If you think launching a start up in Silicon Valley is hard, try it in Sierra Leone, Surinam or Senegal. Emerging market entrepreneurs face extraordinary challenges to growth, including access to finance, access to markets and access to talent. Of these, talent is the most critical. Over the past few years, I have become increasingly convinced that the lack of quality managers in emerging markets is the lynchpin to unlocking the prosperity-creating potential of small and growing businesses. Yet we have seen little movement on the talent issue. And the time has come to change that.
Having qualified management teams is fundamental to receiving growth capital. Successful private equity investors look first at the team – and then consider the business plan and implementation strategy. Banks may look at financial statements first, but even a solid balance sheet is not enough if lenders are not comfortable with the management team. Read more
By Spencer Lake, HSBC
Chinese companies have been stepping up their global investment spree in the past 12 months. Mergers and acquisitions by private Chinese investors are becoming the key drivers of the country’s outbound direct investment.
In what has been called the ‘Third Wave’ of China outbound direct investment (ODI), the focus of investment has been on companies in the developed economies in high-tech and services. Previous ‘waves’ have focused on supporting developing economies and investing in commodities and extraction industries. Read more
By Christopher de Bellaigue, Trusted Sources
The prospects for an Iranian economic revival and new opportunities for foreign investors hinge on a final agreement at the end of this month on the nuclear deal and United Nations verification – probably at the start of 2016 – of Iranian compliance, after which sanctions will begin to be lifted.
But even before being finalised, the nuclear deal is already proving economically beneficial since the prospect of the deal is facilitating the Iranian government’s efforts at fiscal adjustment essential for longer-term macroeconomic stability.
Political risk is well contained and will be further reduced by the most tangible dividends of the lifting of sanctions: Iran’s gaining access to $100-120bn in frozen assets (as soon as sanctions are lifted) and its readmission to the SWIFT mechanism of electronic money transfers. Read more
Germany – and its chancellor Angela Merkel – deserve credit for the continuation of the EU’s sanctions regime against Russia. But Germany happens also to be home to the energy giant E.ON, which recently signed a (non-binding) memorandum, together with Russia’s Gazprom, Austria’s OMV, and Shell from the UK and the Netherlands, agreeing to the extension of the Nord Stream pipeline, which brings Russian gas into the European Union (EU).
The extension, to be completed by 2020, would double the transit capacity of the pipeline, currently at 55bn cubic meters per year. Together with Turkish Stream, another project Gazprom is toying with, it would make gas transit through Ukraine redundant by the time the country’s current contract with Gazprom expires in 2019. Read more
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In August last year I received a phone call from President Koroma of Sierra Leone. His country was fast becoming the centre of the most widespread Ebola outbreak in history. He had just declared a national emergency, and he was asking for support.
My foundation, the Africa Governance Initiative, had been working in Sierra Leone since 2008. We had helped the government introduce free healthcare, push through agricultural reforms and turn on the lights in the capital Freetown. But the nation was now facing its biggest test since a brutal civil war ended a decade ago. It was clear our focus needed to change. Read more
The Financial Times and Bloomberg have reported that the IMF is intending to categorise a $3bn 2-year eurobond sold by Ukraine in December 2013 to a Russian sovereign wealth fund as ‘official’ government to government lending. This decision, if confirmed, will directly effect not only the implementation of Ukraine’s $40bn IMF-led bailout agreed in March 2015 but also Russia’s leverage over Kiev at a time when Russian-backed separatists are fighting the Ukrainian army and allied volunteer battalions in two breakaway oblasts in the east of the country.
Ukraine, the Financial Times argued, would be weakened by the IMF’s decision as it would compel it to service and repay the Russian bond because the IMF is not allowed to disburse funds to countries in arrears to other IMF member governments. Bloomberg argued that Ukraine’s remaining private western bondholders would have to shoulder an even greater burden of the IMF-imposed ‘debt operations’ making it more difficult for Ukraine to reach an agreement to reduce its private sovereign debt obligations.
