Connect with us
business business

Economy

Economies vs. coronavirus

Published

on

As the coronavirus pandemic advances worldwide coming to the fore is the ability of economies to hold out against an increasingly likely global recession.

Throughout the past year, a number of economists predicted a deterioration in international and country situation in 2020. However, at that moment, the researchers cited “classical” macroeconomic reasons for such a recession – the trade war, the slowdown in leading economies, the growing “bubbles” in stock markets, factors of cyclic nature. As for more radical forecasts, even their authors categorized them as “shocking” or “unbelievable.” No one could contemplate a global epidemic, capable of literally “putting on quarantine” billions of people.

“The fight against the pandemic came as a shock of a scope, if not the Great Depression of the 1930s, then at least the Great Recession of 2008–2009,” – says Oleg Shibanov, professor at the Russian Economic School, in Vedomosti. In the face of the coronavirus, there emerged a watershed between countries that have demonstrated the ability to quickly and effectively respond to the epidemic – “this is South Korea, Taiwan, Singapore, Hong Kong”, along with one-party China, which mobilized a well-trained military and civilian state apparatus to fight against coronavirus, “and those Western countries that turned out to be unprepared, ” – says Pierre Lelouch, former French Secretary of State for European Affairs, in an interview with Le Figaro.

From the structural point of view, the closure of dozens of businesses and even the entire sectors of the economy in most countries of the world, combined with the fall of stock markets “during February and March” has caused a drop in demand in most countries of the world. Quarantine inevitably limits consumer access to the service sector, which is fraught with disaster for small and medium-sized businesses, which, for example, in South Korea, make up more than half of national economy. Also, it is completely unclear as to how the transportation industry, tourism industry, public catering can recover after the crisis. In addition, a major problem to be tackled with is the absence, for understandable reasons, of reliable epidemiological models that would allow governments to predict with high precision the development of a pandemic and its economic consequences.

For example, experts have information on the economic indicators of US metropolitan areas during the Spanish Flu pandemic in 1918-19. They show that the more drastic measures the authorities used to combat the epidemic, the higher their economic performance was after it ended. However, The Economist says, the age-related characteristics of coronavirus mortality are very different from the Spanish flu. Unlike then, when it was about an industrial economy, today it’s mainly about the economy of services. Therefore, the outcome may be different.

Economists have traditionally used the concept of “growth model” to describe the key characteristics of the economic systems of individual countries. They also use this model to predict the policies of the authorities in the context of economic crises. However, at present most leading economies or economic associations are characterized by a mixed model which requires the adoption of measures that contradict each other. And therein lies a huge problem.

Thus, the EU faced the pandemic in a situation where the chances for meeting the criteria for EU membership in case of an unfavorable turn of events in the global economic environment were very limited for most countries in the eurozone. The slowdown in European economies during the 2000s – 2010s led to an increase in budget deficits in many countries. The current crisis hit Europe, first of all, countries that are already burdened with high debt. For example, Italy’s public debt could reach 160 percent of GDP by the end of this year – which “could provoke panic in the state bond market.” As a result, one of the first “victims” of coronavirus was the EU Stability Pact.

The current crisis is different for Europe compared to the previous ones also because the pandemic is “unpredictable” and because “Europeanism” was weakened by other crises of the last decade. ”. The situation in the eurozone is“ much worse than in 2009 ”, because forecasters underestimate the “implosion of economic processes.” “The recession promises to be longer and deeper”. According to the ECB, the EU may require a package of fiscal measures of up to 1.5 trillion euro until the end of the year. Like during the euro crisis, Europe has split. Paris, Rome and Madrid, supported by a growing number of other countries, are demanding common “corona bonds” to share the burden of fighting the epidemic and its economic consequences. This is because countries that rely on consumption for growth combat the negative consequences of the epidemic, first of all, by supporting incomes at the highest possible level.

On the other hand, where export is the main driver of the economy, it is first necessary to support the sustainability of the current balance sheets of enterprises and keep jobs. That’s why Germany, which, they predict, will see a 10 percent economic decline in the first quarter, and Austria and the Netherlands, for the evening of April 8, strongly oppose the “uncontrolled printing of money.” Finally, it is not clear what long-term effect for the common market will come from the restoration of border controls and entry bans. “No less than the existence of the EU could be put at stake”,experts say.

The US growth model is highly questionable as well. While it leans on a fairly large service sector, significant exports, the main driver of the economy is consumer spending. According to critics, the American economy cannot survive a long period of national quarantine without catastrophic consequences. A total halt in economic activity will destroy the social fabric of society and bring the existing growth model down to its knees. However, a “reset” of the economy, which the Trump administration continues to dream about, “will turn the pandemic into a plague.”

Unlike the 2008 crisis, all the emergency measures taken by the FRS in recent weeks have not stabilized the markets. The more than two-trillion aid package, formally approved by the Congress, leaves the most burning question unanswered: who should be the recipients of this support, businesses or citizens? Usually, Washington chooses businesses. But in this case, the authorities face a dramatic upsurge in unemployment, which has not been observed for the past 60 years. Meanwhile, it is the employment factor that can become key in determining the winner in the upcoming presidential election. For the incumbent administration, Henry Kissinger points out, “public trust in American ability to manage the situation at home” is at stake.

