The policy, which is expected to support transport enterprises in the Southeast Asian country, will also reduce logistics costs, in addition to stimulating economic activity during the implementation period.

“In addition, inland waterway vessels operating between domestic ports and terminals will also benefit from fee exemptions. These include vessel tonnage fees, port and terminal entry and exit charges, and inland waterway reporting fees, costs that account for a significant share of waterway transport expenses,” the Circular noted.

The new policy is expected to provide a solid boost to Vietnam’s pursuit of becoming a major logistics hub in Asia and beyond. In 2025, Prime Minister Pham Minh Chinh signed a decision approving the National Strategy for the Development of Vietnam’s Logistics Services for 2025-2035.

This became a historic occasion, as the Southeast Asian country adopted, for the first time, a comprehensive, long-term framework to build a globally competitive logistics sector, while accommodating elements such as digital transformation and green and sustainable growth within the roadmap.

Since then, Vietnam has upgraded its approach toward the logistics sector, recognising it as a key economic sector with high added value and strategic importance to the Southeast Asian nation’s economic competitiveness.

Under its national strategy, between 2025 and 2035, Vietnam wants to ensure that the value added by the logistics sector reaches 5%-7% of its national GDP, growing at an average of 12%-15% annually. By 2050, logistics services are expected to contribute 7%-9% of GDP, maintaining a yearly growth rate of 10%-12%.

While 70%-80% of domestic enterprises are expected to use outsourced logistics services by 2035, the ration, by 2050, will increase to 90%. Vietnam also eyes bringing down its logistics costs to 12%-15% of GDP by 2035, and 10%-12% by 2050.

Apart from breaking into the top 40 countries in the World Bank’s Logistics Performance Index (LPI) by 2035 and the top 30 by 2050, the roadmap also envisions digital transformation playing a central role in Vietnam’s makeover as a global logistics hub, with 80% of businesses expected to adopt digital solutions by 2025, a ratio that will become 100% by 2050.

The post Vietnam removes domestic maritime fees for three months appeared first on International Finance.

Antony Froggatt, Senior Director for Aviation, Climate, Energy, and Shipping at T&E, a Brussels-based NGO advocating clean transport and energy, told International Finance, “Many forecasters, such as the IMF (If energy prices sustain just a 10% increase over one year, this would add 0.4 percentage point to inflation and slow economic growth by 0.1%-0.2%,) and Fitch, suggest that higher energy prices will negatively affect global inflation and reduce global growth. The extent of these will depend on how high prices get, and how long they remain high.”

Jan Rosenow, Professor of Energy and Climate Policy at Oxford University and Senior Associate at Cambridge University, said, “The short-term pain is real. Higher inflation, squeezed household budgets, and recession risk in energy-intensive economies. But the adjustment mechanisms are also kicking in: strategic reserve releases, demand destruction, and accelerated supply from non-Gulf producers. The deeper concern is duration. A shock that lasts months reshapes investment decisions in ways that a spike lasting weeks does not.”

Clean energy pivot: A Must For Asia Now

In 2026, Asia has become the Europe of 2022. Back then, Russia, in response to the Western sanctions for the Ukraine war, significantly cut natural gas supplies to the continent, resulting in high energy prices and a cost-of-living crisis. Asia, which buys more than 80% of the crude that transits the Strait of Hormuz, is now facing an “energy emergency.”

This could prompt Asia to have a re-look at renewables and initiatives to future- proof both its energy security and economic outlook.

Froggatt commented, “I would argue that renewables have been a necessity for some time, and the economic case for them is even stronger now. As far back as 2020, the International Energy Agency called solar PV the ‘cheapest source of electricity in history’. Since then, the costs of not only renewables (solar and wind), but also storage options, particularly batteries, have continued to fall.”

Rosenow remarked, “Each successive shock – 2022, and now this – makes the economic and security case for domestic clean energy harder to ignore. Renewables are not just cheaper in many markets; they are now the geopolitically safer choice. The question is no longer whether to accelerate the transition but how fast institutions can move.”

EV: The Best Starting Point

Stating that higher fossil fuel prices affect consumers’ cost of living and the balance of payments of importing countries, Froggatt believes episodes like the 1970s global oil price spikes, and the European energy crisis in 2022 will only motivate policymakers to accelerate their efforts to limit their dependence on fossil fuels for economic and supply security reasons.

“We saw this in the EU with the introduction of the ‘Fit for 55’ package in 2022 to accelerate the transition away from imported fossil fuels. However, the majority of these measures will take time to have an effect. If we want to really reduce dependency on fossil fuel, structural changes with new investment are needed, particularly in infrastructure, such as the grids and buildings,” he stated.

Rosenow, on the other hand, remarked, “The pressure is certainly there. Asia bears the heaviest volumetric burden from Hormuz disruptions, and governments that were already energy-insecure are now facing acute supply anxiety. I’d expect faster permitting of renewables, more serious electrification policy, and renewed interest in long-term LNG alternatives – though the pace will vary significantly by country.”

To deal with the “energy emergency,” Asian countries are advocating solutions like a four-day workweek and preventing unnecessary travel to save fuel. This might make electric vehicles more attractive.

Froggatt says, “I would assume that sales will continue to increase. Globally, only around 10% of car sales are electric, but in leading countries, such as China and Vietnam, we are already seeing over 40% of car sales being electric. Consequently, as the cost of electric vehicles continues to fall and charging infrastructure becomes more available and robust, the pace of sales growth will accelerate, especially in an era of high fossil fuel prices.”

Froggatt also pointed out that in Europe, car manufacturers have failed to develop smaller, low-cost EVs fast enough. This is part of the reason why Chinese vehicles are entering the EU market so quickly.

“I think it is incumbent on all car manufacturers to make EVs to meet a variety of consumer requirements, which include those that are most affordable,” he said.

So, Asia should focus on the affordability factor, introducing tax credits for consumers, apart from setting up intensive charging networks.

“There have been significant cost reductions already. And in many markets, EVs are close to or at cost-parity over their lifetime. Further cost reductions are needed to shift the market faster to EVs,” Rosenow noted, while adding, “The underlying drivers – policy support, falling battery costs, expanding model ranges – remain intact. Short-term, high fuel prices actually reinforce the EV value proposition. The risk to growth is on the supply side: critical mineral availability and manufacturing capacity. I don’t see a near-term peak, but the rate of growth will inevitably moderate as markets mature.”

The Continent Holds Promise

As per the International Energy Agency’s (IEA) Renewables 2025 report, two of Asia’s growth engines, China and India, along with the United States and Europe, were responsible for clean energy’s global expansion. Southeast Asia holds promises too. With an estimated 20 terawatts of untapped solar and wind potential (equivalent to around 55 times the region’s current total power capacity), the IEA sees the region as being more than capable of securing its energy security through the renewable route.

“The case for doing so has never been stronger. Energy import dependence is now visibly a security and economic liability, not just an environmental one. Southeast Asian economies, in particular, have strong renewable resource endowments – solar, geothermal, offshore wind – that remain underexploited. The Gulf crisis should be the catalyst for a serious regional rethink,” Rosenow said.

