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Emerging and Frontier Markets: Economic and Geopolitical Analysis

My commentary: Just to explain for those not familiar, private equity firms raise capital for a fund that typically has a lifetime of 5-7 years (i.e. the fund liquidates its holdings and returns the investment plus profits of the fund to the investors).

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Myanmar Creates Buzz, But It’s Not For the Faint Hearted - Private Equity Beat - WSJ

  • wsj_print.gif
  • October 29, 2014, 9:47 AM ET
Myanmar Creates Buzz, But It’s Not For the Faint Hearted
BySonja Cheung
BN-FG702_MYANMA_G_20141029094309.jpg

Some private equity firms are seeking to get in on the ground level as Myanmar’s economy gets on track. Above, a woman carries baskets at the main railway station in Yangon, Myanmar.
Agence France-Presse/Ye Aung Thu
Myanmar is creating buzz among private equity investors looking to catch the first wave of deals in the frontier market as it develops its economy after years as a pariah state.

U.S. private equity firm TPG Capital made its first steps into the Southeast Asian country earlier this year when it injected capital into Apollo Towers and its operating unit Apollo Towers Myanmar, which provide telecommunications tower infrastructure. In a statement, Cleary Gottlieb Steen & Hamilton LLP, counsel to TPG, pegged the value of that transaction at $35 million.

The country’s appeal lies in its large population, government initiatives to encourage foreign investment and a strategic location close to India, China, Thailand and Vietnam, but the investment landscape can be riddled with challenges.

“Myanmar is not for the faint of heart,” said Tim Dattels, who co-heads TPG’s Asia operations.

Some market participants say a crucial hurdle is that small businesses are less mature there compared with their Asian counter- parts, meaning general partners may need to hold on to companies beyond a fund’s average holding period of roughly five years.

For this reason, Myanmar Investments International Ltd., an investment company listed on the London Stock Exchange, said a fixed-life private equity fund structure may be less suitable in Myanmar than an evergreen or perpetual structure.

“There are those companies which you’re likely to hold on for 10 to 15 years, and you don’t want an artificial gun to your head to exit them,” said Mike Dean, a co- founder of Myanmar Investments.

A healthy supply of deals is another benefit to investing in Myanmar, but the question remains: how will firms exit portfolio companies? The country is in the process of opening a stock exchange, which is slated for next October, but in general underdeveloped capital markets could give some private equity firms the jitters.

For more on the challenges and opportunities in Myanmar, check out this month’s issue of Private Equity Analyst.
 
The society and culture of the EU is very different from the US.

US drives automatic, EU Manual.
US washing machines have hot and cold water, the Socialist EU has only cold.
US has the good olde Imperial system rather than the socialist Metric.
US has Month/ Day/ Year. EU has Day/ Month/ Year.
US requires students to pay for their University, although scholarships based on merit and financial aid is given.
US only likes to speak English, have to learn 2-5 languages? psht.
US prefers to have only 2 strong political parties.
USA USA USA, ever hear a German saying GERMANY? or DEUTSCHLAND!?
US prefers their males circumcised.


734839_123081847860125_1037531438_n.png



Its the US against the world. We are quite self-egotistical.


But on a serious note.

I never thought I would miss having the University Academic Research Database.

Most papers need log in.

But it seems that the TTIP would open up every sector of the EU, Healthcare, Food & Drugs, Banks, Labor.

So your talking about Britain's NHS being Privatized.
US Food & Drug regulations are less stricter than EU.
US Banking regulations are stricter than EU's.
US Labor regulations are less strict than the EU's.
US has Lobbying, known as bribery overseas.

US has Private Interest Groups that can donate unlimited fund to Political Action Committees.
US companies can sue the government.


Enacting the TTIP is going to bring back memories of NAFTA. Going to be very much harder also. Add the the fact that much if not all is being done behind closed doors.

Freedom of Capital, People, Services, and Goods is the best. US-EU already have one of the Freedoms. It will be only a matter of time, but allot later than sooner.
 
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The society and culture of the EU is very different from the US.

US drives automatic, EU Manual.
US washing machines have hot and cold water, the Socialist EU has only cold.
US has the good olde Imperial system rather than the socialist Metric.
US has Month/ Day/ Year. EU has Day/ Month/ Year.
US requires students to pay for their University, although scholarships based on merit and financial aid is given.
US only likes to speak English, have to learn 2-5 languages? psht.
US prefers to have only 2 strong political parties.
USA USA USA, ever hear a German saying GERMANY? or DEUTSCHLAND!?
US prefers their males circumcised.


734839_123081847860125_1037531438_n.png



Its the US against the world. We are quite self-egotistical.


But on a serious note.

I never thought I would miss having the University Academic Research Database.

Most papers need log in.

But it seems that the TTIP would open up every sector of the EU, Healthcare, Food & Drugs, Banks, Labor.

