I am worried about our tendency to overinvest in things and underinvest in people.– J. Galbraith
In the past several decades the world economy experienced a sizeable rise in the share of profits/capital in national income compared to the share of wages/labour. These trends were driven by a lower role played by trade unions, by rising market concentration as well as trends in IT and technical advancements in production. Looking ahead, however, there may be reasons to expect a reversion of the share of labour in the coming years – a trend that may have significant implications for the evolution of the global economy. The economic effects are likely to be also complemented by political shifts favouring left-wing parties, with some of the regions (Latin America being a case in point) already starting to exhibit these trends. One of the bellwether indicators of a potential resurgence in labour is the rise in the levels of unionization. In the US according to recent data from the U.S. National Labor Relations Board union representation petitions filed increased 57% YoY, while unfair practice charges rose 14% YoY between October 2021 and March 2022. Interestingly, these trends are corroborated by changing US public attitudes – a Gallup poll conducted in September 2021 showed 68% percent of Americans approve of labor unions — the highest rate since 71% in 1965 . Internationally some of the highest unionization levels in the world are exhibited by Nordic economies that at the same time are widely seen as possessing one of the most successful models of economic development. In the political sphere pro-labour forces are starting to gain the upper hand. In Latin America left-wing parties are staging victories across the continent, including most recently and for the first time in decades in Colombia. In the US President Biden vowed to create a taskforce to boost union membership and staked a claim to being America’s most pro-union president . In the EU, discussions have been undertaken on the possibility of adopting a minimum threshold for collective contract coverage. There are also drivers emerging that may underpin a rising trend in wages and social security transfers. In the corporate world, these changes will be driven in part by the ESG agenda, most notably its “S” (social) component. Companies adhering to the ESG paradigm will be increasingly focused on strengthening labour standards, lower the “gender gap” in wages as well as the overall inequality in remuneration. The ESG paradigm will also constrain corporates in relying on the suppression of labour costs as a short-cut to gaining competitiveness – instead there will be more importance accorded to labour education and training. Perhaps the most important driver of the labour agenda in the developing world may be the rise of China and the economic model of development that it is likely to advance in the coming decades. This modernization model is likely to include a progressively greater emphasis on social security, consumption and services sector. Competition with the US in the technological sphere will also push China towards prioritizing the attraction of top talent cadres in the high-tech sector. At this stage for China the period of using low wages as a major competitive edge has given way to greater emphasis on attracting top talent and attaining technological leadership. Labour, most notably high-skilled labour, is increasingly a scarce resource – sizeable labour shortages are reported in some of the most sensitive sectors for long-term growth globally, such as IT, medical care and education . These shortages are likely to be exacerbated by demographic trends and the effects of Covid have already resulted in adverse effects on the demographics and the labour market in both developed and developing economies. Importantly, apart from the spike in mortality there is also the changing pattern of demand for labour, as sectors such as IT and medical services are facing supply constraints in meeting rising demand. There are also the problems and obstacles faced by capital in squeezing ever higher shares of national income compared to the relatively quiescent period of the past several decades. First and foremost, there are the risks faced by investors vis-à-vis the headwinds of systemically higher geopolitical risks, risks associated with climate change and cybersecurity risks. In the macroeconomic sphere the realm of negative real yields has steadily expanded on the back of the rising prominence of quantitative easing. Another aspect in the rising prominence of labour is the interplay between political and economic factors as the political left-wing shift may favour a greater redistribution of national income towards labour. This trend towards a more left-wing political landscape is driven in part by record high levels of income inequality as well as the decades of underinvestment in human capital, most notably in health care – something that rendered the global economy highly vulnerable to the Covid pandemic. The increasing role and share of labour is long overdue in the global economy. The main benefit from this long-term trend will be a greater emphasis placed in development on human capital, most notably in education and healthcare. Greater investment undertaken in these areas will support productivity growth and will serve to render economic development more sustainable. At the same time, the rising share of labour and wages in national income may result in a significant increase in