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23-MAY-2016 Qatar Punching Beyond its Size @TheStarKenya Africa |
I visited Doha for the first time on the eve of the second (Iraq) Gulf War in 2003. I was convinced then that Qatar was set to explode onto the scene because of its gas reserves, and I wanted to see things up close and personal. Doha in 2003 was still a little sleepy. Subsequently, I visited Doha with al Jazeera in 2011 and by that time the State of Qatar had the wind (gas) in their sails for a number of years and the growth and transformation of Qatar had turned exponential. The ubiquity of al Jazeera (after a period when it was caught in Donald Rumsfeld’s cross-hairs) gave the state outsize soft power across the Middle East and beyond. Today, Qatar is a big player in the region punching far beyond its absolute size (estimates are that there are fewer than 300,000 Qatari citizens) both in terms of hard and soft power. In a geopolitical context, Qatar played a big role in toppling Muammar Gaddafi in Libya and its influence can be seen similarly in the move to remove President Bashar al-Assad in Syria. In foreign policy terms, Qatar has packed a big punch beyond merely hosting the US military at al Udeid air base. It was the state of Qatar which bailed out Barclays Plc during the financial crisis. In Kenya, Qatar National Bank was spoken of as a possible buyer of Chase Bank but notwithstanding that QNB was a rank outsider in that transaction (they tend to operate on a wider canvas and not a narrow one which Chase Bank was). The fact that it was referenced speaks to the state’s power on the global stage.
I am therefore grateful to the Qatar ambassador to Kenya Ibrahim Mohammed Abdulrahman Alabdullah for the invitation to attend the 16th Doha forum, from where I am writing this article from. This is the 16th iteration of the forum which is being held under the title “Stability and Prosperity for All”. I attended the opening ceremony on Saturday night and on my way in I spotted Afghanistan President Ashraf Ghani who was clutching his Tasbi. Big- ticket attendees were the Yemeni President Abdrabnuh Mansur Hadi and the President of Niger Mahamadou Issoufou who said “terrorism has deleted borders between countries”
in his opening address. President of Mauritius Dr Ameenah Gurib said “equity and equality of opportunity are essential”. The UN secretary general Ban Ki-moon said “we urgently need to start discussions on the transition in Syria”. The former president of Mozambique Armando Guebeza was also in attendance.
One of my takeaways is: The new and youthful Emir HH Sheikh Tamim bin Hamad Al Thani has reset the look and feel, and we will have to watch to see whether the direction has been reset as well.
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Twilight of the Petrostate The National Interest Law & Politics |
The age of oil rents is over. A political and geopolitical revolution is on its way.
About twenty countries around the world are dependent on a single number: the price of oil. Some, primarily Persian Gulf states, live entirely off their oil and gas wealth. They rely on crude oil, natural gas and petroleum products for 50 percent of their Gross Domestic Product and for 70-plus percent of their budget revenue. Some 15 countries generate more than 50 percent of their export earnings from oil, gas and petroleum product sales.
Oil-producing countries have been living a dream. In recent decades, most oil-producing countries saw their per-capita GDP not only expand but show a rate of growth above the global average. In other words, they were getting rich faster than the rest of the world. In terms of dollar-denominated GDP per capita, as crude prices peaked in 2011 Russia and Kazakhstan outstripped Malaysia and Turkey; Saudi Arabia and Equatorial Guinea nearly overtook South Korea; Kuwait shot ahead of Great Britain, while Qatar rose to rank as one of the three richest nations. The new generation of the petrostates' political elite has come to look on oil rent as a means to achieve all its goals. And yet, many experts will call the oil windfall a curse, not a blessing. A prosperity that is due to the sheer accident of owning large mineral resources rather than to technological prowess, investment and hard work has its downsides, including the degradation of political systems, the throttling of competition and the proliferation of populist fiscal policies.
The weakening in oil demand has more to do with technological progress than with the slowdown in China’s economy, which has been the main growth driver for the world economy and oil consumption in the recent decades.
