By Evan Abrams
In the wake of political instability in eastern Ukraine, the country has experienced a sharp economic downturn and is having trouble meeting is foreign debt obligations. The IMF has led an international bailout effort, but according to Euro News the efforts have been muddied by an unexpected legal debate. The critical question is whether Eurobonds held by Ukraine should be considered bilateral sovereign debt or a standard private bond issuance. The answer may determine whether Russia could avoid any restructuring that would affect other private debtors.
By Evan Abrams
Afghanistan has struggled to develop a formal finance sector, but legislators hope a new law focused on Islamic finance will change that. The focus on Islamic finance is critical because roughly 90% of households reject the western interest-based system, largely for religious reasons. Reuters reports that the new law should increase financing options for individuals and local businesses. The law is expected to be finalized in June.
By Evan Abrams
Human rights groups are urging Myanmar to reconsider several
provisions in its much touted draft investment law. The law is a key step in
the country’s recent move toward more open markets and democratic
accountability. According to Voice
of America groups have expressed concern that the law would make it
difficult for the government to pass subsequent regulations to protect human
rights and the environment. Human Rights Watch has been particularly critical,
claiming that the law was put forth with very little public consultation.
By Evan Abrams
Bashing China
for currency manipulation has become a popular refrain among American politicians.
Republicans and Democrats alike,
find it politically expedient to point the finger at China for the decline in
American manufacturing and stagnant wage and job growth in the middle class.
Their arguments tend to focus on export-led employment because that issue is
most salient to the voting public. However, the most pernicious long-term
problem caused by an undervalued Yuan is the yawning payments imbalance that
has emerged between the two nations.
China’s current
account surplus creates a capital account deficit, leading to an outflow of
foreign portfolio investments. This can help lead to asset bubbles and has been
blamed, by Ben
Bernanke and others, as contributing to the subprime mortgage crisis of
2007-2008. It also creates a strong market for United States treasury bills,
helping America to continue to live beyond its means. Conversely, the U.S.
current account deficit means that much of the growth in the American economy
over the past decade and a half has been financed by debt, both public and
private. This arrangement of debt financed American consumption of Chinese
goods is clearly unsustainable.
By Evan Abrams
Working in
conjunction with the Financial Stability Board, Hong Kong has set out to update
its financial industry laws and regulations. While the new law would give
policy makers a variety of options to deal with failing institutions, it would
allow the government to bailout a variety of banks, brokerages, and insurers if
they believe a failure could trigger a systemic collapse. While the bailout
provisions may prove unpopular, many observers feel the law is necessary for
Hong Kong to remain a competitive and attractive financial hub. The bailout
provision may be particularly hard for Hong Kong residents to swallow, because
the majority of the island’s financial institutions are foreign companies. See
more here
from the South China Morning Post.
By Evan Abrams
Myanmar is
working with the International Finance Corporation to unveil a new law
governing foreign and domestic investment in the country. This is the latest in
a series of reforms aimed at improving democratic governance and enhancing
economic freedom. According to Shanghai
Daily, the Directorate of Investment and Company Administration is inviting
comments and feedback on the draft law over the course of the next month. The
government is hopeful the new law will encourage foreign investment, which had
been severely limited over the past decades due to restrictive economic
policies and western sanctions.
By Evan Abrams
European and
American banks frequently give business to other financial institutions as a
reward for referring business to bank or an inducement to do so in the future.
To some this is smart business practice but to others it seems highly
anticompetitive. According to the Wall
Street Journal, the U.K. Financial Conduct Authority has launched an
investigation into competitiveness among financial institutions, including the
practice of reciprocity. Reciprocity may also hurt shareholders by inflating
the number of banks working on any one project.
By Evan Abrams
The newly
appointed King Salman of Saudi Arabia replaced the head of the Capital Market
Authority as part of a cabinet reshuffle. The new head, Riyadh attorney
Mohammed Al-Jadaan, has strongly emphasized his commitment to opening the
Kingdom’s $500 billion dollar stock market to direct foreign investment in the
near future. According to GulfBusiness.com,
Mr. Al-Jadaan said the move was “very important” and could have “huge benefits”
for the Saudi economy. He also emphasized the need to increase the number of
listed companies to keep pace with economic growth.
By Evan Abrams
The Egyptian
Investment Ministry is working a new law designed to streamline the investment
process and create a one-stop shop for obtaining licenses and permits. Daily
News Egypt reports that the law will be submitted for review to 60
international and domestic organizations, including the International Finance
Corporation. The law is still subject to continuing negotiations within the
Egyptian government, particularly regarding the appropriate level of investment
incentives to provide. The law has received a positive reception from investor
groups who have long been concerned about Egypt’s burdensome business laws.
By Evan Abrams
Abu Dhabi has
been actively seeking to diversify its economy away from the energy sector it
has been so dependent on. Part of this effort is the proposed Abu Dhabi Global
Market, a financial center designed to attract banking and finance business
from around the world. According to The
National, a UAE newspaper, newly released documents show the market will be
based primarily on English common law with some elements from Singapore and
Hong Kong. Certain English statutes, such as those governing contracts and
partnerships will also be utilized.
