Despite its sizeable youth population, some fear that India’s much touted demographic dividend is on the verge of going horribly wrong – that the economy may not produce enough jobs to absorb the fast-growing labour force, leaving millions of young people feeling bitter and betrayed. To make matters worse, a recent Gallup study found that Indians are simultaneously the LEAST and MOST entrepreneurial people in Asia – with many Indian youths possessing strong entrepreneurial traits, though few actually wanted to start their own businesses.

Despite its sizeable youth population, some fear that India’s much touted demographic dividend is on the verge of going horribly wrong – that the economy may not produce enough jobs to absorb the fast-growing labour force, leaving millions of young people feeling bitter and betrayed. To make matters worse, a recent Gallup study found that Indians are simultaneously the LEAST and MOST entrepreneurial people in Asia – with many Indian youths possessing strong entrepreneurial traits, though few actually wanted to start their own businesses.

“For a country as poor as India, growth should be what Americans call a ‘no-brainer’,” according to economist Raghuram Rajan in an op-ed piece published on EconomyWatch earlier this year.

“Unlike many equally poor countries, India already has a very strong entrepreneurial class, a reasonably large and well-educated middle class, and a number of world-class corporations that can be enlisted in the effort to provide these public goods,” Rajan noted.

Therefore for India’s economy to succeed, “It is largely a matter of providing public goods: basic infrastructure like roads, bridges, ports, and power, as well as access to education and basic health care,” he added.

But of course, as Rajan, and most other economists, will attest, a nation’s economic growth can hardly be a ‘sure thing’. In fact, India’s annual GDP growth has fallen by 5 percentage points since 2010; while in October, the IMF cut India’s growth outlook to just 4.9 percent – its slowest pace in a decade.

Related: India’s GDP Growth to Weaken to Slowest Pace in Decade: IMF

Related: India Face “One-in-Three” Risk Of Downgrade To Junk Status: S&P

Related: Foreign Investors Forsaking India for More Promising Emerging Markets

No Brainer? Not Really.

The current economic malaise is a scenario that challenges the core belief among Indian bulls that India’s private sector and, more importantly, the sheer size of its youth population, can somehow overcome weak government policies, rampant corruption and global crises to maintain economic growth in the nation.

After all, unlike China, which faces a rapidly aging population, more than half of India’s 1.2 billion citizens today are below the age of 25; while nearly 70 percent of Indians are under 40.

“History shows us that generations with an exceptionally high youth ratio create political movements that shake up their systems and leave a profound impact on history,” said Mustafi; but, “some commentators now fear that India’s much touted demographic dividend is on the verge of going horribly wrong – that the economy may not produce enough jobs to absorb the fast-growing labour force, leaving millions of young people feeling bitter and betrayed.”

This ‘youth crisis’ is further highlighted by the results of a Gallup study conducted this year.

According to Gallup, while more than 60 percent of India’s population possess personality traits “critical for success as an entrepreneur”, few actually start, or want to start, their own businesses.

The study also found that just 16 percent of Indian adults owned any form of business, be it formal or otherwise, today. Worst yet, just 9 percent of adults who weren’t business owners were actually thinking about starting their own businesses – making India simultaneously the LEAST and MOST entrepreneurial nation in Asia depending on your definition.

“At a glance, you wouldn’t think India has a problem [with entrepreneurship],” wrote Gallup. “Entrepreneurs have consistently contributed to the country’s vibrant growth-oriented economy since its economic liberalization in 1991… [And] entrepreneurship has become increasingly important in sustaining India’s rapid growth.”

The analysis by Gallup demonstrated that India’s entrepreneurial ecosystem ranked in the bottom quartile for external factors such as government support, culture, social capital, and access to training.

“By contrast, intrinsic factors – such as entrepreneurial talents and attitudes – ranked much higher than external factors in enabling support for aspiring entrepreneurs.”

Related: Indian Technological Entrepreneurship – At Street Level in Mumbai

Related: Indian Entrepreneurship Challenges Caste System

Related: Low-Cost Innovation: Waves Of Change From India?

Rich In Ideas, Poor On Support

According to the Gallup study, nearly 46 percent of Indians believed that the government was making it hard for Indians to start a business, while just 26 percent thought otherwise. Additionally, among aspiring Indian entrepreneurs, just 29 percent of respondents felt that they had sufficient access to funding to start their business in the next 12 months – down from 37 percent in 2011. This level of financial support is far lower than the average for all Asian economies surveyed (44 percent).

“[And] What does an entrepreneur need besides money? They need strong support in terms of advice,” said Mukund Mohan, who has founded and sold three Silicon Valley start-ups and is CEO-in-residence at the Microsoft Accelerator, to Reuters. “There are not that many entrepreneurs in India, and there are hardly any in Kerala who have the expertise to be able to build, scale and sell strong software companies.

Starting Up India

Clearly more needs to be done by the Indian government to create a conducive environment for entrepreneurs. Still, as EconomyWatch has previously mentioned, private enterprises should be able to play an equally important role to grow the Indian economy – and breed entrepreneurs – in spite of the government.

That is the vision of the Mahindra Group, one of India’s largest private conglomerates, and its “Spark The Rise” campaign – now in its second year.

As part of its new corporate branding position, “Mahindra Rise”, the Mahindra Group and its “Spark The Rise” campaign have sought to create a platform where Indians can share their entrepreneurial ideas and possibly receive funding to build their start-up.

It is a noble idea with elements of international crowd-funding sites or other micro-financing platforms around. During the first incarnation of “Spark The Rise” back in 2011 for instance, Mahindra showcased 1,346 projects on its site, gave out 48 grants worth 400,000 rupees ($7,550) and provided a further 10 million rupees ($188,670) to four specially selected projects.

Now in its second season, Mahindra appears to be at the early stages of making a platform not only for grant giving, but also a place where young entrepreneurs can reach out to each other for advice and support. Setting it apart from many similar international websites, “Spark the Rise” is both a marketplace where volunteers, funders, and resource donors can find projects (and vice versa), as well as a place to find out about upcoming entrepreneurship conferences and events.

This is a bold step into the world of entrepreneurism in the digital age, especially for a company that ranks among India’s old guard of family-run conglomerates. 

Find out more about Spark The Rise.

Sparking The Rise

For the moment however, India’s entrepreneurship landscape remains bleak. According to a World Bank report, it is still easier today to start a business in violence-afflicted Pakistan or even poverty-stricken Nepal than it is to in India, while the Global Entrepreneurship and Development Index ranks India 74^th out of 79^th nations in terms of an entrepreneurship environment.

Related: The Broken BRIC – Why India’s Economy Is Underperforming: Raghuram Rajan

Related: A Tale of Two Indias With One United Goal

Related: Comparing India to The World

Programs, such as “Spark the Rise”, that engage with every-day Indians using crowd-sourcing can thus be a way that conglomerates can both full-fill a gap left by the government, and prevent themselves from becoming superfluous.

As the latest edition of The Economist points out:

Still, only time will tell if India’s business leaders can heed the call. 

By Raymond Tham, EconomyWatch.com

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Although European leaders are scrambling to avoid a cataclysmic economic fallout, Asia is now eyeing Europe’s prospects with nervousness and suspicion. Asian markets, in particular China, are increasingly frustrated and impatient with the lack of clear policy and rescue direction from European leaders. With Asian exports declining amid a global demand slump, what impact could a eurozone breakup have on Asia?

Although European leaders are scrambling to avoid a cataclysmic economic fallout, Asia is now eyeing Europe’s prospects with nervousness and suspicion. Asian markets, in particular China, are increasingly frustrated and impatient with the lack of clear policy and rescue direction from European leaders. With Asian exports declining amid a global demand slump, what impact could a eurozone breakup have on Asia?

As the European sovereign debt crisis enters its fourth year, that Spain, the fourth-largest economy in the euro area, could collapse under the weight of its debt and trigger a break-up of the eurozone.

Although European leaders are scrambling to prevent this potentially cataclysmic event, their squabbling over how to resolve the crisis has frustrated policymakers across the globe, especially in Asia where the region’s export-oriented economies are already suffering from a dip in global demand.