So your talking about Britain's NHS being Privatized.
US Food & Drug regulations are less stricter than EU.
US Banking regulations are stricter than EU's.
US Labor regulations are less strict than the EU's.
US has Lobbying, known as bribery overseas.

US has Private Interest Groups that can donate unlimited fund to Political Action Committees.
US companies can sue the government.


Enacting the TTIP is going to bring back memories of NAFTA. Going to be very much harder also. Add the the fact that much if not all is being done behind closed doors.

Freedom of Capital, People, Services, and Goods is the best. US-EU already have one of the Freedoms. It will be only a matter of time, but allot later than sooner.

Thank you Sir . Appreciate it .
Have to write an article for TTIP . Was wondering weather I should focus on the geo-political impact of this deal or commercial aspect.
 
My commentary: Just to explain for those not familiar, private equity firms raise capital for a fund that typically has a lifetime of 5-7 years (i.e. the fund liquidates its holdings and returns the investment plus profits of the fund to the investors).

---

Myanmar Creates Buzz, But It’s Not For the Faint Hearted - Private Equity Beat - WSJ

  • wsj_print.gif
  • October 29, 2014, 9:47 AM ET
Myanmar Creates Buzz, But It’s Not For the Faint Hearted
BySonja Cheung
BN-FG702_MYANMA_G_20141029094309.jpg

Some private equity firms are seeking to get in on the ground level as Myanmar’s economy gets on track. Above, a woman carries baskets at the main railway station in Yangon, Myanmar.
Agence France-Presse/Ye Aung Thu
Myanmar is creating buzz among private equity investors looking to catch the first wave of deals in the frontier market as it develops its economy after years as a pariah state.

U.S. private equity firm TPG Capital made its first steps into the Southeast Asian country earlier this year when it injected capital into Apollo Towers and its operating unit Apollo Towers Myanmar, which provide telecommunications tower infrastructure. In a statement, Cleary Gottlieb Steen & Hamilton LLP, counsel to TPG, pegged the value of that transaction at $35 million.

The country’s appeal lies in its large population, government initiatives to encourage foreign investment and a strategic location close to India, China, Thailand and Vietnam, but the investment landscape can be riddled with challenges.

“Myanmar is not for the faint of heart,” said Tim Dattels, who co-heads TPG’s Asia operations.

Some market participants say a crucial hurdle is that small businesses are less mature there compared with their Asian counter- parts, meaning general partners may need to hold on to companies beyond a fund’s average holding period of roughly five years.

For this reason, Myanmar Investments International Ltd., an investment company listed on the London Stock Exchange, said a fixed-life private equity fund structure may be less suitable in Myanmar than an evergreen or perpetual structure.

“There are those companies which you’re likely to hold on for 10 to 15 years, and you don’t want an artificial gun to your head to exit them,” said Mike Dean, a co- founder of Myanmar Investments.

A healthy supply of deals is another benefit to investing in Myanmar, but the question remains: how will firms exit portfolio companies? The country is in the process of opening a stock exchange, which is slated for next October, but in general underdeveloped capital markets could give some private equity firms the jitters.

For more on the challenges and opportunities in Myanmar, check out this month’s issue of Private Equity Analyst.

Private equity provides a unique dimension to the FDI picture and I welcome it but the lack of financial deepening is a real drag. The stock market was slated to open this year but it'll be atleast until after the election in 2015 so more like 2016. Anyway, thanks for posting this. I will also post it in the Myanmar thread.
 
Hey guys , need your view about : " The Transatlantic Trade and Investment Partnership (TTIP) "

What do you think, Is it the next big thing for EU and US ? Is it dangerous ? Please let me know your view.

From my understanding of the TTIP so far, in aggregate, it's actually supposed to benefit Europe more. But clearly it has its detractors as well, usually from the left: Stop TTIP | Campaign It will also create some political friction between countries that are part of one shared trade agreement with several TTIP countries, but not part of TTIP itself: The Road to War (Part I: Trade) | Page 3

Here are the views of TTIP from the two sides, officially:

Transatlantic Trade and Investment Partnership (TTIP) - Trade - European Commission
Transatlantic Trade and Investment Partnership (T-TIP) | Office of the United States Trade Representative
 
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This thread was always supposed to include geopolitical analysis, but has been heavily tilted towards economics thus far. I will start posting more on the geopolitical side to balance the coverage.

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Belindia Has Spoken by Andrés Velasco - Project Syndicate


CULTURE & SOCIETY
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ANDRÉS VELASCO
Andrés Velasco, a former presidential candidate and finance minister of Chile, is Professor of Professional Practice in International Development at Columbia University's School of International and Public Affairs. He has taught at Harvard University and New York University, and is the author of numerous studies on international economics and development.

OCT 29, 2014
Belindia Has Spoken
SANTIAGO – Forty years ago, the Brazilian economist Edmar Bacha named his country Belindia: a combination of prosperous and modern Belgium and poor and backward India. In last Sunday’s presidential election, according to many observers, the Indian part of Brazil voted for the incumbent, President Dilma Rousseff, and the Belgian part voted for the social democrat Aécio Neves. India is larger, so Rousseff won.