However, the unusual structuring of the $3bn Russian eurobond and the new western-backed Ukrainian government’s policy of trying to detach itself from Russia suggest otherwise. Read more
By Gregory Chin and Kevin P. Gallagher
Former US Secretary of State Dean Acheson famously wrote that his generation was ‘present at the creation’ of the world order that ushered in US leadership. We may now be present at the unpicking of that order; the fate of the US Ex-Im Bank is set to be decided by the US Congress this month amid predictions that it may be scrapped.
After putting in place the pieces for domestic recovery after the Great Depression, the United States laid the foundation for a series of financial institutions that sought stable international economic and financial growth, and the export of American goods and values. Read more
It has been fashionable to paint Microsoft as laggards in the race for the world’s mobile users. However, two important developments this month could result in Windows being the dominant technology ecosystem in the developing and emerging markets.
The most significant was Microsoft’s launch of a $20 Nokia phone targeted squarely at aspirant consumers in the developing world. The new product has an affordable price tag and features ideally suited to places with unreliable power and limited connectivity such as a month-battery life and a flashlight. Read more
When a public health crisis on the scale of Ebola hits, the urgent focus is on the frontline agencies and individuals carrying out the heroic job of diagnosing and treating the sick while managing the wider emergency that follows in its wake.
At the same time, local businesses also play their own vital role. It is local businesses that often have the capacity and expertise to help response efforts. A well-functioning private sector, with firms who are able to provide these services quickly and efficiently, is a key part of a country’s resilience. Read more
Last year, Bangladesh Prime Minister Sheikh Hasina announced that her vision for the Bangladesh ready-made garment (RMG) sector was to reach $50bn in exports by 2021. It is an important and ambitious goal for a nation that has worked hard to develop a brighter economic future. With the RMG sector accounting for 81 per cent of Bangladesh’s overall exports, reaching such a milestone could help the nation substantially reduce poverty and strengthen economic outcomes for millions of people.
Transforming industries and economies requires dedication and commitment from numerous stakeholders, ranging from the government to the private sector. That’s why the Alliance for Bangladesh Worker Safety and the Accord on Fire and Building Safety in Bangladesh—two coalitions of brands that source garments from Bangladesh—have undertaken an enormous and unprecedented effort to inspect every factory from which their members source, and to ensure that safety issues are thoroughly addressed. Read more
Even prior to Russia’s invasion of Crimea, energy security was a hot buzzword in Europe. But while many of the continent’s leaders frequently called for reduced dependence on Russia and greater diversification of energy supplies, practical progress on the issue was slow. The Ukraine crisis, however, has brought new momentum for a concerted push towards energy security. Talk of an “energy union” now surfaces high on the political agenda in Brussels, along with proposals for several infrastructure projects to connect Europe’s disjointed energy networks and build away bottlenecks. Read more
A month ago, in the largest military parade held on Red Square since the days of Stalin, one foreign guest drew as much attention as the fearsome hardware on display. While leading the celebrations of the 70th anniversary of victory in what Russians call “the Great Patriotic War”, Vladimir Putin had by his side the congenial Chinese president, Xi Jinping.
President Putin hoped Xi’s presence would symbolise a new, multipolar world order, with Moscow and Beijing playing leading roles. Ultimately, Russian strategic thinking continues to assume, as it has since the days of the Tsars, that military and geopolitical power precede and largely determine a nation’s wealth and prestige. Read more
From hairdressers to film companies, the vast majority of companies in Nigeria are micro, small and medium-sized enterprises (SMEs). They account for the livelihoods of most of the country’s 173m people, and are engines of diversification for a country long reliant on oil.
But so little is known about this universe of entrepreneurs: the enablers helping them grow, or the obstacles holding them back. To address this knowledge gap, this month the Economist Intelligence Unit is publishing a new report, commissioned by IHS Towers, that shines a light on this all-important segment of Nigeria, now the largest economy in Africa. Read more
Turkey’s recent initiatives within Nato are remarkable but, even so, may not be enough to secure the trust of its western partners. In the current geopolitical context, the new Turkish government’s ability to address deep-routed concerns over its foreign policy will be limited unless it takes comprehensive action. A loss of trust brings costs for Turkey, limiting its capacities in the transatlantic community.