Chinese Premier Wen Jiabao has expressed his concerns over a lack of clear direction in Europe during talks with German Chancellor Angela Merkel in Beijing. Wen said Spain, Italy and Greece – the economies most at risk of defaulting and exiting the eurozone – must implement reforms to prevent the crisis from worsening.

Related Story: Can China Alone Save the Eurozone?

Related News: China-EU Summit Opens with Strong Focus on Trade

China Concerned by Lack of Reforms

Beijing is especially worried that economic chaos in Europe for Chinese-made goods, and conventional wisdom holds that a collapse of the 17-nation currency union would seriously curtail Chinese economic growth.

However, while most experts believe that a breakup of the eurozone will indeed affect Asian economies, there remains disagreement about the severity of the impact in Asia.

“Asia may be half a world away from the eurozone, but we can be sure that any sort of break-up of the single currency would have implications for the region,” writes Credit Suisse Economist Robert Prior-Wandesforde in his recent report Asia’s Risk List: A US Debt Crisis & Other Dangers.

He adds:

[quote] The more difficult issue to address, however, is the potential size of the impact. [/quote]

Much of the disagreement stems from uncertainty over the nature of a potential eurozone breakup. In the first possible scenario, known as the “clean break,” one or more smaller economies, like Greece or Portugal, defaults and either exits or is forced out of the currency union. In the second scenario, a major eurozone member, like Spain or Italy, faces default and leaves the currency union, most likely accompanied by several smaller neighbours.

According to London-based Capital Economics Economist Mark Williams, both scenarios will hurt Asia, but the default of a larger European economy would be exponentially worse.

“We estimate that for most countries a clean eurozone break-up and (resulting) moderate US slowdown would shave up to one percentage point off headline GDP growth of some export-driven Asian economies,” he said. “If the break-up was messy and the US economy also contracted, the direct hit to growth would be four or five times as large.”

Related Story: Winners & Losers In The New Global Economy: Dani Rodrik

Falling Exports

A closer look at the projections for the economies of Singapore, Hong Kong and Taiwan underscores the very real difference in the impact of the two scenarios.

Credit Suisse estimates that a Greek exit from the eurozone would reduce demand for Asian exports by 6 percent in the euro area and 2 percent in the US, thereby shaving 2.3 percentage points off GDP growth for Singapore and Hong Kong and 2.2 percentage points for Taiwan. However, a full-blown crisis would see eurozone imports from Asia plunge 25 percent and US imports to drop 8 percent, wiping more than 9 percentage points of growth away across the three Asian tigers.

While China, India and other Asian countries with large domestic markets are somewhat buffered from the effects of a collapsing eurozone, Europe’s problems still represent a potential economic drag.

The worst-case scenario would cut 1.8 percentage points off China’s economic growth rate, according to Credit Suisse. India would see 1.6 percentage points shaved from its growth rate and Indonesian growth would drop by an estimated 1.2 percentage points.

However, Prior-Wandesforde points out that these numbers don’t take into account the impact of foreign investors withdrawing their money from Asia to shore up their bank accounts at home, meaning the effects of a messy breakup of the eurozone could ultimately be much more serious. Therefore, he stresses that his estimates be considered “the minimum” potential impact.

Related Story: Enter The Dragon Year – How Will Asia Fare? : Haruhiko Kuroda

Aggressive Monetary Action

Asian leaders still have tools to fight the fallout of a potential eurozone breakup. With interest rates generally much higher in Asia than in the West and Asian governments comparatively unburdened by excessive debt, Capital Economics’ Williams believes that policymakers across the region have room to loosen monetary policy and provide stimulus to their economies.

“Debt levels in general are low and would not be a constraint on renewed loosening in the event of a downturn,” he said.

Prior-Wandesforde agrees, but notes there is less room for policy easing than before the global financial crisis. At the start of the financial crisis Asian economies, especially China, took aggressive steps to prop up growth and then suffered the painful consequences of soaring inflation and mountains of bad loans.

“With some countries, including China, subsequently regretting the extent to which policy conditions were loosened (in 2008 and 2009), the risk is that they prove to be more cautious on a second occasion,” he said.

Still, if ripples from Europe’s sovereign debt crisis threaten to become a tsunami, Asian policymakers appear prepared to use all the remaining instruments in their toolbox to avoid being dragged down along with a flailing eurozone.

Related Story: Can Asia Overcome Its Vulnerability To The European Crisis? : Stephen Roach

Related Story: A New Economic Disorder – When Old Western Powers & Emerging Markets Clash: Mohamed El-Erian

By Allison Jackson

Allison Jackson is a freelance journalist based in Guadalajara, Mexico. She has written for the GlobalPost in the United States, Agence France-Presse in China, The Australian, The Sydney Morning Herald and Thomson Financial.

is republished with permission from .

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The post Asia’s Fortunes Intricately Intertwined with Europe’s Fate appeared first on Economy Watch.

Since 1951, the Indian government has somehow managed to fail every single attempt to reach its annual target of increasing the nation’s electricity production capacity. But while the nation continues to struggle with crippling blackouts and power shortages till today, an energy plan, conceived during the 1950s, may fundamentally alter the nation’s, and quite possibly the world’s, energy future.

Since 1951, the Indian government has somehow managed to fail every single attempt to reach its annual target of increasing the nation’s electricity production capacity. But while the nation continues to struggle with crippling blackouts and power shortages till today, an energy plan, conceived during the 1950s, may fundamentally alter the nation’s, and quite possibly the world’s, energy future.

Late last month, India suffered two consecutive power grid failures, which crippled the nation’s social and economic infrastructure: On July 30^th, nearly 300 million Indians were affected by a massive blackout; and on the very next day, more than half of the population had no access to electricity after three of the nation’s five power grids failed at lunchtime.

As engineers struggled to fix the world’s worst blackout in history, many analysts questioned whether the Indian government could meet the nation’s increasing appetite for energy.

“The turmoil caused by the back-to-back grid failures is almost at the scale of a national emergency,” wrote Times of India journalist Ranjan Roy in an op-ed piece.

According to a report by Bloomberg, India has missed every annual target to add electricity production capacity since 1951. India also faced a deficit of 8.5 percent on its base electricity load from 2010-2011; and many Indians now feel that government’s general inaction has compounded the nation’s energy problems.

“This is a telling commentary on the situation of the power sector in the country,” told Chandrajit Banerjee, Director General of the Confederation of Indian Industry, to Arab News. “Losses to businesses have been in hundreds of millions of US dollars, which pales into insignificance when compared to the difficulty that the people of the country have had to face.”

Related: 360 Million Indians Hit By ‘Worst Blackout In Decade’

Related: The Broken BRIC – Why India’s Economy Is Underperforming: Raghuram Rajan

But, the Indian government insists that they are doing their best. In a report by the Economic Times, the Indian government blamed three states – namely, Punjab, Haryana and Uttar Pradesh – for the blackouts – as they had drawn power in excess of their allotted quota all through June and July. Then-Minister of Power Sushil Kumar Shinde, who has since been replaced by Veerappa Moily, also initially boasted about how quickly India managed to recover its power – comparing it to the 2008 power grid failure in the United States, which took four days to restore.

Still, interestingly enough, on August 22^nd, the Indian government announced that they would restructure $35 billion of loans held by its utilities in order to boost their ability to supply electricity and avert another blackout.

And the biggest news for India’s energy future actually came earlier this year – before the blackouts even occurred – when the Indian parliament declared, in collaboration with its Atomic Energy Commission (AEC), that the nation would commence on the construction of its first-ever 300 MW (megawatt) thorium reactor by 2016-17.

Thorium-Fuelled Dreams

Thorium is a naturally occurring radioactive chemical element that is named after the Norse god of thunder, Thor. Discovered in 1828 by Swedish chemist Jons Jakob Berzelius, the 90^th element on the periodic table has been described by Forbes as possibly “the biggest energy breakthrough since fire.”

According to Greentech Media, Thorium the potential to replace uranium as a ultra-cheap and ultra-safe nuclear energy source. Not only is the metal approximately three times as abundant as uranium in the earth’s crust, but it also contains up to 200 times the energy density.

