By Chandran Nair, Global Institute for Tomorrow

The idea that a world of limitless connectivity, spreading democracy and freer markets promotes convergence and endless possibility may be fashionable, but it is far from the complete picture.

There is little appreciation that this idea is instead leading to a great “era of divergence,” as we see an expanding split between the lofty ideals of Western liberal thinking and the reality in much of the developing world. Possibility may be “limitless”, but the question remains: “limitless possibility” for whom? Read more

The annual Yalta European Strategy conference, now relocated to Kiev until further notice, is a good place to take the political temperature of Ukraine. Last weekend’s gathering saw the country’s ruling elite, from President Petro Poroshenko down, out in force and keen to talk. What regular attendees noted most was the change of mood since last year: less appetite for apportioning blame and more focus on what Ukraine can do to rebuild itself. There was even room for guarded optimism. A snap poll showed that most participants expect to see Ukraine to be stable, growing and with its conflict in the East frozen, if not solved, within three years.

There are certainly reasons to argue that Ukraine is beginning to turn the corner. Its currency has stabilised, the renegotiation of its sovereign debt has strengthened its fiscal outlook and a return to growth is widely anticipated. The government’s economic programme recently earned praise from Christine Lagarde, the IMF’s managing director. The problem is that while it is possible to detect an improvement in Ukraine’s macroeconomic position, it will take longer for this to feed through into anything resembling a feel good factor in the country as a whole. Read more

Stopping the downward spiral of Brazil’s economy will take a bitter combination of tax increases and spending cuts. But highly negative reactions to the latest set of such measures announced in Brasília on Monday suggest that the government of president Dilma Rousseff no longer has the credibility needed to be able to contain the crisis it brought upon the nation through miscalculation, mismanagement and an astounding incapacity to govern.

The measures – centred on the recreation of a tax on banking transactions that was shelved just three weeks ago after being rejected by the business community, the public and vice-president Michel Temer – have little chance of being implemented by such a discredited president and government. Read more

By Edward Tse, Gao Feng Advisory Company

China’s recent stock market turbulence and currency devaluation has attracted enormous attention from around the world—with a disproportionate amount focused on whether we are seeing the end ofChina’s growth story.

True, many people lost a lot of money (though doubtless some also made a lot) and the reputation of the country’s economic managers has been badly damaged. The aftermath resulting from the meltdown will likely continue to be felt for at least several months, particularly by those private sector companies which have had to shelve plans to raise funds via initial public offerings. Read more

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By Matt Gamser, SME Finance Forum

Financial inclusion has become something of a buzz term in development circles. It is generally understood to mean the provision of finance and financial services by regulated institutions to disadvantaged and marginalised sectors of society, those who have been ‘excluded’ in the past.

What is not spoken about or generally well understood is that the group of ‘excluded’ includes the owners of small and medium-sized businesses (SMEs). When we speak about where financial inclusion is most critical, we are generally referring to the 4bn people on the planet who live on less than $2 a day.

The owners of small businesses are generally not in that group. But they are the most likely employers of the 4bn and are themselves being starved of capital. Read more

While the word has focused on China’s disastrous stock market bailout and the devaluation of the currency, a far larger crisis is brewing in China’s hinterland.

China’s property bubble has sagged in the big cities like Beijing and Shanghai – but it is on the verge of popping completely in the country’s heartland. After spending a week in Sichuan Province, it is clear that land sales, prices and transactions are all declining in double digits.

Sichuan province is one of China’s largest, in the heart of the country. We spent some time at a residential project called Universal City Centre, about 20km from Chongqing. The 1.08m sqm property has seen prices fall one-third from 4,000 to 5,800 psm one-third to 3,000 to 4,000 psm. Read more

By Richard Samans, World Economic Forum

“Are emerging markets already mired in a ‘crisis’,” the FT asked this week. The word is starting to surface, it noted. Economic growth slowed, global demand slumped, and trade plateaued, in recent months and years.

But leading emerging markets (EMs) such as China, Brazil and South Africa can still avert a real crisis. To do so, they would do best to broaden their attention beyond traditional measures of GDP growth to specific drivers of social expectations. They may find a more diversified strategy for growth itself along the way.

