Source: Eurasia Daily Monitor “New Turkish Internet Regulations Signal further Restrictions On Freedom Of Speech”
Turkey recently enacted regulations for Internet Service Providers (ISPs) that require all commercial ISPs to block access to illegal content and use government-approved filters to prevent users from going to undesirable websites. Further, commercial ISPs will now have to record the details of which website each of their subscribers visited in the past year.
Amazingly, few Turks are aware of the new regulations because of the small mount of coverage in the Turkish media. Turkish citizens aware of the regulations are upset at the limits on their freedom of speech and privacy. One citizen went so far to say “Turkey is becoming a police state.”
Previous regulations required Tukish ISPs to prevent access to certain websites.
Currently, all the banned websites are associated with views that oppose official Turkish ideology, rather than explicitly inciting violence. In addition, internet café owners have been responsible for stopping users from accessing illegal sites since March 2007—but this used to require a judicial order. Now, all internet subscribes with have their internet use monitored.
The new regulations reflect a movement towards “re-imposition of the draconian restrictions on privacy and freedom of expression that were once common in Turkey.” As Turkey made its recent push towards EU membership many of the restrictions were erased, but as chances of membership have decreased the restrictions have crept back in. In particular, the EU wants Turkey to abolish a rule that makes it illegal to criticize “Turkishness” (a broad term allowing enforcement over a number of areas). The Turkey Justice Minister recently declared the rule would not be abolished but simply amended. The article also describes a number of other examples of government restriction on speech, including two incidents with YouTube.
Questions for discussion: Do you think Turkey’s most recent limits on sppech are a direct result of their chances for EU membership declining? If not, what other factors explain Turkey’s regression?
Saturday, November 17, 2007
Government Asserts Right to Control Food Prices in Bolivia
Sources:
La Razon (La Paz) - El Gobierno Interviene Para Regular Precios de Alimentos
The Bolivian Minister of Development Planning announced that the government would be intervening and setting the prices of basic food items in Bolivia. The Minister, Gabriel Loza, said that the governments controls were going to be put into effect to prevent speculation in this key area of the economy. Loza said that the problems with inflation for food items were concentrated in about five to seven basic food items, and that those would be the ones regulated.
Loza complained that there was an abundance of certain types of food being exported, but that there remained shortages within the country. He said that within a country as small as Bolivia, there was a small oligopoly that controlled many of the food prices and distorted them, making it necessary for the state to intervene in the food prices of products such as sugar and flour. Loza also stated that "distortions" in the chain of production of certain foods, such as meat, were making it difficult for the average consumer.
Loza claimed that the government had the power to regulate food prices, noting that the Constitution and the National Development Plan both gave the government the right to intervene in strategic sectors of the economy.
Food suppliers disagreed with the Bolivian government and noted that government-controlled food prices was a disincentive to productivity and also put efficient production in danger. The Manager of the Eastern Chamber of Agriculture said that the price controls had already caused him to switch crops, from corn to sesame, explaining that importation rules will allow foreign producers an advantage over domestic ones in certain sectors. Another producer stated that state-controlled prices were a blow to the industry.
Discussion:
1. How should governments balance consumers' interest in affordable prices for basic items with the potential for shortages and inflation that government-set price controls and intervention may cause?
La Razon (La Paz) - El Gobierno Interviene Para Regular Precios de Alimentos
The Bolivian Minister of Development Planning announced that the government would be intervening and setting the prices of basic food items in Bolivia. The Minister, Gabriel Loza, said that the governments controls were going to be put into effect to prevent speculation in this key area of the economy. Loza said that the problems with inflation for food items were concentrated in about five to seven basic food items, and that those would be the ones regulated.
Loza complained that there was an abundance of certain types of food being exported, but that there remained shortages within the country. He said that within a country as small as Bolivia, there was a small oligopoly that controlled many of the food prices and distorted them, making it necessary for the state to intervene in the food prices of products such as sugar and flour. Loza also stated that "distortions" in the chain of production of certain foods, such as meat, were making it difficult for the average consumer.
Loza claimed that the government had the power to regulate food prices, noting that the Constitution and the National Development Plan both gave the government the right to intervene in strategic sectors of the economy.
Food suppliers disagreed with the Bolivian government and noted that government-controlled food prices was a disincentive to productivity and also put efficient production in danger. The Manager of the Eastern Chamber of Agriculture said that the price controls had already caused him to switch crops, from corn to sesame, explaining that importation rules will allow foreign producers an advantage over domestic ones in certain sectors. Another producer stated that state-controlled prices were a blow to the industry.
Discussion:
1. How should governments balance consumers' interest in affordable prices for basic items with the potential for shortages and inflation that government-set price controls and intervention may cause?
Wednesday, November 14, 2007
World Bank Urges More Industrial Zones in Bangladesh to Reduce Poverty
Source: The Economic Times: World Bank asks Bangladesh to add more SEZs
Roughly half of Bangladesh’s country, or about 70 million people, live below the poverty line. This is the equivalent of less than $1/day. A founder of Grameen Bank criticized the World Bank’s efforts in failing to alleviate poverty.
Robert Zoellick, World Bank President, recently visited the Dhaka export processing zone. He urged Bangladesh’s government to develop more special industrial zones. Building these zones will hopefully drastically reduce the poverty rate in Bangladesh by creating more jobs. Brigadier-General Ashraf Abdullah Yussuf, executive chairman of the Bangladesh Export Processing Zones Authority, commented that “Bangladesh expects to draw $4 billion in investment in the EPZs over the next three years.”
Bangladesh currently has eight export processing zones which contribute 18% to the national export earnings. These zones employ more than 200,000 people. There are about 270 enterprises which operate in the zones which make an investment of about $1.8 billion. Bangladesh’s biggest export is clothing. Clothing accounts for three-quarters of Bangladesh’s annual export income.
