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Trade wars, currency wars and geopolitical clashes

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The Chinese yuan has already plummeted to the historic lows of the last seven months as against the dollar and nothing prevents us from thinking that the Chinese government is organizing a real devaluation of the yuan-renmimbi.

In fact, on June 27 last, the Chinese central bank set the parity as against the dollar at 6.596, by also cutting additional 391 points compared to the levels of the previous day.

A move that could largely expand the already significant size of China’s foreign trade, as well as avoid further tension with the USA on trade tariffs, and finally increase and differentiate Chinese exports.

This does not necessarily mean, however, that China really wants to significantly and clearly devalue the yuan. We rather fear that this threat is a sword of Damocles to be placed right on President Trump’s head.

The problem is, above all, of a geopolitical rather than of a financial nature.

As early as the 1990s, the US ruling classeshave ridden  their project of globalization, which has inevitably been matched by universal financialization.

On the one hand, this has created a new power – that of the major international regulators (the World Bank, the Basel Bank for International Settlements, the Monetary Fund, etc.), which have largely changed the course of US geo-financial interests since the USSR collapse – while, in the meantime, the advanced technologies have migrated to Asia and partly to the European Union.

Asia is currently a US global competitor, while Europe is now perceived by the United States as a useless buffer vis-à-vis the pan-Russian region and, above all, the pleasant geopolitical region that believes it has a currency, namely the euro,  preventing the dollar from fully developing.

By all accounts, on July 15 next, Trump and Putin could just decide to stop the escalation between Russia and the USA, thus together weakening the European region.

The region that has so far followed the new American Cold War blindly and even against its own clear interests.

Hence currently China wants to direct the whole globalization and financialization process of the world economies.

According to China’s decision-makers, the United States can no longer afford it, considering that -based on 2017 data – its trade deficit amounts to 567 billion dollars and its public debt is equal to 21.5 trillion dollars.

It should be recalled that this is the real bone of contention.

Moreover, despite President Trump’s tax reforms, the US companies still have 2.7 billion dollars held in tax havens.

All global tax havens hold 21-35 billion US dollars of private funds. Resolving this tension means becoming global leaders, both financially and industrially.

This holds true also for corruption.

For example, the African nations alone lost at least 1 billion US dollars in 2017 due to the capital flight, while the sum of these African countries’ foreign debt is currently only 200 million dollars.

This year Switzerland ranks first in the list of tax havens, but followed by the United States and the notorious Cayman Islands.

Hence while the capital market is grey and inelastic, as shown by most tax havens, when the public revenue stemming from corporate income decreases, personal income taxes can only increase. This is certainly not a formula for economic development, neither driven by exports nor by other operations.

Not surprisingly, over the last ten years the US public debt has grown at the rate of 1.23 billion dollars, but it has recently doubled, rising from 8.9 trillion dollars in 2007 to 20.1 trillion dollars in December 2017.

Hence, while currently the US globalization trick mainly favours China, military pressure and protectionism are the main and inevitable models of behaviourand protection of the US interests in the world.

Furthermore, protectionism is worth as much as manufacturing, considering that finance is already globalized everywhere: nowadays the US industry, including the energy system, produces only 21% of GDP, while the rest is produced by the service sector.

President Trump’s new proposals, however, i.e. the mix of FED’s “moderate” monetary policy, of trade deficit reduction and of tariff protection through the buy American policy, are worth approximately 1 billion dollars of increase in federal spending, with support to some new infrastructure, but with additional 4.4 trillion dollars relatingto tax reform.

The reduction of personal income and corporate income taxes from 35 to 20% – the focus of President Trump’s new tax policy – as well as the reduction of taxes on repatriated capital and the other corporate tax cuts, are all operations leading to a depreciation of capital income and hence, according to neoclassical models – to a corresponding investment increase which, however, never really materialize.

Therefore President Trump’s tax reform could certainly stimulate domestic demand and hence the GDP growth rate, thus resulting in greater household spending, but above all enabling companies to deduct new investment from taxes until 2022.

However, the amount of recently-issued US debt securities can raise interest rates significantly.

