Emerging and Frontier Markets: Economic and Geopolitical Analysis

[LeveragedBuyout]

Personal debt often denominated in foreign currency is a major problem in the developing world. Do you think it is advantageous to the US if this debt is dollar denominated?

The reason why foreign governments and corporations raise debt denominated in the USD is because our capital markets are the most developed and sophisticated in the world, which makes raising debt on them (and connecting with the world's largest investors) easier, which consequently means debt is cheaper raised in USD compared to virtually anywhere else (it's possible Germany is an exception, but I am not familiar with the vaguaries of a bund-based foreign debt raise). That's the main advantage to the debtor in raising dollar-denominated debt.

I can't think of a specific advantage to the US of having foreign debt denominated in the USD, other than further contributing to the depth, breadth, and liquidity of our capital markets.

 

[LeveragedBuyout]

Sorry to see this thread die without my regular involvement. Dear PDF users: please feel free to post, it doesn't have to be financial or economic in nature, as this is also a geopolitical thread. The emerging and frontier markets are too important and too interesting to pass over without discussion.

In any case, here's another high-level update for ASEAN that I thought might be interesting to our readers here.

---

http://blogs.ft.com/beyond-brics/20...-to-know-about-asean-and-theyre-not-all-good/

Five things you need to know about Asean – and they’re not all good
Jeremy Grant Author alerts | Nov 10 15:01

With China’s economy slowing, Japanese companies looking for an alternative to China due to political friction with Tokyo’s larger neighbour and a host of other factors, the Association of Southeast Asian Nations (Asean) has become flavour of the year for some portfolio investors and many companies.

If Asean were a country, the collective gross domestic product of its 10 members – from Myanmar on its western fringe to the Philippines at its easternmost point – would make it the world’s seventh largest economy, ahead of California. With combined gross domestic product of $2.4tn, its economies collectively were 25 per cent larger than that of India in 2013.

A burgeoning middle class, rapid urbanisation and greater intra-regional trade – spurred by the advent next year’s Asean Economic Community – mean that Asean’s time has come, many believe.

Yet as shown by a new report published on Tuesday by McKinsey, the consultancy, the arrows do not all point upwards for the bloc. While some of the “headline” fundamentals are sound, there are serious challenges that should temper any investors’ or policymaker’s views of Asean’s prospects.

Here are five things you need to know about Asean, from the McKinsey report:

1/ Asean’s economic growth has been remarkably stable

Source: McKinsey. Click to enlarge

Since 2000 and up to last year, McKinsey ranks Asean as one of the most stable economic blocs in terms of the volatility of gross domestic product growth, and down cycles. Much of that stems from an emerging “demographic dividend”.

That is in spite of temporary shocks such as the emerging currency mini-crisis that hit Indonesia – Asean’s largest economy with a population of 250m – as well as India. While it should come as no surprise that Russia topped the volatility stakes, Asean was a beacon of reliable, consistent growth at two notches below Canada’s ranking. Gross government debt is less than 50 per cent of GDP, far lower than levels on many developed countries

2/ Yet productivity is worryingly low

Source: McKinsey. Click to enlarge

Although productivity has been rising in recent decades, much of this progress was driven by a broad shift of labour from agriculture into more efficient sectors, rather than improvements within sectors, McKinsey notes.

And while rising labour costs in China hand Asean a window of opportunity to capture a greater share of global manufacturing – especially from multinationals that are seeking a lower cost base or are simply daunted by the challenges of doing business in China – Asean is undermined by weak output per worker.

In 2012, the average daily wage of a Vietnamese worker was $6.70, compared with $27.50 in China. Yet average labour productivity in the manufacturing sector of Vietnam – which is starting to be touted as a hotspot for electronics – was only about 7 per cent of that in China. In short, most Asean countries will need to make “sharp improvements” in labour productivity to maintain historical growth rates, McKinsey says.

3/ Asean’s intra-regional trade is much lower than you might think

Source: McKinsey. Click to enlarge

Some 25 per cent of the region’s exports of goods go to other Asean countries, a share that has remained roughly constant since 2003. For all the talk of greater intra-regional commerce – tariffs have been all but dismantled across Asean since 2010 – intra-regional trade accounts for less than half the share of total trade in the bloc.

Asean member states will sometimes compete against each other for market opportunities. And non-tariff barriers still abound: the costs of importing and exporting are 24 per cent higher in Asean than to and from China. Regional supply chains are not what they could be. The Asean Economic Community is supposed to deal with this but, as McKinsey notes, “the working reality has been uneven”.

4/ One bright spot is smaller cities – watch for facial moisturisers

Source: McKinsey. Click to enlarge

The number of Asean households in a “consuming class” – McKinsey shies away from the harder-to-define “middle class” label – is expected to double by 2030, with strong gains in Indonesia. (The consuming class is defined as households with more than $7,500 in annual income at 2005 purchasing power parity terms).

McKinsey identifies a number of smaller cities in Indonesia with “significant promise” for higher consumption as residents adopt more sophisticated spending habits – identifying in Indonesia Padang, the capital of western Sumatra; Bandar Lampung, the economic capital of Lampung province; and Madiun, a small city in east Java. Facial moisturiser is supposedly a bellwether: the consultancy identifies half of the cities in Asean – most beyond the capitals – as being in a “hot zone” where sales of facial moisturisers increase by 1.34 percentage points per 1 percentage point increase of per capita GDP.

5/ But infrastructure is in serious need of upgrading

Source: McKinsey. Click to enlarge

The infrastructure in Asean’s cities is already straining as urbanisation drives people from the countryside. Yet almost $3.4tn in investment not related to property will be required between now and 2030, most of which will need to be earmarked to support growing urban areas. This is roughly two to six times the annual amount spent historically by Asean countries. In Indonesia, there are 27 kilometres of roads for every 100 square km of land, compared with 185 km in Germany. Only 57 per cent of Indonesia’s roads are paved. In the Philippines, congestion at Manila port is starting to become a serious bottleneck.

 

[LeveragedBuyout]

And here's a slightly different look at the effect of a poor demographic outlook on GDP growth in the emerging markets.

---

http://blogs.ft.com/beyond-brics/2014/11/10/moodys-emerging-markets-face-demographic-challenges/

Moody’s: EMs face demographic challenges
Robin Wigglesworth Author alerts | Nov 10 17:47

Teeth have long been gnashed over the dismal demographic trends of the developed world, with the babyboomer generation soon set to retire and fewer workers around to pay for their healthcare and pension costs. But the developing world also faces a demographic challenge, fast FT reports.