For Discussion:
If small business development is believed to be a basis for relieving poverty in poor nations, is it a legitimate criticism that the World Bank's lending policies do not allow for enough money to be spent on small entrepreneurs?
Roughly half of Bangladesh’s country, or about 70 million people, live below the poverty line. This is the equivalent of less than $1/day. A founder of Grameen Bank criticized the World Bank’s efforts in failing to alleviate poverty.
Robert Zoellick, World Bank President, recently visited the Dhaka export processing zone. He urged Bangladesh’s government to develop more special industrial zones. Building these zones will hopefully drastically reduce the poverty rate in Bangladesh by creating more jobs. Brigadier-General Ashraf Abdullah Yussuf, executive chairman of the Bangladesh Export Processing Zones Authority, commented that “Bangladesh expects to draw $4 billion in investment in the EPZs over the next three years.”
Bangladesh currently has eight export processing zones which contribute 18% to the national export earnings. These zones employ more than 200,000 people. There are about 270 enterprises which operate in the zones which make an investment of about $1.8 billion. Bangladesh’s biggest export is clothing. Clothing accounts for three-quarters of Bangladesh’s annual export income.
For Discussion:
If small business development is believed to be a basis for relieving poverty in poor nations, is it a legitimate criticism that the World Bank's lending policies do not allow for enough money to be spent on small entrepreneurs?
“Gone are the days when Africans used to see Information and Communication Technology as a Luxury”
Sources:
AllAfrica: Africa: ICT No Longer Luxury for Citizens
At the two-day high-level Connect Africa summit in Kigali, Rwandan President Paul Kagame stated that “In just ten years, what was once an object of luxury and privilege, the mobile phone has become a basic necessity in urban and rural Africa.” Additionally, he urged stakeholders, including the top government and telecoms industry leaders, to explore and invest in other ICT ventures in an effort to connect Africa to the “global information superhighway.” Furthermore, to increase ICT investment in Africa, he encouraged Africa’s private sector to compete with multinational ICT companies.
Although Africa remains the world’s least connected continent, the ICT revolution has made significant steps in Africa. The mobile phone technology is at the forefront, which allows consumers to access a variety of services and helps rural African farmers and traders to receive market information. Additionally, public health delivery has advanced, leading to significant improvements in the transmittal of health data from remote rural corners. Increased use and access to the Internet also connects rural schools and provides access to new information for both teachers and students. Yet, investments remain low in building the necessary ICT infrastructure for more ambitious ICT development. Therefore, President Kagame encouraged African governments to create environments that encourage increased investment, both foreign and domestic, in the ICT sector.
Notably, improved ICT development will improve access and affordability, thereby retaining Africa’s best and the brightest and allowing rural Africa to become fully integrated into the productive economy.
Discussion Question:
Do you believe the growth of mobile phones in Africa will be the catalyst for future African ICT development or is it just wishful thinking?
AllAfrica: Africa: ICT No Longer Luxury for Citizens
At the two-day high-level Connect Africa summit in Kigali, Rwandan President Paul Kagame stated that “In just ten years, what was once an object of luxury and privilege, the mobile phone has become a basic necessity in urban and rural Africa.” Additionally, he urged stakeholders, including the top government and telecoms industry leaders, to explore and invest in other ICT ventures in an effort to connect Africa to the “global information superhighway.” Furthermore, to increase ICT investment in Africa, he encouraged Africa’s private sector to compete with multinational ICT companies.
Although Africa remains the world’s least connected continent, the ICT revolution has made significant steps in Africa. The mobile phone technology is at the forefront, which allows consumers to access a variety of services and helps rural African farmers and traders to receive market information. Additionally, public health delivery has advanced, leading to significant improvements in the transmittal of health data from remote rural corners. Increased use and access to the Internet also connects rural schools and provides access to new information for both teachers and students. Yet, investments remain low in building the necessary ICT infrastructure for more ambitious ICT development. Therefore, President Kagame encouraged African governments to create environments that encourage increased investment, both foreign and domestic, in the ICT sector.
Notably, improved ICT development will improve access and affordability, thereby retaining Africa’s best and the brightest and allowing rural Africa to become fully integrated into the productive economy.
Discussion Question:
Do you believe the growth of mobile phones in Africa will be the catalyst for future African ICT development or is it just wishful thinking?
China Refuses to Agree to Binding Emissions Rates
Sources: China Opposes Binding Emissions Targets, China to Reject Binding Emissions Caps
Questions:
1) Is
2) What do you think is more important—spending money on development or spending money on the environment? Is there a way to strike a balance?
Tuesday, November 13, 2007
Recent American Sanctions Influence World Bank Projects in Iran
Sources: U.S. Sanctions Force World Bank to Halt Some Iran Aid; World Bank delays some Iran aid due to US sanctions
Since the start of this month, the World Bank has had to curtail funding for four of its projects in Iran that focus on providing humanitarian assistance within that country.
The Bank’s actions are in pursuance of American sanctions against the four largest banks in Iran. The United States has targeted Bank Sepah, Bank Melli, Bank Mellat, and Bank Saderat for their involvement in 1) the Iranian government’s drive to obtain nuclear weapons, and 2) facilitating terrorist financing.
Announced on October 25, 2007, these sanctions are tougher than the two resolutions the United Nations Security Council (“UNSC”) has passed in the last two years. The UNSC resolutions have called for freezing assets associated with the Iranian government’s weapons program, and have targeted only one Iranian bank (Bank Sepah). In contrast, the American sanctions seek to prevent American nationals and the private sector at-large from doing any business with its target banks.
The United States and the World Bank are not alone in sanctioning these four Iranian banks; Prominent European banks have also halted interacting with these institutions. However, many banks and businesses in the Middle East and Asia continue to conduct business with the four banks targeted by the United States.
One World Bank official noted that while the Bank hopes to find alternative means to continue funding the humanitarian projects without undermining the American sanctions policy, it is uncertain whether such measures are available at this time.