Hence short-term investment expands in the USA, while the market is well aware that, as from 2025, the public deficit and hence interest rates will fall significantly.

There could therefore be the corporations’ temptation to postpone investments for a few years. Nevertheless, in the short term, the tax rebate policy is a drain on public revenues, which are expected to decrease by 11 trillion dollars until 2027.

Corporations can stand it.

Currently the US debt-to-GDP ratio is equal to 105%, but in 2027 it is expected to reach 110% with a foreseen 3-3.5% yearly annual growth rate.

The US Congress calculates that the tax losses caused by President Trump’s reform should be 414 trillion dollars staggered over ten years.

Over the same period, the reduction in revenues is expected to be 1,633 trillion dollars.

Moreover, the increase in direct household income is supposed to be 8%, with a clear increase in taxable income.

Nevertheless, this obviously does not offset the primary decrease in revenues – otherwise we would have discovered the perpetual motion.

Hence US corporations could save 1.2-1.3 trillion dollars, which previously went on taxeswhile, if all goes well, President Trump’s reform could stimulate a further 9% GDP growth in the medium to long-term.

However, the US domestic market’s dependence on foreign markets is very high, even with a population of 320 million inhabitants and a high average consumption rate.

Hence if a policy is implemented to substitute imports from abroad to the USA, where the labour cost and taxes are comparatively higher, this will imply an obvious increase in inflation.

It should be recalled that currently the Russian Federation has already put in place as many as 780 projects of import substitution, while last March Chinese imports rose by 14.4% – a higher rate than expected – but with a corresponding 2.7% yearly fall in Chinese exports denominated in dollars.

For the time being, China aims mainly at import diversion, not so much at import substitution.

As we all know, another piece of President Trump’s tax and economic domino is the dismantling of Obamacare.

A substantial cut would be a dangerous political mistake on such an important issue from an electoral viewpoint.

Probably President Trump’s cuts will be mainly focused on education and research, considering that under President Obama’s Administration the social spending for income support had reached 66% compared to 15% of the previous Presidencies, including the Democratic ones.

The United States is not good at implementing Socialism- this is a specialty of the best Europe, as is also the case with social Catholicism.

The welfare Catholicismwas certainly not born only to take away votes from the Left, but also resulted from a long and  elaborate analysis that the Catholic Church made on capitalism, from the French Revolution until the Encyclical Rerum Novarum, with the refined philosophy of Mounier’spersonalism and, in Italy, with the extraordinary season of the Code of Camaldoli.

Within the framework of US typical capitalism, however, high social spending is a danger to the economic system and to domestic financial markets.

The US friends can afford neither democratic Socialism nor the social Catholicism of the Code of Camaldoli.

Furthermore, President Trump’s idea to repeal the Dodd-Frank Act – which, after the 2007-2008 crisis, redesigned the clear separation between investment banks and savings banks, invented by the Fascist legislation on the State holding IRI and later revivedby President Roosevelt in the Glass-Steagall Act of 1933, repealed in 1999 – is not entirely wrong.

If anything, President Trump wants to revive the 1933 Act, with an eye to the new “21st century” Glass-Steagall Act proposed by John McCain and Senator Elizabeth Warren – a new Act specifically banning the current dual role played by banks, both as institutional investors on behalf of corporate clients and as classic collectors of savings from small clients.

President Trump probably agreeswith the lines of a new Glass-Steagall Act that, according to the US President’s economic advisors, should favour the control and management of bank credit and the mass of credit liquidity.

Theringfencecurrently required of US banks is certainly not enough to regulate the cycle, but nowadays it is hard to well define the different types of financial investment.

Moreover, duration is not the only index to assess its dangerousness or not. We will talk about it at a later stage.

It is also worth recalling, however, that private consumption in the USA amounts to 70% of GDP, while the US citizens’ private debts are currently worth as many as 18.94 trillion dollars, equivalent to 96% of current GDP.

Hence either private debts are rescued or also the GDP is jeopardized, with ripple effects which are hard to foresee.

In our opinion, the policy line supported by President Trump, who wants a federal law regulating current and future financial markets, goes in the right direction.