Froggatt too observed, “It is not just countries in Asia that can and should accelerate their use of renewable energy. Without accelerating deployment in the EU, the 2030 renewable energy target of at least 42.5% of energy from renewables will not be met. In developing countries, renewable energy is a way to meet rapidly increasing demand. Governments can take several steps to support the renewable energy sector. They can reduce construction risks and costs through accelerated planning, grants, soft loans, and other measures. Furthermore, they can implement support schemes, such as contracts for difference or feed-in tariffs, that create stable revenues. Governments can also help develop local supply chains, which provide additional price security and create local jobs. Finally, governments can set targets for renewable energy use, which gives confidence to investors.”

While noting that higher rates will raise the cost of capital precisely when deployment needs to accelerate, Rosenow advised, “The policy response matters enormously here: blended finance, public guarantees, and development bank support can reduce the risk premium that makes projects unfinanceable in the private market alone. Countries that get this right will attract investment; those that don’t will fall behind.”

Despite investing heavily in offshore wind, solar, and hydrogen strategies, Japan and South Korea still fulfil a massive chunk of their energy requirements through imported fossil fuels. Both of them are feeling the Hormuz pinch right now.

Rosenow said, “This crisis is a stress test they (Japan and South Korea) were always likely to fail. Both countries have made genuine progress in renewables but remain structurally dependent on imported fossil fuels in ways that leave them exposed to exactly this kind of shock. A serious reassessment of domestic generation capacity is overdue.”

Maybe, it’s time for Japan to shed the ghost of Fukushima.

Froggatt said, “Electricity generated from renewable energy is, under most conditions, far cheaper than that generated by nuclear power. In addition, renewable energy generation is much quicker to build. Therefore, although some countries may look again at nuclear power, I think that the higher costs and slowness to build – especially in countries that don’t already have a nuclear sector – will reduce the number of countries that actually start building nuclear power plants.”

Rosenow concluded, “The political and public calculus on nuclear in Japan was already shifting before this crisis, with several reactors being restarted. A prolonged Gulf disruption accelerates that conversation considerably. Energy security concerns now outweigh, for many policymakers, the post-Fukushima caution. I would expect Japan to move more decisively on restarts over the next few years.”

The post IF Insights: War in Middle East likely to accelerate Asia’s renewable energy revolution appeared first on International Finance.

The Port of Antwerp-Bruges had up to 27 inbound ships waiting offshore with no possibility of entry, while Zeebrugge saw around 10 vessels held up during peak interruptions of March 19–22, according to port authorities and industry advisories.

Antwerp-Bruges handles about 290 million tons of cargo annually, and the strike has forced ship owners to omit certain port calls on Asia-Europe loops.

Most cargo types that come in through the port are perishables, such as fruits and vegetables, and automotive parts. These cargo types were especially vulnerable, with some shippers warning of production stoppages at Flemish assembly plants if just-in-time parts failed to arrive.

The strike was organised by Belgian pilots and staff at the Zeebrugge traffic centre, which effectively suspended vessel movements in and out of Zeebrugge for several days and forced Antwerp to proceed with seagoing traffic via the North pilot station using only Dutch pilots.

The Belgian National Strike is due to a pension reform proposal and budget cuts. Pilots and maritime controllers argue that reforms will significantly reduce retirement benefits, while the Federal Government frames the measures as fiscally necessary.

The bottleneck, compounded by a national strike in Belgium on 12 March, created a cascading delay across the Scheldt River system and tightened capacity for exporters and importers on the corridor.

Several major lines, like Maersk and MSC, redirected Asia-Europe loops to Rotterdam and Le Havre. The rerouting compressed capacity at those ports and pushed demurrage and storage costs higher across North European gateways.

Bremen and Bremerhaven, further north, have also grappled with congestion pressures, notably in vehicle logistics, where storage at Bremerhaven reportedly neared its maximum capacity amid extended dwell times for road or cargo. With these logistics, the main terminal operator moved vehicles off-site and adjusted rail and interland waterway flows to ease the backlog, but freight forwarders say scheduling remains volatile.

Freight‑data and advisory platforms describe the Antwerp-Zeebrugge strike as one of the most disruptive industrial actions in the region this year, with planners in Europe and Asia now building in extra buffer days for cargo routed via Belgium. The episode highlights how tightly packed Europe’s northern gateways have become, and how quickly local labour disputes can ripple into global supply‑chain lead times.

The post Antwerp-Bruges gridlock stalls cargo flow appeared first on International Finance.

Ben Powell, Chief Strategist for Middle East and Asia Pacific at the BlackRock Investment Institute, told Zawya that the world’s largest asset manager was “very open-minded” about co-investment opportunities with SWFs in the region.

“We are driven by opportunity, and as the world’s largest investor, we see an advantage over many of our competitors in terms of reach and scale. So, we are very open-minded about increasing our focus on Asian markets. As many know, the India bull story is very real, and we want to be a part of this, be it through co-investments or joint ventures from the region,” Powell told Zawya on the sidelines of the Abu Dhabi Finance Week (ADFW).

With USD 13.52 trillion in assets under management (AUM), BlackRock has expanded its network in the Gulf region over the past two years with the set-up of its regional headquarters in Riyadh in 2023, following the launch of an investment platform with the help of a USD 5 billion anchor investment from the Kingdom’s Public Investment Fund (PIF). In 2024, the Larry Fink-backed fund manager was granted a commercial license to operate in Abu Dhabi, and since then, the venture has expanded its headcount in Riyadh and Dubai, along with opening offices in Kuwait and Qatar.

“The UAE and Saudi Arabia are at the core of deepening the importance of capital markets in the region, and it is increasingly clear the regulatory efforts are very strong in establishing these places as a regional hub, and maybe in time, as a global hub for capital,” Powell remarked.

BlackRock is already looking to double its investments in the Gulf country by 2030, with current investments in the Kingdom standing at USD 35 billion, as the administration accelerates its socio-economic diversification under the ambitious “Vision 2030” agenda.

BlackRock’s 2026 outlook for the Gulf region calls for a push for investments in domains like artificial intelligence (AI) and infrastructure development. While energy remained an important sector in the Middle East for now, Powell said the AI “mega boom” will continue to gather momentum in the coming years. In 2024, BlackRock partnered with Microsoft and launched a USD 30 billion fund to invest in AI infrastructures such as data centres and energy projects. As per the stakeholders, the partnership will likely mobilise up to USD 100 billion in total investment potential, including debt financing.

According to Powell, there is increased potential in tech firms tapping into capital markets to fund the next phase of AI expansion, with a specialised focus on the build-out, as the latter is going to be necessary to help more individuals and companies drive productivity gains.

“This is where the money is flowing and will build up to be a mainstream asset class over the next few years,” the senior official concluded.

The post BlackRock’s new bait in Asia: Partnerships with Gulf-based wealth funds appeared first on International Finance.

Touted as a “holy grail” for boosting intra-African trade, spurring industrialisation, and accelerating economic development, the AfCFTA agreement carried immense hopes when it was signed in 2018. Yet six years on, analysts warn that AfCFTA is at risk of joining the list of Africa’s missed opportunities.