While news reports recently zoom in on the currency, debt, and stock markets woes in emerging markets, EM governments may worry about popular discontent at home more. From the BRICS over to Chile and Turkey to Indonesia, governments as of late are grappling with demands for wider social inclusion. Read more

Ukraine’s economy may be battered but its agriculture is enjoying a period of record exports, defying geopolitical challenges and the conflict in the east of the country.

Despite losing control over some of its territory, Ukraine has retained its place as the world’s largest exporter of sunflower oil and was the third largest exporter of grains in 2014-15. Today, Ukrainian agriculture, which has shown overall growth during the past 15 years, is an industry worth $13.5bn. Read more

By Herald van der Linde, HSBC

On the face of it, it makes no sense that the international flower industry should be headquartered in the Netherlands. The feeble sunshine and predisposition for a large number of rainy days would not make the Netherlands the first choice for anyone starting a flower-growing business today – if not for the fact that the business, and its integral supply chains, are already there. This is a huge competitive advantage for a new entrant, who can benefit from such things as the sophisticated Dutch flower auctions, the flower-growers’ associations and advanced research centres.

Academic Michael Porter uses this very example to illustrate his cluster theory of trade development, whereby whole supply chains “cluster” together. Another well-known cluster is the auto manufacturing industry in Michigan in the US. Over 50 per cent of North American auto companies are based in Michigan, and 46 of the top 50 global auto suppliers have operations in the state. Further south in the US, around Dalton in Georgia, over 90 per cent of all functional carpets are produced. It is why Dalton is called the “carpet capital of the world”. Read more

Nigeria’s new government must use its mandate to implement much-needed reforms in the oil and gas sector, which continues to be the driving force behind the economy. The country has achieved what initially looked to be an unlikely result – democratic elections and a peaceful transition of power. This is an important step towards the country’s full transformation into a developed economy and should be used as a platform for real change.

For a country so rich in oil and with almost ideal geological characteristics, Nigeria suffers from poorly developed infrastructure and sub-par living standards for the majority of the population. Since Shell discovered its first commercial oilfield in the Niger delta, Nigeria has grown to become Africa’s largest oil producer. The oil industry quickly crowded out investment in other sectors of the economy and the country’s oil and gas sector continues to be the most important contributor to the budget. Read more

Youth unemployment across the G20 is stuck at 16 per cent. Globally, some 358m young people are not in education, employment or training – more than the population of the US and Canada combined. The scale of the problem is such that the major economies of the world are at serious risk of another financial crisis if nothing is done. How do we ensure a bright future for our youth that not only contributes to their livelihood, but builds upon and strengthens our economic foundations?

The answer of course is obvious – produce more jobs and provide skills and confidence to young people. But how we get there is a better question to ask. Read more

Four years after independence there is very little to celebrate in South Sudan. Border and land disputes continue to strain ties, and given other high-visibility emergencies the civil war is not the subject of much attention from international media. However, there is a small good news story amid all the conflict in the form of new investment in agriculture as a means of providing livelihoods and promoting peace. It turns out that sustainable agriculture, particularly coffee, can be an important building block for peace and development in Africa. Read more

By Hayden Briscoe, AllianceBernstein

The visit to the US later this month by China’s President Xi Jinping comes at a politically sensitive time, with volatility in China’s markets — widely attributed to the effect of policy decisions — rippling globally. In our view, however, China deserves more credit than blame for its recent actions.

As China attempts to make the transition to a more open economy, two things are virtually inevitable: market volatility and difficult policy decisions, many of which need to be taken in the heat of the moment.

A case in point is the government intervention that followed the initial correction in the A shares market in July. This was widely interpreted outside China as a panicky reaction. But China’s share market is largely retail driven, and the need to maintain social harmony is of paramount importance to a single-party state. In light of this, the government’s response makes sense. Read more

The global commodity super-bubble is coming to an end. It is exactly a year since we forecast that a Great Unwinding of stimulus policies was underway, due to a major slowdown in China. As we warned on beyondbrics:

Oil and commodity prices are falling sharply as supply/demand once again becomes the key driver for prices; the US dollar is strengthening and liquidity is tightening across the world; equity markets risk sharp falls, as investors realise they have overpaid for future growth and rush for the exits; China’s economy is slowing fast as the new leadership implements the World Bank’s ‘China 2030’ plan; interest rates are becoming volatile as some investors seek a ‘safe haven’, while others worry that stimulus policy debt may never be repaid.