This means that, as already happens, President Trump will do everything to provide stable employment to the Americans (158 million employees) by curbing the foreign manpower whocarries out direct wage dumping against US citizens, thus competing with them at a minimum wage level.

Domestic wage dumping will no longer be allowed in President’s Trump era and investment in manufacturing will be aimed at turning temporary jobs for Americans into stable jobs.

The President wants to do exactly the opposite of what the European Union is doing – and he will succeed.

During President Obama’s Administration, legal and illegal migrants totalled 27 million people.

Hence the three goals of what has been defined as Trumponomics are essentially the expansion of national production; the increase of the US  labour market in terms of size and income, as well as the repatriation of the huge amount of US capital held abroad.

Nevertheless, with specific reference to trade regulations,  rebalancing the US market is a complex process: in the USA there is no VAT for imported goods, except for a sales tax which, however, is applied only in some States of the Federation.

The solution would be to manipulate taxation on imports in such a way as to remove the difference between the external taxation levels of the various countries exporting to the USA and hence abolish the comparative advantages of the various countries selling in the US market.

Let us now analyse, however, the overall policy line and, above all, the energy tax policy that President Trump wants to implement.

The USA is still the first energy consumer in the world since it uses as much as 25% of all energy produced globally, with a share that is more or less equivalent to the US share of global economy.

The United States currently uses 19.7 million oil barrels a day.

Nowadays, based on March 2018 data, the North American autonomous oil production amounts to 10.4 million barrels a day- a share which, however, is worth only 52% of US consumption.

Nevertheless, it should be recalled that 68% of oil imports into the USA are duty-free.

It is also worth recalling that, based on the most reliable  predictions on shale oil and gas, by the end of 2022 the Americans expect to produce two-thirds of their own energy needs autonomously -hence it is extremely probable that NAFTA exporters to the USA, especially Mexico, shall accept an unexpected share of taxation on oil barrels exported to the United States.

This, however, could lead to a price war between NAFTA producers and competitors in the Gulf or other areas.

Obviously the taxes and duties on energy imports would mainly favour the US domestic production, thus allowing the massive internal consumption of US oil and gas and the re-exporting of thetaxed ones coming from the NAFTA regions.

With specific reference to natural gas, the US situation is equally rosy. Since 2009 the United States has gradually become the world’s largest producer of natural gas, with proven reserves in North America equal to Saudi Arabia’s, but 5.5 times less than Russia’s and 3.7 times less than Iran’s.

This will explain many things in the future.

In 2017, the USA produced 73.6 billion cubic feet of natural gas per day, especially in the Appalachian regions, while the North American government agencies expect that gas – as long as it lasts – will not only saturate all domestic consumption, but will also enable the USA to become a net exporter of liquefied petroleum gas (LPG), with facilities in Louisiana and Maryland, which are now on the point of being completed.

This new US presence in the energy sector will be a powerful lever to deal with the new tariff balances from a strong bargaining position.

With specific reference to infrastructure, there is a “Roosevelt-style” plan that, not surprisingly, President Trump is putting in place, by using a bill – originally submitted by the Congress – which provides for investment to the tune of 1.5 trillion dollars to stimulate private individuals and entities to further invest in this sector that is usually unattractive for US capitalists.

Only 200 billion dollars would be direct federal funds, while the remaining 1.3 billion dollars would, in fact, come from private individuals or entities or from States of the Union.

The goal is to modernize the railway network, motorways, airports and sea ports, as well as waterworks and hydroelectric dams.

Additional 50 billion dollars will be allocated to agricultural infrastructure and irrigation.

The States of the Federation will be responsible for the entire infrastructural operation, but we do not see how the necessary external investment can come to the USA  – an investment that will be unavoidable, considering the amounts at stake.

Hence, with Trump’s Presidency, the United States will basically tend to become an economic organization virtually impervious to external shocks. It will make all the companies which are essential for both military or economic national security go back into the Federation’s perimeter. It will finally expand the manufacturing sector to the detriment of the service and financial sectors.

Along with these geo-economic prospects, Trump’s Presidency will try to foster peripheral and marginal tensions in the world arena, above all to sell arms and later create the flow of high-tech investments which, as usual,   starts from the military sector and then affects also the civilian sector.