At the Nato meeting of foreign ministers in Antalya last month, Turkey took the opportunity to demonstrate its commitment to the transatlantic alliance by offering to be a lead nation for Nato’s Very High Readiness Joint Task Force by 2021 – an initiative designed to deter Russian aggression after its annexation of Crimea. Turkey has recently donated $800,000 to Nato trust funds for defence capacity building in Iraq, Moldova and Jordan. In normal times, such initiatives would be seem as commonplace for a country known for its staunch commitment to Nato. This time, they weren’t. Turkey’s actions positively surprised its western partners, who have grown sceptical about its place in the alliance. Read more
For much of the past two decades, Brazil and Mexico seemed at times to be on a collision course. Diplomats from Latin America’s two largest nations were often preoccupied, if not obsessed, with a competition for an elusive role as regional leaders and players in the post-Cold War shifting global scene. The 2013 battle for the post of director general at the World Trade Organization, won by Brazilian diplomat Roberto Azevêdo over Mexican Herminio Blanco, a former trade minister, left plenty of hurt feelings. Ironically, the dispute for influence also led to convergence. The 2011 creation of the Community of Latin American and Caribbean Nations (CELAC), proposed by Mexico to affirm its Latin American identity and counter a perceived Brazilian effort to separate it from the region, was warmly embraced in Brasília as a way project leadership by promoting formats that excluded the US. Read more
Some 95 per cent of all global foreign exchange reserves are invested in just four currencies: the US dollar, the euro, the yen and sterling. The central banks of the ‘Big Four’ are all expanding their balance sheets or have been doing so for years with no sign of immediate reversal. They are all trying to convert huge debt problems into inflation problems, and when they succeed their currencies will weaken sharply.
In this currency war, EM central banks risk suffering the most collateral damage. Their reserves – so many of them held in the big four currencies – will be decimated in purchasing power terms. The world will become desperate for alternative currencies to act as replacements for the traditional reserve currencies once their currency debasement efforts really take root. Read more
Over the past 18 months, hundreds of thousands of desperate migrants have paid smugglers to set sail from Libya on barely seaworthy boats headed northward towards Europe.
Fleeing war-torn and misgoverned hellholes across the globe, these poor souls are treated worse than contraband. Drugs need to arrive intact for the smugglers to earn a profit; the weary migrants are lucrative whether they live or die, since they pay in advance. Unsurprisingly, more than 2,000 migrants have already drowned this year in the Mediterranean. Read more
For 15 years, a global partnership for development finance has delivered remarkable results in Africa – but right now that partnership is in peril. With G7 and African leaders meeting in Schloss Elmau and Johannesburg we must seize this rare chance to implement an urgent remedy.
Since 2000, African nations have received $100bn in debt cancellation, while aid to the region has more than doubled. Over the same time, African domestic financing for development has more than quadrupled. This financing, coupled with strong local action, has had profound impacts. In Liberia, we have cut child mortality by two thirds, and it’s a similar story in many other countries. In Africa as a whole, a million fewer children die each year from preventable diseases, millions more girls are in school, nine million Africans now have access to life-saving antiretroviral drugs, economic growth has accelerated, millions more people have jobs and extreme poverty is beginning to fall. Read more
As the World Economic Forum holds its Africa meeting in Cape Town, South Africa’s public finances remain under pressure. The country is predicted to post significant current account and fiscal deficits this year at a time when the US Federal Reserve is moving towards raising interest rates and global funding conditions are tightening. But South Africa is also a promising environment for private companies, impact investors and philanthropists who wish to invest in projects where government budgets are constrained. The World Economic Forum meeting offers an opportunity for the country to attract overseas money and help fill its public service gap. Read more
This Sunday, Turkey heads to the polls for its parliamentary election. The outcome will be pivotal for the country’s future.
The election is the culmination of a political race started 13 years ago by the Justice and Development Party (AKP) and its leader Recep Tayyip Erdogan, who is seeking to change the constitution and make Turkey a presidential regime. Read more