Discussion:
1. What alternatives are there to ensure that the Iranian people will receive the aid that they need, while clamping down on the Iranian government’s efforts to develop weapons of mass destruction?
2. How should the Bank and the United States government engage other banks and businesses of other Middle-Eastern and Asian countries that continue to do business with the blacklisted Iranian banks so as to secure the objectives of the American sanctions policy?
Since the start of this month, the World Bank has had to curtail funding for four of its projects in Iran that focus on providing humanitarian assistance within that country.
The Bank’s actions are in pursuance of American sanctions against the four largest banks in Iran. The United States has targeted Bank Sepah, Bank Melli, Bank Mellat, and Bank Saderat for their involvement in 1) the Iranian government’s drive to obtain nuclear weapons, and 2) facilitating terrorist financing.
Announced on October 25, 2007, these sanctions are tougher than the two resolutions the United Nations Security Council (“UNSC”) has passed in the last two years. The UNSC resolutions have called for freezing assets associated with the Iranian government’s weapons program, and have targeted only one Iranian bank (Bank Sepah). In contrast, the American sanctions seek to prevent American nationals and the private sector at-large from doing any business with its target banks.
The United States and the World Bank are not alone in sanctioning these four Iranian banks; Prominent European banks have also halted interacting with these institutions. However, many banks and businesses in the Middle East and Asia continue to conduct business with the four banks targeted by the United States.
One World Bank official noted that while the Bank hopes to find alternative means to continue funding the humanitarian projects without undermining the American sanctions policy, it is uncertain whether such measures are available at this time.
Discussion:
1. What alternatives are there to ensure that the Iranian people will receive the aid that they need, while clamping down on the Iranian government’s efforts to develop weapons of mass destruction?
2. How should the Bank and the United States government engage other banks and businesses of other Middle-Eastern and Asian countries that continue to do business with the blacklisted Iranian banks so as to secure the objectives of the American sanctions policy?
South African utility looks to coal to meet growing energy demands
SOURCE: IC Publications: “South African power giant signs 5-billion-dollar contracts”
South Africa, as the continent’s largest economy, has experienced continued growth. At the same time, the nation has been plagued by power shortages. In the past, South Africa has had to resort to planned outages—also called load-shedding—to deal with the problem. The country has increasingly sought to diversify power sources and has made a long-term commitment to nuclear power. However, at least one major utility in the country—Eskom—has suggested that coal offers the best short- to medium-range energy option for South Africa’s growing economy.
As a result, Eskom recently signed contracts with two companies, Hitachi of Japan and Alstom of France, to build a new coal-fired power plant. It will be the first such operation in twenty years and marks the largest combined contract ever signed by Eskom.
FOR DISCUSSION:
Given the perennial problem of disposing of how and where to dispose of spent fuel rods, how wise do you think it is for the world to look to nuclear energy as a “cleaner” option?
South Africa, as the continent’s largest economy, has experienced continued growth. At the same time, the nation has been plagued by power shortages. In the past, South Africa has had to resort to planned outages—also called load-shedding—to deal with the problem. The country has increasingly sought to diversify power sources and has made a long-term commitment to nuclear power. However, at least one major utility in the country—Eskom—has suggested that coal offers the best short- to medium-range energy option for South Africa’s growing economy.
As a result, Eskom recently signed contracts with two companies, Hitachi of Japan and Alstom of France, to build a new coal-fired power plant. It will be the first such operation in twenty years and marks the largest combined contract ever signed by Eskom.
FOR DISCUSSION:
Given the perennial problem of disposing of how and where to dispose of spent fuel rods, how wise do you think it is for the world to look to nuclear energy as a “cleaner” option?
Monday, November 12, 2007
US Stocks Continue To Fall
Sources: CNN Money, Associated Press
U.S. stocks, amid continuing credit concerns fell again—with the Dow Jones dropping to below 13,000 for the first time since August 2007. This was also the fourth straight losing session—and with the high-tech NASDAQ index the biggest loser. Nasdaq lost nearly 1.7% on Monday. The Nasdaq saw the heaviest losses because more investors believe that the hi-tech stocks just cannot provide the economy with a cushion against the collapsing housing market. The broader S&P 500 slipped 1%. The Dow lost 4% just a week ago, and has fallen 8.53 percent since its record high on October 9th.
Much of the losses have stemmed from market nervousness from the continuing credit crisis. Last week several of Wall Street’s largest lenders had a series of write-downs. UK-based HSBC is reported to also have write-downs forthcoming. Furthermore, other recent bad news led to Monday’s severe losses. Countrywide Financial Corp., said in a regulatory filing that it could be severely limited if its credit rating drops into the junk bond status. E-Trade Financial Corp stated Friday that the value of its mortgage-backed securities has fallen significantly this quarter, and it would need to take bigger-than-expected write-downs. E-Trade stocks dropped 58.7%, to $3.55/share. Countrywide fell 64%, to $13.19/share.
Question: With the bad news continuing to come—what can be done to stop the continual loss of value in light of the seemingly unending credit crisis?
U.S. stocks, amid continuing credit concerns fell again—with the Dow Jones dropping to below 13,000 for the first time since August 2007. This was also the fourth straight losing session—and with the high-tech NASDAQ index the biggest loser. Nasdaq lost nearly 1.7% on Monday. The Nasdaq saw the heaviest losses because more investors believe that the hi-tech stocks just cannot provide the economy with a cushion against the collapsing housing market. The broader S&P 500 slipped 1%. The Dow lost 4% just a week ago, and has fallen 8.53 percent since its record high on October 9th.
