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Russia, Zimbabwe And Investment Opportunities

Kester Kenn Klomegah

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Over the years, Russia and Zimbabwe have maintained strong cordial relations in all significant spheres and the prospects of broadening cooperation are very bright. Right now, Russia is stepping up economic investment in Zimbabwe. Russia-Zimbabwe economic partnership will blossom in coming years as the groundwork for this new chapter in their economic diplomacy was laid when Zimbabwean President Robert Mugabe met President Vladimir Putin in Moscow in May 2015.

Quite recently, Brigadier General Mike Nicholas Sango, Zimbabwean Ambassador to the Russian Federation, spoke to Kester Kenn Klomegah, an independent research writer on Russia-African affairs, about some aspects of Russia-Zimbabwean relations, economic cooperation and future prospects.

Current level of Russia’s economic presence in Zimbabwe and that of Zimbabwe in the Russian Federation:

Zimbabwe is a developing country whose economic development progress has been set back as a result of illegal economic sanctions by the United States, the EU and white commonwealth who historically have been major beneficiaries of economic activity in pre and post independent Zimbabwe. The Russian Federation, although a historical ally had not been economically active in Zimbabwe until 2014 when she had a maiden entry into Zimbabwe in a joint venture project with the Zimbabwe government, started the platinum mining project estimated to inject three billion United States dollars. This will be one of the largest single investments in the country. From 2014 the two governments are engaged in negotiations for other Russian investments in Zimbabwe.

What are your Government’s key priorities and expectations from Russia?

Zimbabwe’s key priorities can be summarized as follows (in order of priority):

Energy: For industry and commerce to thrive there has to be sufficient power. Presently, Zimbabwe has a power deficit of 750 MW. The most reliable source is the 750 MW Hydro power plant which has been affected by low water levels due to two years of drought. The country is relying on power imports.

Agriculture Support: Agriculture is the economic mainstay and provides 15% of GDP. Water harnessing through dam construction, irrigation mechanization, and agricultural machinery are key areas.

Infrastructure Development: Although the country has a fairly well developed infrastructure, the road and rail infrastructure needs refurbishment and expansion to take trade volumes for the country as well as its neighbours to the north.

Mining: Zimbabwe is endowed with abundant unexploited resources.

Manufacturing: Zimbabwe’s manufacturing sector has been hit hard by illegal economic sanctions. Most industries have outdated and expensive to run machinery. They are in dire need of retooling, refurbishment and funding.

Tourism: Zimbabwe hosts one of the wonders of the world, the Victoria Falls. Investment in infrastructure development in the hotels would complement the opening by larger airports to accommodate larger body aircrafts.

Which economic sectors are attractive for foreign investors (e.g. U.S., EU, China etc) generally and what investment incentives are currently available for investors or foreign players?

  • To China – mining, agriculture and infrastructure development
  • To USA – Mining especially in strategic minerals, (low due to illegal sanctions)
  • EU – Mostly in manufacturing and agricultural and horticultural products

Incentives:

  • Investment Options – limited liability Company, sole proprietorship, partnerships, joint ventures.
  • Investment Funding Options – commercials banks, pension funds, micro-finance, own funds.
  • Taxation – Government is moving towards harmonizing customs and taxation on a regional basis.

Taxation:

  • Income tax rate 25%
  • Capital Gains tax 20%
  • Dividends   10 – 15% (Listed to on ZSE 10%)
  • VAT  15%

Specific tax Incentives

  • 20% corporate income tax for manufacturing companies exporting at least 50% of output
  • 15% corporate tax applied for first 5 years of operation in road, bridge and sanitation or water facility construction
  • 15% corporate tax for special mining base operations, losses are carried forward indefinitely for mining operation
  • Duty exemption on imported capital equipment
  • Exemption from duties on the import of raw materials used in the manufacture of goods for export and also for a registered operator
  • Five year tax holiday for designated Tourist Zones
  • Exemption from VAT for a variety of goods and products that include agricultural produce, raw materials for further processing, goods used in the products that include agricultural, mining, industrial or manufactured products etc
  • Build Operated Transfer (BOT), Build Own Operate and Transfer (BOOT) projects are taxed at a variable rate depending on the years of operation (0% for first 5 years and increasing to 30% after 16 years.