the role of household consumption as a driver of economic growth. It may also lead to a substantial revision in economic policy in terms of priorities and instruments used. Fiscal stimuli to support the economy may become more “labour-intensive”, i.e. they may start prioritizing social outlays and transfers. A modernized system of social support could include “smart Treasury” outlays that are targeted towards the segments of the population most in need of social assistance with improved targeting of social outlays attained on the basis of the use of “big data” and AI. Prioritizing labour in economic development may also involve the transformation of economic policy rules. While existing rules have largely targeted macroeconomic stability as the prime target of employing monetary and fiscal policy rules, there may be a case for devising “labour-oriented” economic policy rules that establish minimum threshold levels of public spending for critical items pertaining to long-term social security. In particular, long-term minimum levels of public spending could be established for outlays on education and healthcare as a percentage of GDP. Other aspects of the possible transformation may include greater self-reliance/protectionism as a way to shield labour from lower cost producers, as well as “industrial policy” to prop up competitiveness. Labour markets are likely to become more rigid, while in the post-pandemic setting labour conditions are likely to be notably transformed towards greater flexibility in working location and working-week duration. With countries such as UAE and New Zealand adopting the 4-day working week, many more countries are likely to follow their lead in the years to come. Overall, the transformation of capitalism towards a more labour-oriented mode is underway. The ESG paradigm at the corporate level and the sizeable scale of stimuli that prioritized social outlays and household consumption during the pandemic crisis are suggestive of such a shift. The question is whether this is a systemic transformation or an aberration, a façade that is to camouflage lingering inequities and imbalances. As argued by John Kenneth Galbraith, “the manners [i.e. the façade] of capitalism improve. The morals may not.”
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There has been a lot of talk and controversy recently, about exchanging debts owed to China for $8 billion with Egyptian strategic assets from ports and airports. Which may not be well understood by some, and given my specialization in Chinese affairs, I tried to analyze the Chinese debts and lending mechanisms to Egypt and the other African countries, in order to understand the Chinese viewpoint in this regard, as follows:
There is no evidence to support fears that China is using its debt to control the strategic assets of debtor countries. But on the other hand, China recently recorded its direct participation in the ownership of projects, by acquiring a share of the shares in them.
China has funded projects along the African continent, including Egypt, with almost zero interest, and with grace periods of up to five years. It also managed the use of a mixture of grants and loans, the repayment periods of which can reach periods ranging from 15 to 30 years.
We find that the most prominent terms and conditions that are included in Chinese loan contracts, within foreign aid projects, were the phrase:
“If there is any difficulty in repaying the debt on time, the repayment period can be extended after consulting with the Chinese government”
We note that there has been extensive use of the term “waiver of sovereign immunity” in the contracts of a number of loans to countries such as Nigeria and Kenya.
We find here that the waiver clause that China requires of “sovereign immunity” allows a sovereign country to be sued in a foreign court or to be subject to international arbitration.
When reviewing many Chinese loan contracts, most of them contain language on waiver of sovereign immunity in relation to arbitration and enforcement.
At the same time, it did not find what is known as any “expropriation of sovereign assets” by China, as a result of default, whether in Africa or globally.
We find China’s justification for resorting to the inclusion of the “sovereignty” clause, as a common practice in many international trade agreements, and accordingly China confirms that criticism directed at this clause specifically in several countries, was employed in favor of some local political agendas. Especially, since these concepts in financing Chinese international projects, and according to commercial law, are completely technical concepts that are routinely used.
Accordingly, the debts of many countries to China in particular, and in conjunction with the economic crises of most countries, especially after the spread of the Corona pandemic, have undergone rescheduling operations that sometimes reached dozens of times.
The most prominent point for me here, is that it is not only China as a partner or as a commercial investor that is only accused of pledging assets, that is, the assets of countries that are in default of loans. We find that in the international financial and monetary institutions, and within the restructuring programs, under the supervision of the International Monetary Fund and the World Bank, a number of African governments have privatized their state-owned institutions. Accordingly, its approval was given to exchange Chinese loans for shares in official institutions.