Trumponomics has so far worked well and has reached some good results.

In 2017 domestic demand rose by 4.6%, the fastest growth in the last three years.

Consumer spending, which is worth two-thirds of all US domestic trade, grew by 3.8% in late 2017, but families also benefited from the steady increase in stock market indices, as well as from the increase in property and real estate prices and in wages- which is certainly not a negligible fact.

Most of the growth in consumption, however, was directed to imports, which grew by 13.8% in the last quarter of 2017. In terms of balance of payments, this offsets the increase in US exports deriving from the relative weakness of the dollar.

The diversification of the North American economy has increased by 19% and the USA are collectively less dependent on the results of the various productive sectors.

Unemployment is falling also for the “Latinos” and the black people, with the lowest unemployment rate of the last 40 years, as well as the return of Chrysler-FIAT to the USA, for example, through a new factory for 2,500 workers in Michigan, while the opinion polls show that 70% of the US population believe that the economy is “excellent” or good”.

In 35% of cases,temporary jobs are turned into stable jobs -without particular racial differentiation.

According to Moody’s, since 2014 the US economy has produced over 2 million new jobs a year, while the unemployment rate is currently lower than 4%.

Nevertheless, imports obviously continue to be the Achilles’ heel of President Trump’s project.

The more the US economy grows, the more the share of imports increases.

In 2017 the USA imported 2.79 billion dollars of goods and services with a related export share of 2.32 billion dollars alone, resulting in a trade deficit equal to 566 billion dollars.

The imbalance between imports and exports, however, always leads to a 1.13% decrease of GDP.

The sectors that contribute most to this imbalance are the automotive and consumer goods sectors.

In 2017 the USA imported drugs, cars, clothes and other goods to the tune of 602 billion dollars, while it exported 198 billion dollars of consumer goods only.

The United States imported 359 billion cars, but exported only 158 billion ones.

In this sector the real US competitor is still China. In late 2017, however, the USA recorded a 375 billion dollar balance of payments deficit vis-à-vis China; a 71 billion dollar deficit with Mexico and a 69 billion dollar one with Japan, as well as a 65 billion dollardeficit with Germany.

Nevertheless the trade wars – which, as President Trump maintains, are “easy to win” – are not so much so.

The introduction of a single tariff on goods imported from China, as well as a 45% duty – 35% for Mexican goods –  would increase the cost of all imports, from any country, by 15%, with a 3% average price increase resulting in a 85 billion fall of US exports compared to the initial data.

Furthermore, the EU could easily increase its duties within two months.

Finally, China could respond by increasing customs rights and duties on as many as 128 types of imports from the USA, in addition to imposing a further 25% duty on cars, aircraft, oil and food from the USA.

In short, for a President very focused on the economy like Donald J. Trump, the prospect of protectionism will be less likely than we can currently anticipate and, however, the slow reconstruction of the US manufacturing and internal market – which are President Trump’s electoral and geopolitical goals – will continue.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

Economy

St. Petersburg Forum Offers Unlimited Business Opportunities

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The 24th St. Petersburg International Economic Forum (SPIEF’21), unique business forum that is highly expected to bring together politicians, corporate business directors and investors from different parts of the world, is set to take place June 2-5 as the epidemiological situation begins to stabilize in Russia.

That however, the Russian Federal Service for the Oversight of Consumer Protection and Welfare (Rospotrebnadzor) with organizers promise everything in its power to ensure that the event is held with all the necessary measures in place to prevent the spread of coronavirus, and strictly in compliance with the recommendations given by the World Health Organization (WHO).

Roscongress Foundation, the organizer, says on its website that it has decided to create new infrastructure for comfort and safety of participants in view of the coronavirus pandemic. For instance, PCR test conducted at access to the venues, catering, sanitizing the premises, and providing participants and staff with personal protective equipment.

Thermal imaging control will be provided. Medical stations at the venue provided with the necessary equipment and medicines. There will be ambulances and resuscitation vehicles, including teams of English-speaking doctors. All spaces of the site equipped with air recirculation units and decontamination devices, among other measures for all participants visiting the events in St. Petersburg city.

