With a view to assessing the impact of the pandemic that has been afflicting Italy since the beginning of 2020, I think we should examine the careful analysis made by the National Commission for Listed Companies and the Stock Exchange (Consob) in its report on the year 2020.
2020 was one of the worst years for Italy in economic and social terms since the end of World War II. After experiencing a significant fall in GDP, the country has been moving towards economic recovery since the second half of the year and, more markedly, in the early months of 2021, and is showing its own willingness to tackle the unresolved problems, by also taking advantage of the change in the EU’s fiscal policy attitude, which is a necessary foundation for cohesion among Member States.
The 2020 results confirmed the assessment that savings and exports are the two pillars of the country’s economic and social strength. The protection of savings by public institutions follows rules that have been tested and perfected over time. Nevertheless, they need to be updated in the light of technological innovations in the financial sphere. The most solid protection, however, remains its anchorage to real activity, the progress of which is shaped in Italy by export performance. On the other hand, private consumption and public spending show that they have not the momentum they have in other major world economies.
One of the few positive aspects emerging from the report is that the savings ratio of Italian households compared to their disposable income grew by 50% in 2020. Excluding savings invested in listed companies, its yield remained rather low, close to zero.
Considering the amount of financial assets owned by Italian households, each percentage point of return can be estimated at around 30 billion euros, i.e. almost 2% of GDP, the size of a good public budget plan and fiscal manoeuvre of the past.
Taking into account the management charges, savings have contributed significantly to sustaining market stability, but without producing real growth, although this effect is now the result of a crisis that arose for particular and contingent reasons.
Exports experienced difficulties, declining in volume by about one-seventh compared to 2019, due to the concomitant effect of falling global demand and quarantine-related obstacles to domestic production.
Imports fell more sharply, thus enabling Italy’s foreign current account balance to remain positive and increasing slightly with regards to GDP.
In 2020 Italy’s international investment position improved further, showing a surplus for the first time in three decades. The international financial market only partially recorded and acknowledged this favourable structural position of the country.
In the first quarter of 2021, world trade rose to higher levels than pre-crisis levels and Italy’s exports continued to grow at double their rate, thus confirming the resilience and dynamism of Italian companies in the sector – a traditional cornerstone of our economy.
The financial account balance with foreign countries, which had recorded a slight negative balance in 2020, also turned positive, thus confirming the role of Italian savings as a pillar of stability – another Italy’s point of strength.
Confidence in the Italian economy’s ability to react has grown, as shown by the significant reduction in the spread between BTP and Bund interest rates. This is also the result of the decisions taken by the ECB to purchase significant amounts of public bonds and by the European Commission to suspend – albeit temporarily – the Stability Pact and launch the Next Generation EU Plan (NgEU).
The report under consideration, however, states that for the recovery phase to continue, we need to complement and supplement the decisions taken so far to boost companies’ risk capital in view of improving their financial leverage and making them more willing to undertake new initiatives.
This phase provides an important opportunity for the tax reform that has been urged for some time and reaffirmed in the framework of the National Recovery and Resilience Plan (NRRP) implementing the Next Generation EU Plan.
State intervention for social purposes has reached unusual forms and levels, without anyway reducing citizens’ pressure on public resources. This is not surprising because the rational content of human action leads to choose obtaining the best result at the lowest cost.
Private companies, especially the exporting ones, have been forced by competition to solve their problems without delay, so as to avoid being excluded from the market. Their ability to do so is a cornerstone of growth and a foundation for the good and smooth functioning of the democratic system, which has the power to correct the income distribution determined by productive and commutative activity through regulations, taxes and levies.
Conversely, when these forms are insufficient and savings are not used by private individuals, the State resorts to debt, but not always following a well-founded assessment of the intergenerational redistributive effects.
In this regard, the report insists on the fact that – on the basis of the yardstick provided by the laws in force – it is no longer possible to distinguish – with technical and legal certainty – of what currently currency and financial products legally consist – a content that is interrelated due to the connection ensured by the conversion platforms between virtual and traditional instruments.