A few months back, in May, the continent quietly marked the sixth anniversary of AfCFTA’s signing, a milestone that arrived with more frustration than fanfare. In principle, nearly the entire African Union (AU) supports AfCFTA’s ideals. Almost 54 out of 55 African countries have signed on, with only Eritrea holding out after openly questioning the deal’s value. Of those signatories, 48 have officially ratified the agreement.

In practice, however, even countries that ratified appear stuck at the level of rhetoric. In fact, three ratifying states—Burkina Faso, Mali, and Niger—are currently suspended from AU activities after military coups, slowing their participation.

This gap between vision and action is becoming increasingly glaring. Africa Kiiza, a researcher and PhD fellow at Germany’s Universität Hamburg, describes the situation bluntly: “The aspirations and ambitions of AfCFTA are brilliant. The problem was in putting the cart before the horse.”

In Kiiza’s view, African leaders were so eager for a continent-wide trade pact that they rushed to sign a “shell” agreement long before resolving the many practical obstacles that stand in the way. Now, as political and economic landscapes shift both within Africa and globally, tackling those unresolved hurdles is proving to be a Herculean task.

Lofty goals vs languid reality

From the outset, AfCFTA was imbued with sky-high expectations. It was enshrined as a flagship project of the AU’s Agenda 2063, elevating it as a linchpin for Africa’s future development. On paper, the agreement’s goals paint a rosy picture of transformation.

By creating a single continental market for goods and services, a market of 1.3 billion people with a combined GDP of roughly $3.4 trillion, AfCFTA aims to fundamentally reshape African economies. The ultimate vision is to pave the way for a continental customs union and eventually an African Common Market, echoing the progression of the European Union.

More immediately, AfCFTA proponents tout a laundry list of concrete benefits anticipated from freer trade within Africa. These include boosting intra-African trade by 53%, addressing the historically low trade integration on the continent (where, before AfCFTA, African countries traded only 12–18% of their goods among each other). They also include expanding the manufacturing sector by $1 trillion, as reduced barriers encourage industrial growth and diversification beyond raw commodity exports. And generating $450–$470 billion in income gains, as businesses access new markets and more efficient value chains take shape.

The union also hopes to create 14 million jobs, from farms and factories to logistics and services, helping absorb Africa’s growing labour force and lift 50 million people out of poverty, roughly 1.5% of the continent’s population, by opening opportunities and reducing consumer prices through competition.

Such outcomes would be revolutionary. Achieving them, however, depends on translating the agreement’s text into real changes on the ground—and that is where progress has been painfully slow. Now, six years down the line, the cart-before-horse nature of AfCFTA’s launch has become starkly evident.

Consider the basics: AfCFTA’s administrative backbone, the AfCFTA Secretariat, was only established in 2020 and remains surprisingly reliant on external support. In fact, the German development agency GIZ has been footing much of the bill, including financing the Secretariat’s operations, supporting technical negotiations, and helping draft legal frameworks.

To be sure, GIZ’s assistance has been invaluable in moving the agreement forward on paper, for instance by helping finalise rules of origin in many sectors, setting up a dispute settlement mechanism, and developing protocols for digital trade. Yet this dependence exposes an uncomfortable truth about African integration efforts.

Slow start to a long journey

After years of preparation and delays, trading under the AfCFTA officially commenced on January 1, 2021. However, the volume of commerce happening under AfCFTA preferences remains well below initial expectations. Before the agreement, formal trade within Africa was only about 15% of the continent’s total trade, lagging far behind regions like Europe or Asia.

Today, that figure is still stuck below 20%. In 2022, the AfCFTA Secretariat launched a “Guided Trade Initiative” to jump-start commerce under the new rules. This pilot programme selected eight countries to begin exchanging specific goods under AfCFTA conditions, testing customs procedures, documentation, and tariff reductions in practice.

The good news is that intra-African trade is showing slight growth. In 2023, trade between African countries rose about 7.7%, reaching $208 billion, according to the African Export-Import Bank. There are also signs of gathering momentum, and by the end of 2024, 31 of the 45 AfCFTA-ratifying states had initiated at least some form of trade under the AfCFTA framework, a big jump from only seven countries trading under AfCFTA in early 2023.

Moreover, African negotiators have continued ironing out the deal’s details by adopting new protocols on investment, intellectual property, and competition policy to complement the core trade agreement. These developments signal that African governments are, on paper, committed to building out the AfCFTA architecture and gradually bringing more countries and products on board.

Despite these positive steps, the scale of trade happening under AfCFTA rules remains a drop in the ocean relative to Africa’s ambitions. The agreement’s target to boost intra-African trade to 53% of total trade by 2030 or shortly thereafter would put Africa on par with other continents where regional trade is dominant. By comparison, about 68% of Europe’s trade is within Europe, 59% of Asia’s trade is within Asia, and North America stands at 51% internal trade. AfCFTA’s current performance is still far from these levels.

The road to progress

Why has AfCFTA’s promise been so difficult to realise? The truth is that the agreement faces a tangled web of structural, logistical, political, and economic obstacles. Overcoming these will require sustained effort and political will, both of which have been in short supply.

One fundamental challenge is resistance born of economic disparity and fear of unequal gains. Not all African countries are convinced they will benefit equally under AfCFTA, and some of the smallest and poorest states worry they could lose out. Many least-developed countries have historically pursued inward- focused development strategies.

For them, opening up borders feels risky, as it could mean being flooded by imports from larger African economies like South Africa, Nigeria, or Egypt. There is a perception, fair or not, that AfCFTA might primarily serve the interests of Africa’s biggest economies, those most eager to find new markets for their industrial and consumer goods, at the expense of smaller nations that have fewer competitive industries. In other words, critics fear the agreement could turn into a pursuit of profit for Africa’s giants rather than a project in pan-African equity.

Kiiza provides a striking example of the uneven playing field within Africa.

“A US citizen has the luxury of travelling to 24 African countries without a visa. For a Ugandan national, visa-free access applies to only nine countries,” he points out.

This highlights how even basic facilitators of integration, such as free movement of people, are far from reality.

African governments have been hesitant to implement the AU’s Protocol on Free Movement of Persons, fearing migration or security issues. To date, only four countries have ratified that protocol, leaving Africa one of the most visa-restricted regions for its own citizens.

Such reluctance directly undermines the spirit of a continent-wide free trade area, since trade isn’t just about goods and capital—it’s also about the ability of people (business travellers, workers, service providers) to move freely.

Trade itself is beset by examples of counterproductive barriers. Take Ghana and South Africa: Ghana is the world’s second-largest cocoa producer and has a nascent chocolate-making industry. Yet if Ghana wants to export chocolates to South Africa, those products face a hefty 30% tariff upon entry.

Contrast that with chocolates from Switzerland (a non-African country), which enter South Africa tariff-free, thanks to pre-existing trade arrangements. An African product is penalised by African tariffs, while a European product enjoys preferential access. Af- CFTA is supposed to eliminate such inconsistencies, but until its tariff reductions are fully in force, these old rules remain a hindrance.

