Russia Fun: Ruling on $100B Yukos Expropriation Claim

♠ Posted by Emmanuel in ,, at 7/25/2014 01:30:00 AM
Those were the days--and some hope to bring them back.
Five years later, we are about to hear the decision on Russia's liabilities from expropriating Yukos. Readers will remember Mikhail Khodorkovsky, formerly a favored oligarch who then irked Vladimir Putin by entering politics. Shortly thereafter Khodorkovsky was thrown in jail, the firm he controlled was dismembered, and its assets were subsumed by the state-owned giant oil concern Rosneft. In post-USSR Russia, the unspoken arrangement among the beneficiaries of the fire-sale of state-owned commodities firms was that they could enjoy their, er, unusually acquired fortunes for as long as they did not criticize the men who made it possible. This guy had other bright ideas in biting the hand that fed.

While Khodorkovsky has become the poster boy for Putin's arbitrariness and venality, there were other shareholders adversely affected by the expropriation. The case they made to recoup lost investment--they claim over a whopping $100 billion--is about to be ruled on by the Permanent Court of Arbitration which handles these sorts of cases:
Russia will discover next week how much it may be asked to pay for the confiscation a decade ago of Mikhail Khodorkovsky’s Yukos Oil Co., then the country’s biggest oil producer. The Permanent Court of Arbitration in The Hague will rule on July 28 on a $103 billion damages claim the company’s former owners filed against Russia in 2007, Tim Osborne, head of GML Ltd., former holding company of Yukos, said by e-mail. Court official Willemijn van Banning said by phone she couldn’t comment on the date for the ruling.
As you know, Putin and Co. play hardball. They are not going to fork over whatever compensation is determined gladly. What most observers expect to occur is for Russia to balk at payment of an amount rather less than $100 billion. This intransigence will result in a fight to freeze Rosneft assets waged the world over to provide compensation:
GML has a good chance of winning partial damages, according to Gus Van Harten, a professor specializing in arbitration at York University’s Osgoode Hall Law School in Canada. There’s “very limited room” for appeal and Russia will resist paying, so any amount awarded would trigger a global legal battle to seize state property, including assets of OAO Rosneft (ROSN), which acquired most of Yukos in a series of forced auctions, Van Harten said.
The largest shareholder that brought the case, former Yukos holding company GML, is composed largely of other Russians who benefited greatly from the fire-sale of Soviet era energy assets. Ironically, Russia is being taken to task by those who it enriched prior to the state reincorporating what it previously owned. Russian politics are weird. Given its rich human capital, you would have hoped that the country moved past extractive industries and diversified into others from those that make it reliant on commodity-based industries.

Rather, the back-and-forth between the state and those it (questionably) enriched goes on and on. The resource curse lives on in Russia, then, as the emphasis of its political economy centers on nasty quarrels over redistributing existing wealth as opposed to generating more wealth from other industries. The rents may have increased since the Soviet era, but the assets generating those rents--hydrocarbons--are continuously dwindling.

Sisi's No Sissy: Ending Egypt's Unsustainable Subsidies

♠ Posted by Emmanuel in ,, at 7/24/2014 01:30:00 AM
His sartorial choices may have been Oppa Moammar Style, but Sisi has made a good start.
For the record, let us recall how Egyptian President Abdul Fattah El-Sisi came into power. First, he overthrew the popularly-elected Muslim Brotherhood President Mohamad Morsi over the declining security situation in the country. Next, he successfully ran for the post of the person he mounted a coup d'etat against--there is no other appropriate term--and threw Morsi and his Muslim Brotherhood flunkies in jail to boot. Zero tolerance for intolerance, right? After the disorder of the post-Mubarak period, the part of the electorate that bothered to show up for the most recent elections wanted some (surprise!) Mubarak-style law-and-order by electing another military man.

Yet Sisi may be the leader with the clout to finally kill of financially unsustainable energy and food subsidies that had bedeviled Mubarak and Morsi before him. Both his predecessors vowed to undertake these reforms, but ultimately crumbled in the face of sustained domestic pressure. You can even say with a great deal of accuracy that Sisi out-Mubaraks Mubarak: he is even more vicious in suppressing the Muslim Brotherhood by branding it a terrorist organization in pursuing a secular path. More pointedly, he has finally begun implementing much-delayed reforms. Things have begun with removing fuel subsidies:
So it was a surprise when, as one of his first major policy initiatives, President Abdel Fattah el-Sisi sharply raised fuel prices two weeks ago [by 70%], cutting deeply into energy subsidies, the most expensive single part of the government’s sprawling and expensive subsidy system. Even more surprising, perhaps, has been the absence of widespread civil unrest...