The young and rising labour forces of emerging markets have been a crucial factor behind their rise over the past decade, but in a report, Moody’s points out that the positive effect this has had on growth is fading.

Based on UN population projections, the working age population (defined as being between 15 and 64 years old) of the biggest emerging markets will rise by 0.3 per cent per year on average in 2014-19, compared with 1.6 per cent in 2000-05.

Unless this tapering is counteracted by faster increases in participation rates than in the past, it will result in lower growth in the labour force and weigh on economic growth, Moody’s points out.

Lower growth in the labour force dampens potential GDP growth by lowering the amount of people available for work, potentially exacerbating skill mismatches, and by lowering savings available to fund investment. Every 1 per cent rise in the labour force is usually estimated to raise the level of potential GDP by around 0.5 per cent in emerging markets, i.e., the labour share is around half.​

All developing countries in the G20 group will experience economic headwinds from less favourable demographics, but some nations stand out as particularly vulnerable.

These are South Africa – where demographic changes will lower potential economic growth by more than 1 percentage point, according to Moody’s – China, Brazil and Russia.

China’s growth potential is also significantly curtailed by changing demographics. And Brazil, with a much younger population than Russia’s, will see similar effects in terms of change in potential growth, at just under half a percentage point per year.

In turn, unless slower increases in the labour force are offset by marked rises in productivity growth, GDP growth will be noticeably lower in emerging markets than before the global financial crisis.​

Source: Moody's Investors Service. Click to enlarge

 

[alaungphaya]

I'm going to put this in here as it talks broadly about developmevent models. It makes a good point contrasting government led development and the laissez-faire model neo-liberals try to promote. For me, both models have their advantages. Government should be actively involved in identifying competitive sectors but also be mindful of competitiveness in attracting capital.


http://blogs.ft.com/beyond-brics/2014/11/11/guest-post-myanmar-should-switch-its-development-model/
Guest post: Myanmar should switch its development model
Guest writer | Nov 11 17:18 | 1 comment | Share
By Stuart Larkin of the Institute of Southeast Asian Studies

President Barack Obama’s visit to Myanmar this week once again puts a spotlight on the progress of the country’s opening up and political transition. But in a familiar refrain: it’s the economy, stupid.

The Thein Sein government’s lovefest with western donors over ‘Washington consensus’ policies risks intensifying resource-curse dynamics without delivering the infrastructure upgrade that Myanmar needs for labour-intensive manufacturing export competitiveness. Meanwhile, foreign investors struggle with local conditions and the very people who may be able to get big projects off the ground, Myanmar’s own tycoons, are often shunned by their president and precluded from western financing by US blacklisting.

An alternative model is that of the ‘developmental state’, where the state harnesses big business for the purpose of rapid industrialization. There are many successful precedents for this in the region – unlike the western, neo-liberal approach. The 2015 election presents the opportunity for a political realignment and the adoption of this more effective development model.

The Washington Consensus advocates fiscal conservatism, market-determined interest rates and exchange rates, liberalisation of trade and investment, privatisation of state enterprises, deregulation and free competition, with an emphasis on secure property rights. These, broadly speaking, are the policies currently advocated by the donors and which Thein Sein’s government has wholeheartedly embraced.

However, many of the successful Asian economies have followed the ‘developmental state’ model, making economic growth their top priority and enlisting the private sector to achieve that goal. Under this model, state intervention is circumscribed by a commitment to private property and free markets but an elite economic bureaucracy maintains close institutional links with the private sector for consultation and cooperation. Strategic industrial policy is central to the model. First adopted by Japan, this approach has been emulated by several successful Asian economies such as South Korea, Taiwan and Singapore and, in its southeast Asian variant, by Malaysia, Indonesia and Thailand.

To achieve sustainable, inclusive and high rates of economic growth, Myanmar must diversify from its dependence on agriculture and the resource sectors and target labour-intensive manufacturing exports, climbing the technology ladder. To be competitive, it must invest in infrastructure. Washington consensus policies, with their emphasis on governance and market liberalisation, are unlikely to achieve this.

The more proactive developmental state approach, with collaborative relations between the state and business, in combination with new sources of international debt finance, offers a better model for Myanmar to follow. Like neighbouring Thailand, Myanmar has a number of pre-eminent tycoons at the head of family-owned conglomerates. Although they are no angels the president can work closely with them to establish a pipeline of “shovel-ready” infrastructure projects, assigning the necessary concessions to ensure that essential infrastructure does not fall under foreign control. Backed by those concessions, Myanmar’s tycoons could seek financing from the new China-led multilateral development banks; they would have to secure the necessary finance or relinquish the concessions.

There are a number of constraints on western sources of infrastructure finance. The World Bank’s IFC and the ADB are no longer big infrastructure lenders; international banks have limited capacity for infrastructure lending following the 2008 Global Financial Crisis and with Basel III regulatory requirements; the US prohibits dealings with many of Myanmar’s conglomerates with big project experience through its Specially Designated Nationals blacklist and is generally slow to lift sanctions; and., apart from telecommunications, foreign investors struggle in Myanmar’s infrastructure sectors. Japan, though a significant potential source of development finance, is dependent on the US defence umbrella and cannot break ranks with the prevailing Washington consensus orthodoxy.

But the tycoons will soon have more options. Two new China-led multilaterals – the New Development Bank, or Brics Bank, and the Asian Infrastructure Investment Bank – will both focus on infrastructure finance. They will lend on commercial terms and without non-economic conditionality, such as linkage to democracy and human rights, making them more attractive sources of funding for many developing countries. Political pushback in Myanmar based on fears of China’s rapid rise will be minimized, as loan recipients will be special purpose vehicles (SPVs) wholly owned or majority controlled by Myanmar conglomerates, and the new lending institutions are multilateral, though China-led.

Chinese thinking is evolving from the ‘Going Out’ strategy of securing energy and minerals for its domestic industry, to a new strategic vision that sees infrastructure investment, globally but particularly regionally, as a future driver of world growth in place of the flagging US consumer. There is the initial demand stimulus from the construction phase of projects and, on commencement of operations, growing productivity gains to be enjoyed. China can bring to bear a huge scale of new financing. Myanmar’s tycoons can work with Naypyitaw to establish a pipeline of new projects in time for the new lenders’ commencement of operations.