This is fast becoming the standard account of Brazil’s election, the most acrimonious and hotly contested in recent memory. And it is easy to see why. In Brazil’s underdeveloped Nordeste, Dilma (in Brazil, politicians, like footballers, go by their first name) swept the vote.

In the relatively rich South, which accounts for 70% of Brazil’s economic output, Aécio won handily. Similar divisions appear when voters are classified according to dependence on government handouts (high in the Northeast) or years of schooling (high in the South).

Yet there is more to this election than this broad-brush picture suggests. In 1974, when Bacha coined his term, it went without saying that the prosperous and modern Brazil was just a tiny sliver of the total. In 2014, Neves, the candidate of “Belgian” Brazil, won more than 48% of the vote.

That reveals how much the country has changed in the last four decades, and how large and influential its middle class has become. It was precisely that middle class, fed up with allegations of corruption and a sluggish economy, that turned against the ruling Workers’ Party (PT) and voted for change.

But it is also striking that despite the weak economy – growth will barely average 1.5% during Rousseff’s first term, and the economy is now in a technical recession, having contracted in two consecutive quarters – Dilma and the PT managed to retain the support of Brazil’s tens of millions of poor and excluded citizens. This is partly because the recession has not made a big dent in employment, which means that many households have yet to feel the impact.

Dilma was also helped by the commodity super-cycle, which filled Brazil’s coffers and made it possible to run ambitious cash-transfer programs that helped pull countless families out of poverty. These policies were actually launched by former President Fernando Henrique Cardoso of Neves’s Party of Brazilian Social Democracy (PSDB), but are associated in the popular imagination with Dilma’s political mentor and predecessor, Luiz Inácio Lula da Silva, also of the PT. By claiming (with no evidence) that Aécio would cut these popular programs, Dilma dealt the PSDB a sharp electoral blow.

Using commodity revenues to obtain political support is not a strategy unique to Brazil. In Argentina, Bolivia, Ecuador, and Venezuela, populists have tried the same trick. So have the vastly different governments of the conservative Sebastián Piñera and the socialist Michelle Bachelet in Chile. And the similarities do not end there.

Now that the commodity boom is ending, all of these countries face the challenge of building a new economic engine to sustain growth and create jobs. Without the commodity windfall, they must develop new sectors that can produce new goods and services, requiring new sets of skills and new types of infrastructure.

This is a tall order, especially for Brazil. The structural deficiencies of its economy have long been understood, but little has been done to correct them. Brazil has South America’s biggest government (with a tax take exceeding one-third of GDP), yet the authorities save and invest too little, which creates both micro- and macroeconomic problems.

On the micro side, too little public investment means poor infrastructure and high export costs. Brazil has none of neighboring Argentina’s hefty export taxes, but its heavy transport costs have the same effect.

Education, too, receives little public funding, especially at the pre-school and primary levels. Like Chile, Brazil has sharply increased school enrollment but has yet to provide high-quality learning opportunities to disadvantaged children. In the OECD’s international PISA rankings of educational achievement, Brazil places near the bottom, below Mexico and Chile.

On the macro side, too little public savings means insufficient savings at the national level. When international funds are available, this produces short-lived booms and large current-account deficits, financed by heavy external borrowing. When international liquidity dries up, as it often does for Brazil and Latin America, weak domestic investment and sluggish growth follow.

Neves had a plan to address these shortcomings. Dilma does not. Her election-night speech was full of calls for unity and dialogue, and included a pledge to “take urgent action” to resume growth. But, like her campaign, the speech was short on specifics.

On industrial policy, the PT has the right intuition but the wrong tools. Partnering with leading domestic sectors to promote innovation is one thing; doing so through price controls (as with fuels), indiscriminate subsidies, and protectionism is another. In recent years, Brazil has taken the latter route.

Rousseff has little time to waste. She will govern a country with substantial public debt (60% of GDP), a volatile currency, and high inflation. Nervous financial markets will keep the government on a tight leash.

Neves and his PSDB have come out of this election considerably strengthened, but they also will face difficult challenges in the coming years. The social democrats will have a larger delegation in Congress (including Neves himself in the Senate) and will govern some of Brazil’s larger states, including São Paulo, home to 43 million people and one-third of the country’s GDP. But to reach the Planalto Presidential Palace after the 2018 election, the PSDB will have to convince poor Brazilians – those living in Bacha’s India – that it works on their behalf, and that the policies it advocates benefit them the most.

Then, and only then, will Brazil’s longstanding divisions begin to heal. When they do, the country will get the modern and effective social-democratic government that it deserves.