Hans Kluge, Director of the World Health Organization (WHO) Regional Office for Europe, together with Anna Popova, Head of Federal Service for the Oversight of Consumer Protection and Welfare (Rospotrebnadzor), will hold a special briefing for participants on pandemic situation and its control in Russia and around the world.

Kremlin Spokesman Dmitry Peskov told the Russian local media that President Vladimir Putin plans to take part in the plenary session of the St. Petersburg International Economic Forum (SPIEF). “But Putin will be there in person,” Peskov reaffirmed his earlier statement, and further informed that in-person forum will be held in strict accordance with health and safety measures, the president received the first vaccination shot on March 23 and the second on April 14.

Over the years, this forum has strengthened multifaceted business ties, facilitated broadening relations and the development of cultural dialogue between Russia and many foreign countries. According to Roscongress Foundation, a number of foreign countries, keen on making solid business presentations and equally seek partnership opportunities for mutually beneficial cooperation, have already registered their participation.

Traditional inter-country business dialogues are planned as part of SPIEF featuring representatives of business communities of Italy, Germany, France, the United States, India, Africa, Finland, Japan, Latin America, Middle East, as well as the EAEU-ASEAN business dialogue. Under the umbrella of SPIEF, international meetings in business room format will be held with the participation of representatives of Roscongress Foundation’s international partners and businesses in the corresponding world regions.

Apart from the main business programme, SPIEF will also host the SME Forum, Youth Economic Forum, SCO, BRICS and ASEAN events, B20 Regional Consultation Forum, Creative Business Forum and Drug Safety and Security Forum, as well as events on Arctic and African agenda.

The central theme of the Forum is A Collective Reckoning of the New Global Economic Reality. The business programme includes more than a hundred events divided into four tracks touching upon the issues of global and Russian economy, as well as social and technological agenda.

Joining Forces to Advance Development is the key track of the business programme. It includes sessions on economic recovery and international cooperation, discussions on Eurasian integration, transformation of global trade, effectiveness of business during the pandemic, global energy market, recovery of food market, and sustainability of national healthcare systems.

The second theme block of the business programme focuses on national development targets, the anti-crisis agenda for strengthening long-term potential of the economy, investment climate in Russian regions, shaping of Russian research and technology space, development of the financial market, creation of circular economy, and functioning of strategically important industries.

Discussions under the New Technology Frontiers track will feature the topics of international cooperation in science, digital sovereignty and information security, healthcare digitalization, tech ethics and others.

The Human Factor in Responding to Global Challenges theme block will talk about cultural codes of the new reality, collaboration in international education projects, and new skills and employment models in a post-COVID world. Moreover, there are sessions on the development of creative industries, sport and education.

The Russian Small and Medium-sized Business Forum is an annual event held as part of SPIEF to discuss the current state of small and medium-sized businesses and measures to enhance their role in the Russian economy. It is, however planned that the focused sessions encompass the key aspects of support and development for small and medium-sized enterprises.

“Small and medium-sized business is the foundation of the economy and a key indicator of the current status of socioeconomic development. As we are looking towards the future, it is essential to develop and implement long-term programmes that will give a new impetus to the development of SMEs,” said Anton Kobyakov, Adviser to the Russian President and Executive Secretary of the SPIEF Organizing Committee.

“We plan to discuss all the proposals in details at the SME Forum because they determine how small and medium-sized businesses will thrive in the future. Small and medium business is the largest employer and a guarantor of socioeconomic stability and the dynamic development of society. The development of entrepreneurial education, cooperation among small and big businesses, and the development of youth entrepreneurship, among other issues,” he said.

With a similar view and position, SME Corporation CEO Alexander Isayevich said “Entrepreneurs need to understand how to work in the new economic realities and what support measures the state will continue to provide. In addition, it is crucial for entrepreneurs to have high-quality non-financial services. The sessions, attended by a wide range of experts, will help to find optimal solutions not only for the SME sector, but also for the entire economy. We always advocate an open dialogue with business, as this is the principle that underlies our new development strategy.”

As part of Youth Day programme, the most promising undergraduate and postgraduate students, as well as young scientists from Russia’s leading universities and scientific organizations will participate in the St. Petersburg Forum.

