Currency jitters in India and emerging markets
India was once seen as a rising superpower and one of the world’s most dynamic economies, but now its rupee is plunging and the economy is stalling. What’s more, this seems to be part of a broader problem in emerging markets, as Indonesia, Turkey, South Africa and Brazil all experience currency jitters. Gideon Rachman is joined by Victor Mallet, New Delhi bureau chief and Ralph Atkins, capital markets editor, to discuss what’s going on and how deep the problems are.
By Catherine Contiguglia
♦ The signing of a contract between the Somali government and UK oil and gas exploration company Soma to collect data on onshore and offshore oil has been called non-transparent, and raised concerns about whether oil politics could destabilise the country’s fragile recovery.
♦ Prague’s CorruptTour agency is selling out bookings for their Crony Safari that brings tourists to a sites connected with the most famous corruption scandals – from an address registered by 600 companies to a school where cash can buy a degree.
♦ The monetary tightening by India’s central bank could close credit arteries and make it difficult for the country’s banks to cover a mass of rapidly souring loans, writes Reuters’ Andy Mukherjee, as short term funding costs have increased during a time where the economy has slowed and the stock market is slumping.
♦ The drive by policy makers to put Fannie Mae and Freddie Mac out of business doesn’t make any sense, writes Joe Nocera, as they are no longer bullies, are making the government money, and are necessary to uphold the core of American housing finance.
♦ The sit-ins being held around Egypt by those in favour of reinstating President Mohamed Morsi will likely not work, according to an analysis by Foreign Policy’s Erica Chenoweth, as studies show that nonviolent campaigns must follow a strategy of carefully sequenced moves, or they can end in catastrophe. Read more
♦ The Egyptian military reasserted its privileged political position by removing Mohamed Morsi from power. Troops surrounded the state broadcasting headquarters and General Abdel Fattah al-Sisi, the army chief of staff, delivered a televised speech announcing the takeover. Morsi’s authoritarian governing style exacerbated the huge challenges Egypt already faced – including a moribund economy and intense political polarisation, reports the FT’s Borzou Daragahi. David Gardner says that Morsi’s government, the liberals and Mubarak’s “deep state” are just as much to blame for Egypt’s stormy state of affairs as the generals.
♦ The Indian newspaper Patrika has achieved success through itsreputation for credibility – it doesn’t take political bribes, which is increasingly common among other Indian newspapers – and for public interest advocacy – it focuses on hyperlocal coverage.
♦ Lithuania’s president, Dalia Grybauskaite, has backed a deal to break up the Russian export monopoly that supplies gas to Lithuania by anchoring a ship off of a small nearby island to process deliveries of liquefied natural gas for homes and businesses.
♦ Le Monde reports that France has a “big brother” similar to the American Prism system that systematically gathers huge amounts of information on internet and phone activity.
♦ The FT’s Chris Giles argues that Carney’s “forward guidance” plan for the BoE may be too risky, even though it is based on a strategy used by other central banks including the US Federal Reserve and Bank of Japan. Read more
♦ All change in Europe? French labour market reforms start to bear fruit, with signs of movement in industrial relations and eurozone austerity might be on its way out.
♦ India’s economy grew at the slowest rate in a decade – hampered by electricity shortages and poor infrastructure.
♦ Mexico’s highest-grossing film is still filling multiplexes 10 weeks after its release. The NYT looks at whether audiences just want to see rich people humiliated, or whether they are actually looking for a form of middle class catharsis.
♦ Neal Ascherson reports on the state of German politics: “They are pissed off with Angela Merkel’s governing coalition, but reluctant to let go of Mutti’s hand. In short, the public are in one of those sullen, unreasonable moods which make politicians despair.”
♦ Ethnic strife in Xinjiang, northeast China, is worsening with the growth of immigrant-dominated settlements – Uighurs are resentful of such powerful entities dominating the region and employing so few of their own ethnic group.
♦ And here’s something to chew on this weekend. When you’re having your morning pastry spare a thought for New Yorkers who have been lining up at 6am, or paying as much as $40, for a delectable new pastry – the cronut, a croissant-donut hybrid. It seems the bakery has a scaling problem, which is driving cronut-craving customers to the black market. Read more
♦ Pharmaceutical companies are worried that the battle in India over patents will inspire other emerging economies to change their laws and make it more difficult to register or extend patents.
♦ Joshua Foust makes the liberal case for drones: “a lethal autonomous drone could actually result in fewer casualties and less harm to civilians.”
♦ The US military has seen a baffling rise in suicide numbers from 10.3 per 100,000 troops in 2002, to above 18 per 100,000 now.
♦ Gazans have a real taste for KFC and one entrepreneur has set up a business smuggling the fried chicken in from El Arish, Egypt. “Despite the blockade, KFC made it to my home”, says one satisfied customer. Read more
Activists of the Indian right-wing Hindu organisation Shiv Sena burn a Chinese flag in protest against troops moving into Indian-controlled territory on April 25 (NARINDER NANU/AFP/Getty Images)
Rising tensions with Japan are evidently not enough to keep China busy. The People’s Liberation Army has now also pitched tents in a bit of disputed territory, controlled by India, creating an embarrassing security dilemma for the Delhi government. Official India’s initial reaction has been to play the incident down. I encountered an Indian diplomat in Beijing last week, who speculated that the whole thing was probably an initiative by an over-zealous local Chinese commander – and assured me that it would all be smoothed over. But that was five days ago, now – and the Chinese are still there.