Today, it is clear that risks are rising in all these areas. And fewer people now believe that the problems can be magically wished away by a further round of stimulus – even if this was economically and politically possible. Read more

By Sanjay G. Reddy and Ingrid Kvangraven, The New School for Social Research

Should we really have new global development goals? The push for Sustainable Development Goals (SDGs) – meant to guide the process of global development from 2015 to 2030 and expected to be adopted by governments at the UN in September – assumes the answer is yes.

Activists, lobbyists and government officials scrambled during the last two years to make sure that their respective interests were reflected in the new agenda and that has contributed to its bewildering complexity (17 goals, 169 proposed targets and 304 proposed indicators). Given that the goals were all but sure to be adopted, it is hardly a surprise that an imperfect political process governed their creation.

However, why adopt goals at all? Any systematic effort to answer this elementary conceptual question is disturbingly absent. Read more

It was perhaps fortuitous that this month’s 70th anniversary of the atomic bombings of Hiroshima and Nagasaki followed so soon after the announcement that Iran had reached a deal with the US and others to step back from the nuclear brink. Whatever the critics say, the world’s most serious proliferation threat has been averted for now. By agreeing to reduce stockpiles of enriched uranium and accept stronger verification, Iran has extended the breakout period needed to build a nuclear weapon from two or three months to around a year, reducing the temptation for other countries in the region to take pre-emptive military action or acquire nuclear capabilities of their own.

This news is particularly welcome because elsewhere the nuclear arms control agenda has stalled and important agreements that defined the end of the Cold War have started to fray at the edges. Without a concerted diplomatic effort there is a danger that the world will slide unwittingly into a new era of nuclear competition. There is a pressing need for new multilateral initiatives and agreements that strengthen norms of restraint, co-operation and trust in the field of nuclear weapons policy. Read more

As always, there is a great deal of noise around the Russia story and that makes it difficult for investors to identify the core issues with the greatest impact on risk. There is a lot of concern and speculation over the next steps in eastern Ukraine and the possible consequences for sanctions. Russia is also viewed as being among the most exposed to any deterioration in China’s growth outlook and from the yuan devaluation. On top of which is the daily battering from the sliding oil price.

There can be no argument that Russia is in a very precarious and even dangerous position. The 4.6 per cent preliminary estimate for GDP contraction in Q2 confirms that. But, cutting though the noise and discarding extrapolations and exaggerations, there are two core issues which investors should now be most focused on and which will provide guidance as to whether investment risk is deteriorating or improving. Read more

Wherever we look in the world, there are dark clouds overhead. The global economy remains fragile. Violent extremism is putting lives and stability at risk. Old tensions and divisions between nuclear powers have been re-awakened.

These divisions have again brought into sharp focus the terrible dangers that nuclear weapons pose to our world’s survival. Despite recent welcome reductions in the number of warheads, those that remain could destroy humanity many times over. This threat has been made far worse by the active pursuit of weapons of mass destruction by violent extremists who would not hesitate to cause unimaginable death and destruction.

It is against this sombre background that there have been, in recent weeks, two powerful signs of hope. Read more

More than 20 years after the Ukraine Independence Act that created the country I love, its future hangs in the balance once again.

Hostilities have resumed in Eastern Ukraine and the number of casualties is multiplying. Following three-way talks in Berlin on Monday, the leaders of Germany, France and Ukraine all reiterated the need to implement the Minsk cease-fire agreement hammered out this year in tense late-night talks involving Russia.

“We have only one single rule today and this is the full respect and implementation of the Minsk agreement,” said French President Francois Hollande. He is not alone in this view. Many in the west still cling to the hope of a political and diplomatic solution to the conflict in Ukraine.

Yet to imagine at this stage that Russia suddenly intends to abide by the Minsk II agreement is naïve, wishful thinking. Read more

By Derek Scissors, American Enterprise Institute

Stock market volatility and a small currency devaluation have in the past few months caused the financial community to take note of Chinese economic weakness. A natural question is what effect this weakness will have on the rest of the world. The answer is very little, with most important reason being that China has not truly contributed to the global economy for at least four years.

The idea that Chinese weakness threatens the world economy melds a number of misconceptions. The first is that the weakness is a new phenomenon. It was actually the initial stock market climb and a rising renminbi that were somewhat surprising; the ensuring partial corrections were late in coming, if anything. Read more