“It has become a good tradition for talented young scientists and students to take part in SPIEF, it is a leading business event that brings together unique experts from all areas of the economy. Participation opens up limitless opportunities for young people to exchange experience and gain new knowledge,” said Andrey Fursenko, Aide to the President of the Russian Federation.

There will also be large-scale different cultural events. For instance, Qatar plans an exhibition – “Qatar between Land and Sea, Art and Legacy” – this exhibition is a great opportunity for people from around the world to explore the very precious elements of the Qatari and Middle Eastern tradition and lifestyle, such as handmade carpets and artifacts, pearls, and antique jewelry, which makes it a magical journey through history.

St. Petersburg forum is highly-considered as an important step forward in developing and strengthening investment‑related collaboration. As one of the biggest economic forums in Russia, it yearly gathers several thousands of participants, including representatives of ministries and government bodies, financial and investment organizations, startups, and tech and innovation companies, and representatives of the media.

Despite the adjustments made due to the pandemic, there are for all participants interesting and useful initiatives for comprehensive interaction as the key objective is to create opportunities and friendly conditions to consolidate links between Russia and the world.

About the SPIEF’21 Organizer: Roscongress Foundation is a socially oriented non-financial development institution and a major organizer of international conventions and exhibitions; and business, public, sporting, and cultural events. It was established in pursuance of a decision by the President of the Russian Federation.

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On the Role of Sovereign Wealth Funds (SWFs) in Supporting a Green Recovery

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Perhaps one of the few areas where a consensus is crystallizing across the major powers of the global economy is on the urgency of advancing the green environmental agendas and reducing the carbon emissions. Global institutions such as the IMF are emphasizing the need for a green recovery to take hold in the world economy as the global community emerges from one of the starkest crises in the past century. The world’s sovereign wealth funds as a powerful force in international financial markets could play a vital role in advancing green projects as well as green finance. This is particularly relevant for Russia, where the National Wellbeing Fund could be partly invested into green financial instruments.

At this stage there is a number of global networks and initiatives that bring together the world’s largest institutional investors, including sovereign wealth funds, to drive the green investment agenda. These include European Long Term Investors, the Institutional Group on Climate Change and the Network on Climate Risk. Some of the wealth funds from the Middle East, including the Abu Dhabi Investment Authority, the Kuwait Investment Authority, the Qatar Investment Authority and the Public Investment Fund of Saudi Arabia, are signatories to the One Planet SWF Framework. The meeting held by the International Forum of Sovereign Wealth Funds in 2016 “participants highlighted that SWFs are particularly well-positioned to become trailblazers in green investment”.

Recent data and surveys reveal a growing integration of the green agenda into the decision-making and strategies of the world’s sovereign wealth funds. These were the findings of an inaugural survey of 34 sovereign wealth funds, representing 43% of the world’s sovereign funds, conducted in September by the International Forum of Sovereign Wealth Funds and the One Planet Sovereign Wealth Funds .

The survey reveals that climate-related strategies represent more than 10% of portfolios for 30% of responding wealth funds. The survey also found that these funds made 18 investments in agriculture technology, forestry and renewables opportunities in 2020 at a total value of $2 billion, up from eight investments valued at $324 million in 2015. Overall, according to the survey “sovereign wealth funds have invested more than $5 billion in agritech, forestry and renewables opportunities over the past five years as part of an increased push toward climate change-aware investing”.

Just over a third of responding funds (36%) have a formal climate-change strategy in place, with 55% of these funds adopting the policies since 2015 and 30% since 2018.

The survey came up with the following recommendations to wealth funds based on the survey findings:

· to adopt and implement climate-related strategies;

· to seek appropriate talent and expertise;

· to explore board member and executive education;

· to use metrics to show not only climate impact but also comparable returns and risk reduction;

· to communicate to all stakeholders the strategic importance of climate change;

· to partner with peers and international initiatives to share experience and generate greater leadership from within the wealth fund network.