While experts on Egypt’s economy praised the boldness of the move, there was also criticism of how it was put into effect, and of a lack of a clear plan to ease the burden on the country’s most vulnerable citizens. There was no easy way to fix the subsidy program in a country where half the population lives around or below the poverty line and relies on government support. Any mistakes carried considerable risks for the government, which faces a more impatient nation since President Hosni Mubarak was thrown out of office by protesters demanding “bread, freedom and social justice...”
Make no mistake: the causes of Egypt's repeat visits to the IMF largely lie with these subsidies:
The decades-old system, which provides subsidies for energy and food, including sugar, flour and tea, had eaten up more than 26 percent of the national budget annually. It also was criticized for inefficiency, benefiting companies, for instance, rather than Egypt’s poorest citizens. Reforming the system was seen as an attempt by the Egyptian government not just to plug a budget deficit that reached more than 12 percent of G.D.P., but also to impress international lenders, like the International Monetary Fund, as the country searched for new financing beyond the generous sums provided over the last year by wealthy Persian Gulf states.
After initially taking a holier-than-thou attitude towards the Morsi coup, the US now recognizes that Sisi is a far more useful character than his hapless predecessor. Aside from restarting military aid (coup, what "coup"?), the Yanks are probably glad that someone has gotten around to tackling the subsidies issue so that Egypt may finally stop resorting to emergency lending from the Washington-based lender.

Next up given a newly pliant Egyptian public after years of being battered by civil disorder is to remove food subsidies. This may be slightly trickier to pull off technically and politically:
Egypt spends more than $4 billion a year on food subsidies, on which millions of poverty-stricken Egyptians depend. One cash-strapped government after another has resisted tackling problems in the system, fearful of a backlash from the public...
President Abdel Fattah al-Sisi and Prime Minister Ibrahim Mehleb have not announced similar drastic cuts to the food subsidy system but reforms to the way the government hands out the subsidy have been in the making since April in an attempt to decrease waste and corruption.

Under the new system Egyptians use electronic smart cards for bread purchases and around 20 different subsidised goods at grocery stores across the country. The cards follow a points system which raises incentives for Egyptians to buy only as much subsidised bread as they need, helping reduce spending on wheat by as much as five billion Egyptian pounds ($699 million), Hanafi said.
Sisi is likely feeling out the terrain here. Test the waters and all that. Obviously, fuel is less crucial to survival than food. So, he is starting off with smaller reforms to first limit the supply of subsidized foodstuffs made available. In a few months, though, do not be surprised if these subsidies are removed just as the fuel subsidies were.

The white people will come around as they usually do for people who can get things done in a manner that they cannot such as stabilize the law and order situation and wean these countries off the IMF dole. You may have reservations about his anti-democratic methods, but hey, there is something to be said about respecting authoritarian regimes like Sisi's that achieved office through the ballot box no matter what else.

When McDonalds China Can't Serve Burgers...

♠ Posted by Emmanuel in ,, at 7/23/2014 01:30:00 AM
...it's like Amazon without books to sell. A colleague in China posted the picture above to his social media account in the wake of Chinese food supplier Shanghai Husi being found to have relabeled the expiration date of its meat products. Upping the visibility and impact of its food safety violations, it sold these products to several major Western food chains. We usually believe that tampering with food products is common among PRC firms and not Western ones who would think more carefully about tarnishing their reputations for a bit more profit, but this instance depicts the opposite: Shanghai Husi is a subsidiary of the OSI Group of America, a private meat processing concern headquartered in Aurora, Illinois of Wayne's World fame. You can't get more American than that.

