Sovereign Wealth Funds: Hedging Bets – ISN
February 26th, 2009
http://www.isn.ethz.ch/isn/Current-Affairs/Security-Watch/Detail/?lng=en&id=96985
Having bet heavily on now ailing or defunct western financial institutions in 2007-2008, sovereign wealth funds are facing a period of retrenchment.
SWFs by country/size (Sovereign Wealth Fund Institute)
By Diana Ionescu and Simon Roughneen for ISN Security Watch
Sovereign wealth funds (SWFs) are taking stock of the global downturn, which has not only eaten into their revenue streams, but left the funds with registered losses of 20-30 percent on average, measured against their 2007 asset portfolio.
SWFs recent rise to prominence has sparked some public debate, and quite a bit of pundit and policymaker navel-gazing, with Cassandras lifting their heads to shout their fears of Gulf and Asian covert takeovers of key western banks and even utilities. Now the debate has capsized – with western governments seeking revenues to underwrite pump-priming economic interventions at home.
However, the SWFs are in turn more wary of getting involved in financial systems reeling from often unquantifiable toxic debts.
To illustrate, China Investment Corp (CIC) paid US$3 billion for a 10 percent stake in Blackstone Group just ahead of its initial public offering in June 2007. Blackstone’s shares are now around one-seventh of the value when CIC originally paid up. (more…)
Sovereign Wealth Funds: White Knights to Ride Again? – World Politics Review
February 24th, 2009
http://www.worldpoliticsreview.com/article.aspx?id=3345
by Simon Roughneen and Diana Ionescu
IFLR.com
As Western financial sectors reeled during 2007 and 2008, Asian and Middle Eastern sovereign wealth funds (SWFs) offered some succor, administering exotic medicine to banks poisoned by subprime toxins.
These White Knights cast a dark shadow, however, as questions — and fears — were raised about the political influence that, for instance, a Chinese government presence on the board of Barclays Bank might represent.
The focus has shifted recently. Plummeting oil prices and declining demand for imports by contracting U.S, European and Japanese markets undercut the vast revenue base the SWFs were drawing upon. Now SWFs are writing off untold billions in debt and meeting liquidity needs in domestic markets, while seeking recapitalization from revenue-hungry governments. They might no longer be able or willing to invest in Western financial institutions.
As Tang Tjun, partner and managing director at Boston Consulting Group and head of its Financial Services Practice (Greater China), told World Politics Review, (more…)
Ireland, Singapore: Tigers Down – The Washington Times
January 18th, 2009
http://www.washingtontimes.com/news/2009/jan/18/boisterous-and-strong-economies-now-imperiled/
Boisterous and strong economies now imperiled
High-rise banking - financial district Singapore (Getty Images)
Two of the world’s most open and successful economies face tough times as the global downturn marks the end of one era and opens a new period of peril and possibility for both. Singapore and Ireland have staked their fortunes on being small, export-oriented, investor-friendly dynamos. Singapore was one of the original Asian Tiger economies, and the label passed to the Atlantic nation in the 1990s, as 15 years of 5 percent average growth earned Ireland its “Celtic Tiger” reputation.
But as Kishore Mahbubani, a former Singapore diplomat and author of “The New Asian Hemisphere – The Irresistible Shift of Power to the East,” told The Washington Times, “being globalized has its downside – when the world economy stutters, the more open economies feel the pain first.”
Both Singapore and Ireland are officially in recession, defined as two consecutive quarters of negative growth.
Last week, U.S. computer giant Dell Inc. culled 2,000 jobs at its plant in Limerick, while Singapore’s Trade Ministry stated Jan. 2 that it expected the economy to contract 2 percent in 2009, the worst predicted performance of any Asian economy for the coming year. (more…)
Fudging the food flux – ISN
December 19th, 2008
http://www.isn.ethz.ch/isn/Current-Affairs/Security-Watch/Detail/?lng=en&id=94889
Arrests in Food Price Riots. St. Quentin, France ca 1910. (George Grantham collection, LoC)
2008 brought see-saw food price fluctuations, where rises prompted riots, and now leave almost a billion people without enough to eat. The outlook for 2009 is uncertain, and governments appear unable to cope, Simon Rougheen writes for ISN Security Watch.
