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Innovative ideas and investment opportunities needed to ensure a strong post-COVID recovery

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After the huge success of its opening day, AIM Digital, the first digital edition of the Annual Investment Meeting, continued to gain momentum as it reached Day 2. The three-day mega digital event, an initiative of the Ministry fo Economy, under the patronage of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, concluded its second day with interactive activities that catalysed investment-generation, knowledge-enhancement, and local, regional and international collaborations.

Joined by more than 15K participants from over 170 countries, including 70+ high-level dignitaries from across the globe, the second day of AIM Dıgital witnessed a wide range of major events, from the Conference, Exhibition, Investment Roundtables, and Regional Focus sessions to Conglomerate Presentations and Startups competitions; all geared towards providing opportunities to achieve a digital, sustainable & resilient future.

In his keynote speech in the FDI session, Ministers Roundtable: Adapting to the New Flow of Trade and Investment, His Excellency Dr. Thani Al Zeyoudi, the UAE Minister of State for Foreign Trade, said: “It is my distinct honor to welcome you to the UAE’s first-ever digital edition of the Annual Investment Meeting. Thank you to everyone participating, including our panelists from the Governments of Costa Rica, Canada, Nigeria and Russia. Today’s discussion on how countries are ensuring the free flow of trade and investment could not be more timely, especially as the world grapples with the economic recovery and moves toward building a more resilient, post-COVID economy. The pandemic has significantly impacted global markets that created new challenges for trade and investment. While the challenges ahead are enormous, the UAE sees tremendous opportunity for governments and business leaders to work together through trade and investment to reshape policies, create new partnerships, leverage new technologies, and build a future global economy that is more diverse, inclusive, and sustainable. We know that FDI can bring new technology and know-how, lead to new jobs and growth, and is often the largest source of finance for economies – making today’s discussion even more imperative.”

He further stated that FDI has played a critical role in the UAE’s economic growth, with policies and measures in place, such as the Foreign Direct Investment Law enacted in 2018 to further open the UAE market to investors in certain sectors, and the issuance of Positive List, which allows for greater foreign investment across 122 activities, and increasingthe UAE’s FDI value by 32% in 2019.  He also mentioned that the UAE came in 16th of 190 countries in the World Bank Ease of Doing Business 2020 Ranking due to the country’s digitization strategies and promising business regulatory environment.

His Excellency Al Zeyoudi furthered: “The UAE is continuing to refine and implement policies that will maximize competitiveness, increase collaboration, and provide opportunities to facilitate trade and investment. Our aim is to become the #1 country for foreign investment, target zero contribution from oil to our GDP in the next 50 years, and support research, development, and innovation. The UAE’s trade and investment strategy is centered on economic diversification and focuses on enhanced investment in industries such as communications, Blockchain, artificial intelligence, robotics, and genetics. We are also initiating measures to strengthen our position as a regional leader in supplying financial and logistical services, infrastructure, energy supplies, and other services.”

He added: “The UAE believes that increased partnership and cooperation with governments and the private sector will be key to achieving our objectives. We view platforms such as the Annual Investment Meeting as instrumental in bridging the gap between nations and supporting global efforts to strengthen international trade and investment. Through this platform, we hope that participants will uncover new, innovative ideas and investment opportunities needed to build back better and ensure a strong post-COVID recovery.”

Furthermore, world-class speakers shared their viewpoints in Day 2 of the Conference highlighting Foreign Direct Investment, Foreign Portfolio Investment, Small and Medium-sized Enterprises, Startups, Future Cities, and One Belt, One Road, including H.E. Amb. Mariam Yalwaji Katagum, Minister of State, Federal Ministry of Industry Trade and Investment of The Federal Republic of Nigeria; Victoria Hernández Mora, Ministry of Economy, Industry and Commerce of Republic of Costa Rica; Hon. Victor Fedeli,  Minister of Economic Development, Job Creation and Trade of Ontario, Canada; and Sergey Cheremin, Minister of Moscow City Government Head of Department for External Economic and International Relations, among others.

