News and Analysis: 17-28 Jan 11 | EmergingFrontierMarkets.com

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Posted on Fri, 28 Jan 11:

What's behind the unrest in the Arab world? An explainer: In the 3 short weeks since a poor, unlicensed Tunisian fruit-seller set himself on fire after police seized his wares, protests have ousted his nation's longtime authoritarian ruler and confronted Egypt's octogenarian pres with the greatest challenge of his 30 years in power. Thousands of Yemenis inspired by Mohamed Bouazizi's death in Tunisia demanded an end to their ruling strongman's 32-year reign Thu. Here are brief descriptions of the tumultuous events and the underlying causes,   McClatchy News, 28 Jan 11 (Democratic change is possible in the Arab world, Deutsche Welle |   Noland / Pack: Looking beyond the boom - The Arab unemployment challenge, VoxEU, Aug '08 | The Arab economies in a changing world, Peterson Inst, June '07)

Reports from Davos--Selected session summaries, World Economic Forum, 28 Jan 11:

1) What Is the New Economic Reality?--with Elliott; Premji; Roubini; Sorrell; Turley; and Zhu |   The Resilient Recovery: An Update--with Keane; Evans; Niederauer; Parisot; Rogoff; and SaKong | Reshaping the US Economy: The Impact Abroad--with Tett; Banerji; Bergsten; Trumka; Weinberg; and Yongding

2)   Insights on: Middle East / North Africa--with Oraibi; Ahmed; Alghanim; Khalifa; Khoury; and Rimawi | East Asia--with Mahbubani; Amranand; Mokhtar; Hayashi; Kwak; and Rajasekaran | Africa--with Gichuru; Bekker; Leke; Nhleko; Okonjo-weala; and Sachs | Latin America--with Hausmann; Sada; Iglesias; Mendoza; Naím; and Marino

3) The Int'l Financial System: Back on Track?--with Thomson; Brosens; Childs; Cohn; Mingkang; and Sands | Redesigning the Int'l Monetary System: A Davos Debate--with Bergsten; Gref; Jianqing; Lagarde; Lipsky; Rajan; and Soros | Rebuilding Global Governance--with Woods; Al Saud; Haass; Kagame; Lamy; Pangestu; SaKong; Samans; and Malloch-Brown

4)   Defining Shared Norms--with Wallis; Ariely; Avni; Lee; and Seidman | Role Models for the 21st Century--with Koehn; Chapman; Ash; O'Brien; Silva; and Sutton | Preparing for New Realities--with Tapscott; Beckett; Bradford; Condo; Haji; Khagram; Laserna; and Zarur

5) An Economic Narrative for the 21st Century--with Ramo; Collier; Frenkel; Johnson; Lu; Magnani; Rangan; Scharmer; and Stiglitz | Dev't Lessons from High-growth Economies--with Koh; Bajaj; Carlsson; Mohamed; Ogata; Okonjo-Iweala; Rachid; and Sala-i-Martin | Nat'l Innovation: An Oxymoron?--with Kao; Arthur; Gurry; Hiranandani-Vandrevala; Jefferson; and Seike

Financial crisis was avoidable, inquiry finds: The '08 financial crisis was an 'avoidable' disaster caused by widespread failures in gov't regulation, corporate mismanagement and heedless risk-taking by Wall Street, acc to the conclusions of a federal inquiry, a copy of which was read by the NY Times. The final report is to be released on 27 Jan, Thu. The commission that investigated the crisis casts a wide net of blame, faulting 2 admins, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans,   NYT (free registr req'd), 25 Jan 11 (This crisis was avoidable - a result of human actions, inaction and misjudgments; warning signs were ignored, inquiry finds, Financial Crisis Inquiry Comm, 27 Jan [PDF] | Full report, w/ exec sum)

Posted on Wed, 26 Jan 11:

Forum's annual meet to focus on 'shared norms for the new reality': During the 5-day meeting from 26-30 Jan, over 2,500 leaders from more than 100 nations will convene in Davos-Klosters, representing biz, gov't, civil society, academia and culture. The theme of the meet has 4 interconnected 'pillars': 1) Responding to the new reality, 2) The econ outlook and defining policies for inclusive growth, 3) Supporting the G20 agenda, and 4) Building a risk response network, World Econ Forum, 19 Jan 11 (World Social Forum returns to Africa in 2011, NewsAhead, 8 Jan)