With an already lengthy history of food scares, there was no other option for the Chinese authorities other than to disrupt the food supply chain to these chains:
Authorities suspended operations at Shanghai Husi, a unit of Aurora, Illinois-based OSI Group, after the local Dragon TV channel reported on July 20 its workers repackaged and sold chicken and beef past the sell-by date. The probe may affect chains such as McDonald’s, Yum’s KFC and Pizza Hut, Papa John’s International Inc. (PZZA) and Burger King Worldwide Inc. (BKW), which said they had bought and have since removed items from the supplier.
Unfortunately, the Chinese government doesn't go scot-free here. As it turns out, they had already been looking into the firm's practices prior to the investigative show on Dragon TV running its feature on Shanghai Husi. How do we know this? Part of the show contained the interrogation of a Shangai Husi employee stating that these practices have been going on for years now:
An unnamed quality manager at Shanghai Husi’s factory said company executives approved the use of expired ingredients, a practice he said had been going on for a few years, according to Dragon TV’s taping of his interrogation by authorities. Two calls to OSI China’s main office in Shanghai weren’t answered. The Shanghai city government’s media office didn’t immediately respond to a request for comment.

Shanghai Husi’s case would be handed to police if crimes were suspected, according to the regulator. It also ordered probes into all other China food-production operations invested by the OSI Group, including in Shandong, Guangdong and Yunnan. 
Instead of taking action only after the show was aired, the authorities ought to have cracked down as soon as they confirmed these irregularities not only to bolster their reputations but also to ensure public safety. When I travel abroad, I usually think of McDonald's as a haven for clean and safe (if not necessarily healthy) food. After all these years, I guess I should rethink that.Apologies won't work now, unfortunately.

UPDATE: For what it's worth, TIME speculates that finding against this firm may be part of Chinese efforts to undermine foreign companies operating in the PRC:
We can speculate why that might be happening. The government could be trying to reel in a few “big fish” to try to scare smaller fry into better behavior. Officials might be attempting to win points with the public by appearing to address issues of great public concern like food safety without roiling any Chinese interests. And in the process, the Chinese government might believe it can aid Chinese companies in their competition with foreign firms by undercutting the reputation of international brands...

The Chinese government has a long history of attempting to tilt the local playing field in favor of its own firms. Foreign carmakers, though very successful in China, are still forced to manufacture in the country only through joint ventures with Chinese firms — a restriction most other emerging economies don’t impose. Reports from chambers of commerce accuse Chinese bureaucrats of routinely hampering the expansion of foreign business by taking a “go-slow” approach when issuing mandatory permits and licenses. 

Adios Sochi Grand Prix 2014, Russia World Cup 2018?

♠ Posted by Emmanuel in ,,, at 7/22/2014 01:30:00 AM
Geography is against Russia retaining these events without scrutiny.
This is not exactly a pleasant post to write given the circumstances, but it's something that will be the subject of discussion anyway in the coming months and perhaps years. First, as I wrote a few weeks ago, the first Russian Grand Prix is scheduled on the Formula One calendar for October 12. Even as its business elites are preparing for the worst as the full weight of Western sanctions passed (and yet to pass_ disrupt their abilities to conduct business abroad, Russian race organizers are adamant that show must go on:
Organizers insist Russia's first Formula One Grand Prix will go ahead as planned despite an airliner being shot down in the conflict zone in eastern Ukraine.

Malaysian Airlines Flight 17 from Amsterdam to Kuala Lumpur crashed Thursday in eastern Ukraine. All 298 people on board are believed to have been killed. Ukraine accused pro-Russian separatists of shooting the plane down, something the rebels deny.

The promoters of the Oct. 12 Russian Grand Prix in Sochi told The Associated Press in a statement Friday that "all the preparations are on track and run according to the schedule," and that "organisers are confident that the inaugural Russian Grand Prix will be comfortable for all."
All I can say is that the organizers of the Bahrain Grand Prix were making similar noises prior to the 2011 race being canceled against the backdrop of anti-monarchy protests during the Arab Spring. Self-evidently, the disorder in Sochi's case emanates not from internal turmoil--Chechnya is far away--but from the weight of disapproval from foreign powers-that-be. In motorsports, they reside in Great Britain.. As the graphic above indicates, 7 out of 11 Formula One constructors are headquartered in the UK (never mind that the car brands themselves are "foreign"; their F1 facilities are mainly in the Blighty. 