Then there’s the disparity in economic scale. Burundi’s entire economy is worth only about $3 billion, while Nigeria’s is around $487 billion (the largest in Africa). Yet under AfCFTA’s framework, both countries are theoretically expected to open 97% of their markets to duty-free trade over time. Many economists argue that asking a tiny, fragile economy to liberalise at nearly the same pace and extent as a regional heavyweight is a recipe for trouble.

“The idea that liberalisation and tariff removal before building the capacity of small nations will automatically increase trade is flawed,” Kiiza notes.

He suggests that African leaders need to ‘apply the brakes on political expediency’— in other words, not just rush for feel-good announcements of unity but instead focus on building the fundamental blocks that would allow weaker economies to compete. That includes developing industrial capacity, improving productivity, and strengthening local businesses so they can actually take advantage of a larger market.

Beyond politics and policy, practical obstacles significantly raise the cost of doing business across African borders. Chief among these is the infrastructure conundrum, the simple fact that it is often prohibitively expensive and cumbersome for African companies to move goods to a neighbouring country. Transport networks are underdeveloped and often oriented toward overseas trade rather than intra-African commerce.

For instance, African ports, railways, and roads were historically designed to extract commodities out of Africa to global markets, not to facilitate continental trade. As a result, it can be cheaper to ship goods from Africa to Europe or Asia than to send them overland to the next African country. Maritime transport starkly illustrates this, as an estimated 98% of Africa’s shipping traffic is handled by foreign-owned shipping lines.

These global carriers optimise routes for profit, and it is often more lucrative for them to bring in finished goods from abroad and carry out raw materials rather than facilitate inter-African trade routes.

The imbalance is evident when containers that arrive full of imported products often leave African ports either empty or filled with unprocessed commodities, highlighting how African producers struggle to utilise those same vessels to export within the continent.

On land, rail connectivity between countries is minimal and accounts for as little as 0.1% of freight movement in some estimates, due to underinvestment and incompatible rail systems inherited from colonial times.

Then there are non-tariff barriers (NTBs), a broad category of bureaucratic, regulatory, or informal restrictions that hinder trade just as surely as tariffs do. NTBs have become a favoured tool for governments looking to protect domestic industries or pursue political ends without overtly violating trade agreements.

These include things like import quotas or bans, onerous customs procedures, arbitrary product standards, corruption at checkpoints, and subsidies that give local businesses an edge over imports. Within the East African Community, for example, NTBs cost businesses an estimated $17 million in direct losses in 2023 alone, through goods delayed or turned back at borders. And the problem could be pervasive under AfCFTA if not checked.

Tariff reduction is itself moving more slowly than planned. African negotiators agreed to gradually eliminate tariffs on 97% of tariff lines over 15 years (with a bit more leeway for least-developed countries). The clock is ticking, and the deadline to achieve near-full liberalisation is 2034—less than a decade away. Yet many countries have yet to implement even the initial cuts they signed up for. Some nations find tariffs a vital source of government revenue, and slashing them means losing funds that pay for public services.

Others are genuinely afraid that local firms, often less efficient or more expensive than competitors in neighbouring states, will be forced out of business if markets open too quickly. Many African economies export a narrow range of similar commodities and import manufactured goods. With countries not yet specialising in complementary industries, they worry that free trade would simply pit them against each other in a race to the bottom rather than fostering synergies.

Can AfCFTA succeed?

The coming years will be decisive for AfCFTA. The agreement is not an instant fix but rather a framework that requires continuous negotiation, adjustment, and, above all, implementation. To avoid AfCFTA becoming another well-intentioned plan that fails to deliver, African leaders and institutions will have to confront head-on the challenges that have surfaced.

Firstly, infrastructure and connectivity must be improved. It is often said that “you cannot trade where you cannot travel.” Investing in trans-African highways, modern rail links connecting key trade hubs, improved port facilities, and digitised border systems would dramatically lower the cost and increase the speed of cross-border trade.

Secondly, Africa needs to address the “software” of trade, not just the hardware. This means harmonising regulations, simplifying and unifying customs procedures, fighting corruption at border points, and actively identifying and eliminating non-tariff barriers.

Thirdly, support for smaller economies and vulnerable sectors is crucial to get all countries on board. Recognising that liberalisation has winners and losers, the AfCFTA includes a $10 billion Trade Adjustment Fund intended to help governments offset revenue losses from tariffs and assist industries that might be disrupted.

Perhaps most importantly, Africa must break the colonial economic pattern that still defines its trade. AfCFTA’s promise will ring hollow if countries simply continue to export unprocessed minerals and agricultural goods to each other and import finished products.

True success lies in value addition, like processing cocoa into chocolate, cotton into textiles, or cobalt into batteries. This requires investments in manufacturing, skills, and innovation, and creating a business environment where private-sector players feel confident to build factories and supply chains spanning multiple African countries.

The post Dream deferred: The AfCFTA story appeared first on International Finance.

Sourced from the Santos’ Barossa gas project, located off the northern coast of Australia, the LNG will feed rising demand across Asian economies undergoing energy transitions. The Barossa facility, slated to commence operations in 2025, has become a focal point of Santos’ broader expansion agenda, despite facing environmental scrutiny over its elevated carbon dioxide content. The Barossa project, together with the Pikka Phase 1 project in Alaska, is expected to deliver a 30% increase in production for Santos in the next 18 months compared to 2024.

Under the deal, Santos said it would supply 0.5 million tonnes of LNG per annum over a period of two years from 2026. The commodity would be supplied from the firm’s portfolio of LNG assets.

Kevin Gallagher, Santos’ CEO, emphasised the agreement’s strategic value, noting that it secures offtake for a major resource and affirms Australia’s continuing role as a cornerstone of global LNG supply. Meanwhile, QatarEnergy’s chief, Saad Sherida Al-Kaabi, characterised the collaboration as an emblem of Qatar’s dynamic global outreach and an essential step in fostering energy resilience across continents.

“We continue to see robust demand in Asia for high heating value LNG from projects such as Barossa and PNG LNG, as well as for reliable regional supply,” said Gallagher.

The deal has not been without its detractors. Environmental advocates remain concerned about the Barossa field’s emissions profile, pushing Santos to double down on its commitment to carbon capture and storage technologies to mitigate its carbon footprint.

At a time when global LNG demand is intensifying, particularly among Asian nations reducing reliance on coal, the Santos-QatarEnergy alignment signifies more than commercial synergy. It illustrates the evolving architecture of energy diplomacy, where long-term supply security, environmental responsibility, and geopolitical strategy converge in increasingly complex and consequential ways.

The post Santos’ LNG deal with QatarEnergy subsidiary: All you need to know appeared first on International Finance.

Turkey has set its sights on regional trade blocs like the Association of Southeast Asian Nations (ASEAN) and the Asia Cooperation Dialogue (ACD), aiming to expand trade agreements backed by stronger diplomatic alliances. In 2015, it signed a free trade pact with Malaysia and hopes to achieve a similar deal with Indonesia in the coming days. President Edogan’s ambitious goals include transforming Turkey from a “regional economic centre into a global economic powerhouse” and elevating it from the world’s 16th largest economy into the top ten.