Indeed, economic growth and oil consumption have become more and more disconnected. Over the last fifteen years, average oil-consumption-to-GDP elasticity has been about 0.7 for China and even less for developed countries. A striking example is the U.S. where from 1980-2014 real GDP grew by 150 percent and oil consumption edged up only 11 percent. This is because modern economic growth is increasingly driven by more energy-efficient sectors. Even lower prices fail to boost oil's appeal to consumers who stand to gain more from improving energy efficiency than from saving on oil costs.
The vast majority of oil-producing states have paid for their windfalls with the entrenchment of authoritarian or populist left-wing regimes, repression of civil society and infringement of women's rights.
Only a third of oil-producing nations enjoy GDP per capita in excess of $10,000, while five (Angola, Iraq, Nigeria, Venezuela and Algeria) have failed to reach the $5,000 mark. In other words, although the petrostates as a group have outperformed the rest of the world in recent years, some of them have missed out on their chance.
Theoretically, a government can make up for lower oil revenue by deploying the reserves accumulated in a sovereign wealth fund or by raising debt. About half of the oil-producing countries have built substantial reserves. Moreover, Norway (which learned the lesson of the 1986 oil slump and the subsequent banking crisis in the aftermath of which its reserve fund was set up), Kuwait and the UAE have all put aside enough money to tide them over a fairly long period of low oil prices or even nonexistent oil revenue. On the other hand, countries like Angola, Nigeria, Iraq, Venezuela, Mexico and Ecuador have too tiny a piggy-bank to compensate for revenue shortfalls in even the near term, while Russia and Algeria are vulnerable over the medium term. The least wealthy nations (by GDP per capita) have the smallest reserves, a result of the imprudent economic policies of their governments.
The only way out of the squeeze is to cut spending, starting with capital expenditures. However, phasing out infrastructure and other mammoth projects that governments use to create jobs could cause mass unemployment and social unrest. Shrinking capital spending may also trigger infighting among the corrupt elite, as its major source of illicit enrichment dwindles.
The threats to social peace from a reduction in current spending are too obvious to merit discussion.
The deficit is biggest in Venezuela (24.4 percent of GDP in 2015), Algeria (13.7 percent), Azerbaijan (7.6 percent), Russia (5.7 percent) and Ecuador (5.1 percent), all of which are already feeling the pinch. But even the affluent Persian Gulf states, particularly Saudi Arabia where government spending exceeded 50 percent of GDP and the budget deficit hit 21.6 percent of GDP in 2015, will have to radically revise their fiscal policies in the coming years. This revision will have far-reaching consequences not only for their own peoples but for the whole world.
By autumn 1991 the Soviet Union was going bankrupt, with no international reserves to speak of, no means to avert default and no money to buy vital imports, let alone support “friendly” regimes. The living standards of a population that depended on government aid plummeted. The end of 1991 marked the end of the USSR.
First, the populist regimes in Venezuela, Ecuador and Algeria, which are the most financially vulnerable today, are going to be hit hard. Indeed, Latin America as a whole is certain to veer to the right. The rulers in Ecuador and Venezuela, as well as in Venezuela-sponsored Cuba, have already been scared by the triumph of right-wing forces in Argentina. While liberal reforms will hardly bring about an immediate improvement in people's lives, left-wing populism is certain to start losing its grip on the continent.
Now is the time for petrostates to awaken from their long oil dream and choose between the first and the third worlds.
Conclusions
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From Ryszard Kapuscinski's book Shah of Shahs Law & Politics |
The following essay on Oil always struck me as particularly insightful:
Oil kindles extraordinary emotions and hopes, since oil is above all a great temptation. It is the temptation of ease, wealth, strength, fortune, power. It is a filthy, foul-smelling liquid that squirts obligingly up into the air and falls back to earth as a rustling shower of money. To discover and possess the source of oil is to feel as if, after wandering long underground, you have suddenly stumbled upon royal treasure. Not only do you become rich, but you are also visited by the mystical conviction that some higher power has looked upon you with the eye of grace and magnanimously elevated you above others, electing you its favorite.