The latter recommendation dovetails the recent Valdai Club initiative to enhance cooperation among the largest sovereign wealth funds against the backdrop of the Covid pandemic. In particular, in 2020 the Valdai Club together with Shafi Aldamer and Curran Flynn from King Fahd University of Oil and Minerals advanced the proposal to create a platform for the sovereign wealth funds (SWFs) of G20 countries to boost long-term cooperation, direct investments, and the formation of bilateral/trilateral/multilateral investment accords. The findings of this policy brief were included in the T20 communiqué, which encourages the G20 to promote “the creation of a platform that would bring together the sovereign wealth funds of its members, possibly in coordination with the International Forum of Sovereign Wealth Funds.”

Such a platform would encourage the G20 states to strengthen their economic cooperation, bolster mutual interests, improve multilateralism, and develop opportunities for their SWFs. Additionally, it would act as an emergency tool in easing the impact of a global crisis, such as the current COVID-19 pandemic, as it can be employed as an anti-crisis measure via the investments of the G20 states’ SWFs. One important venue of cooperation for such a platform for sovereign wealth funds could be the elaboration of green investing principles and benchmarks for the major sovereign wealth funds, which in turn would support the advancement of a green recovery in the global economy in the aftermath of the Covid pandemic.

As regards Russia’s sovereign wealth funds, most notably the National Wellbeing Fund (NWF), which by Q1 2021 has accumulated more than USD 180 bn in overall resources there may be a case for investing part of the liquid reserve into green instruments, including sovereign green bonds. In particular, the investment guidelines for the NWF may involve a formal target on the share of green assets in the Fund’s portfolio. These in turn may include corporate and sovereign green bonds from advanced economies as well as an allocation reserved for Russia’s corporate and sovereign green bonds. The latter would potentially deliver a significant boost to the development of Russia’s green bond market. Currently green bonds account for just 1.5% of total corporate bonds outstanding in Russia and the emergence of sizeable demand from Russia’s sovereign wealth fund would raise the potential growth for this very important market segment.

From our partner RIAC

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5 things you should know about the state of the global economy

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Is this the year we overcome the global economic crisis caused by the pandemic? Are our jobs in danger? Who has lost the most in the crisis and what can be done to recover? As the UN Department of Social and Economic Affairs (DESA) prepares to launch the mid-year update of the 2021 World Economic Situation and Prospects (WESP) report, here are five things you need to know about the state of the global economy.

1) US and China bounce back, but a slow recovery for developing countries 

While economic output in the United States and China is expected to grow robustly and lift global growth, many developing economies are not expected to return to pre-pandemic output levels anytime soon. The pandemic is far from over for most developing countries where vaccination is advancing slowly, and fiscal pressures have intensified.

2) The situation of the most vulnerable has become even more precarious

Lockdowns and social distancing measures resulted in large job losses in contact-intensive and labour-intensive service sectors, which predominantly employ women. The pandemic has also exposed the vulnerability of informal employment, which is the main source of jobs in many countries and which offers less job security, social protection and access to healthcare.

3) Global trade recovery is strong, particularly in Asia

Merchandise trade has already surpassed pre-pandemic levels, buoyed by strong demand for electrical and electronic equipment, personal protective equipment (PPE) and other manufactured goods. Trade in services remains constrained by restrictions on international travel. While exports from Asian economies have soared, exports from Africa, Western Asia, and the Commonwealth of Independent States has stalled.

4) The COVID-19 crisis has inflicted more harm on women and girls

This crisis disproportionately affected women, who suffered significant job and income losses, contributing to the worsening of gender poverty gaps. Burdened by increased home care duties, many girls and women gave up on schools, and the workforce altogether. Returning to school and work might take longer or may not happen at all for many of them, further widening gender gaps in education, income and wealth.

5) Countries need to do more to address the uneven impact of the COVID-19 crisis

There is an urgent need for countries to formulate better targeted and gender-sensitive policies to drive a more resilient and inclusive recovery from the crisis. Though on the frontlines of the pandemic, women have been under-represented in pandemic related decision-making and economic policy responses. The severe and disproportionate impact of the pandemic on women and girls call for more targeted policy and support measures for women and girls, not only to accelerate the recovery but also to ensure that the recovery is inclusive and resilient.

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