Giants Club” Summit, a meeting of African leaders to bolster the protection of elephants. The ivory burn — the largest in history — is a reminder that conservation is not just the purview of activists in the West, but also something that is dear to the hearts of many governments and people in the developing world. It should also be noted that some African commentators have been critical of this action arguing that in the final analysis it still panders to Western arguments about how to put an end to poaching. Read more

We are facing a growing and menacing threat posed by pandemics. Recent years have witnessed SARS, bird flu, MERS, Ebola and now the Zika virus. With each new discovery, our response is bewilderingly clumsy, and we seem to be no more equipped to respond than before. In many ways, we tie our own noose. History is littered with examples of action performed too little, too late.

Increasing population density and transnational travel of people and commodities increase the risk of communicable disease. As the threat of pandemics is becoming more real, it is paramount to create robust systems at the international, national and local levels to cope with such outbreaks. A recent global health commission estimated the potential annual economic losses from pandemics to be $60bn. Despite this ominous threat, international efforts to mitigate the risks are woefully inadequate. Read more

Capacity utilisation (CU%) in the chemical industry has long been the best leading indicator for the global economy. The IMF’s recent downward revision of its global GDP forecast is further confirmation of the CU%’s predictive power. As the first chart shows, the CU% went into a renewed decline last October, negating hopes that output might have stabilised. March shows it at a new low for the cycle at just 80.1 per cent, according to American Chemistry Council (ACC) data. By comparison, the CU% averaged 91.3 per cent during the baby boomer-led economic supercycle from 1987 to 2008.

This ability to outperform conventional economic models is based on the industry’s long history and wide variety of end-uses. It touches almost every part of the global economy, enabling it to provide invaluable insight on an almost real-time basis along all the key value chains – covering upstream markets such as energy and commodities through to downstream end-users in the auto, housing and electronics sectors. Read more

Bitter experience in Europe tells us that trivialisations of painful historical events, especially if they come from leading political figures, can inspire thinking among electorates that eventually turns into self-fulfilling prophecies. That is exactly why numerous countries in western Europe have laws that prohibit and reprimand any trivialising comparisons with the heinous doings of the axis powers in the 1930s and 1940s that caused the loss of millions of lives and unspeakable suffering. So unspeakable, that most of our ancestors preferred not to share those experiences with their descendants to this very day…

That makes recent historical comparisons by two former mayors of London all the more serious and outright unacceptable to all those who were persecuted and sacrificed their lives in the past century and to those who were dedicated to building a new and “peaceful” European Union. The United Kingdom has been an integral and vital part of that process in the past century, including since it joined the EEC in 1973 and decided by referendum in 1975 to remain in the body that was originally formed in 1952 to secure peace on a continent soured by thousands of years of war. Read more

In 1987, when I was five months pregnant with my youngest child Uchechi, doctors told me they were concerned that his head was not growing fast enough. It was one of the most frightening moments of my life. I couldn’t bear it, the sense of powerlessness in being able to do nothing but wait. It took two long months of fortnightly sonograms before we were finally given the all clear. Although Uchechi was fine in the end, the terrifying experience will remain with us forever.

Today, nearly three decades later, my heart goes out to the hundreds of thousands of pregnant women in Zika-infested countries who are going through the same agonising experience of not knowing the fate of their unborn child, or even worse those with confirmed cases of microcephaly. As world leaders, policymakers and young people come together in Copenhagen this week to discuss health, rights and well-being of women and girls as part of this year’s Women Deliver global conference, this epidemic is a reminder that a gender gap exists in health as well as education, economics and politics. Read more

The travel industry has seen impressive growth in recent years as business travel recovers post-recession and rapidly growing middle classes from emerging markets have sparked an aviation boom. But despite the growth of low-cost mass-market travel, higher-yield premium and luxury trips are outpacing the market as a whole.

Our latest report, ‘Shaping the Future of Luxury Travel’, which is underpinned by data modeling from Tourism Economics, found that luxury travel had a global growth rate of 4.5 per cent between 2011 and 2015, 0.3 percentage points higher than the overall industry. Over the next decade, luxury travel’s growth rate is forecast to accelerate to 6.2 per cent, compared with a (still healthy) 4.8 per cent for the overall market. Read more

The debate on the future of Europe and Britain within it is heating up. This week, Boris Johnson highlighted the problems with “EU foreign policy-making on the hoof”, suggesting that it had contributed to the protracted conflict in Ukraine. He was quickly branded a “Putin apologist” by adversaries.

None of Boris’s critics seem to have noticed that this is a clear case of shooting the messenger. What Boris has done is raise a legitimate concern. He is giving Europe a long-overdue reminder that in order to survive, it needs to get stronger. Read more

Last December, as part of their contribution to the Paris climate talks, a coalition of African governments and the African Union set a hugely ambitious goal to deploy 300 gigawatts of renewable energy by 2030.

That’s roughly the equivalent of Japan’s entire electricity capacity and nearly a third of that of the US, in a continent where hundreds of millions of people currently lack access to power. It will require an average annual deployment rate of 17 GW. Sub-Saharan Africa’s biggest annual deployment to date has been 2.6 GW. So, the 2030 goal means increasing yearly net capacity additions by a whopping 650 per cent. Read more