To what extent Russian companies have shown interest in the mineral exploration sector in Zimbabwe? Has mineral exploration already started after Foreign Affairs Minister Sergey Lavrov went there for the signing ceremony in 2014?

Discussions are in progress to get Russian companies into exploration and mining of various minerals. The Russia-Zimbabwe Joint Commission will be meeting in Zimbabwe in April this year to discuss further areas of cooperation. The Great Dyke Project Minister Lavrov signed in 2014 was not expected to be exploiting the mineral as of to date as there were processes that needed to be undertaken beforehand that include completing geological survey, construction of infrastructure etc.

Do you also consider promotion of small and medium scale businesses as part of strengthening economic cooperation between two countries?

In March 2016, a Zimbabwean private sector delegation will arrive in Moscow at the invitation of the Moscow Chamber of Commerce to discuss and explore areas of preferential cooperation that would benefit small scale and medium businesses in Zimbabwe.

How would you assess BRICS member countries’ economic engagement in Zimbabwe? And finally what, in your view, will be the future of Zimbabwe Russian relations?

BRICS countries (Brazil, Russia, India, China and South Africa) encourage commercial, political and cultural cooperation among themselves. Although there is no formal relationship between this block and Zimbabwe, individual countries have a bilateral economic and political relationship with Zimbabwe. South Africa is Zimbabwe’s largest trading partner. Her geophysical position goes beyond economic relations but political, social and cultural.

Brazil has very strong economic ties with Zimbabwe. Under the economic blueprint “Food for Africa” Brazil has already shipped $93 million worth of agricultural machinery under a $150m project to help Zimbabwe restore its yester year “breadbasket” status. China made the first entry after the West imposed illegal sanctions on Zimbabwe and is the largest single investor in Zimbabwe today. India has also come on board with renewed interest in Zimbabwe. We foresee rising Indian investment in Zimbabwe.

Russia and Zimbabwe have put in place structures and mechanisms for sustainable economic cooperation. Although Russia’s economy is under pressure from illegal sanctions and the depressed global economic environment, she is committed to assist Zimbabwe’s economic recovery. The single giant investment in platinum mining in Zimbabwe worth three billion is a sure sign of long-term economic cooperation.

High level visits have taken place in 2015 and in April 2016 a high level meeting at Ministerial level will be hosted in Victoria Falls in Zimbabwe to explore further areas of cooperation. Meanwhile a private sector business delegation will be in Moscow in March at the invitation of a local chamber to explore opportunities for cooperation. Relations between Russia and Zimbabwe are based on a strong foundation founded on the support given to Zimbabweans during their struggle for independence.

Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.

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Economy

Turkey’s Turn to East could have Deadly Economic Affects

Shahriar Sheikhlar

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Turkey’s appetites to be the European since when it was an Empire of Ottomans is still being pushed back as far as edged it to the East. Turkish political ties with West countries come strategically while Communism threats against Turkey and Greece was confronted by Truman Doctrine (in 1947) which began a new era in US-Turkey relations. U.S military aids and accepting Turkey’s admission by NATO allies brought them closer but mostly served base on military and security supports which didn’t spread to political and economical reforms what was necessitous for accepting its application to EU.

After the World War II, Turkish political condition was involved in several coups and its stagnant economy was mostly affected by import and protectionism strategies. Turgut Ozal’s far reaching reformative program to shift Turkish economy toward export-led growth was the main first step which while followed by Turkish application to European Union and later entering the EU Custom Union, began improvements smoothly but not enough as much as required.

