Emerging Markets Daily - May 24
Saudi Arabia in $55B Privatization Drive, Oil Majors Push Toward Renewables, China-Russia Ties Rising, S. Korea Eyes National Digital Currency, Mexico's Last Glaciers, and more
The Top 5 Emerging Markets Stories from Global Media - May 24
Saudi Arabia Eyes $55 Billion Raise Through Privatization Program
The National
“Saudi Arabia is looking to raise about $55 billion through its privatisation programme over the next five years as Opec’s biggest oil producer aims to boost revenue and narrow its fiscal deficit, its finance minister said.”
“Riyadh has identified a pipeline of 160 projects across 16 sectors for the sale of state assets and public-private partnerships to be carried out through to 2025, Mohammed Al Jadaan told the Financial Times in an interview.”
“Saudi Arabia, the biggest Arab economy, is looking to outsource the management and financing of its health infrastructure and services to the private sector, as well as city transportation networks, school buildings, airport services and water desalination and sewage treatment plants. Sales of state assets will include television broadcasting towers, government-owned hotels and utilities including district cooling and desalination plants in the kingdom, he said.”
“‘It’s not a choice any more, but a requirement by the central government that these services or these utilities will no longer be run by the government,’ Mr Jadaan told the FT . ‘It’s taking it [privatisation] to the next stage.’”
“The kingdom expects to raise $38bn from selling stakes in state assets and $16.5bn through PPP deals. The goal is raise revenue to help narrow the country's budget deficit, which hit $79bn last year, equivalent to 12 per cent of its gross domestic product.”
“In July last year, Mr Al Jadaan said Saudi Arabia may raise $13.33bn in proceeds from its privatisation and PPP programme. The latest estimate over the five-year period is a significant rise in the kingdom’s anticipated revenue from privatisation deals.”
“Privatisation is a key plank of Saudi Arabia’s Vision 2030 economic diversification agenda. In 2019, state-owned oil company Saudi Aramco listed its shares on the Saudi Stock Exchange, Tadawul, in the world's largest public offering, raising an initial $25.6bn and later selling more shares to boost total proceeds to $29.4bn.”
“The kingdom’s privatisation programme does not include entities owned by its sovereign wealth fund, the Public Investment Fund, or further asset sales by Aramco, which has so far sold a total of 1.725 per cent of the company. The kingdom is in talks to sell an additional 1 per cent in Aramco to a leading global energy company, Crown Prince Mohammed Bin Salman said in April.” Sarmad Khan reports.
Oil Majors Jockey for Piece of the Growing Renewable Power Pie
Wall Street Journal
“Businesses are buying more renewable power, and oil majors want a piece of the action.European oil companies including BP PLC and Royal Dutch Shell PLC are building new wind and solar projects and striking deals to supply electricity to big corporate buyers likeAmazon.com Inc. and Microsoft Corp., treading into the domain of traditional power companies.”
“The moves come as more businesses look to limit their carbon emissions, with companies buying a record amount of renewable power last year and on track to hit a fresh high this year, according to data from BloombergNEF.”
“Oil companies say securing long-term deals to supply electricity will provide a new source of income and underpin their expansion into wind and solar power as they seek to reduce their dependence on fossil fuels and prepare for a lower-carbon economy.”
“Power supply has historically been regional, with utilities generating and providing electricity to homes and businesses in an area, state or country. Some of these traditional power suppliers have been tapping into demand from businesses for green power for several years, and have decades of operational know-how.” Sarah McFarlane reports.
Geopolitics: China’s Top Diplomat Heads to Russia as Ties Reach ‘Best Level in History’
Financial Times
“China’s leading diplomat will travel to Russia on Monday for security talks, the latest sign of deepening ties between Beijing and Moscow.”
“Yang Jiechi, who leads China’s central committee for foreign affairs, will be in Russia until Wednesday for a strategic and security consultation, the Ministry of Foreign Affairs said on Sunday. Yang will also visit Croatia and Slovenia before returning to China.”
“The announcement was made as both countries place greater emphasis on bilateral relations in a period where US dominance of geopolitics has receded and the Covid-19 pandemic has stoked global upheaval.” Thomas Hale reports
South Korea's Central Bank Moves to Develop Pilot Digital Currency Platform
The Straits Times
“South Korea's central bank on Monday (May 24) said it will choose a technology supplier to build a pilot platform for a digital currency, moving a step closer to creating a central bank-backed digital currency.”