The early part of 2008 was marked by a series of riots and political upheavals in numerous countries, prompted by rising food prices around the world. Although poorer countries – where people spend a greater proportion of their income on food – felt the impact the hardest, demonstrations were held in middle-income Mexico, and in Italy, as people vented spleen at the cost of tortillas and pasta.
Over 40 countries saw some form of rancor due to rising costs: Government figures in Haiti fell, and demonstrations were held in Indonesia, Peru, Mauritania, Yemen, Burkina Faso, Bolivia and Uzbekistan. In Haiti and Egypt, riots turned deadly, with four and seven people killed, respectively, in both countries during April, while over 40 died in Cameroon’s February food unrest. Even as far back as August 2007, the quashed Saffron Revolution in Burma was sparked in the first instance by the junta’s overnight doubling of essential food and fuel prices.
The political fall-out continues. (more…)
Congo – Ghosts of Liberation – ISN
November 7th, 2008
Ghosts of liberation
Genocide’s legacy looms in the eastern Congo as renewed fighting sparks diplomatic grandstanding, Simon Roughneen writes for ISN Security Watch.
Reacting to renewed fighting in the Democratic Republic of the Congo (DRC), British Prime Minister Gordon Brown proclaimed last weekend: “We must not allow Congo to become another Rwanda.”
Foreign Minister David Millband joined his French counterpart, Bernard Kouchner, in eastern DRC in a show of diplomatic concern, with talk of EU troops coming to back up an overwhelmed UN force.
(more…)
Obama’s Victory – ISN
November 6th, 2008
On the campaign trail, S.Carolina 26/1/08 (APPhoto)
It remains to be seen how an inexperienced public representative with an uncritically liberal voting record can become the reconciling planet healer (in a country and world marked by profound differences in political views) that he has promoted himself as. Even as he was elected, developments at home and abroad set the tone.
Liberal California voted against “gay marriage,” something Obama favors. Does this mean that the new president will have to curtail some of his liberal platform on the altar of political compromise, as doubtless he will seek re-election in four years? What, then, will become of the liberal machine from whence he built his powerbase, if the “Obamessiah” displays a yet-unproven nous for compromise? Or bouyed by a Democratic majority in the Houses, will Obama push the type of reworked European social-democratic policies that may, as per the California vote, run aground?
Abroad, Obama’s vacillating reaction to Russia’s invasion of Georgia in August set alarm bells off across Eastern Europe, and was noted by a Moscow bouyed and bellicose on the back of high oil prices. Obama had no sooner taken a congratulatory call from Bush than the Kremlin announced it would deploy missiles in Kaliningrad, wedged between Poland and the EU Baltic States, in response to a US missile shield for central Europe. Clearly the Kremlin believes the incoming president – reminiscent of JFK’s rough introduction to international relations at the hand of Nikita Krushchev – warrants a direct challenge. (more…)
Biofuels: More heat than light? – ISN
October 6th, 2008
Lauded by eco-worriers and vilified by aid agencies, the role of biofuels in energy, food and climate debates has generated more heat than light as the world determines whether biofuels have a future. Simon Roughneen reports for ISN Security Watch.
The term ‘Biofuels’ might sound like a catchy green buzzword, but these alternatives to petroleum-based staples have been around for a long time. The original Ford Model T was configured to run on ethanol rather than gasoline, and Rudolf Diesel ran his first demo-engine on peanut oil.
