New EBRD chief champions democracy mandate
LONDON, May 19 (Reuters) – The European Bank for Reconstruction and Development’s president-elect said the bank’s role in promoting democracy through its investments would be a central focus for his term, as the EBRD agreed a 1 billion euro fund for North Africa.
In addition to the impact of the euro zone crisis on the bank’s emerging Europe region, there are increasing concerns about the strength of democracy in countries such as Russia, Ukraine and Kazakhstan, while the bank’s four new countries of operation in North Africa face political instability.
Suma Chakrabarti, who was elected the first British EBRD president at the bank’s annual meeting this weekend, told reporters the bank was already reviewing the way it pursues its mandate to promote democracy, and he was keen to follow that through.
“This is an important part of why I applied (for the president’s job),” Chakrabarti, who is currently permanent secretary, the most senior civil servant, at Britain’s Ministry of Justice, said.
He said in a letter to the emerging European development bank last month in support of his campaign for president that it was “important for the Bank to remain a trusted but critical partner” as it sought to ensure that the countries in which it invested showed multiparty democracy.
Non-governmental organisation Bankwatch has said the EBRD needs to tighten up its definition of countries applying the principles of multiparty democracy.
In an open letter to the EBRD in March, it criticised levels of democracy in three of the bank’s new countries – Egypt, Morocco and Jordan – and said:
EBRD appoints UK’s Chakrabarti as president
LONDON, May 18 (Reuters) – The European Bank for Reconstruction and Development said on Friday it appointed senior UK civil servant Suma Chakrabarti as the bank’s first British president for the next four years.
Chakrabarti is currently permanent secretary – the most senior civil servant – at Britain’s Ministry of Justice. He previously ran Britain’s Department for International Development (Dfid).
He replaces Germany’s Thomas Mirow, who campaigned without Germany’s backing in a five-candidate race after the European Union failed to agree a consensus candidate.
The president was chosen by the bank’s 65 country and multilateral shareholders at its annual meeting in London on Friday.
Chakrabarti’s appointment comes despite a running assumption that the presidency would never go to a British candidate, in return for the bank being headquartered in London.
The EBRD was set up in 1991 to help former communist countries of central and eastern Europe make the transition to market economies, but has expanded its activities to include central Asia and, most recently, North Africa and the Middle East.
“A central challenge is to maintain the EBRD’s effectiveness and performance in its current region whilst building a track record in additional countries of operation,” Chakrabarti wrote in a letter to EBRD governors last month in support of his candidacy.
East Europe wary of fresh euro bank crunch
LONDON, May 18 (Reuters) – A new banking crunch in the euro zone risks another sharp retreat by western parent banks from vulnerable economies in central and eastern Europe, a process that must be slowed to preserve growth, officials from the region said on Friday.
Rising speculation that Greece will leave the single currency and a mass downgrade of Spanish banks’ credit ratings late on Thursday have intensified fears among local depositors and global investors about the stability of euro zone banks.
Many east European countries outside the euro have banks wholly or largely owned by western counterparts, which have already reduced lending as they try to fix balance sheets damaged by the sovereign debt crisis. They fear another sudden or sharp pullback to home markets could be devastating.
“The financial system continues to be vulnerable and the need to deleverage continues to be very strong,” Polish central bank chief Marek Belka told delegates at the annual meeting of the European Bank for Reconstruction and Development.
“This deleveraging is potentially more dangerous in countries with a high presence of foreign banks.”
Belka, who chided policymakers from richer economies for their inability to control the crisis, said this reduction of bank lending and debts, or deleveraging, was necessary but that the pace and location of it must be managed carefully.
“The crisis mostly is an issue of the developed economies,” he said. “The so-called west has lost its monopoly for wisdom and I’m saying it without Schadenfreude.”
EBRD seeks new leader to fight fresh fires
LONDON (Reuters) – The impact of the euro zone crisis on emerging Europe and the political challenges of North Africa will occupy minds at eastern Europe’s development bank meeting in London this week, where a new president to deal with it will also be chosen.
The European Bank for Reconstruction and Development, set up in 1991 to enable the former communist economies of the Soviet Union to make the transition to the free market, hosts its annual meeting for its 65 country and multilateral shareholders on Friday and Saturday.