Belindia Has Spoken by Andrés Velasco - Project Syndicate


Read more at Belindia Has Spoken by Andrés Velasco - Project Syndicate
 
http://online.wsj.com/articles/guy-scott-named-interim-president-of-zambia-1414589035

Zambia Faces a Battle Over Leader’s Successor
Cabinet Names Africa’s First Post-Apartheid White Leader After Sata’s Death, but Succession Fight Looms in Copper-Rich Nation
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ENLARGE
Guy Scott at the U.S.-Africa Leaders Summit, in Washington, in August this year. REUTERS

By
PATRICK MCGROARTY in Johannesburg and
NICHOLAS BARIYO in Kampala, Uganda
Updated Oct. 29, 2014 2:00 p.m. ET

Zambia’s cabinet on Wednesday named the first white head of state in Africa since the end of apartheid, following the death of President Michael Sata late Tuesday.

Mr. Sata died at a London hospital where he had been receiving medical treatment, Finance Minister Alexander Chikwanda said on Wednesday.

After an hourslong meeting in the capital, Lusaka, cabinet ministers said they had agreed that Vice President Guy Scott would succeed Mr. Sata, who was 77 years old, on an interim basis.

But politicians and business leaders still face the task of determining who ultimately will take control of the copper-rich country, which has struggled to keep its promising economy on track.

Secretary to the Cabinet Roland Msiska waited more than 10 hours after Mr. Sata’s death to confirm it in a televised address. Mr. Sata had been sick for months, but officials refused to say precisely what killed him.

Zambia’s constitution says Mr. Scott, a Cambridge University-trained economist whose parents were born in Britain, should assume the presidency for 90 days while he organizes elections. He is barred from running for a full five-year term because the constitution stipulates a candidate’s parents be born in Zambia.

Instead, Defense Minister Edgar Lungu, who Mr. Sata appointed acting president last week before departing for medical treatment in London, is seen as a front-runner to represent Mr. Sata’s Patriotic Front party in the coming elections.

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ENLARGE
Zambia’s President Michael Sata died late Tuesday in London. ASSOCIATED PRESS
RELATED ARTICLES


He could face a challenge from Mr. Sata’s son, Lusaka Gov. Mulenga Sata, or Wynter Kabimba, a former secretary-general of the Patriotic Front. Mr. Sata fired Mr. Kabimba in August and replaced him with Mr. Lungu.

The Patriotic Front will also face a tough challenge from opposition candidates including Hakainde Hichilema of the United Party for National Development and possibly Rupiah Banda, whom Mr. Sata unseated in 2011.

Cornelius Mwetwa, a lawmaker for Mr. Hichilema’s party, said politicians wanted the transition and elections to be peaceful and fair.

“It’s a somber mood in the country, but typical of Zambians, everyone is calm,” Mr. Mwetwa said.

Mr. Sata, who is survived by his wife Christine Kaseba Sata and eight children, leaves behind a mixed legacy. He didn’t fit the mold of the modern African strongman. Born July 6, 1937, in northern Zambia, Mr. Sata was a police officer before becoming a trade unionist during colonial rule. He worked as a railway-platform sweeper in London in the early 1960s before entering Zambian politics after the country gained independence from Britain in 1964.

He came to power after more than a decade as an opposition-party leader. In a reasonably fair election in 2011, his triumph ended the two-decade rule by the Movement for Multiparty Democracy party on a continent where peaceful transfers of power are rare.

But he ruled with an authoritative and, some say, dictatorial-style. He was nicknamed “King Cobra” for his venomous remarks about opponents and colleagues alike.

Mr. Sata dismissed questions about his failing health. He suffered a heart attack in 2008, said an official under then-president President Levy Mwanawas, who helped get him to South Africa for medical treatment. During his three years in office, he disappeared frequently from public view, often on trips abroad. Opponents said he was seeking medical treatment from foreign doctors. Mr. Sata and his loyalists called such trips, including a July visit to Israel, “working holidays.”

Outside London’s King Edward VII Hospital on Wednesday, where Mr. Sata had reportedly been receiving treatment before he died, a receptionist declined to comment on whether the president had been a patient there. The private hospital is known for treating illustrious patients, including the Duchess of Cambridge, who gave birth to her first child here.

Whoever succeeds Mr. Sata will be tasked with reviving an economy that has struggled to retain the confidence of foreign investors even as economic growth has approached 7% annually in recent years.

Zambia’s kwacha currency is down about 10% against the U.S. dollar this year, and Mr. Sata’s government approached the International Monetary Fund in June for advice, and potentially financial support, to close yawning trade and budget deficits.

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ENLARGE
One way Mr. Sata sought to close the budget gap was by pulling more tax revenue from foreign firms mining copper in the country, including Glencore PLC, Vedanta ResourcesPLC, First Quantum Minerals and China Nonferrous Metals Co.

During his presidential campaign, Mr. Sata threatened to “bite” mining investors, especially the Chinese, with higher taxes and nationalization for what he regarded as exploitation of Zambian workers. In office, he abandoned talk of nationalization. But he did introduce a law requiring mining companies to present export certificates to curb tax evasion, drawing the ire of investors.