“So why on earth are we using uranium?” asked Marin Katusa of Forbes. “As you may recall, research into the mechanization of nuclear reactions was initially driven not by the desire to make energy, but by the desire to make bombs.”

After decades of relative obscurity however, Thorium is finally attracting increasing interest as an energy source from around the world. Apart from India, China has also announced its intentions to develop a thorium nuclear reactor, while Canada, Germany, Netherlands, the United Kingdom and the United States have all experimented with using thorium as a substitute nuclear fuel in existing nuclear reactors.

India’s thorium plans though are possibly the most well known and most promising of them all.

“With 40 percent of its population not yet connected to the electricity grid and an economy growing by about 8 percent each year, India’s need for a bold energy strategy is apparent,” wrote Phys.org. As early as the 1950s, Indian physicist Homi Bhabha had laid out a three-stage vision for the country’s nuclear programme, which would exploit the country’s vast reserves of thorium – about 25-30 percent of the world’s total supply.

The nuclear plan experienced a hiccup post-1974, after the U.S. placed embargos on India for detonating its first nuclear bomb, but R K Sinha, the chairman of the AEC, now believes that his country is ready and capable of fulfilling Bhabha’s 60-year old vision.

“The basic physics and engineering of the thorium-fuelled Advanced Heavy Water Reactor (AHWR) are in place, and the design is ready,” told Sinha, in an interview with the Guardian.

“Once the six-month search for a site is completed – probably next to an existing nuclear power plant – it will take another 18 months to obtain regulatory and environmental impact clearances before building work on the site can begin.”

The first thorium reactor, to be located either in Tarapur in Maharashtra or Kudankulam in Tamil Nadu, is expected to be a mainly research-based project that will lead the way for commercial ventures in the future. According to the Deccan Herald, the reactor will require 52 tonnes of fuel in its core initially – and just 4.7 tonnes of fuel per annum after – meaning that India can sustain on its thorium reserves for hundreds of years.

Sinha further noted that once India is able to complete to technology, it can beginning exporting similar reactors to smaller developing countries in the Middle East and East Asia.

“Many countries with small power grids of up to 5,000 MW are looking for 300MW reactors,” he said. “Our reactors are smaller, cheaper, and very price competitive.”

Most importantly however, India wants to supply a quarter of the nation’s energy needs from nuclear power by 2050, up from around three percent today.

According to the World Nuclear Association, the limited and environmentally harmful Coal still provides up to 68 percent of the nation’s electricity. India’s per capita electricity consumption figure is expected to double by 2020, and reach 5000-6000 kWh by 2050, and the nation’s supply of coal is unlikely to be able to match the demand.

“Due to past trade bans and lack of indigenous uranium, India has uniquely been developing a nuclear fuel cycle to exploit its reserves of thorium,” wrote the World Nuclear Association.

Still, sceptics– of Both India’s and thorium’s future – remain.

Writing for OpenDemocracy.net, Jayita Sarkar, a PhD candidate at the Graduate Institute of International and Development Studies in Geneva, said:

“The Indian atomic energy programme however, although operating on a grand scale, has till now fallen short of falling into place, and the AEC has not yet succeeded in meeting its own estimates of electricity production.”

Related: Nuclear India: Powering the Future

Related: The Price of India’s Nuclear Ambitions: People’s Lives?

According to Dr. Arjun Makhijani, the president of the Institute for Energy and Environmental Research, Thorium may also not exactly be the “best bet for the future” of the world, especially when compared to renewable energy sources such as solar.

“It doesn’t solve the proliferation problem,” says Makhijani. “It doesn’t solve the waste problem, either. So every nuclear reactor, no matter what type, creates fission products, which are highly radioactive materials, some short-lived, some long-lived, to make energy.”

Germany’s “going to have a completely renewable system maybe by the time thorium reactors become commercial,” he noted.

India’s Energy Future

But despite what the sceptics say, “given India’s abundant supply of thorium it makes sense for her to develop thorium reactors,” noted Baroness Worthington of the Weinberg Foundation, which promotes thorium-fuelled nuclear power.

Science writer Matthew Chalmers of Physics World also believes that India’s energy future is unlikely to end at just thorium.

“In a modern context, Bhabha’s nuclear vision is part of a wider goal for clean, affordable energy also in form of solar, wind and hydroelectricity – all of which India is investing in heavily,” he wrote.

Related: India Energy Policy: India Must Move from Fossil Fuels to Solar and Nuclear Power

Related: Will India’s National Solar Mission Shine?

India has the world’s largest thorium deposits and with a world hungry for low-carbon energy, thorium can prove to be India’s making.

Angela Saini, author of Geek Nation: How Indian Science Is Taking Over The World believes that “no story quite captures India’s remarkable power to think long-term quite like that of thorium.”

“Quietly researching this fuel for decades, Indian scientists have waited for just the right moment to build their first thorium-powered nuclear reactor,” she said, in a piece for the Huffington Post.

By Raymond Tham, EconomyWatch.com

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Scientists have discovered a vast reservoir of groundwater located within Africa, which is said to contain a hundred times the amount of water found on the continent’s surface. But while the news has already sparked excitement across the once water-scarce continent, this joy will be short-lived unless global leaders exercise moral and social responsibility.

Scientists have discovered a vast reservoir of groundwater located within Africa, which is said to contain a hundred times the amount of water found on the continent’s surface. But while the news has already sparked excitement across the once water-scarce continent, this joy will be short-lived unless global leaders exercise moral and social responsibility.

Africa is a notoriously dry continent; and though it may not be the driest continent in the world (that dubious honour goes to Australia), the region suffers from horrible water shortage problems – with 300 million Africans unable to access safe drinking water due to severe distribution issues and poor water sanitation facilities.

But some scientists may have literally unearthed a solution. According to a report by the BBC on 20^th April 2012, large underground aquifers – containing over 100 times the volume of water on its surface – have been found beneath the African continent.

Researchers from the British Geological Survey (BGS) and University College London (UCL) were also said to have been able to map out the potential yield of this groundwater resource across the entire continent, pinpointing fresh water spots that could be tapped for digging borewells in the process.

“Where there’s the greatest ground water storage is in northern Africa, in the large sedimentary basins, in Libya, Algeria and Chad… The amount of storage in those basins is equivalent to 75m thickness of water across that area – it’s a huge amount,” said BGS researcher Helen Bonsor.

Fellow researcher Dr Alan MacDonald highlighted the significance of the find – for not just its quantity, but for its quality as well:

Map of Africa’s Aquifers (Source: Environmental Research Letters)

But the scientists are also keenly aware of the challenges ahead. Widespread drilling of large boreholes for instance could result in aquifers running dry even before the water reaches any African’s lips.

Many of the aquifers have not been refilled in over 5,000 years and could be depleted very quickly, added Bonsor, who expressed caution against over-drilling.

Most importantly, “high-yielding boreholes should not be developed without a thorough understanding of the local groundwater conditions,” said her colleague, Dr MacDonald.

Bonsor went on to advise African countries to, for the moment at least, consider moving slowly on the untapped water resource.

“Our work shows that with careful exploring and construction, there is sufficient groundwater under Africa to support low yielding water supplies for drinking and community irrigation,” Bonsor said.

Related: Access To Land, Water And Other Resources

Related: Hope in Adversity – Fighting Famine in the Horn of Africa: Jeffrey D. Sachs

The Rush For Blue Gold

Nevertheless, the temptation to drill as much, and as fast, as possible is still great. What’s more, any decision over the water resources could soon be effectively taken out of Africa’s hands. After all, the global scarcity of water, coupled with a growing demand, means that clean water may now be the new oil, says Professor Richard Vogel, Chair of the Water: Systems, Science and Society program at Tufts University.

“The worldwide demand for water has tripled in the past century.  And it is currently doubling roughly every twenty-one years.  This is clearly unsustainable, and the places that will be hit hardest are places that are already having serious water shortages.

“You think of water as being different from oil because it’s renewable, but there are a lot of places where water behaves like a non-renewable resource, just like oil.   If you go to the Ogallala aquifer in the Great Plains of the U.S, or to the Great Plains of China, or to Venice, or to many places in India, you see land subsidence and other results of ground water pumping. There are places all over the world, which draw groundwater in a non-sustainable way, analogous to the way in which oil is drawn from the ground.