Much of the losses have stemmed from market nervousness from the continuing credit crisis. Last week several of Wall Street’s largest lenders had a series of write-downs. UK-based HSBC is reported to also have write-downs forthcoming. Furthermore, other recent bad news led to Monday’s severe losses. Countrywide Financial Corp., said in a regulatory filing that it could be severely limited if its credit rating drops into the junk bond status. E-Trade Financial Corp stated Friday that the value of its mortgage-backed securities has fallen significantly this quarter, and it would need to take bigger-than-expected write-downs. E-Trade stocks dropped 58.7%, to $3.55/share. Countrywide fell 64%, to $13.19/share.
Question: With the bad news continuing to come—what can be done to stop the continual loss of value in light of the seemingly unending credit crisis?
Sunday, November 11, 2007
Oil Revenues Reach Record Highs
Sources: Financial Times—Record Prices Deliver $658bn to Opec
Crude oil revenues are expected to reach $658bn this year. This is a 9 percent increase from 2006. The Energy Information Administration guesses that revenues will continue to increase even more in 2008 to approximately $763bn, a 16 percent increase from this year. This increase is most likely caused by the strong oil prices and output increases. The increase in oil income is aiding Opec’s members, like Venezuela and Iran, to take advantage of their political force. Many Opec members, as a result, have become involved in huge development projects in their home countries. The continued revenue increases have helped give Opec member countries much more power.
The oil surge facilitated Iran’s President Mahmoud Ahmadi-Nejad to endure the blow by United Nations and U.S. sanctions. These sanctions were endorsed to deter the government from pursuing nuclear ambitions.
The benefits Iran has incurred may actually hurt Saudi Arabia. The Saudi Arabian government is now under pressure to raise output. This may obscure diplomatic resolution to the Iranian nuclear problem. The extra oil revenues helped internal security in fighting against al-Qaeda. The Saudis wanted stable prices so oil prices would not collapse. Saudi Arabia’s 2007 oil income is expected to increase by 19 percent due to higher prices and production.
Discussion question:
Will Middle East countries join forces and, as a result, increase their political power? Will the United Nations increase the severity of sanctions as Middle East countries gain more independence?
Crude oil revenues are expected to reach $658bn this year. This is a 9 percent increase from 2006. The Energy Information Administration guesses that revenues will continue to increase even more in 2008 to approximately $763bn, a 16 percent increase from this year. This increase is most likely caused by the strong oil prices and output increases. The increase in oil income is aiding Opec’s members, like Venezuela and Iran, to take advantage of their political force. Many Opec members, as a result, have become involved in huge development projects in their home countries. The continued revenue increases have helped give Opec member countries much more power.
The oil surge facilitated Iran’s President Mahmoud Ahmadi-Nejad to endure the blow by United Nations and U.S. sanctions. These sanctions were endorsed to deter the government from pursuing nuclear ambitions.
The benefits Iran has incurred may actually hurt Saudi Arabia. The Saudi Arabian government is now under pressure to raise output. This may obscure diplomatic resolution to the Iranian nuclear problem. The extra oil revenues helped internal security in fighting against al-Qaeda. The Saudis wanted stable prices so oil prices would not collapse. Saudi Arabia’s 2007 oil income is expected to increase by 19 percent due to higher prices and production.
Discussion question:
Will Middle East countries join forces and, as a result, increase their political power? Will the United Nations increase the severity of sanctions as Middle East countries gain more independence?
Disatrous Oil Spill Between Russia & Ukraine
Source: Bloomberg, "Russian Tanker Splits, Spills 1,300 Tons of Fuel Oil (Update4)"
On November 11th, a Russian tanker spilled 1,300 tons of fuel oil in the Kerch strait, between Russia and Ukraine, while at anchor in the strait. The initial tanker accident occurred at 3:35 a.m. on Noveember 11th. Fortunately, the crew of 13 escaped injury. The storm also sank two transporters, the Volnogorsk and the Nakhichevan, which were each carrying about 2,000 tons of sulfur.
As to the effects of the spill, the head of a Russian environmental group believes the spill will have serous consequences for the marine ecosystem due to the toxicity of the spilled oil. It may take several months to remove the oil, but the oil that sank will be “very hard” to clear.
Some analysts find concern in Russia’s “aging infrastructure and the effect of minimal investment in upgrading and maintaining it since the end of the Soviet Union.'' Further, “years of under investment don't just mean a low level of production growth in oil and gas, but the increased risk of transportation infrastructure failure.''
In comparison other large oil spills, The worst spill in U.S. history was from the Exxon Valdez, which leaked 37,000 tons of crude oil into the Prince William Sound, Alaska, in 1989. In addition, the tanker Erika spilt 20,000 tons of heavy fuel oil off the coast of France in 1999, and the Prestige leaked 63,000 tons of heavy fuel oil off northern Spain in 2002.
Questions for discussion: (1) What impact do you think the oil spill will have? (2) Are you concerned about Russia’s “aging infrastructure”?
On November 11th, a Russian tanker spilled 1,300 tons of fuel oil in the Kerch strait, between Russia and Ukraine, while at anchor in the strait. The initial tanker accident occurred at 3:35 a.m. on Noveember 11th. Fortunately, the crew of 13 escaped injury. The storm also sank two transporters, the Volnogorsk and the Nakhichevan, which were each carrying about 2,000 tons of sulfur.
As to the effects of the spill, the head of a Russian environmental group believes the spill will have serous consequences for the marine ecosystem due to the toxicity of the spilled oil. It may take several months to remove the oil, but the oil that sank will be “very hard” to clear.
Some analysts find concern in Russia’s “aging infrastructure and the effect of minimal investment in upgrading and maintaining it since the end of the Soviet Union.'' Further, “years of under investment don't just mean a low level of production growth in oil and gas, but the increased risk of transportation infrastructure failure.''
In comparison other large oil spills, The worst spill in U.S. history was from the Exxon Valdez, which leaked 37,000 tons of crude oil into the Prince William Sound, Alaska, in 1989. In addition, the tanker Erika spilt 20,000 tons of heavy fuel oil off the coast of France in 1999, and the Prestige leaked 63,000 tons of heavy fuel oil off northern Spain in 2002.
