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G20 in China should aim at global free trade treaty

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True globalization and free trade economy have been the top agenda of world economies for quite some time, but, however, practically achieving very little. Both globalization and global trade are being effectively mismanaged and thereby controlled by USA and Europe and to some extend by Russia and China to their advantages. Rest of the world has to bear the negative consequences of restricted globalization and refusal to enact global free trade.

G20, the world’s top economies, is the extended version of G8, the western top economies, incorporating medium/developing economies as well to debate and make decisions on the future goals of world economy. The 2016 G20 Hangzhou summit will be the eleventh G20 meeting. It is planned to be held on 4–5 September 2016 in the city of Hangzhou, Zhejiang. It is also the first ever G20 summit to be hosted in China and the second Asian country after 2010 G20 Seoul summit was hosted in South Korea.

Sandwiched between events like the Brexit vote and the US presidential election, leaders of G-20, the world’s major economies meet this weekend in China presumably to take stock of the Brexit impact on world economy. But the world economies at G20 need to mount a realistic defence of the free trade and globalization they have long championed. At stake is the post-World War Two concord on globalization that proponents say has helped lift so much of the world out of poverty. China, the host of the Group of 20 meeting, has itself been one of the biggest winners from free trade, becoming the world’s leading exporter.

Britain’s shock vote in June to leave the EU and the rise of protectionist Donald Trump in the USA has shaken that accord ahead of the G20 summit in Hangzhou that starts on Sunday.

Hangzhou in China

China as the Olympic host this year, has left no stone unturned, no wall unpainted and no sewer unsealed in getting ready Hangzhou for the G20 Summit, an annual gathering of the leaders of the world’s 20 leading economies. Public offices will close for a special seven-day holiday. Private businesses have been urged to do the same, even though the summit itself only runs for two days. Hangzhou residents will receive 10 billion yuan ($1.5 billion) in tourism vouchers to visit other cities in Zhejiang province (of which Hangzhou is the capital) during the G20. The mayor boasts that a 760,000-strong volunteer force stands ready to serve the G20. One persistent rumor is that the city is spending 160 billion yuan ($24 billion) on the G20. If true, this would be remarkable, eclipsing Rio’s $5 billion expenditure on the Olympics. Many public organizations, however, criticised the government for wasting money in the name of a summit and disrupting ordinary people’s lives against communist principles.

Just 40 minutes west of Shanghai by bullet train, it is one of China’s wealthiest cities. The misty waters of West Lake at its heart, fringed by rolling tea fields, have inspired poets for centuries. In recent years, it has become an entrepreneurial hub, most famously as the hometown of Alibaba, an e-commerce company.

The G20 summit, to be held on September 4th and 5th, will be the first in China in the eight-year history of such meetings and a hugely important diplomatic occasion for President Xi Jinping. He clearly hopes that the event will highlight how central China has become to solving the world’s problems

It came as a surprise when China announced that Hangzhou, a second tier city in the eastern province of Zhejiang, would host the 2016 G-20 leaders’ summit, the political equivalent of the Olympics or the World Cup.

Over the past decade, China has hosted a series of high-profile international events mainly in its first-tier cities, such as the 2008 Summer Olympics and the 2014 APEC in Beijing and the 2010 Expo in Shanghai, in order to showcase the break-neck pace of China’s economic developments since it adopted the Open Door in 1978. Hangzhou, the ancient capital of the Southern Song Dynasty (1127-1279), was traditionally hailed as one of the most beautiful cities in China. The city has been transformed into a home for many high profile tech firms such as e-commerce giant Ali Baba, setting an example of how China’s splendid and rich culture and history in the past can still live on in a modern city with an innovative economy.

China, the economic giant

It’s an image that China wants to promote this weekend to the world’s top leaders, breaking away from its image as the world’s cheap labor factory. For China, it is beginning to catch up with the rest of the world in spending every year on research and development. The percentage is about 2.4% of the GDP, right now. That is close to what the United States is spending. And also, it’s growing at a fast pace. To make that case, Hangzhou is an obvious choice as a G-20 summit venue.

The information economy, championed as a new driving force for economic development in the era of “new normal”, accounted for 23 percent of Hangzhou’s GDP, contributing to over 45 percent of GDP growth in 2015, according to Hangzhou city. It was only natural that questions were raised as to why this relatively obscure city was chosen to host the summit meeting of the world’s 20 largest economies, representing two-thirds of the global population and 85% of the global economy.

President Xi Jinping achieved one of the highest GDP growth rates in China during the period when he held the Communist Party’s top post in this Zhejiang province between 2002 and 2007. World especially the West is eager to know whether China is capable of tackling problems stemming from slowing economic growth and overcapacity, wants to keep the focus of this year’s G-20 summit on economic growth. The summit will look at ways to build “an innovative, invigorated, interconnected and inclusive world economy,” he said.

China remains the world’s major growth engine. Despite all the hand-wringing over the much vaunted China slowdown, the Chinese economy remains the single largest contributor to world gross domestic product growth. For a global economy limping along at stall speed – and most likely unable to withstand a significant shock without toppling into renewed recession – that contribution is all the more important.

The Chinese economy accounts for fully 18 percent of world output – more than double India’s 7.6 percent share. Excluding China, world GDP growth would be about 1.9 percent in 2016 – well below the 2.5 percent threshold commonly associated with global recessions. More broadly, China is expected to account for fully 73 percent of total growth of the so-called BRICS grouping of large developing economies. . Chinese growth would have a much greater effect on an otherwise weak global economy than would be the case if the world were growing at something closer to its longer-term trend of 3.6 percent.