Turkey expands Asian footprint

Beyond Southeast Asia, Turkey wants to attract investment from Asia-Pacific businesses seeking a foothold in Europe and the Middle East. With its strategic location, strong manufacturing sector, and skilled workforce, the country offers a compelling destination for investors.

At the same time, Turkish companies are expanding their presence in Asia. Defence, aviation, and technology firms are forming partnerships in Malaysia and Indonesia, while the textile and construction industries see growing opportunities across the region.

However, challenges remain. Logistical bottlenecks, geopolitical uncertainties, and stiff competition from India and Gulf nations mean Turkey must carve out a distinct advantage in Asia-Pacific trade.

Senior journalist Tulay Kalyon Haznedaroglu said, “To stay ahead, it must enhance its infrastructure, refine trade diplomacy, and tap into emerging sectors like technology and green energy. Expanding shipping routes, increasing air travel agreements, and strengthening digital trade platforms will be key to accelerating its trade ambitions. With new free trade agreements on the horizon and strategic partnerships taking shape, Turkey is positioning itself as a vital bridge between Asia and Europe. Erdogan’s proactive diplomacy lays the groundwork for long-term economic growth, reinforcing Turkey’s status as a rising global trade powerhouse.”

“In the short term, the bi-continental country’s much-vaunted Twelfth Development Plan (2024-2028) aims to improve its international stature, promote prosperity, and combat inflation while maintaining strong and sustainable public finances. That goal will depend partly on the success of an associated Foreign Direct Investment Strategy aimed at significantly boosting FDI. The target is for Turkey to account for 1.5% of global FDI and 12% of regional FDI by 2028,” Haznedaroglu added.

On the domestic front, Turkey’s central bank has cut its policy rate by 250 basis points to 42.5%, marking the third monetary easing in a row after months of holding rates steady, as inflation continues to fall.

Experts now predict that inflation will continue to decrease throughout 2025, although it will still exceed year-end targets. In January, the central bank raised its year-end inflation forecast for 2025 to 24%, up 3 percentage points from the previous projection.

According to the latest official data, Turkey’s annual inflation fell to 39.05% in February, down from 42.1% in January, reaching its lowest level in almost two years and raising expectations for further rate cuts.

However, prices in essential sectors such as food, housing, and transportation have continued to rise. A recent poll by Ankara-based Asal Research revealed that 61.2% of respondents cited the “Economy/High Cost of Living” as their primary concern. Istanbul-based economist Atilla Yesilada also suggested that one more rate cut is likely in April 2025 before policymakers pause to assess the situation.

Growth prospects remain mixed

Not particularly, at least when considering FDI as a key measure. While full-year figures for 2024 have yet to be released, they will likely come close to the previous year’s $10.6 billion—down from $13.7 billion in 2022, far below the 2007 peak of $22 billion and short of the $14 billion hoped for earlier. That amounts to less than 1% of GDP, compared with 3% in 2007 and well under both potential and policymakers’ ambitions.

“In the months since June 2023, when a new policy team led by Finance Minister Mehmet Simsek, Vice President Cevdet Yilmaz, and the Central Bank of Turkey (CBT) reversed unorthodox policies, there have been many positive steps toward rational policymaking. However, challenges have emerged along the way,” said Rafik Selim, lead economist for Turkey at the European Bank for Reconstruction and Development (EBRD).

The EBRD now expects Turkey to post GDP growth of 2.7% in 2024, rising to 3% in 2025. Private consumption will likely be the biggest casualty as policymakers try to lift export-led growth above the current low share of 20% of GDP.

“Reducing spending remains difficult. The 2023 fiscal deficit was 5.2%, and the 2024 level is expected to be similar despite service cuts and tax increases. The main driver is earthquake spending. Ankara committed about $30 billion a year to help communities recover from the February 2023 quake that left several million people homeless in southern and central Turkey. Nevertheless, the unprecedented rebuilding of homes and infrastructure should support growth,” Haznedaroglu noted.

“Without the quake, the deficit would be 1.1%, which is quite reasonable,” Selim noted, adding that the estimated 2024 deficit of 5% will likely fall to 3.1% this year.

“Disinflation will likely continue this year, given the CBT’s signal that it will maintain its tight stance despite the start of rate cuts, the ongoing real appreciation of the Turkish lira, and an improvement in services inflation. We expect inflation to fall below 30% by the end of 2025,” said ING Bank analyst Muhammet Mercan.

The current account deficit has narrowed to around $10 billion from 2023’s high of $60 billion, helping rebuild foreign exchange reserves and reducing Turkey’s dependence on external financing.

“Capital flows have been strong; every recent bond and sukuk issue has been three or four times oversubscribed while yields have declined, indicating falling risk perceptions,” Selim observed.

In 2024, Fitch Ratings upgraded Turkey’s sovereign debt and several Turkish banks twice, from B- to B+ in March, then to BB- in September, making Turkey the only country in 2024 to receive upgrades from all three major ratings agencies up to that point.

“In a sense, we’ve returned to where we were in 2021, before the unconventional policy experiments that caused a dramatic deterioration in the country’s macroeconomic and financial stability outlook,” said Erich Arispe, senior director and head of Emerging Europe Sovereigns at Fitch Ratings.

“Turkey’s slower short-term growth outlook reflects ongoing economic rebalancing, which will take time given stubborn inflation,” Arispe argued. With no elections this year, falling dollarisation, rising foreign exchange reserves, and an expected drop in the fiscal deficit as earthquake spending recedes are all encouraging signs.

“Turkey has the capacity to grow. We expect 2.6% growth in 2025 and 3.5% in 2026, without creating further economic distortions. But this is a multi-year story, with the economy being recalibrated to support sustainable higher growth and realise its export and FDI potential,” Arispe said.

Another bright spot is Turkey’s exports to Europe, which rose 7.1% in January 2025 compared with a year earlier, despite economic challenges in its biggest trade market.

According to the Turkish Exporters Assembly (TIM), outbound shipments reached $10.32 billion, up from $9.63 billion a year ago.

However, growth in exports to the Eurozone has been weak over the past two years, as the continent battles high energy costs, tight government budgets, and cautious households who are choosing to save more, hurting overall consumption.

Turkey’s EV market surges

More than 105,000 electric vehicles (EVs) were sold in Turkey in 2024, marking a 45.9% increase from the previous year in a market where total vehicle sales rose only 0.5%. The share of EVs in total sales increased from 7.5% in 2023 to 10.7% in 2024.

Of the 105,315 EVs sold in 2024, 99,489 were pure electric, and 4,826 were extended-range vehicles.

The country’s first indigenous EV brand, Togg, delivered 30,093 cars last year—far surpassing the 11,534 units sold by US giant Tesla. In December 2024 alone, Togg and Tesla delivered 5,732 and 2,307 vehicles, respectively.

Togg, a joint venture of five Turkish holding companies and a business union, began deliveries only in 2023. In December 2024, Turkey’s EV market grew 82.3% to 22,017 units, capturing a 16.3% share of total vehicle sales.

