Return to Homepage
Image

Mission Grey Daily Brief - September 10, 2024

Summary of the Global Situation for Businesses and Investors

The global situation remains dynamic, with ongoing geopolitical tensions and economic challenges. In Algeria, President Tebboune secured re-election amidst low voter turnout and allegations of irregularities. Pakistan faces an unprecedented financial crisis, impacting its trade and investment prospects. Bangladesh grapples with an energy crisis, resulting in unpaid dues to Adani Power. Venezuela's opposition leader, Edmundo González, has fled to Spain, while Hong Kong denied entry to German activist David Missal. Typhoon Yagi battered Vietnam, causing severe damage and loss of life. China pledged $50.7 billion to Africa but stopped short of providing debt relief. Iran's president will visit Iraq, strengthening ties, while an Iranian MP confirmed missile shipments to Russia. Right-wing media personalities in the US were revealed to be unwitting mouthpieces of Russian propaganda. Croatia faces media freedom challenges, and Belarus-North Korea relations intensify.

Algeria's Political Landscape

Algerian President Tebboune secured re-election with 95% of the vote, according to official results. However, the election was marred by allegations of irregularities and a low voter turnout of 48%. Tebboune's victory is likely to result in continued social spending and economic reforms. While Algerian gas exports benefited from increased European demand due to the Ukraine-Russia conflict, the country faces economic challenges, including high unemployment and inflation. Businesses should monitor Algeria's economic policies and consider the impact on their operations, especially in the energy sector.

Pakistan's Financial Crisis

Pakistan faces an unprecedented financial crisis, according to Princeton economist Atif Mian, due to skyrocketing debts, unsustainable pension liabilities, and a failing power sector. This crisis has severe implications for the country's trade and investment prospects. Mian urges Pakistani leadership to address critical issues, such as the tax-to-GDP ratio and currency stabilization, to correct the country's economic course. Businesses and investors should approach opportunities in Pakistan with caution, considering the country's economic instability and the potential for further deterioration.

Bangladesh's Energy Crisis

Bangladesh faces a critical energy crisis, with total power-related debts reaching $3.7 billion. The interim government, led by Nobel laureate Muhammad Yunus, is dealing with a mounting backlog of unpaid dues to Adani Power, amounting to $500 million. The situation has emerged as a significant challenge for the new administration, which is seeking financial assistance from international lenders. Bangladesh's energy crisis is exacerbated by declining domestic gas reserves and inefficient infrastructure agreements negotiated by the previous administration. Businesses and investors in the energy sector should carefully assess the financial stability of their Bangladeshi partners and consider the potential impact of political changes on their operations.

China's Influence in Africa

China pledged $50.7 billion over three years in credit lines and investments to Africa but stopped short of providing the debt relief sought by many African countries. China's new financial pledge aims to improve trade links and fund infrastructure projects, clean energy initiatives, and nuclear technology cooperation. However, the lack of transparency around debt terms and China's urge for other creditors to participate in debt restructuring have raised concerns. Businesses and investors should be cautious when engaging in opportunities involving Chinese investments in Africa, considering the potential risks associated with debt traps and opaque lending practices.

Risks and Opportunities

  • Algeria: Economic policies and energy sector investments may provide opportunities, but political instability and economic challenges could impact operations.
  • Pakistan: Financial crisis and potential economic deterioration pose significant risks; approach opportunities with caution.
  • Bangladesh: Energy crisis and financial instability may impact operations; monitor financial health of partners.
  • China and Africa: Opportunities for trade and infrastructure development exist, but caution is advised due to potential debt traps and opaque lending practices.

Iran's Foreign Relations

Iranian President Masoud Pezeshkian will visit Iraq, strengthening ties between the neighboring countries. Meanwhile, an Iranian MP confirmed missile shipments to Russia, downplaying threats of sanctions. Iran's relations with the West are strained due to its support for Russia in the Ukraine conflict. Businesses and investors should be cautious when dealing with Iran, considering the potential for increased sanctions and the volatile geopolitical situation.

Right-Wing Media and Russian Propaganda

The US Justice Department revealed that Russian state media funneled $10 million to an unnamed Tennessee-based online media company, employing prominent right-wing commentators. While the personalities were not accused of wrongdoing, the secret payments highlight the vulnerability of the new media ecosystem to foreign influence. Businesses and investors in the media sector should be vigilant about potential foreign influence campaigns and ensure transparency and accountability in their operations.

