Long before the Portuguese-speaking countries wrapped up their first business summit in Simpopo, Equatorial Guinea that gathered approximately 250 government officials and corporate business leaders from Guinea Bissau, Cabo Verde and Sao Tome and Principe, Portugal, Brazil and Mozambique, it was described as a step directed at bringing sustained business development.
Some argued that the gathering historically provided the chance for immense business networking opportunities and building strategies. It additionally offers an important impetus for strengthening future corporate business collaboration among the countries.
According to the organisers, the primary goal was to explore ways to attract investments to the countries in bloc, as well as strengthening economic ties between member states and improving the business environment.
Opening the two-day summit, promoted by the Confederation of Businesspeople of the Community of Portuguese-language Countries (CPLP), President of Equatorial Guinea Teodoro Obiang, said frequent militant attacks in Cabo Delgado, in northern Mozambique, should be of concern to the Community of Portuguese Speaking Countries (CPLP).
“The Republic of Mozambique is the scene of aggressions perpetrated, planned and financed from outside its borders, claiming human lives, displacing populations, destroying personal and public property, and sowing terror in the north of the country,” he said.
Obiang believes that the CPLP “should not remain oblivious to this tragedy, which goes beyond the dimensions of a simple internal conflict. It is an aggression”.
He characterised it as an opportunity to identify the challenges the bloc faces and seek ways to facilitate trade between CPLP countries as well as attracting more investment. “Our wish is that the business community takes this opportunity to form a common front when it comes to facing the challenges that affect its activity. It should also make the most of its respective advantages to participate actively in promoting economic cooperation among the CPLP countries, always having as priority the member countries of our community,” the Equatorial Guinea president said.
President of Cape Verde, Jorge Carlos Fonseca, who participated in the summit virtually, advocated for the creation of customs facilities for CPLP countries within the bloc. “There is an urgent need to create joint solutions for the reciprocal protection of investments, reducing, or even eliminating, where possible, double taxation, and facilitating the circulation of public documents within our community without excessive authentication and notarisation burdens,” he urged.
President of Sao Tome and Principe, Evaristo Carvalho, spoke of the need for investments in the CPLP countries to be sustainable, especially in Equatorial Guinea, which was experiencing a boom in mineral resources. “Our appeal is to look at the country with confidence, stripped of a culture of short-termism. With thought for the country’s development, let’s seek sustainable solutions and invest in the medium and long term, he advised.
While various issues were discussed during the two days, there was particular interest in mineral exploitation, oil and gas development within the bloc. The panel session spent time analyzing widely the various dimensions and aspects of the sector.
Equatorial Guinea’s Minister of Mines and Hydrocarbons has called for a common project of the Portuguese-language countries for gas exploration, stressing the need for a longer energy transition in some African countries. “Hydrocarbon producing countries such as Equatorial Guinea, Angola, Mozambique or Brazil and Portugal, as a major consumer, it is very important that we can work on a coordinated project at the CPLP level to be able to exploit the gas for use in our economies,” Gabriel Obiang Lima said.
“It will be increasingly difficult to get funding to develop our [oil] products because worldwide there is a great motivation to carry out the energy transition from hydrocarbons to renewable energy,” he noted.
Despite this, he said, in countries such as Equatorial Guinea and others in Africa, this transition will have to take at least another 20 years. “Only then will we be at the level of developed countries,” he said.
The Equatorial Guinean Minister was speaking at a panel with government officials from Guinea Bissau, Cabo Verde and Sao Tome and Principe, as well as representatives from Portugal, Brazil and Mozambique on the role of governments in attracting foreign investment.
Speaking at the panel session, Luís Moreira Testa from the Portugal’s Socialist Party in Parliament, explained that in the new advent of renewable energy, Portugal has the potential to move from energy consumer to producer. “Hydrocarbons will serve in the coming decades as transition fuels. Portugal is a major consumer of natural gas, mainly from Algeria, and the new generation of natural gas consumption in Europe foresees the mandatory inclusion of green hydrogen,” he said.
According Luis Testa, the pipelines that bring gas from Algeria may soon take the gas produced in Equatorial Guinea or Mozambique cut with green hydrogen produced in Portugal. “This could be a great opportunity for energy communion in the CPLP,” he said.
Cabo Verde’s Minister of Trade, Industry and Energy, Alexandre Dias Monteiro, considered mobility within the Portuguese-speaking community as a critical factor for creating a favourable framework for business and foreign investment. “Mobility is a critical factor for contacts and exchanges between companies and businesspeople,” he said, stressing the progress made in this area in recent years, which should make it possible to sign a mobility agreement at the next summit of heads of state and government, in July in Luanda.
Guinea-Bissau’s Economy Minister, Victor Mandinga, advocated the creation of an investment promotion agency at the community level to link up with agencies in each of the countries. “This mechanism is essential to make legislation on investment more homogenous and the distribution of investment opportunities between countries more harmonised,” he said, adding that businesspeople lacked transversal information about the CPLP as a whole.
Sao Tome’s Foreign Minister, Edite Ten Jua, noted the importance of creating a climate of trust for attracting investment, particularly in terms of legal protection and tax justice, as well as simplifying administrative procedures, along with the existence of infrastructure and means of transport and communications.
President of the Community of Portuguese Speaking Countries Business Confederation Salimo Abdula, speaking during the opening, urged the governments of member countries to speed up the process of creating the CPLP Community Development Bank to facilitate financing for bloc projects.
“The bank will be a tool which will support projects of small, medium or large size, thus overcoming the difficulty of access to financing, which often has a high cost in CPLP countries, making projects unfeasible,” Abdula argued.
Abdula further proposed the creation of a CPLP arbitration court, because, despite being united by the same language and economic interests, conflicts between stakeholders from different member states could arise.
“This court would make it easier to settle disputes between businesspeople in the community. At this moment, this project (the CPLP Arbitration Court) is at a very advanced stage. A team was formed that is working hard on the subject and has already produced several document proposals and prepared a questionnaire aimed at defining an ideal model for the construction of such an arbitration court,” Abdula told the gathering.
The opening of the summit coincided with World Portuguese Language Day. According to Rádio Moçambique, there is an estimated 300 million speakers spread across four continents. The first CPLP Business Confederation business summit held under the motto, “Together We Are Stronger and Move the World Forward” in Simpopo, Equatorial Guinea.
Economy Contradicts Democracy: Russian Markets Boom Amid Political Sabotage
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.
Synchronicity in Economic Policy amid the Pandemic
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
A New Strategy for Ukraine
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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