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
Judging by media reports and official statements, this year’s Summer Olympics in Rio de Janeiro were a flop well before the August 5 opening ceremony. But if history is any guide, the games stand a reasonable chance of being seeing as satisfactory by the time the estimated 10,000 participating athletes return home. Whether it’s the Olympics in Athens, Beijing, London and Sochi or the soccer World Cup in South Africa and Brazil, a disaster-to-success reversal has been the standard narrative of all recent major global sporting events.
The Rio Olympics, the first to take place in South America, may yet turn out to be a special case. With the threat of a terrorist attack seen as a real possibility after the July 21 arrests of 10 Brazilians identified by local authorities as sympathisers of the so-called Islamic State, the only catastrophes that can be discarded are hurricanes, earthquakes and tsunamis, which are rare on the Atlantic coast of South America. Read more
One difference between the Cold War and today’s confrontation between Russia and the west can be found in the weapons being used to prosecute it. While the balance of military power in central Europe still matters, it is only one dimension of a wider struggle being waged by mostly non-military means.
Different instruments – technological, economic and administrative – are being adapted and combined to find new ways of exerting pressure on the opposing side. What they often share in common is an attempt to turn the features of a more open and globalised world into sources of vulnerability that can be exploited for strategic advantage. Read more
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
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South Sudan marked its fifth anniversary as a state this month not with celebrations but with rival armed factions shooting at each other in the streets of the capital. Several hundred people were killed in less than a week, tens of thousands displaced, and even sacrosanct UN camps protecting civilians were attacked. South Sudan ceased to perform even the minimal functions and responsibilities of a sovereign state long ago, and today the likelihood of a larger pogrom and escalating civil war is high.
A power-sharing agreement to end a conflict that started in December 2013 was centred around two people – President Salva Kiir and opposition leader First Vice President Riek Machar – who are irredeemably compromised among segments of the population, who view them as posing an existential threat to their communities. An African Union (AU) Commission of Inquiry found Kiir and Machar’s forces both responsible for killings that constituted war crimes and crimes against humanity. Sharing power between them has now failed disastrously on two separate occasions, and further attempts can only be expected to produce more of the same: immense human suffering and regional instability. Read more
There’s little doubt that Mexico’s government and private sector have been working overtime to increase global trade.
A recent report by the World Economic Forum and Bain & Company spelled out a host of efforts either completed or underway. Among the many: the Secretary of Economy (SE) eased the import-export process and lowered the transaction costs associated with importing goods that are inputs for export products. The Mexican Tax Administration reduced the time it takes to issue import-export permits and simplified the tariff code identification system. 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
In a surprising recent move, India has served notices to 57 countries including the UK, Germany, France and Sweden seeking termination of bilateral investment treaties (BITs) whose initial duration has either expired or will expire soon.
For the remaining 25 countries with similar treaties whose initial duration will expire from July 2017 onwards, such as China, Finland, Bangladesh and Mexico, India has asked for joint statements to clarify ambiguities in treaty texts, to avoid expansive interpretations by arbitration tribunals. 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
By Lee Cashell, Asia Pacific Investment Partners
Amidst the chaos sown by Brexit, one country’s protest vote is being greeted with relief by investors. In a landslide election, 3m Mongolians opted to end an era of policies that contributed to a fall off in foreign direct investment and economic growth.
After clinching an 85 per cent majority in the election, the Mongolian People’s Party (MPP) hopes to reinvigorate the economy through a more permissive operating environment and friendlier attitudes toward investors. 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
A 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 Max Wrey, Alaco
It is a bold, ambitious plan, but Saudi Arabia’s blueprint for reducing its dependence on oil through economic diversification could struggle to get off the ground unless the country’s education system experiences a major overhaul.
‘Vision 2030’, the brainchild of Deputy Crown Prince Mohammed bin Salman, sets out a bewildering range of policies designed to transform the economy, with the accent very firmly on cutting back the bloated public sector to make way for private enterprise.
Prince Mohammed wants to create just shy of a half a million private sector jobs and sees non-oil revenues more than tripling from Sar163.5bn ($43.6bn) to Sar530bn by 2020. At the same time, he anticipates the government wage bill’s share of the budget dropping from 45 to 40 per cent, to Sar456bn. 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 States. Read more
By Asli Aydintasbas, European Council on Foreign Relations
To put it mildly, “Europe doesn’t know what to do with Turkey”. Always difficult, even torturous, the relationship between the European Union and Turkey has hit new highs and new lows in the last year.
There was the refugee deal, the summits and photo-ops of a type that had been absent for almost six years. There were steps toward visa liberalisation and the opening of frozen accession chapters.
But there were also threats and accusations. In Britain, Prime Minister David Cameron, in an effort to convince British voters to stay in the EU, had to pledge that Turkey would not become an EU member until the year 3000. Meanwhile, in Turkey, President Recep Tayyip Erdogan has made it a part of his routine stump speech to accuse Europe of supporting terrorism. Read more