Naypyitaw must also focus on improving those aspects of governance that pertain to the provision of international project finance. These include paying attention to the legal and regulatory environment and perhaps drafting specific project finance and SPV laws and addressing land issues. Land acquisition should be undertaken by the government through exercise of eminent domain to ensure that infrastructure concessions are bankable, perhaps compensating farmers with fallow and virgin lands repossessed from agribusinesses that have failed to invest. The currency should be depreciated to a level that is stable for the project loan durations and realistic for spurring export-led growth. And industrial policies should be developed so that Myanmar integrates with the world economy in a way that promotes its own industrialisation and technological advancement.

Stuart Larkin is a visiting fellow at the Institute of Southeast Asian Studies (ISEAS). This post is based on ‘Establishing Infrastructure Projects: Priorities for Myanmar’s Industrial Development,’ Parts I and II to be published by ISEAS Trends this month. Stuart_larkin@iseas.edu.sg

 

[Aepsilons]

And here's a slightly different look at the effect of a poor demographic outlook on GDP growth in the emerging markets.

---

http://blogs.ft.com/beyond-brics/2014/11/10/moodys-emerging-markets-face-demographic-challenges/

Moody’s: EMs face demographic challenges
Robin Wigglesworth Author alerts | Nov 10 17:47

Teeth have long been gnashed over the dismal demographic trends of the developed world, with the babyboomer generation soon set to retire and fewer workers around to pay for their healthcare and pension costs. But the developing world also faces a demographic challenge, fast FT reports.

The young and rising labour forces of emerging markets have been a crucial factor behind their rise over the past decade, but in a report, Moody’s points out that the positive effect this has had on growth is fading.

Based on UN population projections, the working age population (defined as being between 15 and 64 years old) of the biggest emerging markets will rise by 0.3 per cent per year on average in 2014-19, compared with 1.6 per cent in 2000-05.

Unless this tapering is counteracted by faster increases in participation rates than in the past, it will result in lower growth in the labour force and weigh on economic growth, Moody’s points out.

Lower growth in the labour force dampens potential GDP growth by lowering the amount of people available for work, potentially exacerbating skill mismatches, and by lowering savings available to fund investment. Every 1 per cent rise in the labour force is usually estimated to raise the level of potential GDP by around 0.5 per cent in emerging markets, i.e., the labour share is around half.​

All developing countries in the G20 group will experience economic headwinds from less favourable demographics, but some nations stand out as particularly vulnerable.

These are South Africa – where demographic changes will lower potential economic growth by more than 1 percentage point, according to Moody’s – China, Brazil and Russia.

China’s growth potential is also significantly curtailed by changing demographics. And Brazil, with a much younger population than Russia’s, will see similar effects in terms of change in potential growth, at just under half a percentage point per year.

In turn, unless slower increases in the labour force are offset by marked rises in productivity growth, GDP growth will be noticeably lower in emerging markets than before the global financial crisis.​

View attachment 149209
Source: Moody's Investors Service. Click to enlarge

Very good article. It definitely puts a new context to some of the theoretical frameworks listed.

 

[LeveragedBuyout]

This article illustrates the perils of government-led investment abroad, and shows the limits of goodwill that such investment can purchase (especially when that investment takes the form of loans). I have increasingly seen articles describing African resentment of Chinese investment as a form of neocolonialism, because the primary objective of those investments is to extract resources for China's use, not African industry's use; the management of those projects is exclusively Chinese, so know-how is not developed locally; and even the labor is often comprised of imported Chinese workers, depriving the common man of the opportunity to earn a wage.

This is yet another reason why opposing China's new infrastructure bank is misguided, because it cannot accomplish what so many fear (political domination of the borrowers). The silver lining in this is that Chinese companies are now more aggressively competing with each other outside of China, which bodes well for China's own shift to a more market-based economy. Emphasis is mine.

---

http://blogs.wsj.com/frontiers/2014...pansion-meets-growing-opposition/?mod=WSJBlog

• November 14, 2014, 3:04 PM ET

East African Rail Expansion Meets Growing Opposition
ByNicholas Bariyo

Rwanda’s President Paul Kagame, Chinese Premier Li Keqiang, Kenya’s President Uhuru Kenyatta, Uganda’s President Yoweri Museveni and South Sudan’s President Salva Kiir (L-R) pose for a photograph after the signing of the Standard Gauge Railway agreement at the State House in Nairobi, Kenya.
Reuters
A Chinese-funded multibillion-dollar standard gauge railway project in East Africa is coming under fire for failing to meet the needs of the local communities it affects. The new network will sharply improve transportation links to key resource-rich areas in the region, helping to open up access to the world’s newest oil and gas discoveries, but local leaders are increasingly pushing the Asian nation to provide more of what local communities want: decent jobs and transparent deal-making.

Once completed, the 2,935-kilometer network is expected to slash freight costs by more than 60%, boost regional trade and provide the first railway link to Uganda’s Lake Albertine Rift basin, believed to contain as much as 6.5 billion barrels of crude oil.

But storm clouds are gathering over the project, with local communities in Uganda and Kenya increasingly questioning the bidding processes and demanding better jobs for local communities.

“Contracts for the projects are shrouded in secrecy, this cannot be good for us as well as future generations” said Geofrey Ekanya, a member of the Ugandan parliament. “The Chinese are giving us cheap loans, but this should also translate into good jobs for our people.”

Chinese Premier Li Keqiang signed the deal for the project with the leaders of Uganda, Kenya, South Sudan and Rwanda in May in the Kenyan capital Nairobi. Although the project is being undertaken by all the countries jointly, each nation has to individually agree financing arrangements for the section of the project in its territory. The agreement gave Chinese companies exclusive rights to lead the project in each of the four nations, according to officials.

The rail network expansion is the largest post-independence infrastructure project in a region that has accounted for 25% of the new oil and gas discoveries worldwide over the past four years. The discoveries have piqued the interest of investors from energy-hungry Asia who are looking to develop facilities to aid the exploitation of newly discovered resources.

The railway project will supplement the existing century-old narrow gauge network that now only runs up to Uganda. The new lines are designed to continue to oil-rich but landlocked South Sudan, Eastern Congo and Rwanda.

According to the East African Community secretariat, the new railway will cut freight costs to 8 U.S. cents a metric ton per kilometer from the current 20 cents. Trains on the new tracks will be able to travel at up to 120 miles per hour.