Questions for discussion: (1) What impact do you think the oil spill will have? (2) Are you concerned about Russia’s “aging infrastructure”?
UK aims to become a center of Islamic Finance
Source: UK Treasury paves way for Islamic bonds
The UK government is in preparation to launch a series of sharia-compliant bonds, known as sukuk. Treasury minister Kitty Ussher plans a three-month consultation process, and might use next spring’s Budget to arrange for any legal changes that might be necessary in preparation for the first western government sukuk. Ms. Ussher believes that this plan will establish London as “a global gateway to Islamic finance,” assisting British Muslims in their search for sharia-compliant retail products, such as mortgages. Additionally, these bonds could be used as vehicles for British Muslims to invest in National Savings products through banks and post offices.
Despite speculation that the government might back away from the project after the departure of Ed Balls, former City minister and initiator of the scheme, Ms. Ussher will inform a high-level group of City executives this Wednesday (November 14, 2007) of her steadfast commitment to the project. In an interview with the Financial Times, Ms. Ussher responded to doubts whether the project will attract investors. “There is no question of delay at all. If anything there is greater demand. We have been doing an enormous amount of work.”
Unlike conventional bonds, sukuk function like Islamic “investment certificates” representing ownership in the underlying asset. This is because Sharia religious law forbids the collection of profits from interest. Rather, returns are paid in proportion to an investors ownership rights to the underlying asset. The sukuk market has experienced significant growth in the last five years, with nearly $40 billion (£ 19.1bn) issues this year alone, as compared to virtually nothing in 2001.
Many details of the project remain unsettled, including the structure of the sukuk. In addition, the competition for business is fierce, as the Middle East is gaining popularity as an attractive location to set up operations due to its oil wealth. Nonetheless, commitment to the project remains strong, and a successful execution of British sharia-compliant bonds could encourage large UK and western companies to launch similar securities in London, effectively boosting the capital as a center of Islamic finance.
Questions for Discussion
1. Are concerns about investor interest in the sharia-compliant bonds well placed?
The UK government is in preparation to launch a series of sharia-compliant bonds, known as sukuk. Treasury minister Kitty Ussher plans a three-month consultation process, and might use next spring’s Budget to arrange for any legal changes that might be necessary in preparation for the first western government sukuk. Ms. Ussher believes that this plan will establish London as “a global gateway to Islamic finance,” assisting British Muslims in their search for sharia-compliant retail products, such as mortgages. Additionally, these bonds could be used as vehicles for British Muslims to invest in National Savings products through banks and post offices.
Despite speculation that the government might back away from the project after the departure of Ed Balls, former City minister and initiator of the scheme, Ms. Ussher will inform a high-level group of City executives this Wednesday (November 14, 2007) of her steadfast commitment to the project. In an interview with the Financial Times, Ms. Ussher responded to doubts whether the project will attract investors. “There is no question of delay at all. If anything there is greater demand. We have been doing an enormous amount of work.”
Unlike conventional bonds, sukuk function like Islamic “investment certificates” representing ownership in the underlying asset. This is because Sharia religious law forbids the collection of profits from interest. Rather, returns are paid in proportion to an investors ownership rights to the underlying asset. The sukuk market has experienced significant growth in the last five years, with nearly $40 billion (£ 19.1bn) issues this year alone, as compared to virtually nothing in 2001.
Many details of the project remain unsettled, including the structure of the sukuk. In addition, the competition for business is fierce, as the Middle East is gaining popularity as an attractive location to set up operations due to its oil wealth. Nonetheless, commitment to the project remains strong, and a successful execution of British sharia-compliant bonds could encourage large UK and western companies to launch similar securities in London, effectively boosting the capital as a center of Islamic finance.
Questions for Discussion
1. Are concerns about investor interest in the sharia-compliant bonds well placed?
World Bank cites Bhutan as a leader in “Gross National Happiness”
Source: World Bank calls for more national happiness
The World Bank is of the opinion that other countries have much to learn from Bhutan, and should follow its lead as a proponent of “Gross National Happiness.” Gross National Happiness is a guiding policy for the country, giving primary importance to the happiness of its citizenry rather than to Gross National Product. The policy has been in place since 1972, when the former King Jigme Singye Wangchuck put it into practice. Bhutan’s policy holds the position that GNH is a better measure of a country’s wellbeing than GNP, and is guided by the idea that people are bound by their natures to search for happiness.
The World Bank acknowledges that Bhutan has been putting this seemingly unorthodox policy into practice on the ground in an effective way; a recent study found that 68% of the country’s 700,000 people were reportedly happy with their life. Additionally, Bhutan has been a leader in addressing global warming issues. Particularly, the country’s practices regarding forestry and how the constitution protects land use for forestry has done much to address climate change issues in the region.
Question: How different is Bhutan’s policy from that of liberal capitalism?
The World Bank is of the opinion that other countries have much to learn from Bhutan, and should follow its lead as a proponent of “Gross National Happiness.” Gross National Happiness is a guiding policy for the country, giving primary importance to the happiness of its citizenry rather than to Gross National Product. The policy has been in place since 1972, when the former King Jigme Singye Wangchuck put it into practice. Bhutan’s policy holds the position that GNH is a better measure of a country’s wellbeing than GNP, and is guided by the idea that people are bound by their natures to search for happiness.
The World Bank acknowledges that Bhutan has been putting this seemingly unorthodox policy into practice on the ground in an effective way; a recent study found that 68% of the country’s 700,000 people were reportedly happy with their life. Additionally, Bhutan has been a leader in addressing global warming issues. Particularly, the country’s practices regarding forestry and how the constitution protects land use for forestry has done much to address climate change issues in the region.
Question: How different is Bhutan’s policy from that of liberal capitalism?