Meanwhile, Ozal’s reforms improved Turkish economy smoothly during 1987 to 2002. Thestate export was over tippled and reached to $36 billion and import was raised to $51.5 billion (about 2.5 times 1991).  By this duration, EU members become the main Turkish economical partner, their share in Turkish export was more than 56% and the imports to Turkey with EU origins was over 50% in 2002(1). Foreign Direct Investment in Turkey was increased smoothly and reached to $1,082 billion, about double of beginning of the period, where share of EU members were 42.05% ($455 million) (2). The improvements occurred but were poor to save Turkish economy. Continuity the crisis followed by 2001 financial crash resulted in a transition in parliament and government to a recent “Justice and Development Party(AKP)”. New lira unveiling, reforms regarding freedom of speech, Kurdish language rights, reducing political role of armies, banning death… were resulted in opening Turkey accession talk to EU which increased hopes in both sides of west countries and Turkey.

Accordingly,EU-Turkey economic relation was expended rapidly and total trading amount increased from $46 billion in 2002 to $62 billion in 2003 and $154 billion in 2011 where reached to $157 in 2014 (1) and later to $165 in 2018(3), about 4 times during 15 years. Also, Turkey received more than $193 billion FDI during 2002 to 2017 while it was just $15 billion for 1973 to 2002, means around 13 timed in a half of period of time where the EU share in this investment is more than 45%, US share is about 9.3% and Japan’s is 2.00% while China’s share is just 1.26% and Russia’s is 6.1% (both are less than each of US, Netherland or U.K). The international companies registered in Turkey, also increased from 5,600 in 2002 to 58,400, about 11 times more (4).

So, the Turkish economic was grown amazingly and west countries’ share was essential but while Turkey’s application wouldn’t be finalized by EU members, Turkey turned to left, maybe to push EU members or it was a conceptually change in its ruling system from 2011 which accelerated from 2014, anyhow the results reacted soon, the Lira dropped rapidly (from 2.7 in 2016 to about 7 for one USD in 2018) and economic growth was slowed.

Despite the common commercial interests and partnership in NATO, the relations of Turkey with EU and US, experienced a lot of difficulties. Ruling the AKP after 2002 and its attempt for establishing the political and economical reforms, especially aligned to west values including human rights, minorities rights…, revived hopes for both sides especially in Turkey to join EU community finally but everything damaged and got back. Internal wars with PKK sparked, elected mayors in Kurdish provinces were suspended, HDP’s members and parliamentarians were arrested, the tensions with west countries was intensified after Turkish coup in 2016, Turkey’s unprecedented crackdown on participants and their allies in the coup as well as imposition of emergency rule encountered by Germany sanction and its limits on export guarantees to Turkey, Dutch journalists detained and deported, US NASA former scientist sentenced for 7 years (but freed after 2 years) (5), US pastor was detained which inevitably faced with Trump tariff war on Turkish steel and aluminium which affected the Turkish Lira fast to record a historical exchange rates and forced Turkey to solve the issue, as well as, Turkey threatened to enter the east of Euphrates River against Kurdish YPG / SDF forces who are backed by US forces. also, Turkey interferes in Libya and finalized the S400 contract with Russia and received them despite all US warnings. It canceled Istanbul mayor election (where AKP got a bigger loss in second round), frequently forced US for the “safety zone” in its borders with Syria and recently followed a plan for “illegal” drilling for oil and gas in waters close to Cyprus (as EU claimed) which seems would be confronted by EU more seriously than previous cases.

While Turkey expands its relations with Russia and China rapidly, it leaved West values and its challenges with the West countries are expanded by the same rate. Turning Turkey to the East is not just politically, it’s also grown to the ruling and economic systems. Turkish government denied democratic results and suspend mayors or cancel the election (as done in Kurdish provinces and Istanbul), also tried to affect on Central bank and change the interest rate which appeared in TRY exchange rate. Then, the Turkish economy will be the first victim of the turn to East, not only because it was established due to Turkey – West relations, but also because affects of eastern decision gwhich could destroy it within just years and led Turkey to public uprising, now it’s up to AKP’s strategy regarding foreign relations and internal policies, if it remain united with no split by some powerful leaders. 