Many photographs preserve the moment when the first oil spurts from the well: people jumping for joy, falling into each other’s arms, weeping.
Oil creates the illusion of a completely changed life, life without work, life for free. Oil is a resource that anesthetizes thought, blurs vision, corrupts. People from poor countries go around thinking: God, if only we had oil! The concept of oil expresses perfectly the eternal human dream of wealth achieved through lucky accident, through a kiss of fortune and not by sweat, anguish, hard work. In this sense oil is a fairy tale, and like every fairy tale, a bit of a lie. Oil fills us with such arrogance that we begin believing we can easily overcome such unyielding obstacles as time. With oil, the last Shah used to say, I will create a second America in a generation! He never created it.
Oil, though powerful, has its defects. It does not replace thinking or wisdom.
For rulers, one of its most alluring qualities is that it strengthens authority. Oil produces great profits without putting a lot of people to work. Oil causes few social problems because it creates neither a numerous proletariat nor a sizable bourgeoisie. Thus the government, freed from the need of splitting the profits with anyone, can dispose of them according to its own ideas and desires.
Look at the ministers from oil countries, how high they hold their heads, what a sense of power they have, they, the lords of energy, who decide whether we will be driving cars tomorrow or walking.
And oil’s relation to the mosque? What vigor, glory, and significance this new wealth has given to its religion, Islam, which is enjoying a period of accelerated expansion and attracting new crowds of the faithful.
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Turkey Ruling Party Anoints New Premier to Tighten Erdogan Grip @business Law & Politics |
Turkey’s ruling party prepared on Sunday to install an ally of Turkish President Recep Tayyip Erdogan as the next prime minister, to legalize the de facto shift of the country’s power to Erdogan’s hands from parliament’s.
Binali Yildirim, the only candidate to lead the AK Party, will take over from current chairman and Prime Minister Ahmet Davutoglu, who announced his resignation this month after failing to assert his authority against Erdogan. According to most readings of Turkey’s constitution, the prime minister is the head of the executive, with the president traditionally taking a more ceremonial role.
That is, until Erdogan became president in 2014.
"What we need to do is to legalize the de facto situation, to bring to an end this confusion,’’ Yildirim said in his speech during the convention, referring to Erdogan’s push to concentrate powers with the presidency. "The way to do this is with a new constitution, and a presidential system in the new constitution.’’
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World's No. 2 Currency Trader says Dollar Rebound Just the Start @business International Trade |
The dollar’s three-week rally is just the beginning, according to Deutsche Bank AG.
A slump by the greenback earlier this year has “likely run its course,” analysts at the world’s second-largest currency trader wrote in a note Friday. The bank favors buying the U.S. currency versus emerging markets -- such as China, Mexico and South Korea -- following a shakeout in speculative bets on the dollar, George Saravelos, co-head of global foreign-exchange research in London, wrote.
“The dollar still has some legs,” said Sebastien Galy, a strategist at Deutsche Bank in New York. “The global dollar trend is probably far less appealing than it used to be, but there’s still some opportunity there."
The Bloomberg Dollar Spot Index, which tracks the dollar versus 10 peers, added 0.8 percent this week. The greenback rose 0.8 percent to $1.1224 per euro and gained 1.4 percent to 110.15 yen. Market Swings
The dollar slumped 12 percent versus the yen, 7 percent versus the euro, and 7 percent against 10 peers this year before turning higher this month.
“The dollar cycle isn’t old enough to die of old age,” Saravelos wrote. “Recent weakness has likely run its course.”
Markets are pricing just a 30 percent likelihood of a hike next month and a 73 percent by the end of the year.
“The dollar does go up against risky assets,” Lee Ferridge, the Boston-based head of macro strategy for North America at State Street Global Markets, said in an interview at Bloomberg’s New York headquarters. “But for euro and yen, it’s much more subtle now because that’s about policy divergence.”