Saturday, November 10, 2007
New director addresses new issue facing IMF
Source: IMF to heed new global players - FT.com
The emergence of “sovereign wealth funds,” hedge funds and other types of investment groups as major players in the world economy is now forcing the IMF to stand up and pay attention, so says Strauss-Kohn, the newly inaugurated managing director of the IMF. Strauss-Kohn said that the prominence of these groups needs to be taken into consideration in the IMF’s work because such things as financial stability in the global economy will be affected by these groups now, rather than just by external imbalances.
This comment by the new Managing Director was perhaps influenced by certain of the IMF’s member countries, many of whom have expressed concern over these types of funds and the sentiment that the IMF needs to develop a greater understanding of them. Further, these members have suggested that the understanding should be guided primarily by the determination of the transparency and objectives of these funds.
Meanwhile, officials in the U.S. and Europe are wary about the role to be played by these types of funds, particularly whether they should be allowed carte blanche with regards to the acquisition of strategic assets. Additionally, there is the possibility of a protectionist backlash in the U.S. Congress.
Question: To what extent should the IMF involve itself in the monitoring/oversight of these funds?
The emergence of “sovereign wealth funds,” hedge funds and other types of investment groups as major players in the world economy is now forcing the IMF to stand up and pay attention, so says Strauss-Kohn, the newly inaugurated managing director of the IMF. Strauss-Kohn said that the prominence of these groups needs to be taken into consideration in the IMF’s work because such things as financial stability in the global economy will be affected by these groups now, rather than just by external imbalances.
This comment by the new Managing Director was perhaps influenced by certain of the IMF’s member countries, many of whom have expressed concern over these types of funds and the sentiment that the IMF needs to develop a greater understanding of them. Further, these members have suggested that the understanding should be guided primarily by the determination of the transparency and objectives of these funds.
Meanwhile, officials in the U.S. and Europe are wary about the role to be played by these types of funds, particularly whether they should be allowed carte blanche with regards to the acquisition of strategic assets. Additionally, there is the possibility of a protectionist backlash in the U.S. Congress.
Question: To what extent should the IMF involve itself in the monitoring/oversight of these funds?
Oil Increasingly an Important Part of Latin American Landscape
Bloomberg - Lula Says Brazil Oil Find May Lead to OPEC Membership
New York Times Magazine - The Perils of Petrocracy
Oil headlines have dominated the Latin American news cycle recently, with the Brazilian announcement of 8 billion barrels of reserves only the latest indication of the increasing importance of oil to the region. The announcement regarding the potential of the Tupi oil field led Brazilian President Lula de Silva to speculate that Brazil might eventually join OPEC. The announcement boosted Brazil's proven reserves by two-thirds.
Developing countries' oil reserves, including those in Latin America, have been gaining importance as traditional oil fields controlled by multinational corporations have reached their limit of capacity and production. Venezuela, the lead producer in Latin America, uses oil proceeds to fund a substantial portion of its increasing government spending. Ecuador, although a relatively small producer compared to other countries, recently re-joined OPEC and has seen its oil profile grow.
The state governments in Latin America have been the primary beneficiaries of the rise in oil prices and increasing oil production, as much of the exploration is done by state-owned companies: Petrobras in Brazil and Pdvsa in Venezuela. However, the boon of oil reserves brings with it the rising cost of exploration. It is estimated Petrobras will have to invest $112 billion in the next several years to develop the Tupi field. Some say that Pdvsa, although very profitable due to the high price of oil, has neglected to put money back into development and infrastructure, rather existing as a personal coffer for President Hugo Chavez's social projects.
As long as oil prices continue to rise, it appears that oil in Latin America will continue to increase in importance and generate a windfall for government revenues. It is unclear, however, the long-term effect increasing oil production will have on the region or what will occur when oil prices drop.
Discussion:
1. Theorists have spoke of the "curse" of abundant natural resources and the resulting poor economic performance and long-term growth prospects of those countries. How can countries with abundant natural resources parlay those into long-term economic growth and sustainability? More specifically, how can countries enjoying the benefits of high oil prices plan for the future when oil prices will be less impressive?
New York Times Magazine - The Perils of Petrocracy
Oil headlines have dominated the Latin American news cycle recently, with the Brazilian announcement of 8 billion barrels of reserves only the latest indication of the increasing importance of oil to the region. The announcement regarding the potential of the Tupi oil field led Brazilian President Lula de Silva to speculate that Brazil might eventually join OPEC. The announcement boosted Brazil's proven reserves by two-thirds.
Developing countries' oil reserves, including those in Latin America, have been gaining importance as traditional oil fields controlled by multinational corporations have reached their limit of capacity and production. Venezuela, the lead producer in Latin America, uses oil proceeds to fund a substantial portion of its increasing government spending. Ecuador, although a relatively small producer compared to other countries, recently re-joined OPEC and has seen its oil profile grow.
The state governments in Latin America have been the primary beneficiaries of the rise in oil prices and increasing oil production, as much of the exploration is done by state-owned companies: Petrobras in Brazil and Pdvsa in Venezuela. However, the boon of oil reserves brings with it the rising cost of exploration. It is estimated Petrobras will have to invest $112 billion in the next several years to develop the Tupi field. Some say that Pdvsa, although very profitable due to the high price of oil, has neglected to put money back into development and infrastructure, rather existing as a personal coffer for President Hugo Chavez's social projects.
As long as oil prices continue to rise, it appears that oil in Latin America will continue to increase in importance and generate a windfall for government revenues. It is unclear, however, the long-term effect increasing oil production will have on the region or what will occur when oil prices drop.
Discussion:
1. Theorists have spoke of the "curse" of abundant natural resources and the resulting poor economic performance and long-term growth prospects of those countries. How can countries with abundant natural resources parlay those into long-term economic growth and sustainability? More specifically, how can countries enjoying the benefits of high oil prices plan for the future when oil prices will be less impressive?