Sources:

1- POLICY DEPARTMENT, EU Parliament, (2016), “Bringing EU-Turkey trade and investment relations up to date?”, Page 21

2- POLICY DEPARTMENT, EU Parliament, (2016), “Bringing EU-Turkey trade and investment relations up to date?”, Page 23

3- TURKEY AND THE EU, Ministry of Trade, Republic of Turkey (September 5, 2018)

4- Investment office, Presidency of Republic of Turkey, FDI in Turkey

5- DW news

6- Euronews (August 17, 2019).

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Internship tips from an intern who became an owner and CEO

MD Staff

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Photo courtesy of Tim Pannell / The Forbes Collection.

Internships can be a valuable opportunity to start your full-time working career, and change your life.

Fatih Ozmen went from intern to owner and CEO of multi-billion-dollar aerospace and national security leader, Sierra Nevada Corporation (SNC).

Starting at SNC as an intern almost 40 years ago when it was a tiny and struggling engineering company, Ozmen and his wife, Eren (now the company’s chairwoman and president), had the chance to acquire the company a few years later. Today, SNC is an agile, cutting-edge disruptor in government contracting with a workforce of 4,000 that supports and protects explorers and heroes. Ozmen has been SNC’s CEO and owner for a quarter century.

Of his journey from intern to CEO and owner, Ozmen said, “I credit a lot of good luck and some good choices, starting with how I approached my internship.” Here are his three tips to help you get the most from yours:

1. Look for companies with missions and values that inspire you.

“As a student or intern you can feel independent, like you’re holding your future in your hands. A lot of business people will tell you to consider an internship a transaction to meet your needs. I would encourage you to turn that focus outward.

“Ultimately, once your basic needs are met, it’s the deeper rewards that keep us going. Things like the feeling of being part of a team and making a real impact. I’d encourage young people first to identify companies or teams that are addressing challenges that really interest you. Read the bios of the people you’d work with or for. Do their stories, and the company’s story, inspire you? Are people there working in their individual interest or in the interest of the team, and the overarching mission?

“It’s more rewarding when you see a whole group within the company working toward a larger goal. Let me give you an example. On a number of occasions, people have come up to Eren and me to tell us how we saved their lives in the battlefield. There was one time our holiday party was crashed by people who wanted to meet the SNC people who built our technology that jams cell signals and prevents IEDs from exploding, protecting our servicemen and women. These people thanked us and cried, and we cried with them. They shared heartfelt stories about how our technologies enabled loved ones to come home safely. This is priceless.”

2. Always look for an opportunity to understand the core need, to look beyond the “what” and truly understand the “why.”

“As a young engineer, working to enhance jet landing systems so they work in all conditions, including rain, was the biggest privilege for me.

“One of my first experiences early on was being on an aircraft carrier at 2 a.m. Standing next to F-18s and working among sailors day and night was fascinating and inspiring. I was sleeping right below the deck and hearing the roar of the aircraft engines, and tires skidding upon landing. They operate 24 hours a day.

“It was invaluable to see firsthand the problems pilots were facing and the environments sailors had to work within. It was eye-opening to see that while we are often comfortable in our homes and warm beds, servicemen and women are deployed months at a time away from their families working within dangerous conditions with poor visibility. Imagine being an F-18 pilot, finding the ship — a postage stamp-sized object off in the distance — and landing on it. That would be difficult to do in even ideal weather and visibility conditions.

“Our engineering task was straightforward: fix a strange flaw on the existing landing system that didn’t work as expected when it rained. We made it work and it’s amazing that 30 years later the Navy still uses the technology we created. Importantly, I was able to witness the challenge and solution, to work alongside the sailors and see it from the pilots’ perspective. This helped me to go beyond the what of our mission — a flaw in technology — to really understand the why — to save lives.”

3. Embrace newness and change as a journey, not an obstacle.

“When Eren and I first came to the U.S., we were young, didn’t speak much English and didn’t have money. But we did have goals and an unrelenting passion to chase our dreams. Was it easy? No. And I’d be lying if I said there weren’t days when it seemed impossible or challenges that we faced along the way seemed insurmountable. But this is our American dream. None of it would have been possible if we didn’t look beyond the uncertainty and challenges. It’s a great country that made it happen. I couldn’t do it anyplace else in the world.