China Road and Bridge Construction Company (CRBC) started work on the first phase of the project in Kenya last month.

But days after the commencement of the construction, protests erupted in the Kenyan town of Voi, blocking traffic to the only regional highway to the port city of Mombasa for several hours. The protesters, who blocked the highway with burning tires, accused the Chinese contractor of denying them jobs in favor of Chinese expatriates.

The protests subsided after the Chinese company promised to cap the number of expatriate workers to 2,500 out of the total workforce of around 30,000, according to Julius Li, the liaison and cooperation manager for CRBC.

It is not only the Kenyan section that has sparked local resentment. Last week, Uganda’s parliament appointed a panel to probe the contract-awarding process for the Ugandan project.

According to Helen Kawesa, a spokeswoman for the Ugandan parliament, the country’s lawmakers want to review the circumstances under which China Civil Engineering Construction Corp., or CCECC, which had been earlier contracted to build the project, lost the deal to another Chinese company, China Harbour Engineering Company (CHEC). “The probe committee will also look into allegations of cost-inflating and design flaws raised by whistleblowers,” Ms. Kawesa said. CHEC denies the allegations.

The two Chinese companies are currently embroiled in a legal dispute in a Ugandan court over the project, a situation that is out of character for the usually cooperative Chinese entities.

“We had a better project proposal, that’s why we won the contract but our colleagues are not taking this in good faith,” a spokesman for CHEC said. But CCECC accuses CHEC of enlisting the support of “powerful” government lobbyists to scupper its earlier deal.

According to Suzan Kataike, the spokeswoman for Uganda’s works and transport ministry, government negotiations with CHEC over the commercial contract for the project are expected to be completed within the next few weeks, to allow the commencement of the project by early 2015. The entire regional project is expected to be completed by early 2018.

Over the past decade, China has strengthened its economic ties with Africa, mainly in search of minerals and energy sources for its resource-hungry economy. But activists accuse Beijing of using Africa only as a source of natural resources as well as a market for its goods, which could strangle the continent’s development efforts.

 

[LeveragedBuyout]

http://online.wsj.com/articles/china-woos-neighbors-with-carrot-and-stick-approach-1415843541

China Takes Carrot-and-Stick Approach to Dealing With Neighbors
New Silk Road Effort Means Tough Choices When it Comes to Disputes With China

By BRIAN SPEGELE
Nov. 12, 2014 8:52 p.m. ET

BEIJING—Six months after China sailed a huge oil rig into waters claimed by Vietnam, Beijing is plying Southeast Asia with pledges of investment and new business, part of a carrot-and-stick approach in its contest for South China Sea control.

China’s latest tack rewards friends and punishes those who publicly contest its claims over nearly the entire South China Sea. The strategy is part of a wider Chinese vision for a more integrated Asia, with China at its center.

Beijing’s push for deeper economic ties with testy neighbors promises benefits for smaller nations eager for investment. For China, such ties carry strategic significance as it seeks to ways to assuage its neighbors.

The more forceful behavior under President Xi Jinping that has brought China into confrontation with both the Philippines and Vietnam is partly driven by questions over how committed the U.S. is to its Asia “rebalancing” strategy, security scholars say.

Taken together, China’s neighbors with overlapping claims face difficult choices: recognize China’s ambition as Asia’s dominant power and embrace economic benefits that come with it or defend maritime claims and confront China, despite no guarantee of support from others in the region or the U.S.

“Nobody ever expected that any new Chinese president was going to tolerate such high tensions with so many countries at the same time,” said Bonnie Glaser, a Chinese foreign-policy expert at the Center for Strategic and International Studies in Washington.

Mr. Xi’s strategy expects over time, countries will recognize that “China is the giver of economic benefits, U.S. staying power is at best questionable and that countries are going to have to realize that they must accommodate to Chinese interests,” she said.

Vietnam has perhaps most keenly felt China’s weight. For more than a year, Chinese diplomats behind closed doors have pressured Vietnamese officials to pursue joint offshore oil-development with Beijing, say people close to the discussions.

Then in May, as negotiations over the program stalled, state-owned China National Offshore Oil Corp.’s most modern deep-water oil rig appeared in area claimed by Hanoi as its exclusive economic zone under the United Nations Convention on the Law of the Sea.

Chinese vessels accompanying the rig engaged in ramming with Vietnam’s coast guard. Several people died in anti-Chinese riots in Vietnam, and ties between the two countries sank to their lowest point in years.

But soon after the rig withdrew in July, Beijing refocused on deepening economic ties to Vietnam. Pledges to set aside maritime disputes to focus on joint infrastructure development and monetary cooperation remain in early stages, but Vietnam has agreed to join a China-led Asian Infrastructure Investment Bank. The U.S. has lobbied against the bank, saying it might be used primarily to boost Chinese companies, and many major Asian economies have yet to sign on.

Efforts to use China’s economic weight to woo mistrustful neighbors have picked up under Mr. Xi. In Indonesia a year ago, he outlined ambitions for reviving a “21st Century Maritime Silk Road,” a trade route that will carry with it billions of dollars in investments.

The ambitions for a Maritime Silk Road aims to ease fears among smaller nations, said Christopher Len, a National University of Singapore fellow who has studied China’s maritime disputes. What China emphasizes is benefits from dealing with it, he said.

Vietnam’s Foreign Ministry said it welcomed efforts to promote regional cooperation, based on agreement by countries involved.

China’s Foreign Ministry said that since Premier Li Keqiang visited Vietnam last year, both sides had been pushing ahead with joint energy development, having already held three rounds of consultations on the issue. It didn’t comment directly on whether its decision to deploy the oil rig was related to negotiations over joint development.

Chinese customs data show trade with many countries in the region is growing fast. Two-way trade with Malaysia broke $100 billion for the first time last year. For Vietnam, trade with China is critical. Despite the oil-rig standoff, Vietnam’s two-way trade with China in the first 10 months of this year was up 22% from a year earlier.

The early build-out of Mr. Xi’s Silk Road leads to the eastern Malaysia port of Kuantan, where a Chinese state enterprise is helping to bankroll the port’s expansion and leading efforts to develop a nearby industrial zone, the Malaysia-China Kuantan Industrial Park.

The Chinese company, Guangxi Beibu Gulf International Port Group, owns 40% of the port and a subsidiary is due to begin construction this month of a $1 billion steel mill in the industrial zone. Whether such investments translate into friendlier relations with South China Sea claimants is less clear.