Nook and cranny: The global competition for talent--The int'l mobility of highly skilled workers is increasing in scale and complexity as more economies participate in R&D and innovation activity. Mobile talent diffuses knowledge both directly and indirectly across borders. This can boost global innovation performance, with benefits accruing to both sending and receiving nations. Many nations aim to attract the same pool of highly skilled talent; thus, relying on int'l flows to fill existing or future gaps in supply may entail risks. Addressing shortcomings in nat'l policies that may limit domestic supply of skilled workers, and ensuring that the wider environment for innovation and scientific endeavor is sound, are key policy challenges for nations, OECD Policy Brief, Feb '09 [PDF]

Posted on Mon, 24 Jan 11:

Cocoa price soars as new Ivory Coast leader suspends exports: The price of cocoa hit a new one-year high this morning after the nation's pres-elect announced an export ban, the latest twist in the nation's ongoing political struggle. Alassane Ouattara, the internationally recognized winner of last Nov's pres'l election, announced a one-mth suspension on exports of cocoa this morning.  Cocoa, the key ingredient in chocolate, is Ivory Coast's single biggest source of revenue. By temporarily halting exports, Ouattara hopes to starve Gbagbo of the financial muscle to keep clinging to power. Ivory Coast is the world's largest supplier of cocoa, contributing around 40% of global output,   Guardian, 24 Jan 11

Barry Eichengreen: The dollar - Dominant no more?:  It was not that long ago that observers were predicting that the dollar was about to lose its 'exorbitant privilege' as the leading int'l currency. First there was the financial crisis, born and bred in the US. Then there was QE2, which seemed designed to drive down the dollar on forex markets. All this made the dollar’s loss of preeminence seem inevitable. The tables have turned. Now it is Europe that has deep econ and financial problems. There are of course a variety of smaller economies whose currencies are likely to be attractive to foreign investors, from the Canadian loonie and Australian dollar to the Brazilian real and Indian rupee, says author of Exorbitant Privilege: Rise and fall of the dollar and. . . ,   Weblog at Oxford U Pr, 7 Jan 11

Financial crisis revives interest in Special Drawing Rights (SDR): The financial crisis that began in mid-'07 brought renewed calls for an alternative to the US dollar as the dominant reserve currency in int'l transactions. Several developing nations suggested greater use of SDRs. SDRs were created in '69 to supplement IMF member nations' int'l reserves. Nine years later, the IMF set the long-term objective of making the SDR "the principal reserve asset in the int'l monetary system". To date, the SDR hasn't fulfilled that lofty aspiration. Reasons for its limited role include poor liquidity, lack of market pricing and the relatively small amount outstanding, by S Cociuba,   Dallas Fed Econ Letter, Oct '10

Posted on Fri, 21 Jan 11:

Tunisia's tipping point: At the time that I was meeting in my Wash. office with the Tunisian Amer Chamber of Commerce pres, Tunisia's pres was fleeing his nation. Of particular note was his observation that perhaps the WikiLeaks scandal might be having some unintended consequences. As relayed to me, revelations in US embassy cables gave credibility to accusations of corruption at the highest level of gov't and resonated strongly with young Tunisians, by J Ortmans, Policy Dialogue on Entrepreneurship, 18 Jan 11 (Tunisia weathers crisis well, but unemployment persists, IMF Survey Mag, Sep '10 |  Tunisia's dependence on Europe fuels unemployment crisis, protests, Weblog at LA Times, Dec '10 | Trouble in paradise - How one vendor unmasked the 'economic miracle', France24, 12 Jan)

Global FDI stagnant in '10, developing economies attracted over half of it for the 1st time: The stagnation of FDI is a cause for serious concern, as global inflows of FDI rose by only 1% in '10. With public investment and stimulus packages running out of steam, private investment in the form of FDI has not yet resumed its role as an engine of growth. However, improved macro conditions strengthened transnational corps' profits and boosted stock market valuations. Coupled with rising biz confidence in '11, these will translate into new investments. Some risks clearly persist, such as the slowdown of GDP growth, currency volatility, sovereign debt and investment protectionism,   Unctad Global Investment Trends Monitor, 17 Jan 11 [PDF]