“He was instrumental in trying to review the tax regime in the mining sector in order for Zambia to begin to benefit from its mineral wealth,” said Isabel Mukelabai, executive director of the Center for Trade Policy and Development, a Lusaka-based organization lobbying the government to hold mining companies to account.

She said she fears Mr. Sata’s successor may move away from policies that aim to pull more revenue from Zambia’s copper-mining industry. “We don’t know if there will be continuity, if these policies will be pursued under a new president,” she said.

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ENLARGE
Zambia’s cabinet on Wednesday named Vice President Guy Scott, above, the first white head of state in Africa since the end of apartheid, following the death of President Michael Sata. Mr. Scott will serve on an interim basis while he organizes elections. ASSOCIATED PRESS
—Alexis Flynn in London contributed to this article.
 
Arab views on governance after the uprisings - The Washington Post

Arab views on governance after the uprisings

By Michael Robbins and Mark Tessler October 29 at 3:40 PM
imrs.php

Defaced presidential campaign posters of ousted president Mohamed Morsi are seen on a wall with a campaign poster of now-President Abdel Fattah al-Sisi. (Sabry Khaled/AP)

The protesters who took to the streets during the Arab uprisings beginning in 2010 demanded change to the existing political order. And, if nothing else, the last few years have brought dramatic changes to a number of countries in the region. In multiple countries, Islamist parties came to power, and in different instances, have since lost power by resignation, coup and the ballot box. Elsewhere, civil wars rage, calling the experiment with political reform into question. Nearly four years from the first protests, only Tunisia seems to offer the hope of a successful transition to democracy.

These ongoing changes across the Arab world have led citizens to reassess their preferences. For example, the Arab Barometer – a project that has conducted public opinion surveys in 14 countries in the region – shows that few Arabs now favor dramatic reforms. In nearly all countries, at least 7-in-10 respondents say reforms should proceed gradually. In Algeria, in the months just after the Arab uprisings, roughly half of respondents said political reforms should proceed gradually compared to 78 percent just two years later.

Concerned about the effects of rapid political change, have Arab publics changed their beliefs about the best type of political system? Do Arabs remain supportive of democracy or has governance by a strong regime become more appealing since the uprisings? Moreover, have the short-lived experiments of Islamists in government led to an increase, or a decrease, in support for political Islam?

Comparing results from three waves of survey data over the past decade, the Arab Barometer finds that support for democracy remains high but support for political Islam has decreased. Interacting these two trends, a key finding is that Islamic democrats – those who support both democracy and political Islam – are becoming scarcer across the region.

Arab publics continue overwhelmingly to support democracy. In all but one country surveyed, three-quarters or more of respondents in the third wave of surveys (late 2012-2014) agree or strongly agree with the statement “A democratic system may have problems, yet it is better than other political systems.” This belief is most widespread in Lebanon (85 percent) and Egypt (84 percent), followed by Tunisia (83 percent), Algeria (82 percent), Jordan (81 percent), and Palestine (81 percent). Although lowest among the countries surveyed, overwhelming majorities also favor democracy in Iraq (76 percent) and Yemen (73 percent).

imrs.php


Since the Arab uprisings, support for democracy has decreased the most in Iraq and Yemen, falling by 10 points and 9 points, respectively. However, these changes are most likely the result of domestic factors rather than regional factors. In Iraq, the failure of the government under former prime minister Nouri al-Maliki to build a strong and inclusive political system may have led a fair number of Iraqis – most notably Sunnis and other minority groups – to question whether democracy is suitable for their country. In Yemen, the state remains extremely weak and is struggling to contain challenges from the Houthi rebellion in the north and the secessionist movement in the south, which may predispose some Yemenis to believe that an authoritarian government is needed to reestablish and maintain political order.

Support for political Islam is substantially lower. In no country do more than half of respondents say religious leaders should have influence over government decisions. It is often far less support, including just 34 percent in Algeria, 27 percent in Tunisia, 20 percent in Egypt and 9 percent in Lebanon. Moreover, support for political Islam declined over the past decade. Algeria has witnessed the most dramatic decline, with support for political Islam falling from 60 percent in 2006 to just 34 percent in 2013. A similar decline has occurred in Egypt, where 37 percent supported political Islam in June 2011 compared to 18 percent in April 2013, a 19-point decrease. Most other countries witnessed a similar decline, including Palestine (-15 points), Iraq (-11), Lebanon (-9) and Yemen (-7).

imrs.php


There are two exceptions to this trend: Jordan and Tunisia. In Jordan, support for political Islam has held relatively steady across all three surveys. In 2006, 52 percent favored political Islam compared to 47 percent in 2012, which represents a decline of 5 points and nearly falls within the margin of error of the surveys.