”We live in a world where the American dream is in reach for everyone. Don’t take it for granted.”

With the power of dreams, innovation and inspiration, there is no limit to what you can accomplish once you get your start, Ozmen says. Learn more about internship opportunities at www.sncorp.com/careers/students/.

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Scaling up support for sustainable development: Mongolia on the rise

Armida Salsiah Alisjahbana

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Mongolia’s economic rebound in recent years reveals a country rising up to the challenges borne from adverse economic shocks. The country’s economic resilience comes as no surprise. Mongolia has responded well to near-term economic challenges and chartered its long-term path towards sustainable development despite its inherent constraints as a small and landlocked economy that is also highly dependent on natural resources. Mongolia prides itself as being one of the first countries to adopt the Sustainable Development Goals (SDGs), with Mongolia’s Sustainable Development Vision 2030 receiving parliament approval in 2016 just six months after the adoption of the SDGs globally.

In particular, Mongolia’s policy experiences in areas of economic diversification, good governance and regional cooperation were well-exemplified by the Action Program of the Government of Mongolia for 2016-2020. So, Mongolia has utilized these policy tools to carve for itself strategic positions to weigh in on issues significant to the country’s national development outcomes. For example, Mongolia leads the global agenda of the needs and challenges faced by landlocked developing countries (LLDCs). The presence of the International Think Tank for LLDCs in Ulaanbaatar further highlights the key role of Mongolia as a credible broker of the LLDCs development agenda.

Mongolia has been active in implementing intergovernmental initiatives facilitated by UN ESCAP including the distinct but interrelated intergovernmental agreements on the Asian Highway Network, the Trans-Asian Railway Network, and Dry Ports. We welcome the recent development on the entry into force of the Intergovernmental Agreement on International Road Transport along the Asian Highway Network among China, Mongolia and the Russian Federation, supporting trilateral economic cooperation.

Currently, Mongolia has substantively engaged on trade facilitation initiatives including the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific. There is great potential for Mongolia to strengthen its role in the related area of transport facilitation, given its position as a transit point between big economies like China and the Russian Federation. Also, we are pleased that Mongolia is soon to become the seventh member of the Asia-Pacific Trade Agreement, a preferential regional trade agreement, open to all developing member States in Asia and the Pacific.

Mongolia has also been a key driving force to advance cooperation for clean energy, especially towards a North-East Asia power interconnection, leveraging from the country’s abundant renewable (solar and wind) energy resources. Energy cooperation finds strong resonance in relation to climate action and air pollution, given the North-East Asia subregion emits over one-third of global greenhouse gases and faces heavy impacts of air pollution.

With inherent constraints due to its fragile economic structure and environmental condition, Mongolia constantly needs to find balance between providing prompt policy responses in the face of volatile and unpredictable external shocks in the short-run and pursuing structural changes to address long-term socioeconomic issues. Under these circumstances, pursuing an integrated approach becomes an imperative for Mongolia to advance its national socioeconomic agenda, regional connectivity agenda and global sustainable development agenda, bolstering Mongolia’s resilience towards adverse economic, social and environmental shocks. To this end, I welcome Mongolia’s emphasis on the “whole of government” plus a “whole of society” approach.

Through the years, we have seen how Mongolia continues to be a steadfast partner of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in promoting regional trade, connectivity and development across its various interrelated dimensions. Mongolia has also provided leadership in advancing regional cooperation agenda in the Asia-Pacific region by chairing the seventy-fifth session of UN ESCAP in May 2019.

Equipped with lessons learned from past development challenges and mindful of new directions and approaches to nurture future opportunities, Mongolia’s regional position and potential are on the rise. I am looking forward to partnering with Mongolia’s leadership to strengthen regional cooperation and achieve sustainable development by 2030 with the United Nations family.

Originally published in Montsame-Mongolia

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