As a result, the Indian government is increasingly open to charges of weakness – or even appeasement. Brahma Chellaney, one of India’s most hawkish commentators, fumes that “China is encroaching little by little on Indian land” and accuses the government of Manmohan Singh of “bending over backward at a time of aggression”. Read more
More on the Great Tax Race
♦ Luxembourg is set to share currently confidential information about multinationals’ bank accounts, showing how much it wants to shed its image as a tax haven at a time of a political and popular backlash against tax avoidance.
♦ One of the biggest hedge fund service businesses on the Cayman Islands has tried to block sweeping reforms to make the tax haven more transparent.
♦ Jeffrey Sachs writes about how austerity has exposed the threat of global tax havens: “In the new world of austerity following the 2008 crash… they are increasingly seen as a cancer on the global financial system that must be excised.”
The rest of the world
♦ Despite Dutch politics being roiled by waves of populist anger and anti-elitism, Willem-Alexander ascends to the throne amid an outpouring of popular enthusiasm – polls show support for preserving the Dutch monarchy running as high as 85 per cent.
♦ President Hamid Karzai acknowledges that the Central Intelligence Agency has been dropping off bags of cash at his office for a decade: “Not a big amount. A small amount, which has been used for various purposes.”
♦ Reuters takes a look through the confidential report prepared for the Cypriot central bank, which found that the Bank of Cyprus had been willing to invest in risky, high-yield Greek debt in its efforts to offset an erosion of its balance sheet from non-performing loans. The report also alleges that 28,000 files, containing emails from a crucial period during which the Bank of Cyprus spent billions of euros buying Greek bonds, were erased before investigators could copy them.
♦ A singer’s lament for Syria, broadcast on “Arab Idol”, has become a hit in the Arab world.
♦ Bangalore, once an advertisement for a new, confident India, is losing some of its sheen. Read more
♦ Martin Wolf argues that the UK industrial revolution shows the Reinhart-Rogoff thesis on debt is not always right.
♦ Frigide Barjot and her fellow protesters have taken the heat off Hollande as people take to the streets to protest over gay marriage rather than the state of the economy.
♦ The planting of sugar cane has exacerbated the effects of the worst drought in more than four decades in the Indian state of Maharashtra.
♦ Critics say that Nelson Mandela’s family members have been using his status for their own enrichment. Two of his grandchildren are involved in a US reality show called Being Mandela and his daughter has launched a wine business called House of Mandela.
♦ FT Alphaville take a typically irreverent look at the ‘tweet retreat’ in their Occupational Indifference series.
♦ The number of people in Britain receiving emergency food rations has more than doubled in the past year as inflation eroded incomes and government spending cuts have pushed hundreds of thousands into crisis.
♦ Jacob Heilbrunn at The National Interest examines Israel’s fraying image and the possibility that US interest in Israel’s fortune could wane: “if Israel remains stymied in dealing with the Palestinians… its predicament is likely to intensify. And the range of options for dealing with the country’s mounting problems is likely to expand toward more radical solutions.”
♦ Japanese drivers are getting televisions installed in the front of their cars. “Japanese law prohibits “staring” at a screen while driving, without saying anything about glancing at one.”
♦ The New York Times is debating the usefulness of Nato.
Chris Cook, the FT’s education correspondent, on how the WISE conference in Qatar showcased alternative attitudes towards learning and knowledge. Read more
Aung San Suu Kyi arriving in New Delhi. (AFP)
Aung San Suu Kyi, Myanmar’s opposition leader, gave an exceptionally interesting interview to the Hindu newspaper ahead of her trip on Tuesday to India, her first visit since she studied there as a schoolgirl nearly half a century ago.
The interview is worth reading in its entirety.
On whether she had ambitions to succeed Thein Sein as president after elections due in 2015, the 67-year-old recipient of the Nobel Peace Prize was pretty unequivocal.
“I’d be prepared to take over the position of president. Not so much because I want to be president of a country but because I want the president of the country to be elected through the will of the people.”
She added that she believes her party, the National League for Democracy, “has the people behind it” but made no reference to the recent divisions within it.
An important test of the irreversibility of reform, she said, would be the military’s willingness to change parts of the 2008 constitution that were undemocratic. This would include sections that guarantee the military one-quarter of parliamentary seats as well as a provision – aimed explicitly against her – that bars people married to foreigners from becoming leader. Such changes would need to be made in advance of the 2015 elections, she said. Read more
Just what the world needs – another think tank. Except that maybe, just maybe, this is a good idea. This week saw the launch of the Fung Global Institute, a self-styled Hong Kong-based independent research institute that wants to be the Brookings of Asia. Its mission is to produce “business-relevant research on global issues from Asian perspectives”.
There are a few red flags here, of which later. But the idea itself is timely. If Asia continues to grow at anything like its current pace, it will play an increasingly important role in the global economy. Yet it lacks anything like a coherent, intellectual voice. The global dialogue is being held in Washington, New York and London. Asia’s views deserve to be heard more – and not just in cacophony of a forum like the G20. Read more