I am obviously not clairvoyant as to what the culpability of Russia is in the downing of Malaysia Airlines MH17. Nor do I know what Russia's response will be if and when an international body finds the weight of evidence implicates Russia. However, I do know this: if Russia is designated a "state sponsor of terrorism" or something similar that results in severed trade ties as UK Defence Minister Michael Fallon suggests, there is no chance whatsoever that the race will proceed as planned. It will be curtains for the race and much else that is Russian-invested in Europe. Aside from most of the teams being UK-headquartered, commercial sponsors scare easily.
* * * 
Tis sad talking about real generals instead of the Oranje Generaal, but we are where we are.
Next, consider the 2018 World Cup. Unlike the IOC with its Olympic events behind the Iron Curtain--the most memorable being the 1980 Summer Games in Moscow, USSR and the 1984 Winter in Sarajevo, Yugoslavia--there were never any FIFA World Cup events held behind the Iron Curtain. (See this interesting story behind IOC politics during the Cold War.) Obviously, large-scale disapproval of Russian involvement will also torpedo Russia hosting the next World Cup even if it's only 4 years away. Being designated a state sponsor of terror or being taken to the International Criminal Court and the like will scare any sensible commercial sponsor away. 

Russia has also rubbed one of football's powers the wrong way--the Netherlands. With a majority of the passengers aboard MH17 coming from the Netherlands [193/298], it has been deeply affected by current events. That said, the Netherlands also has significant commercial ties with Russia alike many other Western European countries. What to do, then? If Russian involvement is found, then trade ties will probably not be enough to quell Dutch frustrations. For obvious reasons, Dutch input will be crucial in forming the international response to Russia.
And while the disaster has touched so many here, the government is also mindful that Russia is the country’s third-largest trade partner and that business is growing, especially natural gas.
“We are a small country, dependent on our exports, and unlike the United States, we cannot always react from our moral high grounds,” [opposition leader Alexander] Pechtold said. “Still, if it is proven that the Russians have their fingerprints on this horrible event, we cannot look in the other direction.”
Also consider that the Dutch national team is one of football's most famous draws. In Yank-speak, the World Cup without the Netherlands participating is like the Lone Ranger without Tonto. (Sorry Dutch readers; if your team had won at least one World Cup final in three tries, I'd say the World Cup without the Netherlands is like the Simpsons without Bart.) As the worst-affected country, the Netherlands is not a pushover being a NATO member and fielding one of football's most recognizable squads in sporting terms. End result? You can safely conclude that the Dutch will play a significant role in determining the fate of the 2018 Russia World Cup.

UPDATE: The highly reliable Christian Science Monitor explains why EU sanctions will likely be shaped by the Dutch. Also notice how the Russia-aligned rebels are now providing passenger remains to the Dutch.

Bhagwati: PRC's Corruption 'Developmental', India's Isn't

♠ Posted by Emmanuel in , at 7/21/2014 01:30:00 AM
Corruption is one of the most studied phenomena given its ubiquity in developing countries. If corruption did not occur on a significant scale in these countries, then they would probably be classified as developed. That said, there are many debates about corruption. At one extreme, there is a "zero tolerance" approach that suggests all forms of using public office for private gain are unwelcome and should be discouraged. On the other hand, others would say that there are different forms of corruption--some of which are potentially beneficial such as "speed money" which hastens the processing of documentation in slow-moving and unwieldy bureaucracies.

It is a perhaps unfortunate sign of its developmental status that India features large as a setting for debates on corruption. In a recent "Lunch with the FT" feature, economist Jagdish Bhagwati explains how Chinese-style corruption is preferable to Indian-style corruption. In effect, the former is efficiency-promoting whereas the latter is not":
I ask [Bhagwati] if he thinks the country can get back on track after several mediocre years. Once there was an idea, now mostly forgotten, that the “tortoise” India could eventually overtake the “hare” – China. “That’s an exaggeration, I think,” [Bhagwati] says. A crucial difference between the two countries is the type of corruption they have. India’s is classic “rent-seeking”, where people jostle to grab a cut of existing wealth. “The Chinese have what I call profit-sharing corruption”: the Communist party puts a straw into the milkshake so “they have an interest in having the milkshake grow larger”.
You can certainly have a debate about whether "developmental corruption" is an oxymoron or otherwise. Those who espouse a "zero tolerance" approach--typically Americans and their acolytes at development banks and other international organizations--would agree. However, a more pragmatic view looks at how corruption relates to how conflicting interests are resolved. If corruption does not engender additional economic activity in a zero-sum sort of setting, then it is not beneficial in the sense most understand it. This is the Indian scenario according to Bhagwati: little growth and much fighting over what resources already exist. However, there is a possibility--admittedly rarer--in which corruption occurs after economic growth has been generated in the absence of significant spoils to quarrel over beforehand. This is the Chinese scenario.