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Why Brimming Oil Inventories Aren't Crashing Prices @Bfly Commodities |
Inventories of crude oil and refined products have soared, but seem to be having little impact on prices.Measured in terms of the number of days of demand that could be met by the stored oil, OECD commercial inventories have risen from 57 days at the end of 2013 to 67 days at the end of March this year. They exceed by 5 days the volume of oil in storage at the depth of the financial crisis, after global oil demand had collapsed.
Surging oil inventories are normally associated with falling oil prices, because they're seen as a signal that there's too much oil about. Until early this year, this time was no different. The 76 percent drop in crude oil prices that accompanied the rise in inventories is well known.But the recent surge in prices, which have jumped by more than 75 percent from their mid-January low, has not been accompanied by a drop in the volume of oil in storage. Quite the opposite.
Much of the reported spare capacity is the result of disruptions to supply that can't be restored without improvement in some underlying political problem -- whether the unrest in the Niger River delta, or the chaos engulfing Libya.
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How Kosovo Was Turned Into Fertile Ground for ISIS NYT Emerging Markets |
KRISTINA, Kosovo — Every Friday, just yards from a statue of Bill Clinton with arm aloft in a cheery wave, hundreds of young bearded men make a show of kneeling to pray on the sidewalk outside an improvised mosque in a former furniture store.
The mosque is one of scores built here with Saudi government money and blamed for spreading Wahhabism — the conservative ideology dominant in Saudi Arabia — in the 17 years since an American-led intervention wrested tiny Kosovo from Serbian oppression.
Since then — much of that time under the watch of American officials — Saudi money and influence have transformed this once-tolerant Muslim society at the hem of Europe into a font of Islamic extremism and a pipeline for jihadists.
Kosovo now finds itself, like the rest of Europe, fending off the threat of radical Islam. Over the last two years, the police have identified 314 Kosovars — including two suicide bombers, 44 women and 28 children — who have gone abroad to join the Islamic State, the highest number per capita in Europe.
They were radicalized and recruited, Kosovo investigators say, by a corps of extremist clerics and secretive associations funded by Saudi Arabia and other conservative Arab gulf states using an obscure, labyrinthine network of donations from charities, private individuals and government ministries.
“They promoted political Islam,” said Fatos Makolli, the director of Kosovo’s counterterrorism police. “They spent a lot of money to promote it through different programs mainly with young, vulnerable people, and they brought in a lot of Wahhabi and Salafi literature. They brought these people closer to radical political Islam, which resulted in their radicalisation.”
But where the Americans saw a chance to create a new democracy, the Saudis saw a new land to spread Wahhabism.
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Indicted opposition leader leaves Congo for treatment in South Africa Africa |
Some of Katumbi's supporters fear that authorities will block the multi-millionaire former mining mogul from returning to the country, but Kapiamba rejected that possibility.
"They can't force him into exile," Kapiamba said, adding that Katumbi was headed to Johannesburg. "He is going to return."
Political tensions are running high in Congo ahead of the scheduled election. The country's highest court ruled last week that Kabila could stay in power if it did not take place before the end of his mandate.
Opposition parties labeled that a "constitutional coup d'etat" and called for marches across the country on May 26 to demand that Kabila step down this year.
On Friday, a court also sentenced three activists, arrested hours before a general strike in February to demand that Kabila leave power when his mandate expires this year, to one year in prison, the United Nations said.
The director of the U.N. human rights office in Congo, Jose Maria Aranaz, denounced the decision as evidence of "the instrumentalization of the judiciary and the continued criminalization of civil society."
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Fears DRC president's push to keep power will spark major violence Africa |
Ben Shepherd, an analyst at Chatham House, said the moves against Katumbi were part of a struggle by the rival politicians to win the confidence of members of Congo’s “interlocking, self-interested elite”.
“There is a sense that the presidency is weak. Kabila hasn’t managed to get a third term rubber-stamped and a new deal is possible. Currently no one wants to commit to either side so momentum is extremely important. If one candidate could attract support it could snowball,” Shepherd said.