As well as choosing the president from a five-candidate field, shareholders will be voting on a 1 billion-euro fund for North Africa as one of the first projects in the bank’s new push into a region experiencing vast political upheaval.
Shareholders will also discuss the spillover from banking and growth problems in the euro zone and elsewhere into the EBRD’s original region of central and eastern Europe.
“The question of what can be done in order to mitigate risks of further contagion from the euro zone crisis to the region will be at the centre of discussions,” current President Thomas Mirow told a briefing this week.
Mirow and other EBRD officials are worried about the threat posed to emerging Europe from deleveraging by Western European banks and have started work on the a new programme, known as Vienna 2.0, to help banking stability.
Some analysts say the bank may be in danger of overstretching itself.
EBRD seeks new leader for battle on two fronts
LONDON, May 11 (Reuters) – Facing a possible change at its helm, emerging Europe’s development bank risks stretching itself thinly as mission creep into North Africa eats up resources while the bank’s core charges feel the heat from raging euro zone financial fires.
The European Bank for Reconstruction and Development, set up in 1991 to enable the former communist economies of the Soviet Union make the transition to market economies, hosts its annual meeting for its 65 country and multilateral shareholders at its London headquarters on May 18-19.
As well as choosing a president for the next four years, the bank will be voting on a 1 billion-euro fund for North Africa as one of the first projects in its new push into a region experiencing vast political upheaval.
Shareholders are also likely to discuss the spillover from banking and growth problems into the EBRD’s original region of central and eastern Europe and some analysts say the Bank may be in danger of overstretching itself.
“When you think of the EBRD’s original mandate, it was quite a different region and set of problems from the issues it is facing with North Africa,” said Vanessa Rossi, global economics adviser for Oxford Analytica.
Emerging Europe, with its close proximity to the troubled euro zone, is still struggling to recover from the 2008/09 crisis.
“The EBRD has not finished with that problem when it has to get started with another quite different set of circumstances,” Rossi said.
Israel’s new political fix may support markets
JERUSALEM/LONDON (Reuters) – Political stability and receding worries about an attack on Iran are likely to support Israel’s markets after the country formed a unity government on Tuesday, but budget and regulatory reform could be a worry.
Prime Minister Benjamin Netanyahu formed the broad coalition government in a political surprise that avoided an early election.
By bringing in the centrist Kadima party led by former defense chief Shaul Mofaz, Netanyahu, who heads the right-wing Likud, will have a government controlling 94 of parliament’s 120 seats.
“There’s a mild positive sentiment,” said Zach Herzog, head of international sales at the Psagot brokerage in Tel Aviv, noting, however, there may be some extra spending ahead.
“By and large we’re getting additional political stability but perhaps it’s going to come at the cost of some anti-market forces rearing their heads,” Herzog said.
In response to a public outcry over the high cost of living and an economy dominated by just a few large groups, the government has planned reforms over competition that would force conglomerates to divest some of their assets, and significant telecoms sector changes that would create a wholesale market.
The new political deal that would keep the next election in October 2013 also has investors worried over fiscal policy. Weaker tax income due to slowing economic growth and higher social spending will already push the 2012 budget deficit to at least 3.4 of gross domestic product — well above a target of 2 percent.
‘A Coke and a smile’ too little for emerging mkts
.JPG)
Emerging markets offer drinks manufacturers exactly what they’re looking for – millions of potential new consumers ready to buy their products. But it’s not enough any more just to sell EM consumers a distilled version of the American Dream, says Euromonitor beverage analyst Jonas Feliciano.
While consumers may once have bought Western carbonated drinks for the same reason they bought blue jeans, now people in the top five drinks growth markets of China, Mexico, Brazil, Indonesia and India want something adapted to local tastes, Feliciano says:
Growing consumer sophistication has put the focus squarely on developing products specifically tailored to consumer taste, to develop products, flavours and textures that local consumers find both familiar and satisfying. And, more often than not, these preferences are outside of the carbonate category.
In China, Indonesia and India, it is non-fizzy drinks that are going to lead the way, Feliciano says, and shows how the Coca-Cola Company’s success with Minute Maid Pulpy, the firm’s 14th brand to reach $1 billion in global retail sales in 2011, has provided drinks companies with a new model for success.