MNCs and Setting Cambodia's Minimum Wage

♠ Posted by Emmanuel in , at 7/20/2014 01:30:00 AM
Textile workers of Cambodia unite to mixed consequences.
Economics textbooks will tell you that the cost of labor is determined when the downward-sloping demand curve for labor meets the upward-sloping supply curve of workers. Their intersection is called the "market-clearing" wage. Governments may introduce "distortions" however in the form of minimum wages when the market-clearing wage is deemed insufficient to meet the needs of the workers or are otherwise below what is normatively acceptable.

In Cambodia, however, the cost of labor may be determined more by external forces. Namely, pressure from multinational corporations that subcontract textile manufacturing to the country. At present, 80% of Cambodia's exports revenues supposedly come from garments. Hence, Cambodia is yet another country in our region that sees manufacturing garments as a stepping stone to development. Fair enough, but it seems the workers are discontent with the wages:
Textile workers in Cambodia have been demonstrating for weeks demanding a monthly minimum wage of around 115 euros. Violent clashes broke out during protests that took place last December and in January. According to human rights organizations, five protesters were shot dead by the police and many more were seriously injured. Twenty-three people were arrested. David Welsh of "Solidarity Center," a labor rights organization in Phnom Penh, is concerned about the recent developments. "This is a gross violation of trade union rights in the largest and most important economic sector of the country. This has nothing to do with the rule of law," said Welsh.
The crux of their complaint is that the government is failing to enforce the minimum wage suggested by a commission that it convened regarding the matter:
Last autumn, the Cambodian government set up a commission to stipulate a statutory minimum wage for the textile sector. The commission's report concluded that, depending on the location of the factory, the living wage should range between 111 and 127 euros. But the minimum wage for workers at the beginning of this year was set at only 73 euros. "The government has ignored the findings of its own commission. Because of this, the unions called for protests. Although political parties took the topic on board, the demonstrations were controlled solely by workers," said activist Welsh.
Even in Cambodia, the loudest labor activist is some white guy. It figures. More importantly, though, some other white guys--namely foreign firms subcontracting work--may be the ultimate arbiters of the wage level. Their fear, of course, is that foreign NGOs will fault them for running "sweatshops." Add the political violence into the mix and there is considerable reputation risk for these Western retailers:
“We can see frequent industrial conflicts coming here,” an H&M representative told the Cambodia Daily in February. “We need a sourcing country that is predictable [and] stable.” During the spring, Levi Strauss cut back on its orders to Cambodia because of the risk of more trouble and more disruption...


H&M, Levi, Gap (GPS), and other companies met with government officials in Phnom Penh this week to discuss their concerns about political unrest. Afterward, Levi spokeswoman Amber McCasland said the company supports the government’s efforts, which “should lead to the announcement of a new minimum wage as soon as possible.” On Friday the Cambodian high court convicted the workers and activists—and then gave them suspended sentences and freed them. “The verdict today is clearly connected to the political situation and pressure from the big brands,” said Am Sam Sath of the rights group Licadho.
Not for the first time, the wage levels of a labor-intensive manufacturing industry in a poor country will in no small part be set by the corporate social responsibility debates in rich countries. 

A Bad Idea: Flying Passenger Jets Over Ukraine

♠ Posted by Emmanuel in ,, at 7/18/2014 12:45:00 PM
I am greatly saddened by the loss of Malaysia Airlines MH17 over the airspace of Ukraine. I have been following the disaster since it was reported several hours ago and remain none the wiser about where responsibility lies, and I am afraid that the circumstances may never be fully known. A colleague working on global health also pointed out that several European experts on AIDS en route to a major conference in Australia also lost their lives. It is thus an additional tragedy that a number of the world's top AIDS researchers have met such a fate.