“As far as the differences between oil and water are concerned, there are quite a few. Water has a religious and a spiritual component.  Water is also a human right.  And most importantly, it’s a pre-requisite for our balance of life.  There’s no substitute for water.”

Consequently, some analysts believe that future wars will soon be fought over “blue gold”, as thirsty people, opportunistic politicians and powerful corporations battle for dwindling resources.

“Countries have not tended to go to war over water, but I have a fear for the world that climate instability drives political instability,” said Ed Davey, the U.K.’s secretary of state for energy and climate change, as cited by The Guardian. “The pressure of that makes conflict more likely,” he added.

Noticeably, rich countries and companies have already been stocking up on their water supplies, with a “land grab” presently occurring in water-rich parts of Africa – even before the underground aquifers had been discovered.

“This recent phenomenon, dubbed ‘land grab,’ is taking place on a huge scale across many countries in Africa, especially those involved in post-conflict reconstruction with poor development.”

Though little is known whether the latest discovery would prompt another land grab frenzy, The Guardian reported that over 20 African countries had leased out land to foreign investors for “water and agricultural purposes” in the past five years.

Ethiopia for instance – one of the hungriest countries in the world with 2.8 million people needing food aid – offered 3 million hectares of its most fertile land to rich countries and some of the world’s most wealthy individuals in 2010 to export food and water for their own populations.

“Rich countries are eyeing Africa not just for a healthy return on capital, but also as an insurance policy. Food shortages and riots in 28 countries in 2008, declining water supplies, climate change and huge population growth have together made land attractive. Africa has the most land and, compared with other continents, is cheap,” added Montreal-based researcher Devlin Kuyek.

Still, Kimberlee Myers, another Maplecroft analyst, believes that a compromise could be reached whereby land grabs could be mutually beneficial for both foreign investors and the African population. Myers cite more recent policies adopted by Ethiopia – whereby 40 percent of agricultural output from leased out land must be distributed to local communities – as an example to follow.

The onus though is on African and international leaders to enact such policies by putting the needs of Africa citizens ahead of profits; and step one to this process is to stop allowing corporations from gobbling up Africa’s water resources.

Related: Green growth or de-growth: What is the best way to stop businesses destroying the biosphere?

Related: Africa Rising: Can “The Dark Continent” Outshine Its Former Colonial Masters?

“Water has been a public resource under public domain for more than 2,000 years,” says James Olson, an attorney who specializes in water rights, to The Daily Beast. “Ceding it to private entities feels both morally wrong and dangerous.”

The post Will Africa’s Wet Dreams Turn Into A Nightmare? appeared first on Economy Watch.

On February 7^th 2012, Mohamed Nasheed, Maldives’ first ever democratically elected president was deposed from his post after a coup led by his predecessor Maumon Abdul Gayoom forced him to resign at gunpoint. What are the implications of Nasheed’s resignations to the Maldives, as well as to democracy in general?

On February 7^th 2012, Mohamed Nasheed, Maldives’ first ever democratically elected president was deposed from his post after a coup led by his predecessor Maumon Abdul Gayoom forced him to resign at gunpoint. What are the implications of Nasheed’s resignations to the Maldives, as well as to democracy in general?

Democracy, as Samuel P. Huntington once famously put it, often comes in waves. According to Huntington’s analysis, countries can be over-swept by democratic ideals during one such wave; and a political transition might occur – transforming the government from an authoritarian to a democratic one.

Yet, as Huntington would later note, the waves of democracy are often followed by “reverse waves” as well. In a reverse wave, a newly democratic country could potentially revert back to its authoritarian ways, especially if the remnants of the old regime attempt to rear up their ugly heads once again.

Former Maldivian President Mohamed Nasheed learnt this lesson the hard way. Less than four years after becoming the first democratically elected president of the Maldives, Nasheed was swept out of power on February 7^th 2012 by a coup – led by his predecessor Maumon Abdul Gayoom.

Gayoom, and his associates, had apparently forced Nasheed to resign at gunpoint, with Nasheed’s vice president Mohamed Waheed Hassan – who Nasheed has now accused of being complicit with Gayoom’s scheme – installed as president on that day itself.

Despite the dramatic manner of Nasheed’s departure, the incident could barely rival the scenes in his country soon after his resignation. According to Minivan News, an independent news site from the Maldives, hundreds of Nasheed’s supporters were quickly rounded up by the Maldivian police following Nasheed’s resignation. EconomyWatch also managed to obtain a document, with the names and details of 172 detainees, that speaks of how numerous individuals had been arrested at their own homes while sleeping or having a meal with their family members, while a number of arrestees were also severely beaten and mistreated – with one such individual having been reportedly beaten up front in front of his 11-year old sister.

“They were beating old women with batons. It was just like the old days,” said a Minivan News reporter, who was injured himself following what he described was a baton charge by Maumoon Abdul Gayoom’s “starforce” officers.

Watch Brutal Crackdown on MDP Protest:

Another Day In Paradise

These violent scenes were a stark contrast to a year ago, when a young and upbeat Nasheed arrived in Delhi for a conference on promoting liberal governance in South Asia. During the conference, Nasheed expressed optimism on his country’s democratic process.

“We are in the process of consolidating our democracy,” said a cheerful Nasheed, as quoted by the Economist. Commenting on the Arab Spring, Nasheed also expressed confidence that his country could soon become a model for other Islamic states in adopting democracy.

“We are a 100 percent Muslim country. We feel if democracy can survive in the Maldives, it can survive in other Islamic countries.”

Related: Premature Speculation: The Arab Spring Cannot Be Considered as Democracy’s Fourth Wave. Yet.

Related: Sorry Dr Friedman, You Are Wrong – the Middle East Has Fundamentally Changed

Having spent more than six years in jail and a further two years in exile, the 44-year-old Nasheed also had a unique perspective on his victory in the 2008 Maldivian elections, which saw him break a 30-year monopolistic grip of power held by the former president Gayoom. When asked whether he would pursue prosecution for Gayoom’s misdeeds during his reign as president, Nasheed simply replied that any “vengeance” against Gayoom was the furthest thing from his mind, as any action would only be “counter-productive” towards peace and democracy in his country.

Unsurprisingly, Nasheed was hailed by the international community as a global leader for change. In 2009, Time Magazine awarded him the first place in its “Leaders & Visionaries” category, while Foreign Policy magazine listed him as one of the world’s top global thinkers in 2010. In 2011, British Prime Minister David Cameron had also called Nasheed “my new best friend” during an interview with The Guardian.

The Beginning Of The End

But despite the international accolades, the Maldivian president and his Maldivian Democratic Party (MDP) were beginning to face opposition from the local population. Former Gayoom cronies often blocked Nasheed’s attempts to implement a batch of sweeping reforms targeted at consolidating democracy in the country, while other Maldivians started to express anger over soaring prices in the country, which they said were a result of economic policies imposed by the government to tackle a huge budget deficit.

The problems came to a head in January this year, when Nasheed ordered the army to arrest the country’s Criminal Court Chief Judge Abdulla Mohamed, who Nasheed claimed was blocking efforts to investigate Gayoom and his associates on corruption charges.

Related: World Corruption Special Report

“My government asked the United Nations to help us investigate judicial abuses and ordered the arrest of Abdulla Mohamed, the chief judge of the criminal court, on charges of protecting the former president and corrupting the judicial system. However, in a dramatic turn of events on Tuesday (7^th February 2012), the former president’s supporters protested in the streets, and police officers and army personnel loyal to the old government mutinied and forced me, at gunpoint, to resign. To avoid bloodshed, I did so. I believe this to be a coup d’état and suspect that my vice president (Waheed), who has since been sworn into office, helped to plan it.”

Maldive’s current president, Waheed Hassan, on the other hand claimed that Nasheed was to blame for the violence that had swept the country, especially as he had overstepped his bounds as president when he arrested the Criminal Court Chief Judge.