Biofuels were revived temporarily at least – in the US, by the 1970s oil embargo imposed by OPEC – with shortages and high prices contributing to western economic stagnation. Alternative energy sources were looked at, but economic revival and lower oil prices from the 1980s onward put these revived non-petroleum fuel sources on the back burner. (more…)
Zimbabwe: credit where credit’s due – ISN
September 17th, 2008
Morgan Tsvangirai campaign poster - Zimbabwe's April 2008 election
Zimbabweans face economic turmoil, putting the western market crisis into sharp relief, while a new unity government deal seems a ploy to put aid money into ZANU-PF coffers, Simon Roughneen writes for ISN Security Watch.
Perhaps he was thinking of Joshua Nkomo – Robert Mugabe’s former liberation-ally later political rival who joined ZANU-PF in a coalition government in the 1980s – only to see some 20,000 of his supporters killed, as Mugabe ensured his then-rival posed no real challenge here to his hegemony.
Maybe he has a pension plan in a western bank, and was sweating over the Lehman Brothers collapse, which was simultaneously reverberating around the world’s stock markets as he sat impassively after making an impassioned plea to the world’s donors:
‘We need to unlock our doors to aid [...] we need medicine, food and doctors back in our country.’ (more…)
The Rise of Developing-World Multinationals – World Politics Review
May 7th, 2008
http://www.worldpoliticsreview.com/article.aspx?id=2073
On March 26 last, India’s Tata Group made headlines with its $2.3 billion acquisition of Jaguar and Land Rover (JLR) from Ford, the latest in a series of high-profile mergers and acquisitions in which well-known Western brands such as IBM, Barclays Bank, Tetley Tea and Corus steel have been bought, in part or entirely, by multinational corporations from developing economies.
Those with a longer historical view might recall that it was private business — the British East India Company — that imposed imperial control over the “brightest jewel in the empire,” before crown rule was implemented in 1858. With Tata scooping up two high-prestige British brands, a reversal of historic proportions appears to be taking place. Meanwhile, during the recent worldwide credit crunch, sovereign wealth funds, state-run investment vehicles often controlled by resource-rich developing countries, have helped bail out cash-strapped Western financial powerhouses like Merrill Lynch, Barclays, UBS and Morgan Stanley.
In the past, globalization’s critics have alleged that the opening up of economic borders is little more than a license for giant Western companies to colonize emerging economies. But recent trends suggest otherwise.
In his “The Emerging Markets Century,” Antoine Van Agtmael says that the combined size of today’s emerging economies will be bigger than their Western counterparts by 2030, which he predicts will help more and more emerging-market companies overtake their rivals in industrialized countries. (more…)
US Woes danger to Celtic Tiger – The Washington Times
April 8th, 2008
http://www.washingtontimes.com/news/2008/apr/08/us-woes-danger-to-celtic-tiger/
Croagh Patrick, on top of which St Patrick emulated Christ's 40 days in the desert. Each St Patricks Day the Irish PM meets the US President at the While House (Simon Roughneen)
DUBLIN — Before his recent resignation, outgoing Irish Prime Minister Bertie Ahern prefaced the annual St. Patrick”s Day pilgrimage to the White House by predicting “a hard year” ahead for the Irish economy.
The banking crisis and credit crunch in the United States, as well as the falling dollar, worry Irish policy-makers. Ireland has 25 percent of its trade in dollars and has bet much of its recent economic boom on a 12 percent corporate tax rate — an enormous incentive for U.S. multinationals such as Intel and Microsoft to run pan-European operations out of Ireland.
Google has the headquarters of its European and Middle East operations in Dublin.
“The company is very pleased with how the Dublin operation continues to develop,” a Google spokesman said.
The spokesman, who asked not to be named in keeping with company policy, said the company “was attracted to Ireland for a number of reasons, including its highly educated work force, multilingual talent pool, where there are in excess of 140 languages spoken, and its solid economic environment.”
The unanswered question is: How will the present economic slowdown in the U.S. affect Ireland?
Dublin”s Economic and Social Research Institute (ESRI) is predicting the lowest economic growth in 20 years, at just 1.6 percent. Others are even more pessimistic, predicting zero growth. (more…)