Also, most of the Chinese debts fall under almost the same conditions, until the Chinese “Exim Bank” took over the management of the Chinese state debt. Then the “Export and Import Bank of China” followed the international norms to include large penalty clauses, including 20% to 50% as an interest rate on late payment. But, these conditions disappeared in the following decades, and it was found that these conditions were not applied at all.
China launched a debt rescheduling program. It was the first pledge by Beijing to cancel debts on the African continent. Then the Chinese government issued a debt cancellation program, due to the collapse and decline in commodity prices, which had a significant impact on the failure of many countries, especially African.
We find that between 2017 and 2021, there was an accelerating tendency from China to increase the volume of lending, due to the return of high prices of goods produced by many African countries in particular.
But, after 2019, the issue of “defaulting” procedures began to change, and the issue of commercial restructuring is no longer the main tool used by Beijing to pressure for payment when the debtor state is insolvent, but rather is moving towards stopping expenses on projects that are being implemented, Which slows down their completion, but this of course has caused great damage to the Chinese contractors.
In addition to these new Chinese procedures for the loan and debt scheduling a mechanism system, stating that: “China does not grant any new loans, until part of the old loans is paid to the debtor country”. If these projects are able to generate revenues, Chinese financing will be completed, as happened in the Addis Ababa railway in the Ethiopian capital.
As for dealing with the insolvency of China’s infrastructure projects in some countries such as the African Congo, a coalition of French-Chinese companies was brought in. This consortium owns shares in the project, which extends for at least 30 years.
We find the expansion of Egypt and all African countries in borrowing from China. The Horn of Africa countries in East Africa borrowed about $29 billion from China for infrastructure, energy and construction projects.
We find that recently, Beijing has intensified its efforts to obtain lease contracts to manage some strategic assets in countries that have defaulted on debt payments, such as the “Hambantota Port” in Sri Lanka, which China will manage for 99 years, and the “Pakistan Gwadar Port” with a lease Up to 44 years old.
Through the previous analysis of the Egyptian researcher, we can monitor the extent to which the Egyptian side suffers economically, like many other economies around the world, and the traditional solutions adopted by Egypt during the past years (from the large expansion of debt or the use of Gulf allies) are no longer sufficient to deal with this crisis, which was exacerbated globally by the Russian-Ukrainian war and the move by the US Federal Reserve to raise the interest rate, which resulted in the flight of dollars from the country and from several countries around the world. Meanwhile, only this year, in 2022, Egypt is scheduled to pay tens of billions of dollars to pay off its debt payments or interest.
Therefore, according to my assessment of the situation, estimating the economic and security risks that adherence to these conditions for lending to the Egyptian economy may cause, requires a high degree of precaution and caution, especially since one of the estimates indicates that the dollar may rise to 25 pounds, in the event of a complete liberalization of the exchange rate. in Egypt.
Russian Agriculture Ministry’s Agroexport Federal Center for Development of Agribusiness Exports in close partnership collaboration with Trust Technologies and the business expert community drew up a business plan for the development of exports of principal agricultural products (grain, dairy, butter, meat and confectionery products) to promising markets of African countries.
The goal of the project is to prepare a practice-oriented model for increasing supplies and enhancing the competitiveness of Russian agricultural goods in the African market.
According to the business report, five African countries have been identified and chosen as traget markets for the delivery of the agricultural products. These are Angola, Cameroon, Ethiopia, Ghana, Kenya, Mauritius, Nigeria, Tunisia and South Africa.
These countries account for 40% of the continent’s population and one third of all African imports of agricultural products. According to ITC Trade Map, the total volume of imports of agricultural products in these countries in 2021 amounted to almost $33 billion.
Russian grain is competitive in the markets of target African countries and is already in demand. At the same time, grain crops have a high potential due to the expected increase in their purchases. Due to a growing population and limited opportunities to increase domestic production, grain imports are expected to grow by 8 million tonnes from 2021 to 2030.
The African countries that are being studied together import more than 1.3 million tonnes of meat products a year. The leaders by volume of imports are South Africa, Ghana and Angola. In Nigeria and Kenya alone, the baking market has grown at an average annual rate of 38% over the past 5 years.
