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The Rise of South-South Development

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In an era when we all seek an alternative, from foods to music to lifestyle, it should come as no surprise that the international order of donor and recipient states has also sought (or supplied) an alternative: South-South development partnerships.

This emerging order, which is effectively led by China but commonly features a supporting cast of the BRICS (Brazil, Russia, India, China, South Africa) and the MINT (Mexico, Indonesia, Nigeria, Turkey) nations, is presenting serious challenges to what some would call the post-historical world. While competition between donors could offer substantial benefits to recipients, in practice this is more the exception rather than the rule. Competition in development often favors expediency over long-term effectiveness. This is different from competition in markets, where the better product for the better price wins out (at least in theory). Furthermore, state competition over who develops increasingly involves strategic considerations, as in, it is not so much about the quality of the partnership but the mere existence of the partnership that matters. The concern is that competition is positively correlated to expediency and strategy. This article contextualizes the rise of South-South development partnerships and assesses its impact on the future of international development.

While I hesitate to espouse the proverbial cause of international phenomena in a simplified form, there are two prominent features that make up the recent rise of South-South commitments – the end of the bipolar geostrategic order with the fall of the Soviet Union and relative gains made within the global South vis-a-vis the Western world. These features, while far from exhaustive, are critical towards contextualizing the shifting paradigm.

The Catch-all For Foreign Policy Woes

The fall of the Soviet Union is still the International Relations bogey man when it comes to complicating the once, and at times longed for, bipolar status quo. All at once new strategic opportunities arose, new threats and intelligence blind spots were drawn from the shadows, and organizational rigidity was exposed as new expertise and flexibility was demanded of state and international actors. These challenges were as present and dramatic in economic development as they were in defense and diplomacy.

In what could have been a Marshall Plan 2.0, the past two decades have exposed frailties in the designs of liberal institutionalism. Whether this is a structural flaw or a lack of applicability towards its object, one thing is clear – the Western order has manifested a subversive order or has at least seeded ground for alternatives in the expanding economic bubble. Defining the South-South arrangement, at least in terms as clear as mainstream Western-led donor states and institutions, presents difficulties. Two points of analysis are useful in understanding the nature of their rise to significance. It remains to be seen whether the South-South arrangement is strategic opportunism in the face of relative Western decline or a loose confederacy of states offering an alternative to a general lull in Western engagement. The South-South arrangement does have one point of clear unity and distinction, however, and that is language – they are not donors, they are partners. And these partnerships, at least in rhetoric, come with relatively no strings attached.

Everyone is Rising

Today it is easy to find common headlines along the lines of Africa Rising, The Rise of China, and even a ‘meta-alternative’ relative to this article – Caspian Energy: A Viable Alternative to The Persian Gulf. Apparently everyone is rising. This is of course from a Western perspective and is thus viewed as rising relative to the Western world. It is not just raw economic data that supports these hopes and fears, but the very fact of South-South development. On the lower end of development, many States are graduating up the World Bank scale of economic distinction. From the World Bank’s perspective this is not just a token of prestige, but a substantive policy category that sets parameters for loans, grants, investments, and most importantly, interest rates.

On the higher rungs of the South-South movement are many former recipient nations who have become donors. In some case, many States are operating both as recipients and donors. This apparent paradox not only complicates financial flows (with so many States both requesting economic assistance and exerting economic influence), but it complicates the geopolitical landscape with layers and knots of complicated, competitive, and interdependent arrangements. Nowhere are these conditions more apparent, and more complicated, than in the Caspian, where the global need for energy resources, market share, and projected long-term demands have sought to make this regional alternative a critical strategic chess piece.

A Critique of the New

South-South development, namely the BRICS, has earned the ire of many Western development professionals. The object of Western condemnation is not exclusive to the emerging order, however, as mainstream donors are criticized for currently tying aid to strategic objects, while the rising South-South framework is criticized for altogether dropping standards of governance in development. This, upon analysis, strongly suggests that poor governance not only negates long-term development but sublimates positive economic conditions (read: resources). I believe that this vocal duality, which frames the future debate and sets parameters for the divide, is a red herring. This debate, which is effectively about tactics on the ground, misses the broader geostrategic point – South-South development is not an experiment, a new trend, or a deviation from our most recent version of relative economic barbarism. It is a strategic consortium set to challenge the West on the world stage.