If Chinese GDP growth reaches 6.7 percent in 2016 – in line with the government’s official target and only slightly above the International Monetary Fund’s latest prediction (6.6 percent) – China would account for 1.2 percentage points of world GDP growth. With the IMF currently expecting only 3.1 percent global growth this year, China would contribute nearly 39 percent of the total.

Despite all the hand-wringing over the much vaunted China slowdown, the Chinese economy remains the single largest contributor to world gross domestic product growth. For a global economy limping along at stall speed – and most likely unable to withstand a significant shock without toppling into renewed recession – that contribution is all the more important.

Chinese domestic demand has the potential to become an increasingly important source of export-led growth for China’s major trading partners – provided, of course, that other countries are granted free and open access to rapidly expanding Chinese markets. There are of course the global effects of a successful rebalancing of the Chinese economy. The world stands to benefit greatly if the components of China’s GDP continue to shift from manufacturing-led exports and investment to services and household consumption.

A successful Chinese rebalancing scenario has the potential to jump-start global demand with a new and important source of aggregate demand – a powerful antidote to an otherwise sluggish world. That possibility should not be ignored, as political pressures bear down on the global trade debate.

Unlike the major economies of the advanced world, where policy space is severely constrained, Chinese authorities have ample scope for accommodative moves that could shore up economic activity. And, unlike the major economies of the developed world, which constantly struggle with a trade-off between short-term cyclical pressures and longer-term structural reforms, China is perfectly capable of addressing both sets of challenges simultaneously.

Concerns

This meeting should send a clear message that world leaders have heard people’s concerns about globalization and are taking steps to better understand and address them. The risk is that nothing much will be achieved. More platitudes about the benefits of global trade and investment will ring hollow.

While there have been recent concessions that not everyone wins out of globalization, the White House has also signaled a renewed push on the controversial Trans-Pacific Partnership (TPP) trade deal as President Barack Obama’s term winds down.

The G20 earned its spurs with a concerted reaction to the 2008 global financial crisis, but recently opposition to free trade seems to have gained purchase and a coherent defence has been lacking. Among the biggest sticking points is overcapacity in the global steel industry, a sore point for China as the world’s largest producer of the metal. Other concerns include barriers to foreign investment, and the risk of currency devaluations to protect export markets.

International Monetary Fund (IMF) Managing Director Christine Lagarde described the global economic outlook as “slightly declining growth, fragile, weak and certainly not fuelled by trade and said this week that G20 leaders need to do far more to spur demand, bolster the case for trade and globalization, and fight inequality. The Centre for Economic Policy Research estimates that in the first eight months of 2016 alone G20 governments implemented nearly 350 measures that harmed foreign interests. The jumps in G20 protectionism in 2015 and 2016 coincide ominously with the halt in the growth of global trade volumes.

The Washington-based U.S. Chamber of Commerce fired a broadside at what it saw as creeping protectionism in the information and communications technology sector, releasing a report citing aggressive new measures from China to Russia to the EU. National security was the reason given by Australia’s government when it rejected Chinese bids for an electricity grid last month, a decision that Beijing labeled as “protectionist”.

West is opposed to free trade   with developing nations. When EU Commission President Jean-Claude Juncker and EU Council President Donald Tusk set out their priorities for the Hangzhou meeting this week, free trade was next to last. It was preceded by the refugee crisis, jobs growth, financial stability and tax transparency. While the challenge was recognised, no solutions were offered.

The G20 might discuss how to reverse the slowdown in the growth of trade and foreign investment and to communicate the benefits of trade to citizens while addressing their concerns. The critics argue the benefits of globalization are too often over-hyped by politicians, leading to public disappointment.

Obama has promoted the TPP deal as an engine of job creation yet it might add all of 0.5 percent to economic growth after 15 years. The 12-nation TPP is the number one legislative goal of Obama’s remaining term, yet is under assault at home and abroad. Both the main candidates in the November election, Republican Trump and Democrat Hillary, have come out against it, blaming past deals for destroying Americans jobs. If anything, the TPP highlights the divisions within the G20. It was sold as the economic pillar of Obama’s broader plan to shift U.S. foreign policy toward Asia and counter the rising might of the hosts of this very meeting, China.

Observation

As China, among other advancing economies are making big strides in capitalist development actions, the G7 leaders USA and EU have brought them also into what is now called the G-20. One of the reasons is to curb fast climate disorder with the help of these developing economies that are also responsible for rising sea levels, threatening the existence of island nations, like Sri Lanka, Maldives, etc.

An officially communist country, China heavily subsidizes capitalist economy of USA, finances the NATO imperialist wars, has been sympathetic to fascist aggression of Palestine by fanatic Israel, would not appreciate Kashmiri struggle for freedom from Indian yoke primarily because China also occupies a part of Kashmir, taken from Pakistan as a stolen gift.

The G20 needs to do better in communicating the benefits of free trade, while giving the political push that’s needed to unlock stalled multilateral trade liberalization. Delivering a successful G20 summit in Hangzhou means tackling big global challenges successfully through practical actions benefit the world.

Hopefully, the G20 would seriously consider global free trade mechanism so that all under developed nations also benefit from G-20. It is urgent the G20 nations evolve a strategy for a global free trade treaty.

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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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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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