See the future - Future industry clusters: The old econ order is shifting. As the global economy recovers, some emerging markets are likely to grow faster than traditional econ powers. The large increase in the share of world GDP represented by Asia over the next 30 years should aid the development of dominant clusters in the region. Our expectations are that for filmed entertainment Mumbai may beat Shanghai, while for asset management we expect Singapore to beat Hong Kong, and for pharmaceuticals, we expect to see Shanghai emerging as the regional center. The auto sector currently tends to be somewhat more dispersed than the others - but we expect to see key hubs develop in China around Nanjing/Shanghai and Tianjin/Beijing,   PwC, Sep '10 (See the future | Top clusters revealed [PDF] | The new 'cluster moment' - How regional innovation clusters can foster the Next Economy, Brookings, Sep '10

Posted on Wed, 19 Jan 11:

Michael Spence: 5 steps forward for the global economy in '11--The worst of the crisis seems to be over. Growth in the US and parts of Europe returned. And emerging-market growth returned to pre-crisis levels and appears to be sustainable, helped by unorthodox policies designed to 'sterilize' massive capital inflows. This situation is largely the result of predictable post-crisis econ dynamics, as firms and households in industrial nations repair their balance sheets. But it also reflects non-cooperative policy choices. Indeed, attempts to coordinate econ policy across the G20 fell short of what was hoped for. So what would a coordinated set of global econ policies look like?, asks Nobel Laureate '01/ fmr Growth Commission chair, Proj Syndicate (courtesy Moscow Times), 19 Jan 11

Arvind Subramanian: Chinese mercantilism - The long view: Start 1st with history and the parallels between Chinese mercantilism today and its counterpart of the early 1800s. Then, like today, China was running large trade surpluses and accumulating reserves, not in the form of dollars but silver. Then, like today, the deficit nation was agitated by the imbalance and the resulting outflow of silver and threatened action. Unlike today, the action taken by the UK was effective and unconscionable. To redress the bilateral imbalance, UK flooded the Chinese market with opium grown in India. Saber-rattling by today's superpower to redress the imbalance carries echoes of the humiliation inflicted by the then superpower, says Peterson Inst senior fellow/ Johns Hopkins U prof, Business Standard/ India, 14 Jan 11

Posted on Mon, 17 Jan 11:

Unrest continues as Tunisia awaits new unity gov't: Tunisia's interim leaders plan to announce a new gov't Mon that includes opposition leaders for the 1st time - a move they hope will stabilize their violence-wracked nation. Prime Minister Ghannouchi, a longtime ally of fmr pres Ben Ali, said a new nat'l unity gov't was likely to be announced that would include former regime opponents long locked out of access to power. That would mark an unprecedented transition of power in the Arab world. Many Tunisians are hopeful about the 1st new gov't in 23 years but wary of what the future may hold,   AP (courtesy CTV/ Can.), 17 Jan 11 [Auto-updated] (Tunisia seeks stability after 'jasmine revolution', EurActiv/ UK | AlertNet--Tunisia at a glance)

Hong Kong still tops economic freedom index, but Singapore closes in; Rwanda earns 'most improved': Though faced with continuing fiscal challenges, more nations embraced greater econ freedom than shied away from it last year, acc to the latest Index of Economic Freedom. Hong Kong and Singapore topped the ratings, finishing 1st and 2nd, with Australia, New Zealand and Switzerland in 3rd, 4th and 5th spots. The index registered a widespread rebound for '10, as the average score increased. More than half the 183 nations included in the index improved their scores. Scores had declined for the previous 2 years as nations responded to the global financial crisis with increased spending and regulations,   Heritage Found./WSJ, 12 Jan 11

Coffers: Private equity's center of gravity is shifting toward emerging markets as returns there accelerate - report--Emerging markets' share of private-equity deals has increased from 5% to 30% over the last decade, rivaling the proportion of deals in the US and Europe, acc to a new study. It is based on an analysis of the Int'l Finance Corp's data set, the largest of its kind, which covers 176 emerging-market private-equity funds. The most attractive markets combine econ scale and favorable socioecon conditions, such as Brazil, Turkey, and Malaysia. Other high-profile markets such as Russia and Argentina appear to offer less potential,   Boston Consult. Group, Nov '10

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