Coca-Cola launched Minute Maid Pulpy, a fruit juice with a texture adapted to Chinese tastes, in 2004. Through a combination of local adaptations and marketing, Pulpy became the most popular fruit juice brand in China in just seven years and Coca-Cola’s first emerging market “billion dollar brand”.
Minute Maid Pulpy is popular for two reasons – one is price, with Coca-Cola able to undercut its competitors by making a drink with less than 24% fruit juice and the second is a thick texture.
Western consumers value a juice drink being 100% natural, but Asian consumers associate healthiness with consuming actual fruit, Feliciano says, so Coca-Cola appealed to them by including bits of fruit in the drink.
Saudi stocks eye foreign flows
Saudi stocks have been on a roll on expectations of more foreign investment.
The Saudi index is already one of the most liquid frontier markets, even though foreigners cannot buy stocks directly, but only through participatory notes.
Plans to widen foreign access to Saudi shares via limited direct ownership have lifted the stock market by 18 percent this year, compared with a gain of only 2 percent in broad frontier markets. The index hit its highest in 3-1/2 years a few weeks ago but has fallen a bit since then.
Analysts expect the market, the largest in the Arab world, to open up this year, though the country’s Capital Market Authority has not yet given a date.
Ghadir leil Cooper, who runs a Middle East and North Africa (MENA) fund at Baring Asset Management, is overweight Saudi Arabia as an out-of-index bet, saying the pace of the move towards greater access has been astounding:
“I used to say, never in my lifetime,” she says of the proposed changes.
Index compiler MSCI in fact this week drew Saudi Arabia back into the fold, agreeing to create Saudi equity indexes and put Saudi Arabia back into its GCC and Arabian Markets indexes. The move comes nearly two years after MSCI withdrew its Saudi indexes after a licensing rights dispute with the stock exchange.
Egypt’s presidential election boost?
Presidential elections may make investors look more kindly on Egypt, as a further sign of democracy in the country.
Egypt, the best-performing MSCI emerging equity market this year, has risen 40 percent after falling sharply in 2011, but many investors remain cautious.
Ghadir Leil Cooper, who runs a Middle East and North Africa equities fund at Baring Asset Management, has been underweight Egypt for over a year, following the ousting of Hosni Mubarak as president. But it could soon be time for a rethink, she says:
I would look to see which direction the elections take. It’s only three weeks, we will have a president in June.
Egypt’s current discussions with the IMF over a $3.2 billion loan are a positive, Leil Cooper says, after the country last year rebuffed the international lender.
Analysts at RBS are more wary, given conflicting pressures from different political and secular groups in the country:
The appetite for reform may be much less in Egypt than was in Turkey in the early 2000s…Egypt could actually end up in a much more serious confrontation between the Islamists and the government, akin to Algeria in the 1990s. To avoid such a situation, the Muslim Brotherhood will need to continue the pragmatism that it displayed in the immediate aftermath of Mubarak’s exit.
Insight – London seeks leading role as yuan bond trade goes global
LONDON (Reuters) – Opposite the neoclassical pile of the Bank of England in the heart of the City of London stands an unprepossessing building that houses a Chinese bank.
Bank of China (UK) has been in the City since 1929, the year of the Wall Street Crash, but nobody much noticed the bank, or any Chinese presence in London’s financial markets, until two weeks ago.
What changed was the launch of one of the first London-listed bonds denominated in China’s renminbi (yuan) currency.
The deal, from banking group HSBC Holdings Plc, arrived with a fanfare. It coincided with Chancellor George Osborne’s launch of a working party with the City of London and five major banks – including Bank of China and HSBC – to develop London as an offshore yuan trading centre.
The move is an attempt by Britain to tap into trading in instruments denominated in the currency of the world’s second-largest economy.
“China and Britain are trying to push for more trade and investments, both ways,” said Janet Ming, who heads a newly created China desk at Royal Bank of Scotland in London. “The Chinese economy grew by 56 percent in five years … it’s very obvious Britain should sell more to China.”
London is hoping to build up its presence in the offshore yuan bond market, which started alongside the offshore yuan currency market less than two years ago in Hong Kong, used by mainland China as an international, or offshore, trading centre.
-
About Carolyn
-
Follow Carolyn