Egypt and China Forge Economic Ties
Source: Financial Times: Egypt and China in investment deal
Egypt and China have reached an agreement to set up a five square kilometer industrial zone in the Suez area. Egypt hopes to attract $2.5 billion in Chinese investment from this deal. To attract foreign investments, Egypt has marketed its strategic location, trade agreements with foreign countries in Europe, Africa, the Middle East, and the United States, and its cheap energy and labor costs. In addition, the new deal highlights China’s increasing economic ties to Africa and China’s increasing global economic control.
Companies in the zone are expected manufacture textiles, gas and oil pipes, electronics and car and car components. The zone will provide Chinese companies with an export hub for Europe, the Middle East, and Africa. The marketing seems to have worked. This is the first manufacturing zone the Chinese government has supported in the area.
The new zone, however, has its critics. Some argue that China is taking advantage of African resources and adding to the competition of African industries. In response, supporters extol the advantages of the industrial zone, such as job creation for Egyptians.
China and Egypt have increased the number of exports between countries. In 2007, Chinese exports to Egypt total $2.9 billion, a 50% increase from 2006, and Egyptian exports to China total $164 million, a 23% increase from 2006. China hopes to use Egypt to capitalize on markets, such as Europe, with which Egypt has connections. Within the next six years, China is expected to become Egypt’s biggest trading partner, surpassing the United States (trade totaled $6.7 billion in 2006).
For Discussion:
In June of 2000, China released a list of 225 projects within China which are open to foreign development and investment. The hope was to draw outside investment and technology into the central provinces of China. This effort shows a history of China desiring greater economic contact with other countries. See China Unveils 225 Western Development Projects. With China's most recent partnership with Egypt, is China bending toward a capitalist system and will a more democratic China become a possibility because of the global opportunities for China?
Tuesday, November 06, 2007
Japan's Unemployment Rates on the Rise
Sources: Japan Jobless Rise Bodes Ill for Economy, Japan Unemployment Rate Worsens
Economists warned that
Question:
1) What might be some of the major causes of
2) Is this likely a temporary blip or could it be indicative of larger problems for the Japanese economy?
Monday, November 05, 2007
Labor Conflicts in Dubai
Sources: Financial Times: Dubai Threatens to Deport Striking Labourers
Many South Asian laborers have refused to return to work due to disagreements over pay and working conditions. However, the government instead of considering these laborers needs, have threatened to deport the strikers. The government has considered the strikers a threat to the security and safety of the state. The strikes have taken place at a few engineering companies that rarely face such political issues. Even though the government has threatened to deport these laborers, other organizations have attempted to reform these labor issues. “The UAE has launched a government reform drive to tackle the issue of workers’ rights, raising the number of labor inspectors to uncover malpractice.”
Although there has been some effort for reform, human rights organizations claim that such efforts are insufficient for change. Dubai has taken some serious leaps towards reconstructing their land, which may be the reason for such severe government reaction against strikers. Engineers on strike may be considered a threat to Dubai’s economic development.
Organizations have recently come together to gather recommendations to create more efficiency in labor in the UAE. One proposition is as follows: “They would set up agreements with the workers’ home countries, and explore ways of formalizing a system for collective bargaining.” This is a good move forward because the organizations are at least recognizing a need for immediate change. The UAE must find a beneficial medium between “international standards” and “national interest.”
Discussion question:
Can Dubai continue to produce economic growth without the security of foreign labor?
Many South Asian laborers have refused to return to work due to disagreements over pay and working conditions. However, the government instead of considering these laborers needs, have threatened to deport the strikers. The government has considered the strikers a threat to the security and safety of the state. The strikes have taken place at a few engineering companies that rarely face such political issues. Even though the government has threatened to deport these laborers, other organizations have attempted to reform these labor issues. “The UAE has launched a government reform drive to tackle the issue of workers’ rights, raising the number of labor inspectors to uncover malpractice.”
Although there has been some effort for reform, human rights organizations claim that such efforts are insufficient for change. Dubai has taken some serious leaps towards reconstructing their land, which may be the reason for such severe government reaction against strikers. Engineers on strike may be considered a threat to Dubai’s economic development.
Organizations have recently come together to gather recommendations to create more efficiency in labor in the UAE. One proposition is as follows: “They would set up agreements with the workers’ home countries, and explore ways of formalizing a system for collective bargaining.” This is a good move forward because the organizations are at least recognizing a need for immediate change. The UAE must find a beneficial medium between “international standards” and “national interest.”
Discussion question:
Can Dubai continue to produce economic growth without the security of foreign labor?
Sunday, November 04, 2007
Job Rates Grow
Sources: AFP, Washington Post
In the midst of all the bad news of a weakening US dollar, a housing glut, and credit woes, the new job report provided much needed good news for the American economy. Employers added nearly 166,000 new jobs in October, nearly double the projected 80,000. Unemployment, however, remained firm at 4.7% nationally. As expected though, jobs tied to the credit and housing markets saw some contraction. Residential construction and contracting jobs fell by 21,500, and the manufacturing sector lost 21,000 jobs. Nevertheless, the health care sector added 34,400 jobs, employment services firms added 33,500, public schools added 34,600, and the professional sector added 23,500 jobs. More than just jobs—salaries and wages are increasing. Non-supervisory wages has risen 3.8 percent over the past year, to $17.58/hour. Nevertheless, some bad news is still around. Unemployment has remained steady, but a lower proportion of the working-age population is employed today.
Analysts remain somewhat concerned, however, that job growth will eventually slow down. Nevertheless, the stronger the expected job growth and a 3.9 percent economic growth demonstrates that the slowdown has not yet occurred. Economic experts consider the labor market an “even more important economic forecaster than usual” in light of the credit and housing crunch. As Americans lose wealth through their homes, they will keep spending money “if businesses keep expanding and hiring. Consumer spending is the economy’s main driver.” In other words, there can be no recession if there are jobs.