I am not belittling the importance of understanding governance as it pertains to long term development or the debate surrounding bilateral and multilateral investment initiatives. I believe it necessary to improving our collective engagement in the developing world. My concern is that the frame of the debate has been created and sustained by a singularly liberal institutionalist order – one that often excludes grand and strategic analysis. In this sense, South-South development is less an alternative in development/donor options and more an alternative or challenge to power relations. To think otherwise would be delusional. Great powers are still at play: their tactics may be temporary and fluid but their interests are eternal.

This analysis has significant applications for the developing world, especially the Caspian region. The most critical question is how can the Caspian states tie their clear strategic importance to the international community into a deal that balances this importance with their own sovereign needs? Elite bargains have been occurring, and will continue to occur, in this energy rich region. Ensuring that such deals do not come at the expense of Caspian sovereignty or at the expense of its people is the real challenge moving forward into the future. This is where I believe development experts and practitioners should focus their attention on influencing these elite bargains. Without understanding the strategic concerns of great powers and developing states this influence will be misplaced and strategically critical regions like the Caspian and beyond will suffer.

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Economy

The Blazing Revival of Bitcoin: BITO ETF Debuts as the Second-Highest Traded Fund

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It seems like bitcoin is as resilient as a relentless pandemic: persistent and refusing to stay down. Not long ago, the crypto-giant lost more than half of its valuation in the aftermath of a brutal crackdown by China. Coupled with pessimism reflected by influencers like Elon Musk, the bitcoin plummeted from the all-time high valuation of $64,888.99 to flirt around the $30,000 mark in mere weeks. However, over the course of the last four months, the behemoth of the crypto-market gradually climbed to reclaim its supremacy. Today, weaving through national acceptance to market recognition, bitcoin could be the gateway to normalizing the elusive crypto-world in the traditional global markets: particularly the United States.

The recent bullish development is the launch of the ProShares Bitcoin Strategy ETF – the first Bitcoin-linked exchange-traded fund – on the New York Stock Exchange. Trading under the ticker BITO, the Bitcoin ETF welcomed a robust trading day: rising 4.9% to $41.94. According to the data compiled by Bloomberg, BITO’s debut marked it as the second-highest traded fund, behind BlackRock’s Carbon fund, for the first day of trading. With a turnover of almost $1 billion, the listing of BITO highlighted the demand for reliable investment in bitcoin in the US market. According to estimates on Tuesday, More than 24 million shares changed hands while BITO was one of the most-bought assets on Fidelity’s platform with more than 8,800 buy orders.

The bitcoin continued to rally, cruising over the lucrative launch of BITO. The digital currency rose to $64,309.33 on Tuesday: less than 1% below the all-time high valuation. In hindsight, the recovery seems commendable. The growing acceptance, albeit, has far more consequential attributes. The cardinal benefit is apparent: evidence of gradual acceptance by regulators. “The launch of ProShares’ bitcoin ETF on the NYSE provides the validation that some investors need to consider adding BTC to their portfolio,” stated Hong Fang, CEO of Okcoin. In simpler terms, not only would the listing allow relief to the crypto loyalists (solidifying their belief in the currency), but it would also embolden investors on the sidelines who have long been deterred by regulatory uncertainty. Thus, bringing larger, more rooted institutional investors into the crypto market: along with a surge of capital.

However, the surging acceptance may be diluting the rudimentary phenomenon of bitcoin. While retail investors would continue to participate in the notorious game of speculation via trading bitcoin, the opportunity to gain indirect exposure to bitcoin could divert the risk-averse investors. It means many loyalists could retract and direct towards BITO and other imminent bitcoin-linked ETFs instead of setting up a digital custodianship. Ultimately, it boils down to Bitcoin ETFs being managed by third parties instead of the investor: relenting control to a centralized figure. Moreover, with growing scrutiny under the eye of SECP, the steps vaguely intimate a transition to harness the market instead of liberalizing it: quiet oxymoronic to the entire decentralized model of cryptocurrencies.

Nonetheless, the listing of BITO is an optimistic development that would draw skeptics to at least observe the rampant popularity of the asset class. While the options on BITO are expected to begin trading on the NYSE Arca Options and NYSE American Options exchanges on Wednesday, other futures-based Bitcoin ETFs are on the cards. The surging popularity (and reluctant acceptance) amid tightening regulation could prove a turn of an era for the US capital markets. However, as some critics have cited, BITO is not a spot-based ETF and is instead linked to futures contracts. Thus, the restrain is still present as the regulators do not want a repeat of the financial crisis. Nevertheless, bitcoin has proved its deterrence in the face of skepticism. And if the BITO launch is to be marveled at, then the regulations are bound to adapt to the revolution that is unraveling in the modern financial reality.