“It is a very volatile situation, very fluid and very dangerous,” said Mohamed Anil, a former legal reforms commissioner under Nasheed’s predecessor and current head of the Democracy House, a prominent human rights organisation in the Maldivian capital of Male, during an interview with the Inter Press Service. With both the police and political activists indulging in violence, Anil said that Maldives was now sitting atop a powder keg with sparks flying all round it.

Out of Sight, Out of Mind

Despite this, most tourists remained blind to the violence in the country. While chaos continued to reign in the streets of Male, the country’s tourist spots – mainly upmarket beach resorts – were relatively immune to the violence.

“We are having a great time. We heard about the coup, but it doesn’t matter to us. It hasn’t affected us at all,” said American literature professor Jerzy Sobieraj during an interview with Reuters at the Kurumba resort on the Vihamanafushi islands in the Maldives. Sipping a glass of white wine while lounging with his wife along the beachfront resort, Sobieraj also appeared nonchalant about the ongoing violence that was just a 10-minute boat ride away.

“Even if there is trouble, the airport is on another island, so no trouble,” added Sobieraj, pointing to the nearby international airport, which most tourists commute through to reach their resorts without ever going through Male.

According to official statistics, tourism accounts for nearly 30 percent of the Maldives’ $2.1 billion economy. Mohamed Sim Ibrahim, secretary-general of the Maldives Association of Tourism Industry, though believes that the figure is closer to 75-80 percent.

Related: Maldives Economy

Related: Maldives Economic Statistics and Indicators

Last week, Nasheed came out to blame a cabal of resort owners for their alleged support in the attempt to remove him from power. The former Maldivian president had originally wanted to implement new tax reforms on the resort owners that would have prevented them from escaping with potentially hundreds of millions of tax dollars.

A Calming Tide?

Still, the ousted Maldivian president probably has more pressing concerns. Apart from garnering international support for an independent query into his departure, Nasheed also wants the Maldives to hold new elections as soon as possible.

“Elections” are the bottom line for us,” stressed Eva Abbdulah, an MDP parliamentarian and relative of Nasheed.

“We will keep up our peaceful political activities until an early election date is announced,” added MDP spokesman Hamid Abdul Gafoor in an interview with AFP.

Presently, the next Maldivian elections are scheduled for October 2013. Last Thursday however, India’s Foreign Secretary Ranjan Mathai managed to hold talks with Nasheed and Waheed Hassan on the possibility of early elections. While there appears to be signs of compromise, the timetable for new elections remains vague.

In the meantime, the international community has advised both parties to remain restrained, particularly in the face of violence and allegations of human rights violence since Nasheed’s resignation.

But despite the UN’s rhetoric, the damage had already been done. The fact that a democratically elected president could be so easily deposed from his post without a peep of international condemnation begs the question on whether the ideals of democracy are as valued as what most politicians champion it to be.

In the aftermath of Nasheed’s resignation, India, the world’s largest democracy, was the first country to congratulate the new government and pledge its allegiance to Waheed Hassan. On a visit to Male over the weekend, the US Assistant Secretary of State Robert Blake also encouraged Nasheed’s supporters to work with Waheed Hassan’s government, despite the obvious lack of legitimacy for the present government.

Nasheed though, as always, remains optimistic.

Nasheed said in the NYT: “At times, dealing with the corrupt system of patronage the former regime left behind can feel like wrestling with a Hydra: when you remove one head, two more grow back. With patience and determination, the beast can be slain.”

The post Paradise Lost: Has Democracy Gone To Hell In The Maldives? appeared first on Economy Watch.

On November 10 2011, Cuba’s Communist Party implemented free market-like reforms to the nation’s property market, by finally allowing Cubans to buy and sell property on their own. These reforms have been met by both optimism and scepticism from within the Cuban and international community, as doubts remain over their long-term future. How will these reforms affect Cuba, and how should the rest of the world react?

On November 10 2011, Cuba’s Communist Party implemented free market-like reforms to the nation’s property market, by finally allowing Cubans to buy and sell property on their own. These reforms have been met by both optimism and scepticism from within the Cuban and international community, as doubts remain over their long-term future. How will these reforms affect Cuba, and how should the rest of the world react?

Along the streets of Havana, Cubans are finally starting to get their houses in order. Thanks to the recent reforms introduced by the Castro government, an average Cuban now has the ability to buy and sell residential property – a privilege that few can claim to have experienced after the Cuban Revolution in 1959 turned all their homes back then into properties of the state. However, the latest reforms now mean that Cubans can, and should, profit from the homes they live in; sparking a renewed vigour among households to renovate their long-neglected and once-crumbling domiciles.

“We’re making it look beautiful again,” said Antonio Tresol, a resident of the Centro Habana neighbourhood, to NPR.org. Centro Habana is one of the smaller municipalities located in Havana, but has the highest population density within the capital city. The infrastructure of the municipality was built over 450 years ago, and has since seen heavy deterioration after the collapse of the Cuban-Soviet trade partnership during the 1990s.

This could change soon. Like Tresol, many Cubans have been doing up their homes as they embrace the latest in a spate of new economic reforms introduced by President Raul Castro, Fidel’s brother, to salvage the Cuban economy. For many years, Havana’s dilapidated buildings reflected the lacklustre, and increasingly feeble, state of the Cuban economy; But today they could very well be a part of a growing paradigm shift within the Cuban government, who, like its citizens, is also attempting to get its house in order.

The most significant (and perhaps, literal) step to this has been the introduction of a Cuban property market on November 10 this year. Previously, the only kind of property transactions that Cubans were allowed to make were “permuta(s)” – a complicated bartering system, which while legal, often included illegal payments made under the table. The “permuta(s)” also failed to assign any kind of value to the properties, relying more on arbitrary factors to determine the nature of the swap. With the new changes, not only will buyers and sellers in Cuba be allowed to dictate their own prices, but also Cubans now will be able to bequeath property to their relatives, even if they leave the country permanently.

Havana architect and urban planner Miguel Coyula added that with millions of cash-poor Cubans suddenly finding themselves in possession of a valuable liquid asset, no one quite knows what will happen next.

Nowhere is this lack of preparedness more evident than in the prices quoted for some of the houses. While some apartments listed in online classified ads can go for around $5000 to $10,000, others easily cost in the upwards of hundreds of thousands of dollars, with an ocean-side villa in the resort town of Varadero costing more than a million dollars. The number is particularly staggering, considering most government salaries in the country only averages at about $20 a month.

But some Cubans do have the money, said Omar Everleny Perez, the lead economist at Havana University’s Centre for Cuban Economic Studies, in an interview with Time. Bank accounts are concentrated among 13 percent of islanders who control 90 percent of the deposits, with some worth between $160,000 to $200,000. Cuban exiles, particularly those who migrated to the US, are also more than likely to transfer funds to their relatives back on the island so that they may live in better conditions.

This could be precisely what the Cuban government wants. Although the property market is certainly freer than it used to be, there remain certain restrictions to it, which Cuban officials have claimed to be necessary in order to maintain the nation’s socialist beliefs. Owners, for instance, will be limited to only two homes (a residence and a vacation property), while financing must go through Cuba’s Central Bank, which will charge fees, which have not been determined. Furthermore both the buyer and seller must share the cost of an 8 percent tax to be paid directly to the Cuban government.

Since 2009, The flow of money and people from the US to Cuba has soared after US President Barack Obama lifted almost all of the restrictions on Cuban-Americans who wished to send cash to Cuba or visit the island. Today, Havana airport’s terminal 2 receives up to six flights a day from Miami alone, with new routes from other US cities being opened up shortly. Cuban-Americans are also said to send an estimated $1 billion in the form of remittances back to the island annually.

Most experts, and Cubans on the island, expect these efforts to accelerate.

Peters, also insisted that while there are obvious monetary benefits for the Cuban government in making these changes, the new reforms should be embraced by the international community as they symbolised a deeper sense of change within the Cuban society and economy.

Cuban-American political scientist Arturo Lopez-Levy is even more adamant about the deeper symbolism behind Cuba’s move.