EVs will make up 30% of the country’s auto market in 2025, predicted Ali Bilaloglu, CEO of Turkish auto exporter and distributor Dogus Otomotiv.
The Energy Market Regulatory Authority’s (EPDK) high-case scenario estimates that the number of EVs in Turkey will exceed 361,000 in 2025 and climb to 1.7 million in 2030 and 4.2 million in 2035.

Turkey’s charging network has expanded rapidly, and the country now ranks first in Europe in socket power and in the number of fast (DC) sockets per electric vehicle. Over the past two years, the number of charging sockets has grown from about 3,000 to 26,000.

Chinese EV manufacturer BYD’s plan to build a $1 billion plant in Turkey is seen as the sort of encouraging development the government hopes for, given the sector’s rapid growth.

Growth outlook remains wary

According to a United Nations report, the Turkish economy is expected to grow by 3% in 2024 and 3.1% in 2025, surpassing the global average of 2.8% for both years, with a moderately easing monetary policy aligned with declining inflation.

While conditions seem favourable for Ankara, a further upgrade to investment-grade status by ratings agencies would be a major step toward realising Erdogan’s broader 2028 ambitions.

According to Fitch, Turkey’s private sector has a remarkable ability to adapt.

“However, it takes time to reestablish macroeconomic credibility and for this to resonate with investors,” the agency warned.

“Many of the factors underlying Turkey’s potential also pose risks, including its geographic location, the possibility of indirect impacts from higher US tariffs, and exposure to shifts in investor sentiment. Many factors are beyond Turkey’s control, not least the current, highly fluid international environment,” Fitch said.

Turkey is working to strengthen its place in the global economy by building new ties in Asia while pushing reforms at home. Falling inflation, better credit ratings, and stronger exports give the country some momentum, even as challenges remain. Its growing EV market and rising investment interest show clear progress. Still, long-term success will depend on steady policies and stronger investor trust. If Turkey stays on this path, it could secure a stable future ahead.

The post What awaits the Turkish economy in 2025? appeared first on International Finance.

“We will retain more focused M&A and equity capital markets capabilities in Asia and the Middle East and will begin to wind down our M&A and equity capital markets activities in the United Kingdom, Europe, and the United States, subject to local legal requirements,” the bank said in a statement.

CEO Georges Elhedery, who replaced Noel Quinn in September 2024, is now on a mission to overhaul HSBC’s organisational machinery, by cutting costs, streamlining operations, strengthening the bank’s leadership in its core competencies and improving accountability as well as to tighten its focus on Asia, where it earns the bulk of its profit.

Alex Marshall, Managing Partner at consultancy firm CIL, said, “HSBC has a commanding position in MENA equity capital markets, whereas it has struggled to achieve equivalent status in the US in particular. The bank’s ranking in M&A advisory work has been declining over the long term. It’s a fiercely competitive market, and with deal volumes in Europe having been depressed in recent years, maybe it is no longer worth prioritising this region.”

LSEG data indicates that HSBC earned USD 107.3 million, or 7% of the total fee pool, in 2024, the highest amount of investment banking fees in the MENA region.

In a recent interview with Zawya, Khaled Darwish, Managing Director – Head of CEEMEA Debt Capital Markets at HSBC, said, “We have substantial issuances on local currency, especially in the Saudi market. If you include issuances in local currency, HSBC MENA tops league tables acting on over $15 billion of credited bond and sukuk offerings in 2024.”

According to LSEG data, the bank’s USD 2.3 billion in proceeds from MENA ECM deals placed it second only to EFG Hermes.

“HSBC will keep its debt capital markets and leveraged acquisition finance operations globally,” said Michael Roberts, CEO HSBC Bank, in a staff memo, which also acknowledged how “unsettling” the news would be for bankers who advise on dealmaking and corporate equity raising, such as through initial public offerings (IPOs).

Details on job cuts, cost cuts and human resource deployment to other financing businesses (where HSBC considers it better to compete with American rivals who have dominated investment banking’s most lucrative segments for years) have remained unclear so far.

During an interaction with Reuters, Shore Capital analyst Gary Greenwood said, “I’ve lost count of the number of times HSBC has been in and out of ECM in the UK. It never seems to succeed. At the end of the day, these are expensive businesses to run and if you are not winning the business and generating the fees then it’s easy to lose money.”

Some commentators have also described the timing of HSBC’s decision as “surprising,” given capital markets activity is expected to grow in the near term, fuelled by expectations of interest rate cuts and pro-growth policymaking across the West, in the wake of United States President Donald Trump’s return to power.

RBC Capital Markets analyst Ben Toms said, “The bank is being run with a medium to long-term view. Geographically, the move reflects the continued shift from West to East, where growth and profitability are higher.”

The post HSBC’s new gameplan: Investment banking retrenchment, more focus on Asia appeared first on International Finance.

From the Boeing strike and lingering 737 MAX controversies to widespread aircraft shortages and jet delivery delays, 2024 shaped up to be a defining year for aviation. This article provides a comprehensive review of the year’s critical developments and a forward-looking perspective for 2025.

A record-breaking travel

After years of pandemic-induced stagnation, 2024 witnessed a robust recovery in global travel demand. Passenger traffic soared, with IATA reporting an estimated 4.6 billion passengers taking to the skies, an increase of 12% from 2023. Key markets, including North America, Europe, and Asia-Pacific, saw record-high ticket bookings as both leisure and business travel rebounded.

Pent-up demand, the easing of travel restrictions, and attractive pricing strategies by airlines fuelled the surge. Notably, international routes experienced a remarkable revival, with Asia-Pacific destinations recording a 30% rise in tourist arrivals compared to pre-pandemic levels.

However, this sharp uptick exposed underlying vulnerabilities in the industry’s supply chain and operational infrastructure. Airlines found themselves grappling with operational constraints, and airport congestion surged to unprecedented levels during peak travel seasons, leading to frustrations among travellers and challenges for ground staff.

Airports struggled to manage the influx of passengers, with reports of flight delays increasing by 20% compared to 2023. Major hubs such as Heathrow, Dubai International, and Changi faced logistical bottlenecks, prompting calls for accelerated infrastructure upgrades. The rapid recovery also strained the workforce, as airlines and airports raced to recruit and train personnel to meet operational demands.

Supply chain disruptions: A persistent headwind

Supply chain disruptions continued to hamper the aviation sector in 2024. The ripple effects of global semiconductor shortages, constrained raw material supplies, and logistical bottlenecks significantly impacted aircraft production and maintenance schedules. Leading manufacturers like Boeing and Airbus faced mounting backlogs, with combined deliveries falling short of targets by nearly 18%.

A six-week strike at Boeing’s key production facility in Everett, Washington, exacerbated the situation by bringing the manufacturing pipeline to a standstill. Workers’ demands for better wages and working conditions highlighted underlying tensions within the labour force and disrupted the delivery of hundreds of aircraft.

Airlines awaiting Boeing’s 737 MAX and 787 Dreamliner faced operational challenges, compounding the strain on their fleets. Meanwhile, Airbus, though better positioned, faced delays due to its reliance on a global supplier network that continued to experience inefficiencies.