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Is Myanmar an ethical minefield for multinational corporations?

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Business at a crossroads

Political reforms in Myanmar started in November 2010 followed by the release of the opposition leader, Aung San Suu Kyi, and ended by the coup d’état in February 2021. Business empire run by the military generals thanks to the fruitful benefits of democratic transition during the last decade will come to an end with the return of trade and diplomatic sanctions from the western countries – United States (US) and members of European Union (EU).  US and EU align with other major international partners quickly responded and imposed sanctions over the military’s takeover and subsequent repression in Myanmar. These measures targeted not only the conglomerates of the military generals  but also the individuals who have been appointed in the authority positions and supporting the military regime.

However, the generals and their cronies own the majority of economic power both in strategic sectors ranging from telecommunication to oil & gas and in non-strategic commodity sectors such as food and beverages, construction materials, and the list goes on. It is a tall order for the investors to do business by avoiding this lucrative network of the military across the country. After the coup, it raises the most puzzling issue to investors and corporate giants in this natural resource-rich country, “Should I stay or Should I go?”

Crimes against humanity

For most of the people in the country, war crimes and atrocities committed by the military are nothing new. For instances, in 1988, student activists led a political movement and tried to bring an end to the military regime of the general Ne Win. This movement sparked a fire and grew into a nationwide uprising in a very short period but the military used lethal force and slaughtered thousands of civilian protestors including medical doctors, religious figures, student leaders, etc. A few months later, the public had no better options than being silenced under barbaric torture and lawless killings of the regime.

In 2007, there was another major protest called ‘Saffron Uprising’ against the military regime led by the Buddhist monks. It was actually the biggest pro-democracy movement since 1988 and the atmosphere of the demonstration was rather peaceful and non-violent before the military opened live ammunitions towards the crowd full of monks. Everything was in chaos for a couple of months but it ended as usual.

In 2017, the entire world witnessed one of the most tragic events in Myanmar – Again!. The reports published by the UN stated that hundreds of civilians were killed, dozens of villages were burnt down, and over 700,000 people including the majority of Rohingya were displaced to neighboring countries because of the atrocities committed by the military in the western border of the country. After four years passed, the repatriation process and the safety return of these refugees to their places of origin are yet unknown. Most importantly, there is no legal punishment for those who committed and there is no transitional justice for those who suffered in the aforementioned examples of brutalities.

The vicious circle repeated in 2021. With the economy in free fall and the deadliest virus at doorsteps, the people are still unbowed by the oppression of the junta and continue demanding the restoration of democracy and justice. To date, Assistant Association for Political Prisoner (AAPP) reported that due to practicing the rights to expression, 1178 civilians were killed and 7355 were arrested, charged or sentenced by the military junta. Unfortunately, the numbers are still increasing.

Call for economic disengagement

In 2019, the economic interests of the military were disclosed by the report of UN Fact-Finding Mission in which Myanmar Economic Corporation (MEC) and Myanmar Economic Holding Limited (MEHL) were described as the prominent entities controlled by the military profitable through the almost-monopoly market in real estate, insurance, health care, manufacturing, extractive industry and telecommunication. It also mentioned the list of foreign businesses in partnership with the military-linked activities which includes Adani (India), Kirin Holdings (Japan), Posco Steel (South Korea), Infosys (India) and Universal Apparel (Hong Kong).

Moreover, Justice for Myanmar, a non-profit watchdog organization, revealed the specific facts and figures on how the billions of revenues has been pouring into the pockets of the high-ranked officers in the military in 2021. Myanmar Oil & Gas Enterprise (MOGE), an another military-controlled authority body, is the key player handling the financial transactions, profit sharing, and contractual agreements with the international counterparts including Total (France), Chevron (US), PTTEP (Thailand), Petronas (Malaysia), and Posco (South Korea) in natural gas projects. It is also estimated that the military will enjoy 1.5 billion USD from these energy giants in 2022.