Questions: Can the job rates continue to grow--even though housing prices and wealth is dropping through the floor?
In the midst of all the bad news of a weakening US dollar, a housing glut, and credit woes, the new job report provided much needed good news for the American economy. Employers added nearly 166,000 new jobs in October, nearly double the projected 80,000. Unemployment, however, remained firm at 4.7% nationally. As expected though, jobs tied to the credit and housing markets saw some contraction. Residential construction and contracting jobs fell by 21,500, and the manufacturing sector lost 21,000 jobs. Nevertheless, the health care sector added 34,400 jobs, employment services firms added 33,500, public schools added 34,600, and the professional sector added 23,500 jobs. More than just jobs—salaries and wages are increasing. Non-supervisory wages has risen 3.8 percent over the past year, to $17.58/hour. Nevertheless, some bad news is still around. Unemployment has remained steady, but a lower proportion of the working-age population is employed today.
Analysts remain somewhat concerned, however, that job growth will eventually slow down. Nevertheless, the stronger the expected job growth and a 3.9 percent economic growth demonstrates that the slowdown has not yet occurred. Economic experts consider the labor market an “even more important economic forecaster than usual” in light of the credit and housing crunch. As Americans lose wealth through their homes, they will keep spending money “if businesses keep expanding and hiring. Consumer spending is the economy’s main driver.” In other words, there can be no recession if there are jobs.
Questions: Can the job rates continue to grow--even though housing prices and wealth is dropping through the floor?
Nigeria: High on Oil but Low on Power
Sources
AllAfrica: Nigeria: No More Excess Crude Fund for Power Plants - Yar'Adua
Wall Street Journal: Nigeria’s Power Problem
Nigeria produces the largest amount of crude oil in Africa, but its energy generation capacity is one of the lowest in the world. Last year, former President Olusegun Obasanjo used money from the excess crude account to fund construction of power plants. Nigeria’s current President, Musa Yar`Adua, has put adequate power as one of the priorities of his administration. However, Yar’Adua announced that the Federal Government will no longer use money from the excess crude account to fund Nigeria’s power plants. The excess crude account consists of money gained by Nigeria over its cost as set in its national budget.
This decision to stop using the excess crude account for power plants was hinged on “the legal implications” of such action. The money belongs to the three tiers of government, so Nigeria will have to find money elsewhere for the power plants.
In the past, Nigeria has faced many problems with producing sufficient amounts of electricity. Additionally, recently there have been concerns about Nigeria’s oil pipelines being sabotaged. As a result of these disruptions, foreign investors are hesitant to invest money in Nigeria. However, Yar’Adua hopes that the reform of the power sector will promote local and foreign investors to invest in the country.
Discussion question:
Will this type of investment by Nigerians in the Diaspora be enough to draw other investors into Nigeria’s energy plan, given some of the political and social difficulties the country is facing?
Saturday, November 03, 2007
New partnerships with Chinese Banks Mark Transformation in Africa’s banking industry
Sources:
Financial Times - ICBC in $5.6bn S Africa bank deal
Financial Times - China’s CDB seals Nigerian deal
The China Development Bank has entered a partnership with the United Bank for Africa, but has not bought equity in the African Bank. This partnership is significant because it will expand the China Development Bank’s ability to finance infrastructure projects in Africa. CDB owns more assets than the World Bank and Asian Development Bank combined. Therefore, the United Bank for Africa’s chief executive, Tony Elumelu, noted that this partnership was particularly important because “[i]t provides us [with] an almost infinite amount of capital to execute projects.” One of the first projects Nigeria hopes CDB will finance is a power project to help with electricity shortages.
Additionally, last week the Industrial and Commercial Bank of China announced that it will pay $5.56 billion to buy a 20% stake in South Africa’s Standard Bank. The Standard Bank chief executive views this deal as a “vote of confidence in South Africa and Africa.” Furthermore, the deal illustrates that China is seeking to deepen its ties with Africa by moving beyond the traditional cheap loans that it has made in the past.
Part of the reason Chinese Banks are interested in funding African projects comes from their desire to secure oil and minerals from Africa to fuel China’s economy. Tony Elumelu pointed out that “Africa is a huge untapped market – but it takes those who understand African markets and African risks to take advantage.”
Discussion Question:
Africa has been primarily dependent on Western companies and donors for funding. What impact, if any, will this shift in funding from Asian banks have on Africa’s economy?
Financial Times - ICBC in $5.6bn S Africa bank deal
Financial Times - China’s CDB seals Nigerian deal
The China Development Bank has entered a partnership with the United Bank for Africa, but has not bought equity in the African Bank. This partnership is significant because it will expand the China Development Bank’s ability to finance infrastructure projects in Africa. CDB owns more assets than the World Bank and Asian Development Bank combined. Therefore, the United Bank for Africa’s chief executive, Tony Elumelu, noted that this partnership was particularly important because “[i]t provides us [with] an almost infinite amount of capital to execute projects.” One of the first projects Nigeria hopes CDB will finance is a power project to help with electricity shortages.
Additionally, last week the Industrial and Commercial Bank of China announced that it will pay $5.56 billion to buy a 20% stake in South Africa’s Standard Bank. The Standard Bank chief executive views this deal as a “vote of confidence in South Africa and Africa.” Furthermore, the deal illustrates that China is seeking to deepen its ties with Africa by moving beyond the traditional cheap loans that it has made in the past.
Part of the reason Chinese Banks are interested in funding African projects comes from their desire to secure oil and minerals from Africa to fuel China’s economy. Tony Elumelu pointed out that “Africa is a huge untapped market – but it takes those who understand African markets and African risks to take advantage.”
Discussion Question:
Africa has been primarily dependent on Western companies and donors for funding. What impact, if any, will this shift in funding from Asian banks have on Africa’s economy?
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