The market uses a different yardstick from that of the existing legislation, which needs to be incorporated and integrated into it. The activity in movable assets, securities and forms that takes place in the field of financial information is also increasingly interfering with international relations and geopolitical equilibria, the stability of which plays an important role for exchanges with currency and nominal funds, especially as a result of the growing weight they have in a political scenario that is no longer at the height of the peace and prosperity achieved in the last thirty years of integration and cooperation between States.
However, the willingness expressed in various fora by government authorities to seize the opportunities opened up by technological innovations in capital movements and management should not be seen as acquiescence to the loss of market transparency, but as a desire to recover it by making use of the same financial innovations.
Therefore, the favourable attitude towards new techniques must be matched by clear rules on the emergence and exchange of encrypted instruments and their intertwining with traditional monetary and financial assets/liabilities, whether already digitalised or not, as an essential guide for operators managing liquidity and savings.
The spreading of virtual instruments has prompted the emergence of “technology platforms” enabling faster and cheaper ways for accessing payment and securities trading services than those offered by banks and other intermediaries and brokers.
We need to be careful, however, as the custody and exchange functions they initially performed have evolved to accommodate increasingly articulated and complex transactions, including the granting of credits secured by one’s own or others’ virtual instruments, or the conclusion of derivative contracts using cryptocurrencies (Altcoin, Crypto token, Stabe coin, Bitcoin, INNBC, etc.) as collateral, even for several transactions of the same type.
These new market segments are evolving rapidly and there seems to be a dangerous repetition of the experience before the 2008 crisis, when derivative contracts grew to ten times the size of global GDP.
Although with the necessary distinctions, it is likely that something similar is happening in the market for virtual monetary and financial products, especially the encrypted ones.
The use of these instruments in closed forms outside the participants in the initiative (permissionless) precludes private supervision (such as the one carried out by boards of auditors and certification bodies) or public supervision (by supervisory authorities). Without adequate safeguards (rules and bodies), the result is a deterioration in market transparency, which is the foundation of lawfulness and operators’ rational choices.
The well-known negative effects include the shielding that these techniques allow for criminal activities, such as tax evasion, money laundering, terrorist financing and kidnapping. The concentration in the possession of cryptocurrencies that has recently been ascertained may reflect this aspect of the problem.
For Italy, the problem raised has particular connotations compared to other countries due to the existence of a constitutional provision that attributes to the Republic the task of encouraging and protecting savings in all its forms, as well as the task of regulating, coordinating and controlling the credit exercise and operation.
It would be improper and inappropriate to attribute to the specific phrase “savings in all its forms’ and to the credit to be protected a connotation that would also embrace virtual instruments, without going through a specific regulation.
If this were to happen, the responsibility for the consequences suffered by savers could fall on the State, as has already happened in the past, because of the covert or overt legitimisation of their existence and the awareness that through financial innovations market manipulation and the consequent ruin of savers can be achieved.
Therefore, the existence and operation of a security system – even if left to private individuals – must be guaranteed and supervised by the State which, however, must bear in mind that the spreading of digital techniques in finance poses specific requirements and needs that must be addressed globally, otherwise its effectiveness will be reduced.
The legitimisation of the existence of “virtual savings”, in various forms, is now a reality that intersects with savings generated in the traditional way, i.e. without spending a portion of the income produced by labour or capital.
We are faced with radical changes that must be tackled being fully aware of their content and urgency in view of avoiding negative consequences on the micro and macro-systemic stability of the securities market and, in this way, on the savings and economic growth needed to protect them and use them properly.
An obligatory step is to reaffirm that the legal validity of contracts is only guaranteed by their denomination in sovereign currency. If – as it would appear to be the case – we intend to recognise the existence of private currencies, users must make it clear in a specific contractual clause that they are aware of the risks they are running in using non-public currencies.
The Blazing Revival of Bitcoin: BITO ETF Debuts as the Second-Highest Traded Fund
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.
Is Myanmar an ethical minefield for multinational corporations?
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.
The Covid After-Effects and the Looming Skills Shortage
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”.
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