Additionally, data shows that the corporate businesses currently operating in Myanmar has been enriching the conglomerates of the generals and their cronies as a proof to the ongoing debate among the public and scholars, “Do sanctions actually work?” Some critics stressed that sanctions alone might be difficult to pressure the junta without any collaborative actions from Moscow and Beijing, the longstanding allies of the military. Recent bilateral visits and arm deals between Nay Pyi Taw and Moscow dimmed the hope of the people in Myanmar. It is now crystal clear that the Burmese military never had an intention to use the money from multinational corporations for benefits of its citizens, but instead for buying weapons, building up military academies, and sending scholars to Russia to learn about military technology. In March 2021, the International Fact Finding Mission to Myanmar reiterated its recommendation for the complete economic disengagement as a response to the coup, “No business enterprise active in Myanmar or trading with or investing in businesses in Myanmar should enter into an economic or financial relationship with the security forces of Myanmar, in particular the Tatmadaw [the military], or any enterprise owned or controlled by them or their individual members…”

Blood money and ethical dilemma

In the previous military regime until 2009, the US, UK and other democratic champion countries imposed strict economic and diplomatic sanctions on Myanmar while maintaining ‘carrot and stick’ approach against the geopolitical dominance of China. Even so, energy giants such as Total (France) and Chevron (US), and other ‘low-profile’ companies from ASEAN succeeded in running their operations in Myanmar, let alone the nakedly abuses of its natural resources by China. Doing business in this country at the time of injustice is an ethical question to corporate businesses but most of them seems to prefer maximizing the wealth of their shareholders to the freedom of its bottom millions in poverty.

But there are also companies not hesitating to do something right by showing their willingness not to be a part of human right violations of the regime. For example, Australian mining company, Woodside, decided not to proceed further operations, and ‘get off the fence’ on Myanmar by mentioning that the possibility of complete economical disengagement has been under review. A breaking news in July, 2021  that surprised everyone was the exit of Telenor Myanmar – one of four current telecom operators in the country. The CEO of the Norwegian company announced that the business had been sold to M1 Group, a Lebanese investment firm, due to the declining sales and ongoing political situations compromising its basic principles of human rights and workplace safety.

In fact, cutting off the economic ties with the junta and introducing a unified, complete economic disengagement become a matter of necessity to end the consistent suffering of the people of Myanmar. Otherwise, no one can blame the people for presuming that international community is just taking a moral high ground without any genuine desire to support the fight for freedom and pro-democracy movement.

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Economy

The Covid After-Effects and the Looming Skills Shortage

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coronavirus people

The shock of the pandemic is changing the ways in which we think about the world and in which we analyze the future trajectories of development. The persistence of the Covid pandemic will likely accentuate this transformation and the prominence of the “green agenda” this year is just one of the facets of these changes. Market research as well as the numerous think-tanks will be accordingly re-calibrating the time horizons and the main themes of analysis. Greater attention to longer risks and fragilities is likely to take on greater prominence, with particular scrutiny being accorded to high-impact risk factors that have a non-negligible probability of materializing in the medium- to long-term. Apart from the risks of global warming other key risk factors involve the rising labour shortages, most notably in areas pertaining to human capital development.

The impact of the Covid pandemic on the labour market will have long-term implications, with “hysteresis effects” observed in both highly skilled and low-income tiers of the labour market. One of the most significant factors affecting the global labour market was the reduction in migration flows, which resulted in the exacerbation of labour shortages across the major migrant recipient countries, such as Russia. There was also a notable blow delivered by the pandemic to the spheres of human capital development such as education and healthcare, which in turn exacerbated the imbalances and shortages in these areas. In particular, according to the estimates of the World Health Organization (WHO) shortages can mount up to 9.9 million physicians, nurses and midwives globally by 2030.

In Europe, although the number of physicians and nurses has increased in general in the region by approximately 10% over the past 10 years, this increase appears to be insufficient to cover the needs of ageing populations. At the same time the WHO points to sizeable inequalities in the availability of physicians and nurses between countries, whereby there are 5 times more doctors in some countries than in others. The situation with regard to nurses is even more acute, as data show that some countries have 9 times fewer nurses than others.

In the US substantial labour shortages in the healthcare sector are also expected, with anti-crisis measures falling short of substantially reversing the ailments in the national healthcare system. In particular, data published by the AAMC (Association of American Medical Colleges), suggests that the United States could see an estimated shortage of between 37,800 and 124,000 physicians by 2034, including shortfalls in both primary and specialty care.

The blows sustained by global education from the pandemic were no less formidable. These affected first and foremost the youngest generation of the globe – according to UNESCO, “more than 1.5 billion students and youth across the planet are or have been affected by school and university closures due to the COVID-19 pandemic”. On top of the adverse effects on the younger generation (see Box 1), there is also the widening “teachers gap”, namely a worldwide shortage of well-trained teachers. According to the UNESCO Institute for Statistics (UIS), “69 million teachers must be recruited to achieve universal primary and secondary education by 2030”.

From our partner RIAC

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