In Tunisia, there has been no significant aggregate change in support for political Islam. In October 2011, 25 percent of Tunisians favored a role for religious leaders in decisions of government, compared to 27 percent in February 2013. These results strongly suggest that the experience of living under a government headed by the Islamist Ennahda party did not lead to a significant decline in overall levels of support for political Islam.

Yet, these dichotomized results conceal an important trend: The intensity of attitudes about political Islam has changed markedly among Tunisians. Among the 75 percent of Tunisians who did not support political Islam in 2011, 56 percent disagreed with the statement that religious leaders should have influence over government decisions while 19 percent disagreed strongly. By 2013, a shift of about 20 points had taken place between these positions, with only 36 percent disagreeing and 38 percent disagreeingstrongly. Thus, living for more than a year under a government led by Ennahda appears to have increased the intensity of attitudes about the place of Islam in political affairs.

Examining attitudes toward democracy and political Islam simultaneously provides additional insight into the types of political system that Arab publics favor. The combination of the two measures yields four distinct orientations: democratic secular, democratic with Islam, authoritarian secular and authoritarian with Islam.

A comparison of survey results from eight counties across the different waves shows a clear trend: Support for democracy with Islam has declined across the region. In seven countries, support for this worldview is now significantly lower than in previous waves. Compared to the first year for which data are available in each country, support for democracy with Islam dropped significantly in Algeria (-28 points), Palestine (-14), Iraq (-14), Egypt (-11), Lebanon (-9), Yemen (-8) and Jordan (-6). Only in Tunisia did support for this form of political system remain unchanged. In other words, the region is now home to many fewer Islamic democrats.

Although the precise reasons for this decline vary by country, a comparison of the experiences of Egypt and Tunisia is particularly instructive. In Egypt, the second wave survey was conducted in June 2011, before parliamentary or presidential elections, and the third wave was carried out in April 2013, after Mohamed Morsi had been president of Egypt for 10 months. During this 22-month period support for democracy with Islam declined by 11 points. This loss of support was accompanied by a 19-point increase in support for secular democracy. Meanwhile, support for authoritarianism with Islam also declined by 8 points. These results strongly suggest that living under a government led by the Muslim Brotherhood turned some Egyptians against the organization’s basic ideology.

Tunisia is the key exception to the general decline of Islamist democrats across the region. Support for democracy with Islam held steady at roughly 23 percent from October 2011 to February 2013. Meanwhile, support for secular democracy declined by 7 points. The clear difference from Egypt is likely linked to the varied strategies pursued by Ennahda and those of Morsi and the Muslim Brotherhood in Egypt. Rather than attempting a power grab once in office, Ennahda joined forces with other parties to form a Troika government. This more moderate governing strategy helped maintain levels of support for democracy with Islam despite the many economic hardships faced by Tunisians.

Elsewhere, the reasons for the general decline are less evident, although international and domestic events have likely played a role. In Iraq and Palestine, parties that take up the banner of religion have won elections but subsequently failed to form broad coalitions. Thus, the causes of the decline of support for democracy with Islam in these countries may be similar to those in Egypt.

Yet, the fall in support for democracy with Islam in countries that did not have direct experience with Islamist governance suggests cross-national factors also played a role. It appears that Arab publics in these countries are likely reflecting on events in neighboring countries. Although the assignment of responsibility is contested, or at least debatable, Egypt slipped into greater instability and the economic situation for many citizens declined under Morsi’s government. Libya has become a byword for chaos. The ongoing infighting and general instability can also be attributed in part to the role that Islamist actors have played in that country.

Even in Tunisia, where Ennahda did share power with other parties, the economy continues to struggle and security remains a challenge. The Troika government was replaced by a technocratic government that has fared somewhat better in public opinion. As such, Tunisia’s limited progress under Ennahda hardly looks like a successful example to citizens in other countries in the region.

There has been no clear example of success in combining political Islam with democracy, which presents a challenge for Islamic democrats. Although there has not been a significant corresponding uptick in support for authoritarianism with Islam among publics at large, Islamist leaders across the region may decide that this is the only political formula by which they can realize their objectives. The overthrow of a democratically elected president in Egypt may have led Islamists to conclude, perhaps not only in Egypt, that they would never be given a fair chance to govern. More radical groups taking root across the region may therefore actually benefit from the decline of Islamic democrats, as those who believe Islam and politics are and should be fundamentally related lose faith in the democratic process as a means to achieve their goals.

The Arab Barometer team will discuss findings from the project’s third wave of surveys at a public event at the U.S. Institute of Peace Oct. 31. A live Webcast will be available.

Michael Robbins (@mdhrobbins) is the director of the Arab Barometer(@arabbarometer). His work on Arab public opinion, political Islam and political parties has been published in Comparative Political Studies, the Journal of Conflict Resolution and the Journal of Democracy. Mark Tessler is the Samuel J. Eldersveld Collegiate Professor of Political Science at the University of Michigan. He co-directs the Arab Barometer. He is the author of “Islam and Politics in the Middle East: Explaining the Views of Ordinary Citizens” (Indiana University Press, 2015).
 