Media Freedom in Croatia

Croatia faces challenges regarding media freedom, with a focus on the safety of journalists, media law reforms, transparency in ownership, and strategic lawsuits against public participation (SLAPPs). An international mission will assess these issues, engaging with government representatives, journalists, and civil society. Businesses and investors in the media sector should monitor the outcomes of this mission, as it may impact the regulatory environment and freedom of expression in Croatia.

Belarus-North Korea Relations

Belarusian President Aleksandr Lukashenko praised the intensification of dialogue with North Korea, expressing conviction that Minsk and Pyongyang will achieve significant progress in practical cooperation. The relationship between the two countries has intensified, with Lukashenko sending greetings to North Korea's Supreme Leader Kim Jong Un. Businesses and investors should be cautious when considering opportunities in Belarus and North Korea due to the political risks and international sanctions associated with these countries.


Further Reading:

Adani warns Bangladesh of $500 mn 'unsustainable' payment delays as energy crisis looms - The Economic Times

Algeria declares President Tebboune election winner with 95% of vote By Reuters - Investing.com

Algeria: Presidential elections, voter turnout below 50 percent - Agenzia Nova

Alleged shooter's mom warned Ga. school. And, opposition leader flees Venezuela - NPR

Belarus-North Korea dialogue praised - Belarus News (BelTA)

Cash-strapped Pakistan faces unprecedented financial crisis driven by complex web of challenges, warns Princeton economist - Hindustan Times

China stops short of Africa debt relief as it pledges more cash, says Reuters - Sierra Leone Telegraph

Croatia: International mission to assess media freedom challenges - ARTICLE 19

Dozens dead as Typhoon Yagi slams into Vietnam - DW (English)

German activist David Missal says barred from HK - Hong Kong Free Press

How some of the biggest right-wing social media stars became unwitting mouthpieces of Russian propaganda - CNN

Iran's president to visit Iraq on first foreign trip - Hurriyet Daily News

Iranian MP confirms missile shipments to Russia, downplays impact - ایران اینترنشنال

Themes around the World:

Flag

Cybersecurity Threats

Japan is facing cyberattacks from Russian-linked hacking groups, targeting government agencies, logistics, and manufacturing firms. These attacks are believed to be attempts to pressure Japan's government due to its support for Ukraine and its increasing military cooperation with the US. The impact of these cyberattacks on critical infrastructure and businesses highlights the growing importance of cybersecurity.

Flag

Scam Epidemic

Scams are a growing issue in Thailand, with over 1.5 million scam numbers detected and 612,603 online scam cases reported between March 2022 and July 2024, resulting in financial losses. The private and public sectors are collaborating to combat scams, and companies like Gogolook are offering anti-scam solutions to protect consumers and businesses.

Flag

Leadership Transition in Family Businesses

Germany's renowned Mittelstand, comprising mostly family-owned businesses, faces challenges in leadership transition. As patriarchs retire, many struggle to find heirs interested in continuing the business, leading to ownership succession issues. This is further exacerbated by high corporate tax rates, rising energy costs, and bureaucratic complexities.

Flag

Tech Hub Status

Thailand has become an attractive destination for Big Tech investment, with companies like Google, Amazon, and Microsoft investing millions. The country's Board of Investment (BOI) has approved $2 billion in new investments in electronics manufacturing and data centers, reinforcing its status as a regional tech hub.

Flag

Global Manufacturing Decline

The global manufacturing industry is weakening, with declining activity in the US, Eurozone, Japan, China, and South Korea. This decline affects output, new orders, employment, and supply chains, causing businesses to pause spending and investments.

Flag

Biometric Screening in Gaza

Israel is considering a plan to implement biometric screenings for Palestinians in Gaza to receive aid, raising concerns about privacy and surveillance.

Flag

India's Economic Growth

The IMF maintains India's growth projection at 7% for FY25, a drop from 8.2% in 2023 due to exhausted pent-up demand. The multilateral lender expects India to grow at 7% in the current fiscal year and 6.5% in the next. The global battle against inflation is considered largely won, and a global recession has been avoided. However, downside risks dominate the outlook, including geopolitical tensions and protectionist policies.

Flag

US-India Relations

The US is a major investor in India, and the outcome of the 2024 US presidential election will impact India's exports, investments, and economic growth. A Trump presidency could bring challenges for India due to his stance on tariffs and immigration, while a Harris administration may carry forward the Biden trade policies with minor tweaks.