In the fog of war--and there is no doubt that's what's going on in Ukraine--details remain iffy. That said, Malaysian authorities have reasoned that the flight path traversing Ukraine was not listed as restricted airspace by the International Civil Aviation Organization (ICAO), the UN body tasked with overseeing the industry worldwide:
Malaysia's prime minister Najib Razak says the aircraft's flight route was declared safe by the ICAO. Mr Razak says the International Air Transportation Association had stated that the airspace the aircraft was traversing was not subject to restrictions. The Malaysia Airlines European chief executive says crossing eastern Ukraine was not unusual since the area had not been classified as a war zone for aviation purposes.
To be exact, there are five flight information regions in Ukraine (which provide air traffic advisories in their respective portions of the country's airspace):
Ukrainian upper airspace is divided into five flight information regions: Kiev, Lviv, Dnipropetrovsk, Odessa and Simferopol. Flight MH17 had been transiting the Dnipropetrovsk FIR eastbound, approaching the Russian border, when it lost contact.
On April 2, ICAO issued advice against flying over Simferopol, not Dnipropetrovsk over which it crashed. However, this advice was not due to the risk of being shot down in a conflict zone, but to conflicting flight information region being provided by Ukraine and Russia:
ICAO issued a letter to its member states on April 2 advising of a potentially unsafe situation because of the presence of more than one air traffic services provider in the Simferopol area. Both Russia and Ukraine are apparently offering services in the region and there was concern the situation could lead to safety issues because it could mean two sets of instructions being sent to an aircraft. ICAO issued a statement Thursday stressing that the loss of Malaysia Airlines Flight MH17 occurred outside of the Simferopol region [my emphasis].
ICAO's statement is here. So the incident occurred in Simferopol where a warning was not raised by ICAO, but I believe that few families of the victims will be comforted by this technicality. Instead, the key points IMHO are as follows:
  1. Regardless of aviation authorities not labeling it a "warzone," Ukraine--more specifically Eastern Ukraine--has been the site of armed hostilities for several months now.
  2. Reports of Ukrainian military aircraft being shot down have been prominent in international news media for over a month
  3. Still, several airlines--especially Asian carriers--nonetheless continued flying over Ukraine.
The UN organization ICAO cannot primarily be blamed for this result, nor the International Air Transport Authority (IATA). Like other international organizations, they are bureaucracies that take a while to respond to current events. If you rely on them to make decisions for you about passenger safety when common sense suggests you should not fly over conflict areas where belligerents possess and use surface-to-air missiles, then I am afraid it was only a matter of time before civilians got hurt.

The time and fuel savings traveling through Ukraine cannot possibly offset what has now happened.

UPDATE: Ukraine has now closed its airspace to commercial traffic.

Diversifying Zambia's Copper-Based Economy

♠ Posted by Emmanuel in , at 7/18/2014 09:42:00 AM
Welcome to Zambia's Copperbelt.
Commodity-based economies are often Johnny-One-Note economies: their fortunes rise and fall based on those of a single commodity (or at best, a handful of them). In Africa, Zambia has had boom and bust cycles based on copper. During the Cold War, its preeminence was such that it once ranked as the world's third-largest producer after the US and the USSR during the late 60s. As copper prices have waxed and waned, Zambia's economic well-being has largely followed a similar path.