The ripple effects extended beyond manufacturers to maintenance, repair, and overhaul (MRO) providers, who faced mounting challenges in sourcing critical components essential for keeping fleets operational.

Airlines reported significant delays in aircraft repairs, with turnaround times increasing by an average of 25%. This in turn led to prolonged groundings of aircraft and further strained global fleet availability. Airlines had to adjust schedules and rely on older, less efficient aircraft still in service, leading to a surge in operational inefficiencies.

According to industry experts, problems in the supply chain cost MRO providers nearly $10 billion in lost sales. The bigger picture for the economy as a whole is $25 billion when you add in the effects on airlines and suppliers. The delays also created ripple effects across the value chain, as major MRO hubs like those in Singapore and Dubai reported backlogs stretching into months.

Additionally, rising costs for alternative components due to shortages further exacerbated financial pressures, with some airlines resorting to cannibalising parts from grounded planes to meet urgent repair needs. These cascading challenges underscored the urgent need for more resilient supply chain strategies and partnerships to weather future disruptions.

Boeing under the spotlight

Boeing’s turbulent year extended beyond the strike, as the company grappled with renewed scrutiny over manufacturing quality issues. In a significant blow, the FAA flagged anomalies in the 737 MAX’s production process, sparking concerns over safety and compliance. This scrutiny followed high-profile incidents that raised alarm about the model’s reliability, reviving memories of the 737 MAX’s grounding in 2019.

Airline customers deferred orders, and several carriers, including Ryanair and Southwest Airlines, publicly voiced frustrations over delays. Boeing’s efforts to reassure stakeholders, including ramped-up quality control measures and enhanced customer communication, provided some relief but failed to offset the year’s financial and reputational setbacks. Additionally, the company has announced plans to heavily invest in AI-powered monitoring systems to enhance quality control and mitigate future risks. But it will take years for these initiatives to yield results.

The regulatory scrutiny also led to increased oversight of other Boeing models, including the 787 Dreamliner. Delays in certifications for these models caused further disruptions for airlines awaiting deliveries, prompting several carriers to seek compensation for the setbacks. Analysts projected that Boeing’s total compensation payouts could reach $2 billion by the end of 2024.

For airlines, 2024 was a balancing act between meeting soaring demand and contending with aircraft shortages. Fleet utilisation rates hit unprecedented highs, with carriers like Delta Air Lines and Emirates operating at over 90% capacity during peak seasons. However, the inability to procure new jets on time led to widespread cancellations and schedule disruptions.

Industry-wide, airlines reported collective losses exceeding $15 billion, attributing a significant portion to delayed aircraft deliveries. Budget carriers, which rely heavily on narrow-body jets for short-haul routes, were particularly hard-hit. Wizz Air, for example, slashed its growth projections by 20%, citing a lack of available aircraft.

Compounding the issue, jet leasing rates surged by 25% as airlines scrambled for stopgap solutions. Leasing firms capitalised on the crunch, with AerCap and Avolon posting record revenues. However, for many airlines, the higher costs eroded profit margins, further straining their financial health. As airlines pushed older aircraft into service for longer than expected, maintenance costs escalated, resulting in increased fuel consumption and operational inefficiencies.

Airlines also faced challenges in fleet optimisation, with many carriers resorting to using larger jets on shorter routes to manage capacity shortages. While this approach allowed airlines to accommodate passenger demand in the short term, it presented significant drawbacks.

Larger jets operating on shorter routes consumed more fuel per passenger mile than smaller, more efficient aircraft, resulting in increased operational costs. The need for additional crew training and scheduling adjustments to operate these aircraft on unconventional routes exacerbated this inefficiency.

Additionally, the use of larger jets on shorter routes reduced flexibility in scheduling and network planning. Airlines struggled to redeploy aircraft to high-demand routes, which led to suboptimal utilisation of their fleets.

For example, during peak travel periods, airlines reported a 15% decline in the availability of narrow-body jets, which are typically better suited for short-haul flights. This situation created many disruptions, including flight delays and cancellations, as carriers scrambled to balance their resources.

These challenges underscored the far-reaching impact of delivery delays on airline operations, with ripple effects extending to customer satisfaction. Surveys conducted in late 2024 revealed a 20% increase in passenger complaints related to delays and schedule disruptions, highlighting the strain on carriers during this period.

Spotlight on key markets

North American airlines fared relatively well, buoyed by strong domestic demand and strategic cost-cutting measures. American Airlines and United Airlines reported modest profits, driven by high load factors and ancillary revenue streams.

However, labour disputes and fuel price volatility remained persistent concerns. In Canada, the government’s push for stricter carbon emissions regulations added a layer of complexity for carriers.

European carriers grappled with operational inefficiencies and rising regulatory pressures. Legacy carriers like Lufthansa and Air France-KLM struggled to maintain profitability amid mounting competition from low-cost rivals. Significant investment was also necessary for the expansion of the European Union’s green aviation initiatives, which further stretched already limited budgets.

Asia-Pacific has emerged as a promising region, exhibiting strong recovery momentum in international travel. Airlines like Singapore Airlines and Cathay Pacific capitalised on the region’s reopening, achieving double-digit revenue growth.

However, the slow pace of aircraft deliveries dampened expansion plans, particularly for Chinese carriers. India saw remarkable domestic growth, but infrastructure constraints at major airports hindered operational efficiency.

The Gulf carriers—Emirates, Qatar Airways, and Etihad—continued to dominate the long-haul market, leveraging their strategic hubs. Emirates launched six new routes in 2024, despite capacity constraints, showcasing its resilience.

However, geopolitical tensions and fluctuating oil prices added layers of complexity to their operations. The region also made significant strides in sustainability, with Qatar Airways piloting biofuel-powered flights on select routes.

The industry’s outlook for 2025

As the aviation industry enters 2025, stakeholders remain cautiously optimistic. The following are key trends and developments to watch:

Manufacturers expect supply chain stabilisation as they ramp up production to clear backlogs, with investments in automation and supply chain digitisation aiding them. Airbus has projected a 15% increase in deliveries for 2025, while Boeing aims to restore its credibility with a renewed focus on quality and transparency. Collaborative efforts between manufacturers and suppliers to build more resilient networks are likely to gain traction.

The push for greener aviation will gain momentum in 2025. Airlines and manufacturers are investing heavily in sustainable aviation fuel (SAF) and electric propulsion technologies. IATA has set a target for SAF to constitute 10% of global jet fuel use by 2030, with incremental progress expected this year. We anticipate that regional collaboration to establish SAF supply chains will play a key role in achieving these targets.

Carriers will prioritise fleet renewal to enhance efficiency and reduce costs. The introduction of next-generation aircraft, such as the Airbus A321XLR and Boeing’s anticipated 797, could redefine market dynamics. We expect fleet modernisation programmes to closely align with sustainability goals, incorporating lightweight materials and more efficient engines.