A dual situation is observed in China. On the one hand, Beijing, according to official figures, has managed to at least put the epidemic under control. In economic terms, China is “in a strong position”, possessing the world’s largest reserves, significant liquid assets, and industrial capacities that can not only quickly compensate for the losses of recent months but give a new powerful impetus to Beijing’s greater economic presence throughout the world. At the same time, China is confronted with “the weakened and over-credited United States and Europe, which are threatened by a widespread financial crisis that will follow the collapse of their economies”.

On the other hand, the Chinese economy is heavily dependent on exports to other countries, which have declined sharply in recent months, and on imports, which suffer as well following closures of production facilities and ports around the world. In addition, China has reported an incessant slowdown over the past few years. The high debt of businesses and problems in the banking sector have worsened amid the “corona crisis”. In terms of global markets, China poses a threat to the US debt market if circumstances force Beijing to sell off dollar reserves. Finally, the slowdown, not to mention the decline of the Chinese economy, will play a major role in lowering commodity prices, since China holds the world’s second position in annual imports.

Lower-priced commodities can destabilize the economies of dozens of developing countries that depend on their exports. On March 30, UNCTAD published a report stating that “for developing countries, the consequences of the pandemic … proved worse than what they had to go through in 2008.” Devaluation hit particularly hard on Brazil, Mexico, Indonesia and South Africa. According to UNCTAD experts, the shortage of funds for developing countries to fulfill their financial obligations in 2020 and 2021 will amount to up to 2 trillion. dollars. “This could lead to a debt crisis in which many direct and indirect lenders in industrially developed countries will be dragged into.” Finally, in many developing countries, most people have no savings and governments do not have enough funds to support those who have lost their jobs. Even a relatively short nationwide quarantine can send the economies of such countries into decline. According to media reports, by April 6, “at least 85 states had turned to the IMF for assistance.”

According to pessimists, there is a good reason to believe that the longer the quarantine lasts, the greater structural damage it will cause to any economy. The professional skills of workers, as well as their social networks, will also be affected. According to optimists, “America and Europe will put the economic crisis out with money, while incomes lost due to the epidemic will be reimbursed from the budgets and all problems will be sent into the infinitely distant future.” And the economic models that demonstrated growth before the Covid-19 crisis will return to it within 2-3 years.

Finally, governments in many countries will surely resort to measures aimed at restoring or expanding national production in strategically important sectors, including the food and medical industries. Domestic market support policy is gaining popularity again. “This is in line with the strategy of Donald Trump in the USA, the strategy of Boris Johnson in the UK and Shinzo Abe in Japan. The goal is not so much as to limit international trade, but to create a sound domestic market, which will make it possible to reduce its dependence on conflicts and the blows of world trade ”.

In the aftermath of the pandemic, the authorities in most countries will have to spend “much more than they think.” The consequences of the pandemic in the form of rising government debt and spikes in inflation will not take long to present themsevles. Markets may find themselves “replaced by governments”; and people in most countries of the world “will want to restore national prerogatives, especially regarding … the health sector.”

Any strategy adopted by the authorities in the current conditions will entail significant social and economic damage. Therefore, a search for the best model for adapting the economy to the comprehensive challenge of the pandemic will most likely be conducted by trial and error. The errors, unfortunately, will cost human lives. In the end, countries that succeed in picking a more effective model will gain a tangible advantage in economic competition in the “post-virus” world.

From our partner International Affairs

Economy

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

Published

on

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.

Continue Reading

Economy

Is Myanmar an ethical minefield for multinational corporations?

Published

on

By

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.

Continue Reading

Economy

The Covid After-Effects and the Looming Skills Shortage

Published

on

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

Continue Reading

Publications

Latest

Defense1 hour ago

American submarine mangled in the South China Sea

Tensions in the western Pacific have been simmering for the past many months. The western world led by the United...

Human Rights3 hours ago

Restore sexual, reproductive health rights lost during COVID, rights expert urges

Sexual and reproductive health rights, are human rights, the independent UN expert on the right to health reminded Member States...

macedonia macedonia
Finance5 hours ago

North Macedonia’s Growth Projected Higher, but Economy Still Faces Risks

The Western Balkans region is rebounding from the COVID-19-induced recession of 2020, thanks to a faster-than-expected recovery in 2021, says...

Development7 hours ago

Rush for new profits posing threat to human rights

The finance industry’s demand for new sources of capital worldwide to satisfy investors, is having a serious negative impact on the enjoyment of human rights, a...

Finance10 hours ago

Bosnia and Herzegovina Should Focus on Job Creation

The Western Balkans region is rebounding from the COVID-19-induced recession of 2020, thanks to a faster-than-expected recovery in 2021, says...

Africa Today11 hours ago

UN’s top envoy warns Great Lakes Region is ‘at a crossroads’

Speaking at a Security Council meeting on the situation in Africa’s Great Lakes region on Wednesday, the Secretary-General’s Special Envoy, Huang Xia, told ambassadors that the countries concerned now...

Tech News12 hours ago

What Is A Mac Data Recovery Software & How Does It Work

With the advent of technology, data storage remains a crucial element of business and communication. Whether using a Windows PC,...

Trending