So many decades later on, Zambia is emblematic of the challenges these commodity-based economies face of moving towards more diversified sources of economic output: 
The country’s economic development over the past decade has not attracted as much attention as some other African states, such as the oil economies of Angola, Nigeria and Equatorial Guinea, yet Zambia’s success has been almost as dependent on the export of a single commodity – in this case, copper. The government has pledged to reduce its dependence on copper exports, but there is no doubt that Zambia has benefited from its mineral wealth. China’s economic explosion and the long boom in the global telecoms industry has pushed up demand for Zambian copper, so the country now exports more and generates increased income per tonne of production. Annual copper production increased from 257,000 tonnes in 2000 to more than 900,000 tonnes last year, with the government setting a target of 1.5 million tonnes for 2015.
To be sure, there have been some moves towards diversification:
Some progress was made on rebalancing the economy last year. The strongest performing sectors during the year were transport, storage and communications, with a 27.1 per cent rise in GDP; construction (24 per cent); community, social and personal services (17.4 per cent); financial institutions and insurance (13.7 per cent); manufacturing (8.2 per cent); and mining (five per cent). In common with the rest of the continent, most people are employed in agriculture and it is here that stronger growth had most effect on living standards.
However, the noteworthy thing about African nations' efforts to diversify is that, well, there is not much diversity to them in emphasizing infrastructure:
Following a continent-wide trend, the government is banking on infrastructural improvements to help drive private sector development. The country’s road network is being upgraded, in urban and rural areas, to enable farmers to transport their crops to market – even during the rainy season. A total of 8,000 km of road is to be surfaced and sealed by 2017, taking the total to 16,000 km. Much of the work is being carried out by Chinese companies and funded by Beijing or Lusaka itself. The country’s first Eurobond issue in 2012 was 15 times oversubscribed and raised $750 million, but yields on the bond have increased as government spending has risen and another issue may be required later this year. In addition, Lusaka has taken out a wide range of loans with various Chinese state-owned organisations, probably on attractive terms, but whose details have not been published. 
I am of two minds on infrastructure as a development tool. On one hand, it may simply expedite the extractive (copper) trade by making it easier to get ores out of the country. OTOH, other industries should also benefit, but the details of what industries benefit and how infrastructure is geared to meet their needs in scant As any number of other countries also demonstrate, diversification is difficult.

New World Order? BRICS "New Development Bank"

♠ Posted by Emmanuel in ,, at 7/17/2014 01:30:00 AM
We've heard all that before, unfortunately, BRICS.
Grand plans to supplant the (American-designed) postwar global financial architecture lie thick on the ground. As I noted in 2007, poor countries have championed the G-77, Non-Aligned Movement (NAM), New International Economic Order (NIEO), and UN Conference on Trade and Development (UNCTAD) as alternatives giving poor countries a larger voice in global economic governance. Interestingly enough, the BRICs grouping which was formed out of Goldman Sachs' Jim O'Neill acronyms has had regular meetings discussing reform of the world's financial architecture. (South Africa has been included in these discussions, hence BRICS instead of BRICs.) Wouldn't it be nice if poor countries could look out for one another instead of having to bow to Western-led interests as prescribed by the World Bank and IMF?

In the most recent BRICS meeting in Fortoleza, Brazil, participants have upped the (rhetorical) ante in proposing alternatives to not one but both Bretton Woods institutions the World Bank and the IMF. In place of the World Bank, consider this description of the supposedly forthcoming, Shanghai-based New Development Bank:
The New Development Bank, as it will be called, is intended to finance infrastructure projects in the founding members of Brazil, Russia, India, China and South Africa, and in other emerging-market countries as well. The NDB still needs approval from each Brics countries' lawmakers, which could take years.

But when it is finally set up, the bank will provide an alternative source of financing for the Brics and other emerging markets and give them much greater control over funding decisions that affect them directly [read: instead of having Westerners ultimately decide]. 
The stated cause of plans to accelerate the so-called NDB's formation is delayed reform of the Bretton Woods institutions:
The new institution, whose first chief executive will be from India, will start out with capital of $50 billion, to be paid in equally by all five Brics countries. Capital is planned to grow eventually to $100 billion, according to the memorandum released after the meeting in Brazil of the heads of government of the five countries.

The Brics have been trying for years to reform the International Monetary Fund and the World Bank, the backbone of the world's global financial structure, to give emerging markets more influence over those institutions, but with little success. "In the IMF and the World Bank, the U.S. and a handful of allies really do make almost all the decisions, and the vast majority of the world…doesn't really have a voice," said Mark Weisbrot, co-director of the Center for Economic and Policy Research, in Washington, D.C. 
Also consider the mooted IMF alternative, the Contingent Reserve Arrangement:
In addition to the new bank, a new monetary fund was also launched at the Fortaleza summit. The five leaders signed a memorandum establishing a Contingent Reserve Arrangement (CRA) - a $100 billion contingency fund, which member states can draw on in financial emergencies when their foreign exchange reserves become dangerously depleted. The BRICS countries currently have the world's largest foreign currency reserves, and the new institution offers an opportunity to invest those savings at a profit. China contributed $41 billion to the capital stock; India, Brazil and Russia each paid in $18 billion, and South Africa's share is $5 billion.