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Africa's ticking time bomb: $35 billion worth of Eurobond debt Africa |
Seychelles holds the distinction of being the first sub-Saharan African country to issue a sovereign bond – it issued a US$30 million bond in 2006. This was followed by the Democratic Republic of Congo (DRC) issuing $454 million, Gabon $1 billion and Ghana $750 million in 2007.
Between 2010 and 2015 at least a dozen other sub-Saharan African countries, including Côte d’Ivoire, Senegal, Angola, Nigeria, Tanzania, Namibia, Rwanda, Kenya, Ethiopia and Zambia issued sovereign bonds. They raised commercial debt in excess of $19.5 billion.
Many of these Eurobonds will mature between 2021 and 2025. It will require these sub-Saharan African countries to repay an average of just under $4 billion annually in that period. But they are already currently bleeding a rising total of just over $1.5 billion in annual coupon payments on these Eurobonds. This represents a total of an additional $15 billion across the term of the Eurobonds. The total accumulated bonds are in excess of $24 billion. The principle amount of this is $35 billion.
The $750 million Ghana bond, with a ten-year maturity, was issued in October 2007 and was four times oversubscribed. The principle repayment, which kicks in in 2017, will signal the direction of the continent’s economic dynamics in the years to follow. The writing is already on the wall. Ghana has already buckled, requiring an International Monetary Fund (IMF) financial restructuring package.
Prior to these countries issuing the bonds, they carried foreign debt in the form of bilateral and multilateral concessional loans. These loans carried an average interest rate of 1.6% and a maturity of 28.7 years. The financing from sovereign bonds comes at an average floating coupon rate price of 6.2% with an 11.2-year maturity period.
This means that these countries will continue to bear rising inflation, debt repayment crisis, reduction of GDP growth and challenges with managing their fiscal deficits.
Déjà vu, Africa. We are set for troubled times.
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Nigeria's gross domestic product contracted by 0.36 percent in the first quarter of the year, the Nigerian Bureau of Statistics (NBS) said on Friday Africa |
"This is probably the economy's worst performance since the mid-1990s," said John Ashbourne, Africa analyst at Capital Economics, in a note on the GDP figures.
The central bank has imposed currency restrictions but maintained the naira's peg against the dollar. Investment has fallen, as foreign firms expect an eventual devaluation because of the slump in oil revenues.
President Muhammadu Buhari has rejected calls by the International Monetary Fund for a more flexible exchange rate.
"The biggest falls in growth came in the manufacturing sector, which is being squeezed by a complex and inflexible FX system," said Ashbourne. "It is now clear that these policies have – as we'd long argued – made a bad situation worse."
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08-FEB-2016 Meanwhile Nigeria, the biggest economy in SSA, will surely contract in 2016 Africa |
Meanwhile Nigeria, the biggest economy in SSA, will surely contract in 2016 and not least because its president is determined not to devalue the naira. The curve of history [from Soros skinning the Bank of England in 1992, to the Mexican peso crisis in 1994, to the Thai baht crisis in 1998 and many more too numerous to mention] confirm that maintaining an artificial foreign exchange rate is a fool’s errand and eventually carries the risk that the breakdown spirals out of control and can become seriously disorderly. The official naira rate is just below 200 to the dollar but no one is holding any store by that price and that’s why absolutely no one is putting any more money in Nigeria because they all know when the haircut is finally imposed it’s going to be a big one. I find it just extraordinary that such a brilliant president would risk it all on a bet on a single number in a game of roulette.
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Battle for media revenue shapes up as Gitahi, ex-Ogilvy MD form rival firm Kenyan Economy |
Mr Thakrar confesses that he did not see this coup coming.
“Of course I was caught by surprise. But this is a people business and these kinds of things happen all over the world,” he told The EastAfrican.
The entrant now promises a fierce fight for the Ksh86 billion ($860 million) advertising market in Kenya, which will reverberate across East Africa least because Oxygène has swooped not just key personnel from Scangroup, but also some of its key accounts.
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