Two Investment Roundtables were also held successfully at the second day of AIM Digital, concluding  with strategies to facilitate sustainable, smart and scalable investments. The Energy Roundtable was led by Laszlo Varro, the Chief Economist of International Energy Agency, which works with countries around the globe to structure energy policies towards a secure and sustainable future. Among the notable participants include H.E. Arifin Tasrif,  Minister for Energy & Mineral Resources of the Republic of Indonesia; and H.E. Gabriel Obiang, the Minister of Mines and Hydrocarbons of Equatorial Guinea. The Agriculture Roundtable was led by Islamic Development Bank Group, the multilateral development bank working to promote social and economic development in Member countries and Muslim communities worldwide, delivering impact at scale.

In addition, the second set of National Winners competed on Day 2 of the AIM Global National Champions League. Overall,  a total of 65 countries competed at this international startups competition. The top five global champions that will win a total prize of USD50,000 will be announced on the last day of AIM Digital.The competition was launched in a bid to help startups in maximizing their potential to attract funding and promote their business ideas to a global audience, getting utmost exposure and expanding their network.

Participating in the Conglomerate Presentation feature of AIM Digital is Elsewedy Electric led by Eng. Ahmed Elsewedy, its President and CEO. Elsewedy Electric began as a manufacturer of electrical components in Egypt 80 years ago, and Electric has evolved into a global provider of energy, digital and infrastructure solutions with a turnover of EGP 46.6 billion in 2019, operating in five key business sectors, namely Wire & Cable, Electrical Products, Engineering & Construction, Smart Infrastructure and Infrastructure Investments. As part of its commitment to sustainability, it has established green energy and smart metering projects across Africa, the Middle East and Eastern Europe.

The Regional Focus Sessions featured the regions of Asia and Latin America and explored the risks, challenges and opportunities for growth and regional cooperation.  Regional Focus Session on Asia brought together government officials and investment authorities from the ASEAN Member States and discussed their strategies to create a borderless and sustainable bloc that will push organic growth, as well as their approaches to gain resilience in the economy. Regional Focus Session on Latin America highlighted the significance of regional and international partnerships to combat the current pandemic and boost trade, investments and employment within the region.

Moreover, Country Presentations on Day 2 presented the outstanding features and investment opportunities in Colombia, Egypt and the Federal Democratic Republic of Ethiopia which highlighted the countries’ status as attractive investment destinations.

Another highly anticipated event in the largest virtual gathering of the global investment community is the announcement of winners for the Investment Awards and Future Cities Awards which will take place on Day 3 of AIM Digital.AIM Investment Awards will grant recognition to the world’s best Investment Promotion Agencies and the best FDI projects in each region of the globe that have contributed to the economic growth and development of their markets.   Likewise, AIM Future Cities Awards will give tribute to the best smart city solutions providers and for outstanding projects that have resulted to enhanced operational efficiency and productivity, sustainability, and economic growth.

Day 1 of AIM Dıgital welcomed the presence of globally renowned personalities such as the UAE Minister of Economy, His Excellency Abdullah bin Touq Al Marri who emphasised the vision of UAE’s wise leadership for the post-COVID era, reflecting great significance to enhancing the readiness of the country’s government sector, raising efficiencies and performance at the federal and local levels. Keynote remarks were delivered by H.E. Juri Ratas, the Prime Minister of Republic of Estonia; H.E. Rustam Minnikhanov, the President of the Republic of Tatarstan; H.E. Dr. Bandar M. H. Hajjar, the President of Islamic Development Bank Group (IsDB Group); H.E. Mohammed Ali Al Shorafa Al Hammadi, the Chairman of Abu Dhabi Department of Economic Development (ADDED); and Dr. Mukhisa Kituyi, the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD).

The UAE Minister of State for Entrepreneurship and SMEs, His Excellency Dr. Ahmad Belhoul Al Falasi, underlined in his Keynote Address for the SME Pillar, that it is crucial for Startups and SMEs to be given opportunities to bounce back from the impact of pandemic and provide a conducive environment that will empower them to have the capability of supporting growth and success.

The Global Leaders Debate featured prominent keynote debaters such as Armida Salsiah Alisjahbana, the Under-Secretary-General of the United Nations and Executive Secretary of United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP); Mohamed Alabbar, the Founder of Emaar Properties, Alabbar Enterprises and Noon.com; Mohammad Abdullah Abunayyan, the Chairman of ACWA Power; and Arkady Dvorkovich, the Chairman of Skolkovo Foundation, who discussed the strategies to restructure the economies in overcoming the consequences of the pandemic.

