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Political paralysis biggest threat to a multi-lateral globalised world

Political paralysis biggest threat to a multi-lateral globalised world

By Mohamed A. El-Erian, Chief Economic Adviser at Allianz, and former Chairman of US President Barack Obama’s Global Development Council. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

ABU DHABI – This being December, my natural inclination is to review the past year’s economic and financial developments to help policymakers and investors anticipate what might be coming in 2020. This year is ending on a relatively positive note, especially when compared to the same time last year. There is hope of a global growth pickup, trade tensions have lessened, and central banks have reaffirmed that that they will maintain ultra-low interest rates and continue to provide ample liquidity. Financial volatility is subdued, and there are reasonable expectations of solid investor returns across many asset classes.

As tempting as it is to dwell on current financial and macroeconomic conditions, doing so risks obfuscating a key element in the outlook for the future. There is a curious contrast between the relative clarity of expectations for the near term and the murkiness and uncertainty that comes when one extends the horizon further – say, to the next five years.

Many countries are facing structural uncertainties that could have far-reaching, systemic implications for markets and the global economy. For example, over the next five years, the European Union will seek to establish a new working relationship with the United Kingdom, while also dealing with the harmful social and political effects of slow, insufficiently inclusive growth. The EU will have to navigate the perils of a prolonged period of negative interest rates, while also shoring up its economic and financial core. As long as the eurozone’s architecture is incomplete, consistent risks of instability will remain.

Moreover, in the years ahead, the United States, having notably outperformed many other economies, will decide whether to continue disengaging from the rest of the world – a process that is at odds with its historic position at the centre of the global economy.

Or consider China’s development process. With the global economy acting more as a drag on growth than a boon to it, China may confront the risk that it has overplayed its hand. Heavy reliance on short-term stimulus measures is increasingly inconsistent with pursuing the longer-term reforms that it needs, and its geopolitical ambitions and regional economic and financial commitments (including the Belt and Road Initiative) are becoming costlier. Most important, in the next five years, China and the US, the world’s two largest national economies, will have to navigate an increasingly narrow path as they try to secure their own interests while avoiding an outright confrontation.

Such fluidity clouds the economic, financial, institutional, political, and/or social outlook for other countries. Today’s macroeconomic and geopolitical uncertainties will amplify those fuelled by technological disruptions, climate change, and demographics. And they will raise questions about the functioning and resilience of the global economy and markets.

This degree of uncertainty is particularly notable in the multi-decade context of globalization. In recent years, the stability that comes with broad-based adherence to the rules-based international order has been considerably weakened, as has the power of central banks to repress financial volatility and buy time for the real economy.

Left unmanaged, these medium-term structural trends would set the stage for greater political and social fragmentation, and raise the spectre of secular de-globalization. If there is one thing that neither the global economy nor markets are wired for, it is a prolonged and deepening rupture in cross-border economic and financial relations. Were such a new paradigm to materialize, today’s trade, investment, and currency tensions would intensify and spill over to the realm of national security and geopolitics.

Bad outcomes are not inevitable (at least not yet). They could still be averted through the sustained implementation of policies to promote stronger, more inclusive growth; restore genuine financial stability; and usher in a fairer, more credible (while still free) system of international trade, investment, and policy coordination.

But much will depend on the functioning of politics in the near term. Going into 2020, politicians have a favourable runway from which to launch the policies needed to extend the positive short-term outlook into the medium and long term. Worries about global recession have receded, financial conditions are ultra-accommodating, and US-China trade tensions have de-escalated. But these auspicious circumstances will not last forever.

Unfortunately, a policy push that could improve and clarify the medium-term outlook is unlikely. The US is entering a tense and divisive election year. Germany, Italy, and Spain are in the midst of difficult political transitions. The EU is dealing with Brexit and other regional divisions. And China’s government is trying to consolidate power in the face of slowing growth and continuing protests in Hong Kong. The main worry – one that too few market participants have spotted – is that over the next five years, global economic and market conditions may need to deteriorate nearer to crisis levels before national, regional, and multilateral political systems muster an adequate response.

Fortunately, we are now in a period when action could be taken to prevent the worst-case scenario from becoming a binding reality. Let us hope that I’m wrong about today’s political paralysis. As long as there is still time, there is a chance that policymakers will follow the advice offered by then-IMF Managing Director Christine Lagarde in October 2017: “Fix the roof while the sun is shining.”


Copyright: Project Syndicate, 2019.
www.project-syndicate.org


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Following reverse listing, public can now acquire shareholding in Paratus Namibia

Promotion

20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.