Tunisian IPO Highlights Growing Foreign Investor Appetite 
 - Frontier Markets News - Emerging & Growth Markets - WSJ

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  • wsj_print.gif
  • October 29, 2014, 1:45 PM ET
Tunisian IPO Highlights Growing Foreign Investor Appetite 

ByJavier Espinoza
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Tunisians celebrate the results of the country’s recent elections.
Reuters
A heavily oversubscribed IPO by one of Tunisia’s key companies and smooth parliamentary elections held last weekend are helping the country attract more attention from foreign investors.

Shares in Delice Holding, a consortium of companies that make dairy products, started trading on October 16 following an IPO that was almost 16-times oversubscribed. The company, which has a market capitalization of $475 million, sold 15% of its shares in the IPO.

Boubaker Mehri, the firm’s chief executive, says Delice Holding, which was founded by Hamdi Meddeb, was looking to come to market in an effort to attract foreign investment. “We wanted to have funds in our business from independent sources outside the family,” Mr. Mehri said in an interview.

Observers of the Tunisian market believe Delice Holding’s IPO signals the strengthening of a stock market that, according to research provider Capital Cube, includes 72 listed companies with a total market capitalization of around $8.7 billion. They also expect more companies in the consumer sectors, such as diaper maker SAH Lila and baker Moulin D’Or, to launch their own IPOs soon as they seek to grow their presence in a market where at least two thirds of the population is classified as middle class.

Matthew Spivack, practice leader for the Middle East and North Africa at consultant Frontier Strategy Group in London, says that despite Tunisia having a small population relative to other countries in the region, investors are interested in consumer goods companies because of the country’s relatively stable market and a return of growth in consumer-oriented sectors.

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Hamdi El Meddeb, founder of Delice Holding.
Reuters
“It is interesting to see some activity in Oman and Tunisia, because these are among the markets that are gaining a lot of new attention from clients who are looking for markets to help fulfill ambitious growth plans for the next few years,” he says.

Others agree. Slim Feriani, executive chairman of Advance Emerging Capital, a London-based investment manager, says: “Firms like Delice Holding are putting the Tunisian stock market in the spotlight.”

Feriani’s own funds didn’t invest in Delice Holding but he believes there are considerable opportunities in Tunisia. “It’s important to take into consideration the specific dynamics of the Tunisian market, which is an inefficient frontier market, where stock prices are driven by local [primarily retail] investors rather than sophisticated foreign institutional investors,” he explains. “Delice Holding’s IPO represented an attractive entry point for long-term investors.”

Investors have been wary of putting significant resources into North Africa in part because of recent events. Tunisia was the cradle of the Arab Spring that led to the ouster of a number of dictatorships. Delice Holding’s Mr. Mehri admits the country still has a somewhat shaky political situation. “We are still in transition and we have some instability,” he says. “But we are determined to build a strong democracy.”

The peaceful parliamentary elections last weekend have been hailed as a return to political stability by some observers. London-based analyst Capital Economics noted: “The fact that the election passed smoothly and that there is a growing consensus among politicians in all of the major parties to push through difficult policies to reduce the economy’s vulnerabilities and raise investment mean that the country’s longer-term growth prospects are brightening.”
 
Interesting political follow up to the very first post in this thread.

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http://blogs.ft.com/beyond-brics/2014/10/30/elections-and-reformers-in-the-fragile-five/

Elections and reformers in the Fragile Five
Oct 30, 2014 1:00amby Alan Beattie

And now the hurly burly’s done. With Brazil’s presidential run-off last weekend, this year’s elections in the five big deficit-plagued emerging markets are now complete.

Growth in all the fragile five – Brazil, India, Indonesia, Turkey and South Africa – has slowed, and ongoing current account deficits leave them vulnerable to a tightening of global credit. Perhaps unsurprisingly, the elections saw shifts against incumbents. Yet how far that move went, and what it is likely to mean for future policy, has divided those countries and may well determine their performance in the future.

First, a family-sized caveat: making generalisations about political trends across emerging markets involves considerable and obvious risks. All politics is local, and voters in Borneo are unlikely to sit up late avidly watching election returns in KwaZulu-Natal. Any attempt to gauge a broad sense of political sentiment also runs up against the somewhat intractable issues of judging public opinion in China and, increasingly, Russia.

Still, there are common themes in the big five emerging markets with slowing economies, external deficits and apparent structural impediments to growth – and which have more painful adjustment to come. Tightening fiscal policy or otherwise reducing demand to close fiscal and current account deficits and angering political constituencies with structural reform are rarely routes to public popularity.

In India and Indonesia, voters turfed out the ruling establishment in favour respectively of Narendra Modi and Joko Widodo (“Jokowi”), opposition figures with a stated commitment to reform. In South Africa and Brazil, populist leaders – Jacob Zuma and Dilma Rousseff respectively – were returned with reduced majorities. In Turkey, the incumbent prime minister, Recep Tayyip Erdogan, easily won the country’s first direct presidential election, though opinion polls suggest his popularity had fallen considerably during the last seven years of his tenure.