A Chinese coast guard vessel, right, fires a water cannon at a Vietnamese vessel off the coast of Vietnam. ASSOCIATED PRESS

“Especially in Southeast Asia, how can anybody contemplate being seen being weak or kowtowing to a bag of cash?” said Zha Daojiong, a Peking University professor of international relations.

He added that new trade connectivity with the region served other useful purposes for China, such as creating new outlets for Chinese companies operating in bloated Chinese industries like steel.

Ms. Glaser, the CSIS expert, said China views a limited window of opportunity to advance its claims.

There is a “perception of American weakness, which has opened a door for China,” she said. “The U.S. is seen as distracted: Ukraine and the Middle East and a generally weak presidency.”

—Nguyen Anh Thu in Hanoi, Yang Jie in Beijing and Fanfan Wang in Shanghai.

 

[alaungphaya]

World leaders must grasp the nettle in the battle against malnutrition | Lawrence Haddad and Dolf te Lintelo | Global development | The Guardian
World leaders must grasp the nettle in the battle against malnutrition
If governments are serious about ending hunger, this week’s international conference on nutrition must yield real results

Haiti and most other countries are grappling with some form of malnutrition, while about half are affected by undernutrition. Photograph: Dieu Nalio Chery/AP
This week, the eyes of the global development community will be on Rome. After a gap of two decades, the second international conference on nutrition (ICN2) is to review global progress made towards improving nutrition over the past 25 years.

The world has changed dramatically since the first meeting in 1992. Globalisation, urbanisation, information technology, population growth, concentration of the food system, the emergence of new state powers, a changing climate and outbreaks of conflict and infectious disease make for a highly dynamic and uncertain global context.

Supported by – and sometimes in spite of – this backdrop, undernutrition, as measured by the rate and pattern of child growth and by micronutrient deficiencies, has slowly edged down. Other manifestations of malnutrition such as obesity and non-communicable diseases like diabetes have become more important as drivers of the global burden of disease.

Nearly every country is now grappling with some form of malnutrition, and almost half are dealing with undernutrition and obesity at the same time. While 70% of countries are on course to meet at least one of the four targets identified by the World Health Assembly (WHA) for which data are available, 30% are not.

Against this shifting backdrop, the nutrition community has never looked more unified. Globally, the four big UN agencies – the (Food and Agriculture Organisation, the World Health Organisation, the World Food Programme and Unicef, the UN children’s agency – are on the same page. The scaling up nutrition movement (SUN) has galvanised and focused commitments for nutrition, and, through reviews in the Lancet, a consensus has been established about what works to reduce malnutrition.



The second international conference on nutrition is a major opportunity for national and global leadership to work together to meet these challenges. The costs of failing to act are tragically high for all countries: premature death, heavy morbidity burdens, stressed health systems, children and adults who never reach their potential – all causing a severe drag on economic progress.

But for leaders to convince us that they are serious about reducing malnutrition, they have to lead on accountability. Without accountability we rely only on goodwill. The most vulnerable people in society need to rely on political will, not goodwill. How can we build accountability and political will? One way is to document and assess the choices that governments and agencies can make – on spending, policies and laws.



Last week, two initiatives were launched to bring those goals closer. The first of them, the global nutrition report, brings together more than 80 nutrition indicators for each of the 193 UN member states. The data cover all forms of malnutrition, its drivers and efforts to address it.

The report concludes that nutrition needs to be embedded much more firmly in the proposed sustainable development goals (SDGs). Out of 169 targets, nutrition is mentioned in only one. The report also calls for bolder SDG nutrition targets for 2030, not mere extensions of the 2025 WHA targets. New data, funding, commitments and new understandings give cause for optimism. We need more ambition on targets, not less.

Scaling up nutrition programmes can be accelerated. A more relentless focus on programme coverage is needed. Finally, if large government budgets allocated to agriculture, education, social protection and water, sanitation and hygiene can be made more nutrition sensitive, they are likely to have a significant impact on stunting. To achieve this, accountability in nutrition needs strengthening. About 40% of all countries cannot tell if they are on or off course to meet the WHA global targets. Data on child growth is more than five years old for nearly half of all countries. Incomplete and outdated data make a mockery of accountability.

Second, the hunger and nutrition commitment index for donors (Hanci) collates and analyses 14 indicators of political commitment to hunger and malnutrition reduction by 23 donors. The index seeks to make donors accountable for their efforts to address hunger and undernutrition in developing countries. Latest findings show that coherence across donor government departments in the fight against hunger and malnutrition is wanting. The top performers, such as Canada and the UK, have good alignment across aid, agriculture and climate policies. Evidently, addressing malnutrition will require not only coherent but also sustained donor engagement, and a climate of austerity puts this to the test.

Reports such as these can support decision-makers but, above all, we need people to take bold decisions. The second international conference on nutrition is about leadership. Malnutrition reduction requires focused and united action. Those who hold the power to accelerate reductions in malnutrition need to exercise it and allow us to hold them, and ourselves, accountable for ending the worldwide tragedy of 21st-century malnutrition.

Dolf te Lintelo is a research fellow in the cities cluster at the Institute of Development Studies

 

[LeveragedBuyout]

Time for a periodic update on the Gulf.
---
http://online.wsj.com/articles/oil-price-slide-may-curb-gulf-states-spending-plans-1416792930

• November 24, 2014, 2:01 PM ET

Oil Price Slide May Curb Gulf States’ Spending Plans
By Asa Fitch

Lower oil prices are threatening to curtail the spending that energy-rich Persian Gulf governments have used to shore up support since the Arab Spring.

A continuing decline in prices could curb foreign-asset purchases by the governments of Bahrain, Oman, Saudi Arabia, United Arab Emirates, Qatar and Kuwait and put a drag on the post-Arab-Spring construction growth that has benefited multinational contractors.

Such a reconsideration could have implications for global asset markets, for regional politics and for the pace of a development boom into which governments have pumped hundreds of billions of dollars and from which many foreign companies have profited.

Leaders in the Gulf have begun talking more openly about spending adjustments and economic diversification away from energy.

Oman’s minister of oil and gas, Mohammed al Rumhi, said this month that the price decline is “a challenge, because the country depends on oil,” according to the Muscat Daily. “Oil prices going down will affect the state budget,” he said.

