When it comes to containing Vladimir Putin’s aggressive posture in Eastern Europe, the conventional wisdom advises strengthening NATO, diversifying Europe’s energy sources, and combating the Kremlin’s propaganda.

There is nothing wrong with any of these recommendations. Yet few things would be as effective in weakening Mr Putin as positive examples of countries in Russia’s immediate neighborhood that have liberated themselves from the shackles of domestic oligarchy and the Kremlin’s influence, and become a success story.

At the moment, only one country has the potential to do that: Ukraine. That is why its economic and political success is not just a matter of a “far-away country” and “people of whom we know nothing,” as Neville Chamberlain used to say about Czechoslovakia. Instead, Ukraine’s success is in the West’s immediate interest. 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

By Anthony Chan, Brad Gibson, Jenny Zeng, AllianceBernstein

Issues coming to a head in China’s corporate sector require its government to decide how much freedom to allow the markets and private business. The risk? That policymakers will duck the issues, leaving the economy to drift.

Let’s take a deeper dive into three notable developments that serve as a guide to the direction of China’s economy and its reform agenda.

Default Dilemma
Dongbei Special Steel (DSS)— a steelmaker majority-owned by the Liaoning provincial government— recently defaulted on a Rmb64.4m ($9.6m) interest payment on a privately placed Rmb870m bond issue. DSS is a serial offender: the company has defaulted on seven bonds, totaling Rmb4.8bn in principal. Read more

By Kevin P. Gallagher, Boston University

The Western-backed Multilateral Development Banks (MDBs) are talking a lot about moving ‘from billions to trillions’ of dollars to meet the Sustainable Development Goals (SDGs) and Paris Climate Agreement that aim to shift the world economy to a low-carbon and more socially inclusive and equitable future.

The MDBs talk the talk but do not walk the walk given that they have not increased their paid-in capital to meet the ambitious goals of the SDGs. By contrast, China’s development banks have been doing the walking—but not quite in the right direction. As it hosts the G-20 in September, China is poised to match words and action on sustainable development. Read more

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Indonesian President Joko Widodo is pushing to speed up infrastructure investment after pledging to build roads, railways and ports to support growth.

He is hampered by one of the weakest tax takes in the Association of Southeast Asian Nations and a fiscal deficit that is dangerously close to Indonesia’s ceiling of 3 per cent of gross domestic product.

Disappointing tax collection, exacerbated by weak commodity prices, has been a significant factor in the deterioration of Indonesia’s public finances. Infrastructure investment, meanwhile, has trailed economic expansion since the Asian financial crisis in 1997-98, resulting in expensive business disruption and high logistical costs. Read more

By Raffaello Pantucci and Anna Sophia Young

The vast Chinese northwestern frontier region of Xinjiang may serve as a useful early indicator of how Beijing’s much-touted “Belt and Road Initiative” (BRI) is supposed to work – and how successful it may become.

The region, which is home to several muslim minority peoples, has been wracked by ethnic turmoil for decades, prompting Beijing to seek to nurture social stability by driving economic development through hefty investments.

But for this strategy to gain traction, Beijing realised that it needed to boost development in the region around Xinjiang by building commercial corridors to neighbouring Central Asian countries such as Kazakhstan, Tajikistan, Kyrgyzstan, Uzbekistan and Turkmenistan. Thus, Xinjiang was key motivator behind the BRI concept. Read more

At the tip of the teardrop of India, as Sri Lanka is often described, lies the Thalsevana Holiday Resort. From here you could once walk to India over 30 miles of limestone shoals.

Long since washed over by the Palk Strait, its silver shoreline and turquoise waters make this an idyllic spot to contemplate the passage of time. In an area ravaged by nearly three decades of civil war, the first green shoots of tourism and economic regeneration are starting to appear. 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

The Rio Olympics that begin today will be the first games where 4G networks are available – one area where Rio is delivering on its Olympic promise. This is an opportunity for the city to showcase its technological progress to visitors from around the world, while benefiting from the international exposure of visitors’ images and videos on social channels, helping boost tourism even after the games.

Even with one in seven Olympic tickets yet to be sold, operators are expecting a 50 per cent increase in data traffic at the Rio games compared with London 2012. Handily, Rio benefits from having hosted the 2014 World Cup, and the infrastructure that was put in place then. On top of this there will be 8,600 free-to-access WiFi hotspots near key events, supported by some of the network operators and by corporate sponsors. 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

Timothy AshHow should we read Russia, and Vladimir Putin’s game plan with respect to the US, the west and Ukraine?

My own view is that Putin is in waiting mode, reflected by the fact that Russia has stepped back from further military intervention in Ukraine and seems to be adopting a holding pattern in Syria. In both conflicts Russia would likely have to commit significant military resources to ensure delivery on its strategic objectives, and this side of elections to the Duma (September 2016) and perhaps also the presidency (March 2018) this just presents too many risks. Read more

Liao Min, China Banking Regulatory Commission

Amid increasing concern about risks in China’s banking sector, the latest banking data from Shanghai tells a story of resilience. The region’s non-performing loan (NPL) ration has declined for eight consecutive months to 0.79 per cent at the end of June, much lower than the 1.81 per cent ratio for China’s commercial banks as a whole. Outstanding NPLs shrank by Rmb3.6bn since the beginning of 2016.

Special-mention loans — a classification for loans that might be at risk of becoming NPLs — also decreased in Shanghai, both in volume terms and as a ratio of total loans. Thus, it’s clear that NPL figures aren’t being manipulated by hiding bad loans in the special-mention category.

 Read more

Kevin Martin, HSBC

Don’t underestimate the Asean consumer.

Yes, there are only about half as many of them as there are in China or India. And the typical shopper in the ten-member Association of South East Asian Nationsis not as wealthy as Mr. or Ms. Europe.

But as a whole, Asean’s 620m-plus inhabitants are an increasingly powerful source of global demand, and a potential game-changer for companies that are looking for growth in a tough and uncertain global environment.

Mr. and Ms.Asean have come a long way in a short time. Read more

By Renata Legierska, Alaco

Over the past five years, few other countries have experienced the highs and lows of the global economy as acutely as Mongolia. In 2011 the country was on the radar of virtually every investor interested in Asian emerging markets.

The International Monetary Fund (IMF) estimated that Mongolia’s GDP would grow by 17.5 per cent that year – largely on the back of the Oyu Tolgoi (OT) project, a gigantic copper and gold mine operated by Rio Tinto – and continue at 14 per cent through 2016.

The mining boom spurred growth in several other sectors, including financial services and construction. By 2012 Ulaanbaatar was a booming town with rapidly rising skyscrapers and a growing expat community. The atmosphere was intoxicating. 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

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

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