The CRA is meant to provide an alternative to International Monetary Fund's emergency lending. In the CRA, emergency loans of up to 30 percent of a member nation's contribution will be decided by a simple majority. Bigger loans will require the consent of all CRA members.
After hearing dozens of these plans being aired without having much to show for in terms of results, my take here is simple: I will believe them when I see the NDB and CRA fully funded by the BRICS. Climate change has probably been exacerbated by so much hot air about South-South groupings (see the institutions mentioned in the first paragraph). Unless these countries really put their money where their mouths are at, it's better to consider these Bretton Woods alternatives with a grain of salt.

GI Joe Got Me Preggers: US Returns to Philippines

♠ Posted by Emmanuel in at 7/16/2014 01:30:00 AM
They shall return...and return and return...
Whether you like it or not--I certainly don't--the fault lines of a territorial conflict in the Asia-Pacific are increasingly visible. In the red(s) corner, there's China accompanied by whomever it can buy off into supporting its vast claims to bodies of water in the South China Sea. In the blue(s) corner are Southeast Asian countries such as Vietnam and the Philippines that are increasingly reliant on support from the likes of the US and Japan to shore up their defenses against a menacing China.

The US and the Philippines have a tense relationship when it comes to security matters. After all, the US occupied the Philippines in 1898 and stayed there until 1946 after the Spanish-American war, delaying Philippine independence for nearly half a century. Americans are not like European imperialists? You must be joking. Even during the postwar era, US forces in the Philippines remained at Clark Air Field and Subic Naval Base until the last left in 1992, when lawmakers told them to go. Since the Cold War was over and done with, neither side thought much of it at the time.

Fast-forward to this decade when the Philippines finds itself in a quandary over what to do with the increasingly belligerent Chinese. On one hand, it has wisely chosen not to spend too much on defense and focus more on development. OTOH, having China pick away territories so close by nearly at will is galling. What to do? Approaching the Americans is probably better than doing nothing. That said, the Yanks' legacy remains widely debated. Even the official military publication Stars and Stripes acknowledges leaving mounds of toxic waste behind care of the US armed forces. Alas, there is also the social toll of having service personnel in large numbers stationed for so long:
Despite one study estimating there are as many as 250,000 Amerasians and their offspring in the Philippines, they are a largely forgotten community. Their plight, however, is gaining fresh attention with the United States preparing to deploy thousands of soldiers back to the Philippines as part of its ”pivot” to Asia.

Clark Air Base in Angeles city and the Subic Naval Base in nearby Olongapo — about two hours’ drive north of Manila — were vital Pacific theater operations for the American military for nearly half a century. Both played crucial roles as logistics and repair hubs for US forces during the Vietnam War in the 1960s and 1970s, with Clark also serving as a launch pad for bomb attacks.
Filipinos are remarkably fond of their former colonizers despite the many slights they have endured by this association. Consider, for instance, the unwillingness of the US to allow the children of service personnel to immigrate, Miss Saigon style, to America:
In 1982, the US government passed the Amerasian Immigration Act that gave preferential immigration status to children born to US service personnel in Vietnam, Thailand, Laos, Cambodia and South Korea. However the law focused on countries most directly involved in the Vietnam conflict and the Korean War of 1950-1953, and excluded children born in the Philippines as well as those in Japan where there were also huge US bases.

Attempts by various groups to have Filipino Amerasians included have failed, a cause of much anger and confusion. Philippine Amerasian Research Center head Peter Kutschera said the US government never explained why they were left out. He said it was ”hypocritical” to include Thailand, where there was no direct conflict, but exclude the Philippines.
With an another extended US tour of duty in the Philippines in the offing, fears of another lost generation are widespread:
The Philippine government is expected to seal the deal late this year to welcome US soldiers back to Subic and other bases. Filipino leaders have hailed the defense pact as an important plank in its effort to fend off an increasingly assertive China, which is expanding its presence in contested South China Sea waters near the Philippines.

But on the fringes of the Filipino bases, there are fears the US soldiers will plant another baby time bomb that will cause many more generations of pain. ”Many (new Amerasians) over time will become the abandoned, forsaken offspring of soldiers and contractors,” Kutschera said.
Americans are exceedingly fond of messing up other places and leaving others to clean up their mess. In the Philippines, the cycle is about to begin anew.