High oil prices have helped Gulf governments in their attempt to head off the kind of unrest that toppled regimes in Tunisia and Egypt in 2011. To keep their citizens content, the royal-family hegemonies used their energy-fueled fiscal muscle to start building schools, hospitals, housing for citizens, roads and other social projects.

Government spending by the Middle East’s oil exporters jumped above $700 billion in 2011 and grew by about 15% annually until this year, when estimates show the rate of increase slowing, according to the Institute of International Finance

“If revenues are not forthcoming, something has to give,” said John Sfakianakis, the Middle East regional director for Ashmore, a U.K.-based emerging-market asset manager. “Eventually some of these huge projects will have to slow down.”

If oil prices, which have dropped to below $80 a barrel from more than $100 a barrel in July, continue to stay low, this slowdown could persist.

The scale of the coming budget problem is biggest in Saudi Arabia, the Gulf’s leading economy. Saudi Arabia spent $265 billion last year, according to International Monetary Fund estimates. If it doesn’t alter fiscal policy, it is on pace to run a budget deficit amounting to 1.4% of economic output next year, despite its enormous wealth.

Saudi Arabia needs oil to trade at about $97.50 a barrel this year to sustain its spending without running a deficit or tapping reserves, according to the IMF.

Oil prices fell below Saudi’s break-even budget level in July and have remained below it since. The break-even levels for the Gulf countries apart from Qatar and Kuwait are already above current oil prices.

Light, sweet crude futures settled at $76.51 in New York on Friday. Brent crude, the leading European oil benchmark, traded at an average of around $110 a barrel between 2011 and 2013.

Spending also has ballooned in the U.A.E., where Abu Dhabi pledged last year to build $90 billion of projects through 2017—many of them with the help of foreign companies. Bahrain, Qatar, Oman and to a lesser extent Kuwait have been on spending sprees, too.

The Gulf’s big energy exporters, including Saudi Arabia, Kuwait, the U.A.E. and Qatar, could try to fight the decline in oil prices.

As some of the most influential members of the Organization of the Petroleum Exporting Countries, the cartel of big oil producers, they could agree to cut output in a bid to buoy prices.

But the group has so far failed to reach any consensus about reining in production, and it is unclear how much impact OPEC would have on prices if it did act.

The countries also could issue debt or tap into government savings if current oil receipts can’t pay for planned expenditures, tiding them over while they make budget adjustments.

In the U.A.E., for example, there was “no need now to adjust very quickly to lower revenues” because of the existence of the Abu Dhabi Investment Authority and other sovereign asset pools, said Harald Finger, the head of the IMF’s mission to the country.

Still, Gulf countries are reluctant to drain sovereign-wealth funds, together estimated at more than $1 trillion, leaving spending cuts as the only other option outside of borrowing.

Such cuts, however, could endanger spending that has been a boon to foreign companies and investors. U.S. construction company Bechtel Group Inc. and Germany’s Siemens AG won contracts to help build a $23.5 billion metro in Riyadh last year, while Royal Dutch Shell PLC signed a deal in 2012 with Qatar Petroleum to build a huge new petrochemicals complex in Qatar.

If Gulf countries do decide to dip into sovereign funds, it could force a pullback by some of the world’s most active institutional investors.

Gulf funds have spent billions of dollars in recent years on everything from London real estate to Australian and U.S. infrastructure, and have served as key financial backstops for large Western banks in the throes of the financial crisis. Funds in Abu Dhabi and Qatar helped rescue Citigroup Inc. and Barclays PLC in 2007 and 2008.

In an era of greater austerity, funds may still make new investments using dividends and investment gains, but the flow of Gulf money into international markets could be slower.

The shift toward domestic spending has already prompted changes in sovereign-fund allocations in Qatar, where more new energy revenues have been flowing directly to the government, bypassing the Qatar Investment Authority, its main sovereign-wealth fund. The QIA “has been changing its strategy, becoming less illiquid and Europe-centric on the international side and more engaged in the local economy,” said Victoria Barbary, the director of Institutional Investor’s Sovereign Wealth Center, a London-based research group.

The IMF, meanwhile, recently reiterated calls to rein in spending. Christine Lagarde , the IMF’s managing director, in October said Gulf countries needed to balance budgets more urgently given the oil-price decline.

The financial realities faced by oil-rich Gulf countries and the investors and companies that have grown used to high prices are stark.

“I think the Gulf economies will have to project fiscal discipline,” Mr. Sfakianakis, the Ashmore director, said. “They don’t want to be seen as profligate.”

 

[alaungphaya]

I don't get it. Aren't prices been lowered by Saudi overproduction? Are OPEC finding out that they can't control the Saudis when they decide to go rogue. Anyway, cheap oil prices may stave off another global recession so long may they continue. @LeveragedBuyout

 

[LeveragedBuyout]

I don't get it. Aren't prices been lowered by Saudi overproduction? Are OPEC finding out that they can't control the Saudis when they decide to go rogue. Anyway, cheap oil prices may stave off another global recession so long may they continue. @LeveragedBuyout

Saudi Arabia has made a conscious decision to lower prices, even at such a cost to itself, in order to maintain market share and simultaneously try and kill higher-cost suppliers (e.g. US fracking operations). As you can see, this game of chicken only works because of the forex reserves that Saudi has built up along with its low debt ratio, but once it starts running deficits and/or must tap its sovereign wealth fund to sustain this price war, it will start to have seriously negative effects on their economy.

At the same time, fracking technology continues to improve, lowering the break-even oil price for fracking operations to be viable, so Saudi's ability to knock off this competition with its price war is not even a certain outcome. They may be shooting themselves in the foot for nothing.

Moreover, Mexico's recent energy sector reforms will mean rapidly increasing productivity (and oil output), and Iraq's gradual stabilization will further put pressure on prices. This may spin out of Saudi Arabia's control, or at least restrain SA's ability to end the war.

That said, the reduction of oil price will prove to be a powerful economic stimulus, so I hope Saudi Arabia continues the price war for as long as possible. This price war also takes money out of the hands of the worst terror sponsors in the world (Qatar, Saudi Arabia, Iran, etc.), which is another welcome side-effect.

OPEC's back has been broken, and it will never threaten the world again with its blackmail.