The first digital edition of the Annual Investment Meeting with the theme “Reimagining Economies: The Move Towards a Digital, Sustainable and Resilient Future, will be held until the 22nd of October 2020.

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Economy

Economy Contradicts Democracy: Russian Markets Boom Amid Political Sabotage

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The political game plan laid by the Russian premier Vladimir Putin has proven effective for the past two decades. Apart from the systemic opposition, the core critics of the Kremlin are absent from the ballot. And while a competitive pretense is skilfully maintained, frontrunners like Alexei Navalny have either been incarcerated, exiled, or pushed against the metaphorical wall. All in all, United Russia is ahead in the parliamentary polls and almost certain to gain a veto-proof majority in State Duma – the Russian parliament. Surprisingly, however, the Russian economy seems unperturbed by the active political manipulation of the Kremlin. On the contrary, the Russian markets have already established their dominance in the developing world as Putin is all set to hold his reign indefinitely.

The Russian economy is forecasted to grow by 3.9% in 2021. The pandemic seems like a pained tale of history as the markets have strongly rebounded from the slump of 2020. The rising commodity prices – despite worrisome – have edged the productivity of the Russian raw material giants. The gains in ruble have gradually inched higher since January, while the current account surplus has grown by 3.9%. Clearly, the manufacturing mechanism of Moscow has turned more robust. Primarily because the industrial sector has felt little to no jitters of both domestic and international defiance. The aftermath of the arrest of Alexei Navalny wrapped up dramatically while the international community couldn’t muster any resistance beyond a handful of sanctions. The Putin regime managed to harness criticism and allegations while deftly sketching a blueprint to extend its dominance.

The ideal ‘No Uncertainty’ situation has worked wonders for the Russian Bourse and the bond market. The benchmark MOEX index (Moscow Exchange) has rallied by 23% in 2021 – the strongest performance in the emerging markets. Moreover, the fixed income premiums have dropped to record lows; Russian treasury bonds offering the best price-to-earning ratio in the emerging markets. The main reason behind such a bustling market response could be narrowed down to one factor: growing investor confidence.

According to Bloomberg’s data, the Russian Foreign Exchange reserves are at their record high of $621 billion. And while the government bonds’ returns hover at a mere 1.48%, the foreign ownership of treasury bonds has inflated above 20% for the second time this year. The investors are confident that a significant political shuffle is not on cards as Putin maintains a tight hold over Kremlin. Furthermore, investors do not perceive the United States as an active deterrent to Russia – at least in the near term. The notion was further exacerbated when the Biden administration unilaterally dropped sanctions from the Nord Stream 2 pipeline project. And while Europe and the US remain sympathetic with the Kremlin critics, large economies like Germany have clarified their economic position by striking lucrative deals amid political pressure. It is apparent that while Europe is conflicted after Brexit, even the US faces much more pressing issues in the guise of China and Afghanistan. Thus, no active international defiance has all but bolstered the Kremlin in its drive to gain foreign investments.

Another factor at work is the overly hawkish Russian Central Bank (RCB). To tame inflation – currency raging at an annual rate of 6.7% – the RCB hiked its policy rate to 6.75% from the all-time low of 4.25%. The RCB has raised its policy rate by a cumulative 250 basis points in four consecutive hikes since January which has all but attracted the investors to jump on the bandwagon. However, inflation is proving to be sturdy in the face of intermittent rate hikes. And while Russian productivity is enjoying a smooth run, failure of monetary policy tools could just as easily backfire.

While political dissent or international sanctions remain futile, inflation is the prime enemy which could detract the Russian economy. For years Russia has faced a sharp decline in living standards, and despite commendable fiscal management of the Kremlin, such a steep rise in prices is an omen of a financial crisis. Moreover, the unemployment rates have dropped to record low levels. However, the labor shortage is emerging as another facet that could plausibly ignite the wage-price spiral. Further exacerbating the threat of inflation are the $9.6 billion pre-election giveaways orchestrated by President Putin to garner more support for his United Russia party. Such a tremendous demand pressure could presumably neutralize the aggressive tightening of the monetary policy by the RCB. Thus, while President Putin sure is on a definitive path of immortality on the throne of the Kremlin, surging inflation could mark a return of uncertainty, chip away investors’ confidence: eventually putting a brake on the economic streak.