Within the framework of the business concept, another strategic area is deepening of cooperation in trading of oil products, primarily vegetable oils. Since 2016, oil imports in the target countries have grown twice as fast as agricultural imports overall, and by 2025, oil sales to the target countries will grow another 67%.
“Analysts estimate that consumption of meat products is expected to increase in many countries of the African continent. And while poultry meat will account for the bulk of growth as the most affordable and technologically advanced, organic growth will also be seen in all other types of meat,” Konstantin Korneev, executive director of Rincon Management, said and quoted in the report.
According to estimates, the potential supply of meat products from Russia to priority African countries by 2030 could reach 148,000 tonnes. There is also potential for boosting the supply of Russian dairy products. The first dairy product for which stable supplies from Russia have been established was ice cream. However, significant opportunities are opening up for shipments of milk powder, whey, cheese and butter, experts said.
According to forecasts, the milk deficit in Africa in 2025 will increase to 12.9 million tonnes (in milk equivalent) from 8.9 million tonnes in 2019. In 2030, it will reach 17 million tonnes. Africa currently imports $4.8 billion worth of dairy products, with the target countries among the top 20 importers.
As for the supply of finished food products, experts believe that for a long-term presence in Africa, the optimal scenario is to localize production to meet market needs. South Africa, Ghana and Kenya are identified as priority countries for this scenario. The volume of consumption of finished food products in the target countries exceeds $29 billion a year.
“The African continent is an interesting and promising area for the development of Russian food exports. However, when working in this market, it is important to take into account a number of factors: strong differences in the level of welfare of the population, political instability in some countries, state regulation of prices for a number of goods, et cetera,” Agroexport head Dmitry Krasnov was quoted as saying in the statement.
According to Krasnov’s explanation the materials of the concept can help Russian business determine priority countries for organization of supplies and choose the focus range taking into account market peculiarities.
In a related development, Russia’s Industry and Trade Ministry has drafted a list of special economic zones (SEZ) in friendly countries where Russian companies could potentially set up production amid sanctions and sent it to business associations.
The ministry decided to compile the list due to the sanctions imposed by “unfriendly” countries and difficulties with purchases of imported raw materials, components and equipment that are used by Russian manufacturers, the letter said.
“As a result of the Industry and Trade Ministry’s work with Russian trade missions abroad, information has been compiled on special economic zones in friendly countries (95 potential sites). Information about the sites abroad has been conveyed to major Russian industrial companies and business associations,” the ministry said.
“Localization of production in the following areas is being considered: transport engineering, energy equipment, construction materials, chemical products and so on,” the ministry said.
Russia has embarked on “special military operation” aims at “demilitarization and denazification” of Ukraine since February 24, and is currently experiencing a raft of sanctions imposed by the United States and Canada, European Union, Japan, Australia, New Zealand and a host of other countries.
When describing Bangladesh’s present economic status to media during an online conference on Tuesday, Rahul Anand, division chief in the IMF’s Asia and Pacific Department, said that Bangladesh’s external position is “quite different from several nations in the region.”
According to him, Bangladesh’s external debt-to-GDP ratio, which is close to 14%, is moderately low, primarily concessional in form, and has a minimal risk of debt crisis.
Following his interview that was recently published in the London-based daily, Bangladeshi Finance Minister AHM Mustafa Kamal sent a response to the Financial Times. “Today, the reserves stand at US$40 billion US dollars, enough for more than five months’ import payments and beyond the risk threshold prescribed by the IMF,”.
After Sri Lanka’s economy collapsed, focus shifted to Bangladesh as the nation looked to prevent the financial crisis that broke out in the island nation. Concerns about the nation’s economic health arose as Dhaka sought the IMF for a bailout package and amid an increase in fuel costs. However, a senior executive from the Washington-based global lender dispelled such dire predictions.
The economist responded to allegations that Bangladesh’s $40 billion reserve was a sign of “impending catastrophe” by saying that “even though Bangladesh’s reserves have decreased, the stockpiles are still large enough to handle four to five months of potential imports.”