Still, it is obvious that more needs to be done. Human rights issues remain a fundamental problem within Cuba as reports continue to emerge of “harassment, beatings, and threats against political opponents by government-organized mobs and state security officials acting with impunity; harsh and life-threatening prison conditions, including selective denial of medical care; arbitrary detention of human rights advocates and members of independent organizations; and selective prosecution and denial of fair trial.”

Doubts also remain over the long-term sustainability of the property reforms, due to the broken promises made in the past by the Cuban government over economic liberalisation. In 1994 for instance, the Castro regime had allowed some businesses to prop up after the end of the Soviet Union had virtually ended all financial aid that it had received from Russia. But the Castros eventually got nervous by the amount of wealth being accumulated by some Cubans and increased the prices for licenses dramatically, killing off many start-ups in the process.

Nevertheless it does seem as though Raul Castro, once dismissed as little more than an understudy to his brother, is making his mark. Apart from the property reforms, the younger Castro has also implemented other free-market changes – including firing 500,000 state workers to force them into the private sector last year, as well as trying to make a more concerted attempt at tackling corruption in order to reduce government waste.

Most analysts are counting on that, particularly with as the faltering Cuban economy continues to underperform. According to Richard Feinberg, a non-resident senior fellow with the Latin America Initiative at the Brookings Institution, Cuba’s current agricultural output is insufficient to feed the population, while merchandise exports, at a paltry $3bn to $4bn a year, has left a chronically large trade deficit. National savings and investment rates are also extremely low, relegating Cuba to a low-growth trap.

Related: Cuba Economy

Related: Cuba Economic Statistics and Indicators

The international development community, especially financial institutions like the IMF and World Bank, and the United States should thus reach out to communist Cuba as it pursues economic reforms and bring it “in from the cold,” said Feinberg, in a new think-tank report quoted by Reuters. 

“My argument precisely is not to deny that there are forces of inertia there; clearly there are and they remain strong. But it is the role of the international community in circumstances such as this to lend their weight to the positive forces of change.”

“IFI (international financial institutions) staff economists and sector specialists are chomping at the bit to engage in Cuba and they should be allowed and encouraged to do so,” he added.

The post Cuba’s Gradual Revolution: Will Capitalist-Style Reforms Save The Socialist Nation? appeared first on Economy Watch.

We, as a collective society, have to shoulder some of the blame for financial crisis as we essentially allowed Wall Street and our policymakers to run the global economy into the ground while we slumbered in blissful ignorance of their misdeeds. But while we have stirred from our slumber, as evident through protests such as Occupy Wall Street, our true awakening will only come when we acquire the knowledge required to fully comprehend the issues.

We, as a collective society, have to shoulder some of the blame for financial crisis as we essentially allowed Wall Street and our policymakers to run the global economy into the ground while we slumbered in blissful ignorance of their misdeeds. But while we have stirred from our slumber, as evident through protests such as Occupy Wall Street, our true awakening will only come when we acquire the knowledge required to fully comprehend the issues.

Life before 2008 was like a dream. Sure, there were problems, and certainly by then some observers had already sensed trouble brewing; but for the rest of us, we were happy to just live our lives in blissful ignorance of the unchecked greed that was pilfering out of Wall Street.

All dreams though must come to an end. As the US housing bubble burst, causing the values of securities tied to US real estate pricing to plummet, eventually leading to the collapse of numerous financial institutions and the loss of consumer and stock market confidence around the globe; the world found itself plunged into a nightmare, one which it has found increasingly difficult to wake up from.

Related: EconomyWatch Real-Time Global Consumer Confidence Index

But, something else changed in 2008. The events on Wall Street was the catalyst of a mass awakening across the world, which awoke people up from an illusion that had been cultivated by their political leaders and the financial institutions for decades.

As the US economy fell into tatters and the eurozone countries entering into crisis mode, people around the world were beginning to ask questions – questions of their leaders and the ivory-tower financial executives who were running and ruining the global economy. The questions asked were fairly simple by nature, but were extremely hard for policymakers, in particular, to answer – How could you have let this happen? What are you going to do about it? How will you ensure that this will never happen again?

Not surprisingly, the answers that came back were hardly satisfactory. The US debt deal, for instance, has been criticised more often than it has been praised, while the recently concluded eurozone debt deal still leaves much work to do before it can truly be considered as a success.

Related: Markets Cheer but Questions and Doubts Remain After EU Debt Deal

Our political leaders, of course, have tried to make us think otherwise. In the immediate conclusion of the US debt deal, Democrat Senate leader Harry Reid described the deal as a “historic, bipartisan compromise that ends this dangerous standoff.” Republican House speaker John Boehner also described the deal as one “that will end this crisis in a manner that meets our principles of smaller government.”

Contrast their statements then to what economist Michael Mandelbaum had to say about the US debt deal.

Reducing deficits in order to raise the debt ceiling was the right thing to do, but the August 2 law does it in the wrong way. Unless more deficit reduction, which is inevitable, comes from curbing entitlement benefits and increasing revenues, and less from programs vital for economic growth, the result will be a poorer, weaker US – and a more uncertain, if not unstable, world.[/quote] 

Related: Doomed for Disaster – America’s Dangerous Debt Deal: Michael Mandelbaum

Indeed, the public reaction to many of their governments’ so-called “reforms”, have been indicative of the disillusion that many people are now feeling over the responsiveness of their policy makers to their needs.

Accordingly, 2011 has been noted for the sheer volume of protests that have taken place all around the globe. From Anna Hazare to the Arab Spring, to the riots in London and now the Occupy Wall Street movement, people have been waking up to the inherent problems that occur when that “1 percent” is able to consolidate financial and political power among themselves.

“While these protests have no unified theme, they express in different ways the serious concerns of the world’s working and middle classes about their prospects in the face of the growing concentration of power among economic, financial, and political elites,” said prominent economist Nouriel Roubini, who was one of the earliest few to predict the collapse of the United States housing market and the worldwide recession which started in 2008.

Roubini adds that the causes of these concerns are “clear enough”:

Related: Why Inequality Will Only Lead To Our Downfall: Nouriel Roubini

Related: Is Occupy Wall Street Bringing Back “Real” Capitalism?

Nowhere are these concerns more pronounced than in the Occupy Wall Street movement that first swept across the US and then the world. While critics could be right in saying that many of the participants lack a clear and precise vision for change, they miss the fundamental essence of the movement. Occupy Wall Street isn’t about anarchy; It isn’t a rebellion, nor is it a mutiny or an uprising. Rather, Occupy Wall Street is about expressing our discontent and dissatisfaction; it is a demonstration, a campaign, a rally against the misdeeds of the “1 percent”.

Admittedly, we, as a collective society, have been asleep for decades prior to this financial crisis. As a society, we too have to shoulder some of the blame for allowing Wall Street and our policymakers to run amok while we slumbered in complete denial of their misdeeds. But while we have stirred from our slumber, our true awakening can only occur when we acquire the knowledge required to understand the fundamental issues. This can often be quite confusing as there is a ton of sources available, many of which can be biased in their interpretation of the issues.

Related: The Fundamental Flaws of Capitalism – Why We Never Learn: Joseph E. Stiglitz

Related: Undoing the Bankruptcy of Capitalism: Joseph E. Stiglitz

Consequently, in order to critically assess the multiple schools of thought, one first needs to know the basics, including the terminologies and the jargon of the financial world, using tools such as the Dictionary of Business and Finance for the iPad, iPhone and iPod Touch from our partner QFinance, for instance. This is a great reference source to keep in touch with the latest terms and lingo associated with accounting, banking, insurance, investments, marketing, risk, tax and many more.

After arming oneself with the essential basic knowledge, we then can proceed to critically and rationally analyse the multitude of opinions and schools of thoughts that is being consistently fed to us. No single theory, system or economist can claim to be flawless or inherently right, meaning that we must determine for ourselves the validity of their claims. At the same time, we too must be able to challenge our own pre-conceived opinions through self and peer critique.

As a final step, it is equally important to share knowledge as much as it is to acquire it. As the age-old maxim goes: knowledge is power, and the spread of knowledge will only seek to extend the power and the credibility of the global protests. Once we able to do so, then can we be truly awake.

The post Waking Up From The Nightmare On Wall Street appeared first on Economy Watch.