Flag

Hurricane Helene's Impact

Hurricane Helene caused extensive damage to Georgia, becoming the most destructive hurricane in the state's history. The storm impacted power grids, roads, water systems, and homes, resulting in a long reconstruction process and significant financial costs, with preliminary estimates of the economic impact on agriculture and timber reaching $6.46 billion.

Flag

US-China Trade Diversification

The US is restricting investments into strategic sectors in China, prompting global companies to diversify their supply chains beyond China. India stands to benefit from this shift, particularly in the pharmaceutical and electronics industries, as it has a sophisticated industrial base and skilled workforce.

Flag

Tech Hub Development

Thailand is establishing itself as a regional tech hub, attracting investments from tech giants like Alphabet Inc. and Microsoft. The country's electronics industry and data center infrastructure are key factors in this development, with the government providing investment incentive packages to enhance its growth prospects.

Flag

Thailand's International Trade Relations

Thailand is seeking the renewal of tariff benefits under the Generalized System of Preferences (GSP) from the US. Thailand's Commerce Minister emphasized the country's potential as a manufacturing base in the supply chain for key US industries, including digital, AI, electronics, and semiconductors. Thailand also invited US investment in its food industry, highlighting its strength in food security and export potential to emerging markets.

Flag

Israel's Security Concerns

Israel is exploring ways to enhance its national security, including a potential military base in Somaliland to monitor the Bab al-Mandab Strait and counter threats from Yemen's Houthis. Israel's security is also impacted by drone technology, as seen in the recent Hezbollah drone strike that killed four soldiers and the use of drones by Hamas, Hezbollah, Iran, and the Houthis.

Flag

Supply Chain Resilience

Thailand is a member of the Indo-Pacific Economic Framework for Prosperity (IPEF), which aims to build resilient and inclusive supply chains. The agreement addresses vulnerabilities and promotes diversification to withstand disruptions. Thailand's role in supply chains has been further bolstered by companies adopting a 'China plus one' strategy, reducing reliance on China.

Flag

India's Trade Strategies

India is adopting a more cautious negotiating strategy after free trade agreements (FTAs) resulted in higher imports than exports. Talks with smaller countries like Oman and Peru are paused, with a shift towards larger markets like the EU and UK. India aims to streamline the process of negotiating trade deals and address concerns over investment outflows and errors in previous agreements. The focus is on maximizing export gains and exploring new markets to address oversupply issues.

Flag

Israel-Palestine Relations

Israel's treatment of Palestinians in Gaza has led to international condemnation and pressure on companies with ties to Israel. The proposed use of biometric screening and private security contractors for aid delivery in Gaza has sparked controversy. US and European officials also urge Israel to maintain financial ties with Palestinian institutions in the West Bank to prevent an 'economic catastrophe', warning of potential regional destabilization.

Flag

Political Instability

France's political landscape is precarious, with President Macron's gamble on new elections leaving Prime Minister Barnier's government without a majority in parliament. Wrangling with leftist and far-right groups could lead to a government collapse, causing uncertainty for businesses.

Flag

Financial System in West Bank

There are concerns that Israel may sever the West Bank from the global financial system by not renewing a waiver for international banks to maintain ties with Palestinian financial institutions, which could result in an economic catastrophe and further destabilize the region.

Flag

Resilience of Ukraine's Seaborne Trade

Despite intensified rocket attacks on civilian ships and ports, Ukraine's seaborne trade remains resilient. Companies like Maersk and Hapag-Lloyd have resumed or continued operations, signaling a bold move to enhance efficiency and interaction with the Ukrainian market. This comes with increased risks and costs, including high insurance premiums and concerns about the safety of vessels in Ukrainian waters.

Flag

Inflation and Jobs

Inflation is a key concern for US voters, with prices remaining high despite a drop in the inflation rate. The job market is strong, but long-term issues persist, impacting specific worker groups. Wages have grown faster than inflation, helping households manage rising prices. The election outcome will influence economic policies addressing these issues.

Flag

International Cooperation

Germany is intensifying economic exchanges with China, with German companies investing heavily in the Chinese market. This cooperation helps control trade friction between China and the EU, ensuring supply chain stability.