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Economy

Synchronicity in Economic Policy amid the Pandemic

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business-economy

Synchronicity is an ever present reality for those who have eyes to see.Carl Jung

The Covid pandemic has elicited a number of deficiencies in the current global governance framework, most notably its weaknesses in mustering a coordinated response to the global economic downturn. A global economy is not fully “global” if it is devoid of the capability to conduct coordinated and effective responses to a global economic crisis. What may be needed is a more flexible governance structure in the world economy that is capable of exhibiting greater synchronicity in economic policies across countries and regions. Such a governance structure should accord greater weight to regional integration arrangements and their development institutions at the level of key G20 decisions concerning international economic policy coordination.

The need for greater synchronicity in the global economy arises across several trajectories:

· Greater synchronicity in the anti-crisis response across countries and regions – according to the IMF it is a coordinated response that renders economic stimulus more efficacious in countering the global downturn

· Synchronicity in the withdrawal of stimulus across the largest economies – absent such coordination the timing of policy normalization could be postponed with negative implications for macroeconomic stability

· Greater synchronicity in opening borders, lifting lockdowns and other policy measures related to responding to the pandemic: such synchronicity provides more scope for cross-country and cross-regional value-added chains to boost production

· Greater synchronicity in ensuring a recovery in migration and the movement of people across borders.

Of course such greater synchronicity in economic policy should not undermine the autonomy of national economic policy – it is rather about the capability of national and regional economies to exhibit greater coordination during downturns rather than a progression towards a uniform pattern of economic policy across countries. Synchronicity is not only about policy coordination per se, but also about creating the infrastructure that facilitates such joint actions. This includes the conclusion of digital accords/agreements that raise significantly the potential for economic policy coordination. Another area is the development of physical infrastructure, most notably in the transportation sphere. Such measures serve to improve regional and inter-regional connectivity and provide a firmer foundation for regional economic integration.

The paradox in which the world economy finds itself is that even as the current crisis is leading to fragmentation and isolationism there is a greater need for more policy coordination and synchronicity to overcome the economic downturn. This need for synchronicity may well increase in the future given the widening array of global risks such as risks to cyber-security as well as energy security and climate change. There is also the risk of the depletion of reserves to counter the Covid crisis that has been accompanied by a rise in debt levels across developed and developing economies. Also, the speed of the propagation of crisis impulses (that effectively increases with technological advances and globalization) is not matched by the capability of economic policy coordination and efficiency of anti-crisis policies.

There may be several modes of advancing greater synchronicity across borders in international relations. One possible option is a major superpower using its clout in a largely unipolar setting to facilitate greater policy coordination. Another possibility is for such coordination to be supported by global international institutions such as the UN, the WTO, Bretton Woods institutions, etc. Other options include coordination across the multiplicity of all countries of the global economy as well as across regional integration arrangements and institutions.

Attaining greater synchronicity across countries will necessitate changes in the global governance framework, which currently is characterized by weak multilateral institutions at the top level and a fragmented framework of governance at the level of countries. What may be needed is a greater scope accorded to regional integration arrangements that may facilitate greater coordination of synchronicity at the regional level as well as across regions. The advantage of providing greater weight to the regional institutions in dealing with global economic downturns emanates from their greater efficiency in coordinating an anti-crisis response at the regional level via investment/infrastructure projects as well as macroeconomic policy coordination. Regional development institutions also have a comparative advantage in leveraging regional interdependencies to promote economic recovery.

In conclusion, the global economy has arguably become more fragmented as a result of the Covid pandemic. The multiplicity of country models of dealing with the pandemic, the “vaccine competition”, the breaking up of global value chains and their nationalization and regionalization all point in the direction of greater localization and self-sufficiency. At the same time there is a need from greater synchronicity across countries particularly in the context of the current pandemic crisis. Regional integration arrangements and institutions could serve to facilitate such coordination in economic policy within and across the major regions of the world economy.