 

[LeveragedBuyout]

Another follow-up to the fallout from the oil price decline, providing a more comprehensive view.
---
http://blogs.ft.com/beyond-brics/20...rs-risk-ratings-downgrade-on-low-crude-price/

EM oil producers risk ratings downgrade on low crude price
James Kynge Author alerts | Nov 25 12:12

Bahrain, Angola, Ecuador and Venezuela rank as the emerging markets (EM) most vulnerable to a downgrade in their sovereign credit ratings if oil prices do not recover in 2015, Fitch Ratings said in a report published on Tuesday.

With benchmark Brent crude prices close to $80 a barrel, down from $115 a barrel in mid-June, the revenues of all oil producers are under pressure. But due to differing levels of fiscal reliance on oil income, the speed of deterioration in domestic budgetary conditions varies sharply among EM producers.

The blue bars in the chart below estimate the oil price at which each country manages to balance government revenues with spending, known as the fiscal breakeven point. The red squares on the chart plot the estimated 2014 budget surplus or deficit in each country, expressed as a percentage of GDP.


Source: Fitch Ratings


Thus, as the chart shows, Kuwait, with a budget surplus close to 25 per cent of GDP and a fiscal breakeven point of around $50 a barrel, is the most resilient to continued weakness in oil prices, according to Fitch.

Other territories such as Abu Dhabi and Norway, which like Kuwait produce a lot of oil per capita and therefore have to devote less of their oil revenues to meeting their people’s needs, also enjoy considerable resilience to oil price declines. They have built up big budgetary buffers in recent years, reinforcing their position of strength.

At the other end of the spectrum, Bahrain’s repeated budget deficits since 2009 has more than doubled its debt to GDP ratio, meaning that a significant chunk of oil revenues is required just to pay off the interest on domestic debts. Ecuador is in a similar position, after its oil receipts fell by 2 percentage points of GDP last year and its central government deficit surged.

The other measure of vulnerability is the extent to which a country relies on oil for its fiscal revenues, with Saudi Arabia, Bahrain, Abu Dhabi, Kuwait, Congo and Angola leading the way (see blue bars in the chart below). The red bars show the proportion of the current account inflows that derive from oil. A low ratio denotes a greater potential for a country – such as Mexico – to rely on non-oil exports when the oil price slumps.

Source: Fitch Ratings

Venezuela appears vulnerable on all counts – it has a relatively high fiscal breakeven point (of around $110 per barrel of crude), runs a fiscal deficit equal to close to 5 per cent of GDP, relies on oil revenues for around 40 per cent of its fiscal revenues and depends on oil exports for close to 95 per cent of its current account receipts. Fitch currently gives Venezuela a sovereign rating of B, with a negative outlook.

Fitch acknowledges difficulties in estimating Venezuela’s fiscal breakeven point because it is not clear what exchange rate the government uses when converting oil-derived revenues, but a weighted average exchange rate using the economy’s three foreign exchange systems results in an estimated breakeven price of $107 a barrel.

Nigeria is victim of oil price slumpIn an example of how the oil price slide is having a market impact on the more vulnerable of countries, Nigeria has suffered a slump in the value of the naira against the US dollar in recent months, creating a policy dilemma for the Central Bank of Nigeria (CBN).

The naira’s fall to NGN176 to the US dollar in mid-November, down from NGN162 to the US dollar in August, may not lead directly to an official devaluation by the central bank, says David Faulkner, economist at HSBC Securities in South Africa.

“Past episodes of currency stress suggest the Central Bank of Nigeria will try a combination of policies to stem depreciation and preclude devaluation of the official foreign exchange rate,” Faulkner said.

“Since late-October, the CBN has introduced several administrative measures, albeit with little impact, and we expect continued intervention through its $37.5bn in foreign exchange reserves to try to stabilise the currency. We also expect the CBN to tighten policy through a higher cash reserve requirement on private deposits and/ora 50 basis point rate hike at its meeting on November 25.”

 

[Aepsilons]

Asia Pacific: growing economies, growing corruption

The 2014 Corruption Perceptions Index scores of countries from Asia Pacific, the world’s fastest growing region, are a resounding message to leaders that, despite many public declarations and commitments, not enough is being done to fight corruption.

Out of the 28 Asia Pacific countries in the index, which account for nearly 61 per cent of the world’s population, the majority lag behind in their efforts in fighting corruption in the public sector, with 18 scoring less than 40 out of 100 (on a scale where 0 is highly corrupt and 100 very clean).

The Corruption Perceptions Index measures corruption in the public sector, which is accountable to the government. The persistent low scores ask a critical question to the leadership of Asian countries, which have full control of the conduct of its public services. This about the leadership.

For China and India, two countries where new leadership are pursuing anti-corruption drives, the index is a harsh reality check.

Corruption grows in China despite campaign

In 2014 we have heard a lot about government efforts to prosecute corruption, and corruption scandals in China. Its commitment to catch “tigers and flies” – public officials big and small – indicates the government is serious in its commitment. The government also recognised the needs for China’s international efforts, launching a “fox hunt” of officials overseas and withdrawing opposition to G20 anti-corruption measures.

However, China shows a downward trend in the index (with a score of 36) in comparison to last year (40), posing a hugely challenging question: how effective is a top-down approach when you don’t have transparency, accountable government and free media and civil society?

The recent prosecutions in China are largely seen as efforts to clamp down on political opponents of the regime as opposed to genuine anti-corruption commitments.

Given the penetration and impact of colossal corruption to every scale of state and society, the 2014 index score shows the need for a wide range of reforms, several of which are listed in this article.

China’s attitude towards transparency and governance is important to the wider region, given its growing influence. If its spreads an economic model based on less transparency and accountability and excluding civil society, it will bode ill for the corruption fight in other countries too.

India’s score remains low

India’s vibrant democracy reveals the flip side of the coin. Despite the engagement, innovation and participation of vibrant civil society, media and people at large, corruption continues to be one of the country’s biggest challenges.

It reveals India’s bitter reality of political corruption: the inadequacy of structures of accountability and transparency to deter the corrupt and the access to such mechanisms by the people. The problem urges the conversion of political commitment to concrete action at the highest level of government. In May, a Transparency International report warned that India, along with other countries in South Asia, needs stronger law enforcement, corruption watchdogs and protection of whistleblowers.

Together with India (38) and China (36), the poor scores of other emerging markets in the region – such as Malaysia (52), Philippines and Thailand (both 38) and Indonesia (34) – indicate a general weak or ineffective leadership to counter corruption, posing threats for both sustainability of their economies and somewhat fragile democracies.