Flag

US Inflation and Consumer Prices

Inflation in the US has dropped from its peak but remains a key concern for voters in the upcoming election. While experts give the economy high marks, most Americans feel worse off than four years ago due to high prices and the lingering effects of the pandemic and Russia's invasion of Ukraine. The outcome of the election will impact economic policies and consumer spending.

Flag

Sanctions on Russia

The UK has imposed sweeping sanctions on Russia's shadow fleet of oil tankers, targeting Putin's covert seaborne oil exports. These sanctions aim to curtail Russia's ability to bypass sanctions and sustain its war efforts, while also addressing the safety and environmental risks posed by the shadow fleet.

Flag

EU Investment Surge in China

Despite calls for 'de-risking' economic ties, EU investments in China reached a new quarterly record of US$3.9 billion in Q2 2024, led by German carmakers. This surge is driven by companies' desire to localize production and protect supply chains from geopolitical tensions. However, it also occurs amid rising trade tensions between the EU and China, particularly in the automotive sector.

Flag

International Business Relations

India's Tata Group faces criticism for its involvement with Israel, particularly in the manufacturing of weapons and provision of IT services for the Israeli military. Activists urge companies like Amazon and Google to withdraw from deals connected to the Israeli military.

Flag

Interest Rate Hikes

The Bank of Japan (BOJ) has signaled its intention to raise interest rates, moving away from a decade of unorthodox monetary easing. This is due to decreasing risks from overseas economies, particularly the US, and the emergence of inflation. However, the complicated political situation and the upcoming US presidential election may influence the timing of these rate hikes.

Flag

US-China Drone Supply Chain Disruptions

China's sanctions on US drone manufacturers, such as Skydio, have disrupted the US drone supply chain in Ukraine. This has prompted Skydio to seek alternative suppliers and raised concerns about potential disruptions in US supply chains. China's sanctions are a strategic move to increase global reliance on Chinese suppliers and eliminate leading American drone companies.

Flag

Global Manufacturing Decline

The global manufacturing industry is showing signs of decline, with major regions like the US, Eurozone, China, and South Korea experiencing decreasing activity. This decline is reflected in falling output, new orders, and employment rates, causing concerns for businesses and investors.

Flag

Book Industry Challenges

The book industry in Japan is facing significant challenges, with a decline in physical bookstores and a decrease in reading habits among the population. A government report identified 34 challenges, including rising logistics costs, cashless transaction fees, and competition from online retailers. The decline in bookstores has implications for Japan's cultural and literary landscape, and the government is seeking feedback to formulate policies to sustain this industry.

Flag

US-China Trade Relations

The US and China are engaged in a trade war with significant tariffs on Chinese goods, impacting supply chains and business operations. The US aims to protect national security and reduce dependence on China, while China prioritizes technological self-reliance. This decoupling of economies may lead to global fragmentation or US isolation.

Flag

Cybersecurity Threats

The UK faces a surge in ransomware attacks, with data breaches reaching record highs. However, the number of incidents investigated by the Information Commissioner's Office (ICO) has dwindled, raising questions about its capacity to address the issue. The British government has pledged to introduce a Cyber Security and Resilience Bill to expand existing laws and increase mandatory incident reporting.

Flag

Structural Reforms Needed

Germany's economic woes are attributed to internal structures, red tape, and underinvestment in infrastructure. Experts call for structural reforms and investment in public infrastructure to boost the economy.

Flag

Military Equipment Shortage

Ukraine faces a shortage of military equipment, including artillery and ammunition, due to limited Western supplies and Russia's advantage in resources and manpower. Ukraine seeks to produce more drones and missiles with financial backing from Western allies.

Flag

US Election Uncertainty

The upcoming US presidential election creates uncertainty for businesses, with potential policy changes affecting investment plans. Tariff threats and promises impact business strategies, while the outcome will shape economic policies and global trade.

Flag

Economic Contraction

Germany's economy is expected to contract by 0.2% in 2024, following a 0.3% decline in 2023, marking a second consecutive year of recession. This is due to a combination of conservative public investment, over-reliance on manufacturing and exports, external shocks like the Russia-Ukraine conflict, and structural challenges such as aging infrastructure and population.

Flag

US Economic Performance

The US economy is showing signs of strength, with rising equity benchmarks, strong retail sales, and lower jobless claims. The US dollar has also gained value, and improved polling for a potential Trump victory has boosted volatility in trading and the dollar's value.