Emerging Markets Monitor - April 22
Ecuador's New Mandate to Crack Down on Crime, Saudi Aramco in New China Push, N. Korea Fires Test Missile, China FDI Down, Africa Tech Funds Rising
The Top Stories Shaping Emerging Markets from Global Media - April 22
Ecuador Gives President More Power to Fight Drug Gangs
Wall Street Journal
“Ecuadoreans voted to give President Daniel Noboa broad powers to crack down on powerful drug gangs at the center of the once-peaceful nation’s descent into some of Latin America’s worst bloodshed.”
“In a referendum on Sunday with 11 questions mainly on crime, voters overwhelmingly approved proposals to allow Noboa’s government to deploy soldiers with police, increase sentences for criminals convicted of terrorism and drug trafficking, extradite suspects indicted in other countries and permit law enforcement to use weapons seized from gangs.”
“‘Now we’ll have more tools to fight crime and restore peace to Ecuadorean families,’ Noboa said Sunday night on his Instagram account as electoral authorities counted votes. As of Monday, all nine questions that dealt with crime and the judiciary had been approved by a wide margin, according to the National Electoral Council, which had tabulated 65% of ballots.”
“After Ecuador logged its highest homicide rate in history last year, Noboa in January declared his government was in an armed conflict with gangs and said that the country could give no quarter.”
“…Ramiro Garcia, the director of the Criminology Institute at Ecuador’s Central University, said Sunday’s approval of the crime-fighting measures will help in the fight against gangs. But he said violence would likely continue because the measures don’t root out corruption in law enforcement or address the lack of opportunities for young people who turn to crime.” Ryan Dube reports.
Aramco Seeks Hengli Petrochemical Stake in Push Into China
Bloomberg
“Saudi Aramco started talks to buy a 10% stake in China’s Hengli Petrochemical Ltd. as it looks to secure a long-term market for its oil.”
“State-owned Aramco and the Chinese company signed an initial agreement to explore a potential transaction, according to a statement from the Saudi company. No financial details or a timeline were provided. The 10% stake in Hengli, based in the Chinese port city of Dalian, has a market value of $1.5 billion based on its current share price.”
“Chinese energy demand has contributed to oil’s gain this year as the country’s industries recover from a longer-than-expected slowdown following the coronavirus pandemic. Aramco, which is also seeking similar deals with two other Chinese companies and has closed one transaction, has been looking to tie up supply contracts to go with the agreements.”
“Saudi Arabia sees demand for petrochemicals used to make goods such as plastics continuing to rise over the coming decades, even as oil’s use in transportation is likely to wane with the global energy transition. Hengli operates a 400,000 barrel-a-day refinery that has integrated petrochemical units along with other facilities in China.”
“Last year Aramco announced a plan to buy a stake in Rongsheng Petrochemical Co. in its largest ever foreign acquisition. It’s also been in talks for stakes in Shandong Yulong Petrochemical Co. and Shenghong Petrochemical. The company also has a joint venture with China that runs a refinery on Saudi Arabia’s Red Sea coast which supplies diesel and other fuels to Europe.” Bloomberg reports.
North Korea Fires Ballistic Missiles Into Water, Alarming South Korea and Japan
Reuters
“North Korea fired ‘several’ short-range ballistic missiles on Monday toward the sea off its east coast, South Korea's military said, drawing a swift condemnation from Seoul, which called it a grave threat to stability on the Korean peninsula.”
“A Japanese government alert and its coast guard also said North Korea had fired what appeared to be a ballistic missile. The projectile appeared to have landed outside Japan's exclusive economic zone area, the NHK broadcaster said.”
“South Korea's Joint Chiefs of Staff said the North launched what it suspected to be several short-range ballistic missile from near its capital, Pyongyang. The missiles flew about 300 kilometres (186 miles) and landed in the sea.”
“…The reports of the launch came as South Korea said its top military officer, Admiral Kim Myung-soo, had hosted the commander of U.S. Space Command, General Stephen Whiting, on Monday to discuss the North's reconnaissance satellite development and growing military cooperation between Pyongyang and Moscow.”
"‘North Korea is all-in on rapid weapons development, not just for military advantage, but also for the Kim regime’s techno-nationalist political legitimacy,’ said Professor Leif-Eric Easley of Ewha University in Seoul.”
“…Russia last month vetoed the annual renewal of the monitoring of sanctions imposed against North Korea, leading U.S. and South Korean officials to accuse Moscow of emboldening Pyongyang. China abstained from the Security Council vote.” Hyunsu Yim reports.
China’s Efforts to Attract Foreign Capital Wavers
South China Morning Post
“The ‘new working models’ of international enterprises in China and Beijing’s heavy focus on self-reliance have deterred a resurgence of foreign direct investment (FDI), business leaders said, as inflows fell more than a quarter from the previous year.”
“FDI movement into China from January to March was 301 billion yuan (US$41.6 billion), down 26 per cent from last year according to official numbers released last Friday.”
“While Beijing hailed a reported gross domestic product growth of 5.3 per cent over the same period as an indication its economy is in stable recovery, notable figures in the field said firms are staying cautious for several reasons.”
“Ker Gibbs, former president of the American Chamber of Commerce in Shanghai, said American companies now operate in China based on a ‘new working model’ – one where the localisation of their Chinese operations continues, but has became more pronounced after foreign staff members have left the country en masse amid changing policies and a degenerating bilateral relationship.”
‘“Companies are separating their China operations so they function in more of a silo. Nobody is happy about this, but it’s the reality of the new working model,’ said Gibbs, who is now an executive-in-residence at the University of San Francisco’s China Business Studies Initiative.”
“…Zheng Yongnian, a prominent political economist and a long-time adviser to the Chinese government, had similar opinions, saying the next step for China to boost investment would be identifying new industries in which foreign companies could take part.”
“‘Traditional areas for economic investments have reached saturation for both private and foreign investors. We should think about how to open up new industries for their investments as we attempt to find new productive forces for high-quality economic development,’ Zheng said, referring to a phrase coined by Beijing to identify the economic sectors with the highest potential for growth and innovation.”
“Zheng, president of the Institute for International Affairs, Qianhai – a think tank based in Shenzhen – added that new growth drivers such as the digital and green economies should offer more opportunities for the participation of private and foreign investors.” Kinling Lo reports.
Africa-Focused Fund Draws Early Investors to Tech Industry
Financial Times
“An Africa-focused venture capital firm has steered one of the region’s biggest fundraising efforts of the past five months to invest in technology start-ups, signalling a potential upturn in dealmaking for the industry.”
“TLcom Capital, which has over the past seven years backed prominent tech start-ups in east and west Africa, on Monday said it has completed a $154mn two-year raise, almost doubling its previous round and attracting investment from the US and Europe.”
“VC firms have raised more than $655mn for Africa’s tech industry since November. TLcom’s latest fundraising added to $300mn in February by Partech’s Africa fund, while Norrsken22, another fund focused on the region, raised $205mn five months ago.”
"…The firm’s first fund, completed in 2020, took three years to raise $71mn, which was deployed to 11 companies…TLcom, which seeks out early-stage companies, plans to invest chunks of up to $3mn in its second fund. The investment comes as the tech industry around the world has suffered a downturn in funding. African tech companies in 2023 received $3.5bn equity and debt funding from investors, a 46 per cent drop from the previous year, according to a report by the global investor Partech. Aanu Adeoye reports.
“But words are things, and a small drop of ink,
Falling, like dew, upon a thought produces
That which makes thousands, perhaps millions think.”
― Lord George Gordon Byron