The strongest momentum for reform is clearly in India and Indonesia, where the new leaders can claim a clear mandate to clear away distortions from subsidies and tackle corruption. Food, energy and fuel subventions together make up a third of India’s fiscal deficit, which has fallen in recent years but remains above 4 per cent of GDP. Similarly, energy subsidies swallow nearly a fifth of Indonesia’s budget. The recent slide in global oil prices will undoubtedly help: if the price to consumers of diesel, petrol and fuel oil is lower, they are less likely to complain if giveaways are withdrawn.

Whether Jokowi and Modi will succeed, however, depends on their being able to negotiate their way through clientelist and corrupt political systems. Jokowi has only been in power ten days, and though he has appointed an investor-friendly cabinet of technocrats, its ability to corral a bureaucracy riven with entrenched interests is untested. In theory, the president has considerable room for policy manoeuvre without the approval of parliament; in practice, strong political opposition may give him pause for thought.

Narendra Modi, whose party only controls one of the two houses of the Indian parliament, has managed to get two parts of his reform package through, removing diesel subsidies and raising the state-controlled price of natural gas. But other, more politically contentious, subventions remain in place, particularly for kerosene, used as a cooking fuel by many of India’s poor. On kerosene, Mr Modi has espoused the standard reformer’s position, saying that targeted welfare payments to the poor are better than distorting a particular market. But that relies on an efficient and uncorrupted system for making cash transfers, a much harder task than simply withdrawing subsidies and letting the market decide.

Meanwhile, faced with a potential coal crisis as the Supreme Court invalidated more than 200 coal licences it said had been awarded corruptly, Modi briskly announced a fresh licence auction to be conducted openly. But so far he has stopped short ofliberalising the coal sector altogether. Modi may be moving at the fastest pace that India’s snarled-up bureaucracy and political sensitivities allow. Yet the history of radical reform in India is that it tends to happen out of exigency, particularly the balance of payments crisis in 1991 that permitted more liberalisation in a week than normally gets done in a decade. Mr Modi’s progress so far could be consistent either with a determined reform effort, or it could be another disappointment where a flurry of announcements and intentions fizzles out.

In Brazil and South Africa, general discontent with the incumbent nonetheless did not crystallise into support for a reforming alternative. Although Aécio Neves ran Dilma Rousseff reasonably close in the presidential election, his platform was based more on vague talk of change, apparently channelling Tony Blair and Barack Obama, than on specific plans for reform. In South Africa, though there less of a swing against the incumbent, the popularity of Jacob Zuma’s ANC government has been dwindling. Both countries face the difficult task of reducing fiscal and current account deficits without angering key groups of voters, and simultaneously trying to address accusations of corruption and inefficiency.

The reaction of investors to the closer-than-expected Brazilian election is clear. The real and Brazilian asset prices have tanked this week, with gloom about the government’s ability to tackle the fiscal deficit and high inflation. This is hardly surprising.

Mass protests against the government over the past year underline the widespread desire in Brazil for less corruption and more spending on public infrastructure – and discontent with the established political parties. Yet her reduced vote leaves Dilma Rousseff with a lot of problems but a weak mandate for change. A shift away from consumption and towards investment will involve angering her core support among poorer households. With the commodity boom that sustained Brazil’s growth over the last decade apparently ending, Rousseff’s popularity is looking increasingly fragile.

Jacob Zuma’s problems in South Africa are similar to those in Brazil, though a relatively solid base of voters – his party won 62 per cent in May’s election – has kept the African National Congress more comfortably in government. He too has problems with infrastructure, particularly power and water supply. And similar perceptions of corruption together with slow economic growth have reduced his popularity sharply. Thus far, Zuma has shown little inclination to address South Africa’s economic problems, though that is only likely to anger voters more.

The outlier among the fragile five is Turkey. Recep Tayyip Erdogan seems to be going Full Populist after his comfortable election victory, albeit one whose cleanliness was vociferously questioned by the opposition. Apparently unfazed by opinion polls showing his popularity sliding during his time as prime minister, Erdogan has decided to deal with high inflation by introducing more regulation, not less. In an echo of the failed attempts of the 1970s in the US and elsewhere to manage inflation by administrative diktat, the president has promised a food supply committee that will attempt to control prices. Investors are little more impressed than they were with Rousseff’s re-election: recently, the Turkish lira has fallen towards the lows it touched during the second episode of taper tantrum earlier this year.

Elections across the fragile five have returned leaders who occupy disparate positions on the spectrum of political mandate and reforming zeal. Even those towards the happier end of that range have endemic local difficulties in the form of entrenched bureaucracies and corrupt political systems. The chances unfortunately are that genuine reformers, both political and economic, will remain oddities rather than normalities within the big emerging markets.
 

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