There were rumors that the government’s most recent record fuel price increase was a requirement imposed by the IMF. The IMF official, however, refuted the charges, stating that there was no connection between the fuel price increase to bring it into line with the market pricing and the support program sought by the IMF (by Dhaka). The external debt of Bangladesh is only about 14% of GDP, which is quite modest.
According to the media reports, Rahul Anand, division leader at the IMF’s Asia and Pacific Department, Bangladesh is not in a crisis and its external position is “quite different from numerous countries in the region.”
While the Sheikh Hasina government has set a target of more than $60 billion in export income for the following fiscal year, Bangladesh’s exports in the 2021–2022 fiscal year exceeded the $50 billion threshold (2022-23). The government was able to achieve a consistent increase in remittances worth $813 million in the first ten days of August thanks to the new opening of the Malaysian labor market and a number of other government initiatives. The number of remittances received through the banking system in July was $2.09 billion, the most in the previous 14 months.
Due to Sheikh Hasina’s astute leadership, the nation implemented a number of preventive steps in response to the surge in spot market LNG prices at the start of the ongoing conflict between Russia and Ukraine.
Among those measures were planned power outages in various regions of the nation, the suspension of a few development initiatives geared toward the future, and restrictions on government leaders’ overseas travel.
To compare RST money to an IMF bailout package sought by Pakistan or Sri Lanka is obviously to ignore the forest for the trees.
Nasrul Hamid, the nation’s junior minister for Power, Mineral, and Energy Resources, has already given the people of his country the assurance that the ongoing load shedding will end in September. He has also made further hints about implementing changes to oil prices in line with international markets. Importantly, despite the price increase, Bangladesh continues to provide its citizens with the most affordable options, and the increase in oil prices was intended to reduce a staggering subsidiary payment of more than BDT 8000 crore made by the government over the previous four months (February 2022—June 2022).
Bangladesh is thinking about importing crude oil from Russia as the price of gasoline in the country rises substantially. Masud Bin Momen, the foreign minister of Bangladesh, announced on Tuesday that a Russian expert delegation will soon arrive in Dhaka to discuss the problem of importing crude oil from that country.
According to the World Bank’s South Asia Food Security Update published on Thursday, there is no significant food shortage in Bangladesh. It is important to note that the government has implemented a number of initiatives to boost the nation’s output of both food grains and vegetables. Bangladesh wouldn’t experience a food crisis even if it was impossible to buy food from other nations owing to market volatility worldwide.
New rice varieties (BR-89) created by our experts will boost rice output by 50–60%. However, the reality is that because of the increase in the cost of diesel, seeds, fertilizer, and other inputs, the nation’s farmers are now finding it difficult to continue growing food grains and vegetables. Diesel, seeds, fertilizers, and other inputs are extremely important to farmers in order to nurture and grow their crops and vegetables. Their production costs will rise as a result of the increased cost of diesel, seeds, fertilizer, and other inputs.
However, the country’s aman paddy production has already been severely hampered by the drought-like conditions caused by a lack of rain. The majority of farmers in the nation rely on rainwater for the monsoon season’s aman paddy cultivation. The objective of aman agriculture in this season may potentially be hampered by the lack of rain.
The administration is committed to ensuring everyone has access to food. As a result, it must come up with strategies for increasing food production while providing farmers with unwavering support. Everyone should keep in mind that expanding the agricultural industry needs to continue to be a top focus.
To meet its demand, the nation has a sufficient supply of all types of fertilizers. 6.45 lakh tonnes of urea fertilizer, 3.94 lakh tonnes of TSP, 7.36 lakh tonnes of DAP, and 2.73 lakh tonnes of MOP are currently in stock. Fertilizer is currently in greater supply than it was during the same time last year. The farmers’ farm loan of Taka 2830.61 core was also distributed by the state-owned commercial banks.
To ensure the nation’s citizens have access to adequate food, the ministries of agriculture and food must exert all possible effort to commercialize and profit from agricultural activity.
The government needs to focus more on our farmers so that the rising costs of diesel, seeds, fertilizer, and other inputs won’t deter them from growing food crops like grains and vegetables. Not least of all, the government should take the required actions to provide farmers with cutting-edge equipment.
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