29 September 2011.

He who laughs last laughs best. For decades, European countries were the colonial masters of Africa, dividing the continent at their own whim and exploiting the abundant resources available for their own purposes. Yet today, there has been a paradigm shift where African nations are now leading the world in economic growth and can more hold their own against their ex-colonial masters.

29 September 2011.

He who laughs last laughs best. For decades, European countries were the colonial masters of Africa, dividing the continent at their own whim and exploiting the abundant resources available for their own purposes. Yet today, there has been a paradigm shift where African nations are now leading the world in economic growth and can more hold their own against their ex-colonial masters.

Throughout history, the African continent and its people have been victims of unfair discrimination and exploitative practices. Africa’s main oppressors have always been its former European colonial masters, who dubbed the region as the “Dark Continent” back during the early 19^th century. While the origins of the term reflected how little Europeans knew about Africa (map makers back then would often leave the region dark as they had no clue of its interior geography), the term soon began to carry racist undertones with it as rampant discrimination began to spread across the region in the wake of a mad scramble for colonies among the European powers.

For decades, the European powers exploited Africa’s resources and its people, often possessing attitudes of superiority and a sense of mission. Even as the decolonisation of Africa began, the Europeans took it upon themselves to carve up Africa by drawing up arbitrary colonial-era borders rather than attempting to correspond to traditional African territories. This in turn led to internal conflicts within African countries, further destabilising the region and hindering economic progress for a prolonged period of time.

Yet something strange happened at the recent IMF/World Bank meetings in Washington last week.

While their former colonial masters were bickering over possible solutions for a debt crisis that is slowly eating away at the heart of Europe, some African states were quietly presenting their own structural reforms that have helped them to manage national debt and public finances.

The tiny African state of Gambia, for instance, has seen its total expenditure and net lending fall from 22 percent of its GDP in 2009 to 21.2 percent, with capital spending cut to 6.3 percent from 7.5 percent and further reductions expected to 5.4 percent and 4.6 percent in the next two years. The overall fiscal deficit of Gambia also fell in 2010 from 3 percent of its GDP in 2009 to 2.7 percent. Gambia’s fiscal deficit is projected to drop to 2.4 percent this year and 1.5 percent in 2012.

Cape Verde is another African country that is gradually reversing its fortunes. It’s 2001-08 Public Financial Management (PFM) reform, for example, led to improvements in expenditure management, while the 2009-12 PFM Action Plan has sought to increase transparency in revenues by strengthening taxation, customs and budget procedures and by reinforcing the national planning system. Cape Verde also managed to see a 4 percent increase in government revenue in 2010, thanks to an increase in efficiency with cross-checking auditing procedures – all this despite a 5 percent decrease in corporate income tax as well an increase in tax waivers and moratoriums. According to the African Economic Outlook, the island country will also see tax revenues reach up to 28 percent of its GDP in 2017, up from 20.8 percent in 2010, through gains in efficiency and private sector development.  

Related: Gambia (The Gambia) Economic Statistics and Indicators

Related: Cape Verde Economic Statistics and Indicators

Indeed, Africa is in a unique position that allows it to have fresh perspectives in regards to the plight of their former colonial masters.  According to Kaberuka, what some of the troubled European states need, is the kind of overhaul in public finances and labour markets that numerous African nations have implemented – and have finally garnered results for – in the last two decades.

And while Kaberuka freely admits to the ever-present threats that prevail on the continent – huge infrastructure and energy deficits, shortages of skilled labor and the risk of political flare-ups – the time has come, he says to do “a re-profiling of Africa’s risk.”

“But are we more risky than some of these peripheral countries in Europe, which have 150 percent of GDP in debt, 30 percent fiscal deficit?“[/quote]

In a way, it is rather amusing, and satisfying, to see Africa being able to lecture their former colonial masters on economic issues. At the recent IMF/World Bank meeting, African leaders joined a chorus of other leaders from emerging economies to call on European nations to face the painful facts of economic reforms.

“It is not easy, it is painful, and we went through the pain, and the Europeans must be prepared to go through the pain,” Kaberuka said.

The role reversal demonstrated at the IMF/World Bank meeting also seem to be indicative of a new world order in the global economy, whereby emerging economies – led by Asia and Africa – are assuming more active roles in determining the global economic path.

Whereas Africa currently only accounts for just 2 percent of global GDP with Asia at a further 25 percent; by 2050, Africa’s contribution would have risen to around 5 percent and Asia’s to an astonishing 50 percent. Together, the emerging regions would account for well over half of the world’s total GDP. Individual African nations, such as Ghana and Angola for instance, are also already among the world’s fastest growing economies, with most experts forecasting that the continent will soon become the fastest growing continent in the world after Asia eventually slows down.

Related: 12 Fastest Growing Economies of 2011

To further highlight this shift in the global economy, a recent report by The Economist tells the tale of thousands of young unemployed Portuguese professionals who are emigrating to the former Portuguese colony of Angola in order to look for jobs.

Not long ago, Angolans were the ones who were flocking to Portugal in order to flee a civil war and start a new life. Yet today, a complete role reversal has happened. In 2007-2008, Portugal’s foreign ministry registered 45,000 Portuguese citizens living and working in Angola. Barely a year later, the figure jumped to 92,000. Today, there are over 3,000 Portuguese companies in Angola, with Portuguese immigrants said to have grown exponentially over the past five years.

“This is the biggest emigration wave since the 1960s,” said Filipa Pinho of Portugal’s newly established Emigration Observatory to the BBC.

1 in 10 Portuguese graduates now leave the country, with the most common destinations being former colonies like Angola and Brazil. Youth unemployment in Portugal is at 26.8 percent, with more than 95,000 people jobless between the ages of 16 and 25.

Things are different in Angola. Blessed with an abundant supply of crude oil, and now backed by Chinese money, Angola was forecasted to be the 7^th fastest growing economy in the world for 2011 by the IMF, and looks ready to accept more and more Portuguese immigrants to their country.

According to Bagal, a civil engineer earning 900 euros (US$1,300) a month in Portugal could easily earn four times as much in Angola. In addition, the shared language between the two states makes it easier for Portuguese to adapt to the Angolan culture.

Paulo Pimenta, a Portuguese lawyer based in Mozambique, could also not help but to see the irony in the situation.

“Historically the Angolans worked for the Portuguese, but now it’s the Portuguese who are working for the Angolans…People have to get used to it.”

Raymond Tham,

EconomyWatch.com

The post Africa Rising: Can “The Dark Continent” Outshine Its Former Colonial Masters? appeared first on Economy Watch.

7 September 2011. 

Belgium has not had a government in over 15 months. Yet their economy somehow managed to outperform those of the UK, Germany, France, Italy, Spain, The Netherlands, Finland, and Switzerland in the last quarter of this year. Are government worthless or is this just another abnormality?

7 September 2011. 

Belgium has not had a government in over 15 months. Yet their economy somehow managed to outperform those of the UK, Germany, France, Italy, Spain, The Netherlands, Finland, and Switzerland in the last quarter of this year. Are government worthless or is this just another abnormality?

It has been 15 months since Belgium last had a government. More than 450 days later, Belgian politics remain stuck in a gridlock after election results meant that no single party received more than 17.4 percent of seats in the Belgian Chamber of Representatives and 19.61 percent in the Belgian Senate.

Thus far, efforts to form a coalition government have been fruitless. A caretaker cabinet, led by Yves Leterme, is currently in charge of the routine business of running the country; but they have little to no legislative or executive power to enact national policies.

“Technically this can last until the next federal election has to be called in 2014,” said political scientist Dave Sinardet to the BBC.

Belgian officials however appear to care less. Since the elections, 10 politicians have tried to negotiate a new government and none have succeeded. Francophone socialist Elio Di Rupo is the latest to give it a go, though the negotiations have reached another standstill, with The Associated Press reporting that Green Party negotiator Jean-Michel Javaux – also the mayor of Amay, a small eastern town – had to attend a town meeting to vote on, among other things, a new police car and a computer, while Yves Leterme is now on a visit to Israel.

In addition, Bart de Wever and his New Flemish Alliance party – the biggest winner in the 2010 elections – appear set on an “orderly breakup” of Belgium and would rather see coalition talks fall on the wayside.