Financial pressures may drive consolidation within the industry. Smaller airlines could merge or form alliances to achieve economies of scale and withstand competitive pressures. Collaborative regional partnerships aimed at optimising route networks and resource sharing are likely to emerge as a trend.

Digital transformation will remain a key enabler for growth. We expect airlines to differentiate themselves in a competitive market by leveraging AI-driven analytics, contactless solutions, and enhanced customer experiences. We also anticipate that predictive maintenance technologies and real-time operational monitoring will reduce downtime and enhance fleet reliability.

Governments and private stakeholders are expected to invest in airport infrastructure upgrades to accommodate the rising number of passengers. Expansion projects in regions such as Asia-Pacific and the Middle East will focus on addressing capacity constraints and improving the overall travel experience.

The post Airlines battle delays amid travel surge appeared first on International Finance.

However, this perspective oversimplifies the complex dynamics of global inequality, especially in the context of developing nations. Instead of an intrinsic flaw of capitalism, the real issue lies in geopolitical tensions, trade restrictions, and the lack of a truly global perspective on economic justice.

This article will unpack the nuances of capitalism, examine the factors contributing to inequality both within and between countries, and highlight what needs to be done to build a fairer world.

The Realities Of Global Inequality

When we talk about inequality, there are two main types: inequality within a country (intra-country inequality) and inequality between countries (inter-country inequality). Historically, the wealth gap between countries was enormous, with advanced economies such as the United States and Western Europe being significantly wealthier than countries in Asia, Africa, and Latin America. However, the past four decades have witnessed a significant shift, primarily driven by the economic rise of Asia and parts of Central and Eastern Europe.

In countries like China and Vietnam, capitalism and integration into global trade networks have helped lift millions out of poverty. According to World Bank data, China alone has lifted more than 800 million people out of poverty since the early 1980s.

Vietnam, another notable example, saw its poverty rate fall from over 70% in the 1980s to below 6% by 2021. This rapid economic growth has resulted in one of the most significant reductions in cross-country disparities in human history, challenging Piketty’s notion that capitalism inherently leads to worsening inequality.

While global inequality between countries has declined, inequality within many wealthy nations has increased. The rise of the billionaire class, stagnating middle-class wages, and the weakening of traditional labour unions have fueled social unrest in countries like the United States.

The infamous “1%” now holds an increasingly large share of national wealth, with Oxfam’s 2023 report revealing that 62% of all new wealth created between 2020 and 2022 went to the top 1% of earners globally.

However, focusing solely on the income disparity within advanced economies, as Piketty did, means ignoring the broader global picture. Western observers often forget that the standard of living enjoyed by even the poorest individuals in advanced economies is vastly different from the extreme poverty faced by farmers in South Asia or sub-Saharan Africa.

For instance, a person living below the poverty line in the United States still has access to public healthcare and infrastructure that are often absent in the world’s poorest nations.

Global Fragmentation And Protectionism

The decline in global inequality between countries is now under threat due to growing geopolitical tensions and the increasing fragmentation of the global economy. This fragmentation is partly fueled by trade restrictions and populist policies that have led to reduced economic cooperation. Such measures pose a serious risk to the world’s poorest countries, which depend heavily on access to international markets.

The COVID-19 pandemic and subsequent disruptions in supply chains highlighted the vulnerabilities of an interconnected global economy. Rich countries responded by turning inward, focusing on securing their domestic economies rather than continuing to support global trade.

The World Trade Organization (WTO) noted that the volume of world merchandise trade shrank by 5.3% in 2020, with the effects felt most acutely in low-income countries that rely heavily on exports.

Furthermore, policies like the Inflation Reduction Act in the United States, which offers substantial subsidies for domestic manufacturing, particularly in green industries, could have unintended consequences.

These moves may undermine the competitiveness of developing countries that depend on the very industries the West is now trying to onshore. The resurgence of economic nationalism and protectionism directly threatens the fragile gains made by developing countries over the past few decades.

The Climate Change Dilemma

One area where there appears to be a consensus for global action is climate change. The consequences of climate change are felt disproportionately by countries in the Global South, despite their comparatively minimal contribution to greenhouse gas emissions. Developing countries are more vulnerable to climate-related disasters, food insecurity, and displacement.

Kenneth Rogoff, a former chief economist at the International Monetary Fund (IMF), has advocated for the creation of a World Carbon Bank, which would provide technical assistance and large-scale climate financing to developing countries. The financing would be provided in the form of grants rather than loans, recognizing the limited capacity of low-income nations to take on additional debt burdens.

This proposal is crucial for ensuring that climate action does not inadvertently exacerbate global inequality. Developing countries need the resources to transition to cleaner energy sources without sacrificing economic growth.

To bridge the financing gap, Rogoff has argued for barring private lenders from suing defaulting sovereign debtors in developed-country courts, thus pushing for fairer terms of international finance.

Strengthening Social Safety Nets

The debate around inequality cannot ignore the importance of robust social safety nets. There is a strong case for expanding public services like education and healthcare within developed countries. But focusing exclusively on domestic inequality ignores the 700 million people worldwide still living in extreme poverty.

According to the World Bank, sub-Saharan Africa remains the region with the highest number of people living below the international poverty line, accounting for more than half of the world’s extremely poor population.

Countries like Norway, which has a comprehensive welfare system, demonstrate how capitalism and social safety nets can coexist effectively. Norway’s model provides a balance, where wealth creation through capitalism is paired with strong redistributive mechanisms to ensure broader access to quality public services.

While Norway’s model isn’t directly replicable in countries with different socio-political dynamics, the principle remains applicable: equitable economic growth must involve policies that provide safety nets for the vulnerable.

The Role Of The Global North

Developed countries have a crucial role to play in reducing global inequality. They have three main options: enhancing their capacity to manage migration, increasing support for low-income countries, or sending citizens to assist directly in those regions.

Many wealthy nations have experimented with programs that encourage recent graduates to volunteer in underprivileged communities abroad. For instance, the Peace Corps program in the United States has sent thousands of volunteers to developing countries, offering technical expertise and fostering cultural exchange.

While these efforts can make a difference, they are no substitute for structural changes in international trade and finance. To create meaningful, sustainable growth in the Global South, advanced economies need to support policies that promote access to global markets. Barriers such as agricultural subsidies in rich countries, which make it difficult for farmers in poor countries to compete, need to be dismantled.

Moreover, there needs to be a shift in political attitudes. As Rogoff points out, politicians in the Global North rarely win elections by promising to help the Global South.

However, the risk that economic instability in poorer countries could spill over into wealthier ones—through migration crises or political instability—is very real and growing. Hence, self-interest alone should be enough to push wealthier countries to adopt more inclusive global economic policies.

The most urgent task for Western leaders today is to find the political will to open up their markets, invest in developing countries, and provide the resources needed for a just climate transition.

Inequality within their borders is indeed an issue, but it pales in comparison to the pressing needs of the billions of people still struggling to make ends meet in the Global South. By shifting the focus from domestic to global, and by recognizing the interconnectedness of our challenges, we can create a fairer, more prosperous world for all.

The post IF Insights: Raking up the debate around capitalism & global inequality appeared first on International Finance.