The Corruption Perceptions Index sends a message to countries at the crossroads: Myanmar (21) Afghanistan (12) and North Korea (8), grappling with the issue of fighting endemic corruption in their countries. All rank towards the bottom of the index. It sends a loud statement that leaders must create societies that are more systematically resistant to corruption. That means taking a more inclusive approach to fighting corruption.


Asia Pacific: growing economies, growing corruption | space for transparency

 

[LeveragedBuyout]

Even though the rapid decline of the Russian ruble is well-known by now, I'd like to post this Economist infographic and a companion FT piece here, because this is starting to look a little scary, and the implications for other emerging markets may be more dire if the problems of the ruble create a contagion problem. 1997 redux?
---
Daily chart: Russia crushed | The Economist

Russia crushed
Dec 16th 2014, 13:45 BY THE DATA TEAM

IN THE world of central banking, slow and steady is the aim. So when a central bank raises interest rates by a massive 6.5 percentage points, and imposes the hike at midnight—as Russia's did on December 15th—it is a sign that something is going very wrong.

Pressure has been building for a while. The Russian economy is highly dependent on hydrocarbons: oil prices have fallen from $110 to below $60 in the past six months. Sanctions imposed by the West as a result of adventurism in Ukraine have made it hard for Russian companies to raise finance abroad. The rouble has been losing value against the dollar for months. On December 15th things got much worse. The rouble lost 10% of its value against the dollar, the worst drop since it was knocked off its exchange-rate peg in 1998. The Central Bank of Russia, led by Elvira Nabiullina, is thought to have intervened, using a few hundred million dollars in reserves to buy roubles. When that proved ineffective, Ms Nabiullina jacked up interest rates.

That brought only temporary relief. The rouble has been tumbling again today, and the panic has spread beyond currency markets, and beyond Russia. Ten-year rouble-denominated government-bond yields spiked to 15% on December 16th; the yield on dollar-denominated Russian ten-year bonds has hit 8%. The Moscow Exchange MICEX-RTS lost ground, as did shares in companies—including Austrian banks—that are exposed to Russia.

The woes of investors pale next to those of ordinary Russians. Before this week’s turmoil inflation was already running at about 9%, far above the 5% target Ms Nabiullina is supposed to hit. A normal depreciation tends to feed through to higher prices quite slowly, as imports, including inputs used by domestic firms, get more expensive. But in Moscow shopkeepers have started to reprice goods daily, in effect handing Russian workers a massive pay cut. The risk now is that Russians will lose confidence in using their own currency altogether.

---

http://blogs.ft.com/beyond-brics/2014/12/16/em-safe-havens-where-oh-where-are-they/

EM safe havens: where oh where are they?
Jonathan Wheatley

In the long-running battle between contagion and differentiation in emerging markets, contagion currently has the upper hand. That’s hardly surprising when you look at the size of the shock coming out of Russia and the failure of Monday night’s 650 basis point interest rate rise to deal with it. Nothing on this scale has been seen since 1998.


Rouble per US dollar, year to date. Source: Thomson Reuters

But contagion is not absolute and some EM currencies are bucking this month’s sharp falls, at least for now. Below, we present charts that show how the big EM currencies are faring in these times of extreme stress.

No other currency is suffering as the rouble but some are coming close. Below is the Turkish lira. Unlike Russia, Turkey benefits from cheap oil. Its current account deficit, a perennial concern for investors, narrows by more than $400m with every $10 fall in the oil price. But Turkey has been caught up in EM risk aversion, helped along by a political crisis that President Recep Tayyip Erdogan has done nothing to dissipate.


Turkish lira per US dollar, year to date. Source: Thomson Reuters

It’s a different story in Brazil, where you would expect the real to be doing badly given Brazil’s status as a commodity exporter. It is not yet, however, the significant net oil exporter it is destined to become (assuming Petrobras ever emerges from scandal). Rather than oil, Brazil is suffering from contagion, as one of the most liquid EM foreign exchange markets there is, and by the failure of its new economics team to reassure markets about the seriousness of their orthodox intentions.


Brazilian real per US dollar, year to date. Source: Thomson Reuters

Also tanking is the Nigerian naira, another oil exporter in the eye of the cheap oil storm. Attempts by the central bank to assert itself as the naira went into free fall may, however, be paying off.


Nigerian naira per US dollar, year to date. Source: Thomson Reuters

There is no chart showing what has happened to the Venezuelan bolívar this year: it is unchanged, at the official rate, at 6.28 to the dollar. The unofficial rate, however, has reportedly gone into the stratosphere, hitting 183.7 to the dollar on Tuesday according to dolartoday.com, from 64 at the start of the year and 159 on December 1.

But for an indication of what investors think of Venezuela’s prospects as the oil price plunges, here is its 5-year credit default swap:


Venezuela 5-yr CDS, year to date. Source: Thomson Reuters

All of the above might be expected to be doing badly in current circumstances. Not so the Indian rupee. India is a beneficiary of cheap oil and its government has been doing pretty much what investors could wish for – not least, taking the opportunity to cut fuel subsidies. But India, too, is a liquid market and investors have taken the exit door.


Indian rupee per US dollar, year to date. Source: Thomson Reuters

It is a similar story with the Indonesian rupiah: it, too, could be expected to gain from cheap oil and from an investor-friendly government. But the EM tide is still sweeping against it.


Indonesian rupiah per US dollar, year to date. Source: Thomson Reuters

Nor has the South African rand done much better. It held up fairly well during the early stages of falling oil, as would be expected. But this month it, too, has been swept away.


South African rand per US dollar, year to date. Source: Thomson Reuters

The Polish zloty is another currency that is suffering more than might be expected, given its solid reputation as an EM safe haven. It has, indeed, weathered the recent extreme storm very well, though only after losing about 12 per cent of its value against the dollar this year to the end of November.


Polish zloty per US dollar, year to date. Source: Thomson Reuters

That leaves just the Korean won moving against the tide. It has strengthened sharply this month, perhaps buoyed up by its current account surplus. But its exports are threatened by Japan’s expansionary Abenomics and the falling yen. The won may be one of the few safe havens around but it may not be one for long.

http://blogs.ft.com/beyond-brics/files/2014/12/krw-dec-16.png
Korean won per US dollar, year to date. Source: Thomson Reuters

 

[Maxtini]

This was certainly a nightmare~
But I think the spike in currency depreciation of some emerging markets like India and Indonesia were just a temporary shock spurred by ruble panic. Let's see how it develops for the next few weeks~