“The worse things are in those talks, the better it is for the New Flemish Alliance,” said de Wever to the RTBf public broadcaster.

To an outside observer, the political situation in Belgium may sound absurd – laughable even – but perhaps the biggest joke of all has come in the wake of the latest quarterly GDP results released by the European Commission’s Eurostat Press Office.

In the last quarter, the Belgian economy has actually grown faster than that of a number of its neighbours including the UK, Germany, France, Italy, Spain, The Netherlands, Finland, and Switzerland. Belgium’s 0.7 percent GDP growth was also higher than the euro zone’s average of 0.2 percent.

Part of the reason for this, according to The Financial Times, is that “in the absence of political leadership, Belgium has been among the few European countries not to enact meaningful austerity measures.”

John Lanchester, writing for the London Review of Books, also slammed the austerity fever that was gripping Europe.

“No government means none of the stuff all the other governments are doing: no cuts and no ‘austerity’ packages. In the absence of anyone with a mandate to slash and burn, Belgian public sector spending is puttering along much as it always was; hence the continuing growth of their economy.”[/quote]

To be fair, the Belgian economy also benefited from the fact that many of the country’s salaries, pensions, and unemployment benefits were automatically indexed to inflation. When oil prices rose earlier this year, consumer spending also increased substantially, which in turn provided a boost to the economy.

Still, it was a stroke of fortune that the political paralysis in Belgium somehow managed to inadvertently provide the country with a shield from austerity measures. While the rest of Europe succumbed to political pressure for aggressive spending cuts, the Belgian caretaker cabinet remained oblivious to the European Union’s call for austerity.

Belgium is “an interesting laboratory on the pertinence of another economic policy,” said Jean-Luc De Meulemeester, a professor at the Solvay Brussels School of Economics & Science Po Bruxelles, to the Slovak Daily Pravda.

It is a compelling case for Libertarians who continually argue for a minimal role for the state. However, the lack of a government, while beneficial in the short-run, could spell trouble in the long-term. Belgium’s high debt to GDP ratio will inevitably attract the attention of speculators the longer it takes for a government to be established. Furthermore, the country is also likely to face higher borrowing costs from nervous investors. Down the line, Belgium will also encounter sustainability issues for any long-term social and economic policies.

Marco Martiniello, a politics lecturer at the University of Liège, warned that “the delays (to form a new government) will distance people from politics.”

As such, the relative success of the Belgian economy should not be seen as the result of a deficient government. Rather, one could possibly label it as a triumph of Keynes over Hayek.

Joseph Stiglitz, for example, has been adamant that the cost-cutting and austerity measures adopted by many European nations have had an adverse effect on the economy.

Related: The Fundamental Flaws of Capitalism – Why We Never Learn: Joseph E. Stiglitz

Related: Diseased and Dangerous – The US and Europe’s Grand Debacle: Joseph Stiglitz

Still, one can enjoy the irony of the situation. As PIMCO’s CEO Mohamed El-Erian pointed out in an interview with Bloomberg, “policy makers in both the US and Europe have been distressingly missing in action.”

So maybe Belgium really isn’t missing out on anything after all.    

Raymond Tham

EconomyWatch.com

The post Less Government, Less Problems: Belgium, 450 Days Later appeared first on Economy Watch.

24 August 2011. 

The Arab world is changing. It began in the Tunisian city of Sidi Bouzid on 17 December 2010 when a simple street vendor named Mohamed Bouazizi set himself on fire to protest the alleged mistreatment that was inflicted on him by a government official. Few would have guessed at that time that Bouazizi’s act of self-immolation would eventually spark a socio-political revolution that would sweep across the Middle East and North Africa; bringing down numerous dictators and autocratic regimes, many of whom had been in power for decades.

24 August 2011. 

The Arab world is changing. It began in the Tunisian city of Sidi Bouzid on 17 December 2010 when a simple street vendor named Mohamed Bouazizi set himself on fire to protest the alleged mistreatment that was inflicted on him by a government official. Few would have guessed at that time that Bouazizi’s act of self-immolation would eventually spark a socio-political revolution that would sweep across the Middle East and North Africa; bringing down numerous dictators and autocratic regimes, many of whom had been in power for decades.

Indeed, some observers have been stunned by the speed, force and scale of the revolution, which continues to reverberate around the region today. The fall of the autocratic regimes – particularly in Tunisia, Egypt and Libya – has also led many political analysts to label the Arab Spring as the start of a new fourth wave of democracy.

This fourth wave would follow Samuel P. Huntington’s historical analysis of the global democratic process. According to Huntington, the adoption of democracy happened in three waves: The first wave began in the early 19th century across North America and Western Europe in the aftermath of the American and French revolutions, the second began after World War II, and the third began in the mid-1970s – starting in Portugal and Spain before spreading across Latin America, Asia, Central Europe and Africa.

In each of these waves, there was a sudden upturn in countries that began to adopt democratic ideals, leading to a political transition towards democracy. The third wave of democracy, for example, saw the number of democratic nations triple from 39 in 1974 to 123 in 2005. Interestingly enough, the Arab world was the only major region in the world that the third wave had bypassed completely, leading some commentators to coin the phrase “Arab exceptionalism” to characterize this phenomenon.

Despite this quirk, it appears as though the Arab world is finally ready to embrace democracy. However, it may be a little bit premature to declare the Arab Spring as the start of the fourth wave of democracy. After all, it took Huntington nearly 15 years in order to confidently identify the third wave of democracy and now apparently, it has taken less than nine months for other political scientists to declare that the fourth wave of democracy had begun.

The problem for the Arab world stems from the fact that political change need not necessarily mean democratic change. Henry Kissinger for example is sceptical of the type of change in the Arab World. “I don’t think the Arab Spring is necessarily a democratic manifestation, I think it is a populist manifestation,” Kissinger told the Wall Street Journal.

Historically, many countries, particularly in Latin America and Africa during the initial stages of the third stage, also faced the problem whereby political upheaval only led to another autocratic regime coming into power. Admittedly, the cold war was a major factor during that time, as governments were essentially being propped up by the US based purely on the fact that they weren’t communists.

However, a different but equally powerful factor could lead to another “meet the old boss, same as the new boss” scenario today. Countries experiencing political change tend to face many socio-economic problems during their early stages, such as poverty and unemployment. One solution most countries would then take would be to turn to advanced economies such as the US or the European Union for economic advice or financial aid.

But can and should the Arab world really turn to the so-called bastions of democracy anymore for help? Bogged down in their own muck, the US and the European Union are no longer shining examples of both political and economic enlightenment. The governments of these economies also no longer have the political and economic will to guide the Arab world towards democracy, especially when they face economic turmoil on their own turf.

Instead, the most likely and well-equipped country to come to the Arab world’s aid is China. Closer to home, Qatar as one of the world’s fastest growing economies, could provide assistance as well. But neither China nor Qatar would be interested in promoting the democratic agenda. Furthermore, the age-old axiom that democracy would eventually lead to economic stability has also been proven to be not necessarily true.

According to a report by Freedom House, global freedom has been on a decline in the past five years with most authoritarian nations becoming more repressive, while citizens in moderate democracies also saw a decline in their overall freedom. Germany’s Bertelsmann Foundation, also spoke of a “gradual qualitative erosion” of democracy and concluded that the number of “highly defective democracies” had doubled between 2006 and 2010. In addition, newly emerging democracies are refusing to lend their weight to the democracy promotion agenda.

The reality is that successfully implementing a western-style democracy in the Arab world is no guarantee. Using a western prism, democracy’s so-called fourth wave would simply be just another ripple in the ocean.

Still, this doesn’t mean that we should ignore the efforts of the Arab Spring. Regardless of whether the Arab world eventually achieves democracy or not, there has been a fundamental change in the region, as EconomyWatch.com has previously mentioned.

This change is one that could be even more important than our traditional perceptions of democracy. A civil society has emerged in the Arab world – one that is powerful enough to determine the fate of its own citizens. Perhaps this is the new “Arab Exceptionalism”.

Raymond Tham

EconomyWatch.com

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