From our partner RIAC

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Economy

A New Strategy for Ukraine

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Authors: Anna Bjerde and Novoye Vremia

Four years ago, the World Bank prepared a multi-year strategy to support Ukraine’s development goals. This was a period of recovery from the economic crisis of 2014-2015, when GDP declined by a cumulative 16 percentage points, the banking sector collapsed, and poverty and other measures of insecurity spiked. Indeed, we noted at the time that Ukraine was at a turning point.

Four years later, despite daunting internal and external challenges, including an ongoing pandemic, Ukraine is a stronger country. It has proved more resilient to unpredictable challenges and is better positioned to achieve its long-term development vision. This increased capacity is first and foremost the result of the determination of the Ukrainian people.

The World Bank is proud to have joined the international community in supporting Ukraine during this period. I am here in Kyiv this week to launch a new program of assistance. In doing this, we look back to what worked and how to apply those lessons going forward. In Ukraine—as in many countries—the chief lesson is that development assistance is most effective when it supports policies and projects which the government and citizens really want.

This doesn’t mean only easy or even non-controversial measures; rather, it means we engage closely with government authorities, business, local leaders, and civil society to understand where policy reforms may be most effective in removing obstacles to growth and human development and where specific projects can be most successful in delivering social services, particularly to the poorest.

Looking back over the past four years in Ukraine, a few examples stand out. First, agricultural land reform. For the past two decades, Ukraine was one of the few countries in the world where farmers were not free to sell their land.

The prohibition on allowing farmers to leverage their most valuable asset contributed to underinvestment in one of Ukraine’s most important sources of growth, hurt individual landowners, led to high levels of rural unemployment and poverty, and undermined the country’s long-term competitiveness.

The determination by the President and the actions by the government to open the market on July 1 required courage. This was not an easy decision. Powerful and well-connected interests benefited from the status quo; but it was the right one for Ukrainian citizens.

A second area where we have been closely involved is governance, both with respect to public institutions and the rule of law, as well as the corporate governance of state-owned banks and enterprises. Poll after poll in Ukraine going back more than a decade revealed that strengthening public institutions and creating a level playing field for business was a top priority.

World Bank technical assistance and policy financing have supported measures to restore liability for illicit enrichment of public officials, to strengthen existing anticorruption agencies such as NABU and NACP, and to create new institutions, including the independent High-Anticorruption Court.

We are also working with government to ensure the integrity of state-owned enterprises. Our support to the government’s unbundling of Naftogaz is a good example; assistance in establishing supervisory boards in state-owned banks is another. We hope our early dialogue on modernizing the operations of Ukrzaliznytsia will be equally beneficial.

As we begin preparation of a new strategy, the issues which have guided our ongoing work—strengthening markets, stabilizing Ukraine’s fiscal and financial accounts; and providing inclusive social services more efficiently—remain as pressing today as they were in 2017. Indeed, the progress which has been achieved needs to continue to be supported as they frequently come under assault from powerful interests.

At the same time, recent years have highlighted emerging challenges where we hope to deepen and expand our engagement. First, COVID-19 has underscored the importance of our long partnership in health reform and strengthening social protection programs.

The changes to the provision of health care in Ukraine over recent years has helped mitigate the effects of COVID-19 and will continue to make Ukrainians healthier. Government efforts to better target social spending to the poor has also made a difference. We look forward to continuing our support in both areas, including over the near term through further support to purchase COVID-19 vaccines.

Looking ahead, the challenge confronting us all is climate change. Here again, our dialogue with the government has positioned us to help, including to achieve Ukraine’s ambitious commitment to reduce carbon emissions. During President Zelenskyy’s visit to Washington in early September we discussed operations to strengthen the electricity sector; a program to transition from coal power to renewables; municipal energy efficiency investments; and how to tap into Ukraine’s unique capacity to produce and store hydrogen energy. This is a bold agenda, but one that can be realized.

I have been gratified by my visit to Kyiv to see first-hand what has been achieved in recent years. I look forward to our partnership with Ukraine to help realize this courageous vision of the future.

Originally published in Ukrainian language in Novoye Vremia, via World Bank

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