“The Bank of Korea (BOK) said it is seeking a partner through an open bidding process to research the practicalities of launching a central bank digital currency in a test environment - the first such exploratory step in Asia's fourth-largest economy.”
“The BOK's efforts come as the spread of bitcoin and other cryptocurrencies has opened up the possibility that competitors of traditional cash could change how the financial sector operates.”
“Central banks from China to Britain and Sweden are looking at developing digital currencies to modernise their financial systems, ward off the threat from cryptocurrencies and speed up domestic and international payments.” The Straits Times reports
The Agony of the Last Glaciers from Mexico
El Pais
“Only five glaciers remain in the country, spread over two mountains: Iztaccíhuatl and Pico de Orizaba. In total they occupy less than a square kilometer of ice. Experts say that in 2050 there will be none left. Global warming is to blame for the accelerated disappearance of this water source.”
‘…The irremediable extinction of the Mexican glaciers, unique in their latitude of 20º north, means losing an unambiguous sensor on climate change, but above all it implies losing a source of water. In an increasingly populated and drier country - the average temperature in Mexico has increased two degrees in the last 34 years - glaciers are an additional contribution in the dry season to communities living near the mountains. They cooperate with around 5% of water to the regional hydrological system, by runoff or by feeding the aquifers. "It is very little, but even so it will cease to exist," insists Delgado.
All the signs - the retreating glaciers, the melting poles , the emptying dams - point in the same direction: “There will no longer be so much water availability. Our society will be under a water stress scheme. It is a problem that is already here, but it has not yet manifested itself in all its magnitude. The real challenge now is how we are going to adapt ”. Beatriz Guillen reports (In Spanish)
What We’re Also Reading…
Inside the Race to Avert Disaster at China’s Biggest ‘Bad Bank’
Bloomberg
“…Because here on Financial Street, a brisk walk from the hulking headquarters of the People’s Bank of China, a dark drama is playing out behind the mirrored façade of Huarong Tower. How it unfolds will test China’s vast, debt-ridden financial system, the technocrats working to fix it, and the foreign banks and investors caught in the middle.”
“Welcome to the headquarters of China Huarong Asset Management Co., the troubled state-owned ‘bad bank’ that has set teeth on edge around the financial world.” Bloomberg News reports
Belarus Forces RyanAir Jet Landing to Detain Opposition Journalist
Channel News Asia
“The United Nations' aviation agency said it was ‘strongly concerned’ by the apparent forced landing of a Ryanair jetliner in Belarus, as global airlines called for an investigation into Sunday's (May 23) rare incident.”
“Aviation leaders reacted with shock after Belarus scrambled a fighter and flagged what turned out to be a false bomb alert to force a Ryanair jet to land, before detaining an opposition-minded journalist who had been on board.”
“The UN's International Civil Aviation Organization (ICAO) said the incident may have contravened a core aviation treaty, part of the international order created after World War II. ‘ICAO is strongly concerned by the apparent forced landing of a Ryanair flight and its passengers, which could be in contravention of the Chicago Convention,’ it said. ‘We look forward to more information being officially confirmed by the countries and operators concerned.’”
“Airlines joined a flurry of government protests.” Channel News Asia reports.
Why Peru is Reviving a Pre-Incan Technology for Water
BBC
“Pre-pandemic, in the austral winter, I drove north out of Lima, up into Peru's highlands to the village of Huamantanga (wa-mon-TONG-a). I was traveling with scientists who were studying local farmers' use of a 1,400-year-old technique to extend water availability into the long dry season.”
“…Peru is among the world's most water-insecure countries. The capital Lima, home to a third of the country's population, sprawls across a flat desert plain and receives just 13mm (0.5 inches) of annual rainfall. To support that human abundance, it relies on three rivers born in the Andes that rise behind the city, soaring to 5,000m (16,400ft) in just 150 kilometres (93 miles). Lima residents are not alone in this reliance on mountain water. An estimated 1.5 billion people worldwide could depend on water flowing from mountains by 2050, up from 200 million in the 1960s.