Gold Standard
Cambodia’s strategic overture to France, Descent into Digital Barbarism, Africa- Middle East withdraw gold reserves over American economic concerns, Egyptians trade Gold to new highs
Cambodia’s strategic overture to France
By Chansambath Bong, Australian National University
Cambodian Prime Minister Hun Manet is driving a reset in the country’s 180-year-old relationship with France. From trade and investment to cooperation on global issues, the partnership holds significant potential, potentially culminating in a strategic upgrade. It is hoped that deeper relations with France will buttress Cambodia’s political and economic ties with the European Union, which became rocky following the bloc’s partial withdrawal of its preferential trade agreement under its Everything But Arms scheme in 2020.
In just 13 months, the Cambodia–France bilateral relationship has experienced a rapid transformation. The government of new Cambodian Prime Minister Hun Manet has continued its predecessor’s strategic overture to France with rigour. Meanwhile, under President Emmanuel Macron France has embraced Cambodia, aiming to boost its economic, cultural and diplomatic influence in the country and in the ASEAN bloc more broadly as part of Macron’s tilt towards the Indo-Pacific.
Between December 2022 and January 2024, there have been three official visits by Cambodian leaders to France, including by former prime minister Hun Sen, King Norodom Sihamoni and most recently Prime Minister Manet. Notably, France is the first European country Manet has officially visited since taking office in August 2023.
Manet’s visit to France concluded with commitments from both sides to bolster trade, investment and defence cooperation. France expressed its support for Cambodia’s 2050 carbon neutrality plan and the two countries reiterated a mutual desire to deepen cultural exchanges buttressed by their Francophile bonds.
But the most significant outcome of the visit was an agreement to strengthen the bilateral relationship aimed at elevating it to a strategic level. Although details about the scope and timeline of the planned ‘strategic’ upgrade remain to be seen, this elevation will make France Cambodia’s fourth strategic partner after Thailand, China and Japan.
Since 2021, Cambodia has pushed for a whole-of-government implementation of its Economic Diplomacy Strategy (EDS) 2021–2023. The strategy aims to attract and diversify global trade, tourism and foreign direct investment, with a new iteration of the EDS currently being developed for the 2024–2028 period.
Cambodia views France as a major European partner in these endeavours. Though two-way trade at the end of 2023 sat at just US$542 million, Cambodia has enjoyed a sizable trade surplus and is stepping up economic ties with France to attract greater private sector investment in aviation, tourism, railways, renewable energy and digital technology. This was reflected in Manet’s meetings with companies like VINCI Group, TotalEnergies, Accor Group and Alstom during his Paris trip. France can serve as a bridge to increase exports of Cambodian agricultural products and garment goods to the EU market.
Another factor driving Phnom Penh towards Paris is foreign policy. Cambodia is aiming to strike a more delicate balance between major players and establish a stronger European footing in its strategy. France is a viable global partner for Cambodia in supporting international law and multilateralism, which have begun to come under increasing pressure. Cambodia’s principled stance against the war in Ukraine, its co-sponsorship of UN General Assembly resolutions condemning Russia, its backing for Ukraine’s fast-tracked accession to ASEAN’s Treaty of Amity and Cooperation and its demining support for Ukraine align with France’s position.
Deeper relations with France could buttress Cambodia’s political and economic ties with the European Union, which became rocky following the bloc’s partial withdrawal of its preferential trade agreement under its Everything But Arms scheme in 2020.
At the regional level, the two countries agree that deepening ASEAN–France relations is key to aligning France’s Indo-Pacific Strategy with the ASEAN Outlook on the Indo-Pacific to promote common interests in regional connectivity, maritime security and sustainable development. For France, Cambodia is an important partner in pushing for a more assertive presence in mainland Southeast Asia and in engaging with ASEAN amid China’s growing influence in the region.
The overture to France also serves domestic messaging purposes. Since taking office in August 2023 Manet has had his work cut out for him, grappling with issues from reviving the economy after the emergence of COVID-19 and mounting geopolitical uncertainties to domestic reforms. To be embraced by France, a nuclear-armed power and a de facto EU leader, sends a powerful message to domestic stakeholders waiting to see what the new, Western-educated leader is planning for the country. It also helps take the wind out of the sails of Cambodian opposition groups, especially those based in Europe, who have questioned the legitimacy of Manet’s ascent to power.
Cambodia’s strategic overture to France under its new government stems from economic, geopolitical and domestic political imperatives. Although ties between the two countries have existed for 180 years, the significant increase in tempo and depth since 2022 underscores Cambodia’s desire to establish a stronger European footing in its foreign policy. France’s reciprocal embrace of Cambodia reveals its aim to bolster its influence in the ASEAN region and the Indo-Pacific more broadly.
The planned elevation of Cambodia–France relations to a strategic level presents an emerging dynamic in Cambodia’s foreign policy under Hun Manet.
Read more here.
Chansambath Bong is a PhD scholar at the Strategic and Defence Studies Centre at The Australian National University and a Research Fellow at the Asian Vision Institute, a policy think tank based in Cambodia.
Digital Westphalia
A Bulwark to the Descent into Digital Barbarism?
By Warwick Powell, Senior Fellow, Taihe Institute, Beijing
Wherever we look, the “order” of the unipolar moment is in disarray. Fractures and contests are emerging just about everywhere, so it would seem, with geopolitical and civilisation dimensions. This discombobulation of the unipolar order is accentuated at the vectors of modern information technology, whether it be in the specialised equipment used to manufacture semiconductors and the associated raw materials supply chains (rare earths and other metals), the protocols and standards that govern the development and use of “intellectual property,” and the various applications of increased computational capacity euphemistically described as “artificial intelligence” (AI).
Digital technologies have increased their footprint over many facets of national and international activities over the past few decades. Their impacts have cut across all facets of human existence; from commerce, through public culture and media, and ultimately to military applications. How information is collected, created, validated, stored, disseminated, and used - data ecologies - is now at the heart of what makes societies tick. What happens in the digital arena is expected to shape the possibilities of future generations, as human societies embark on their various journeys towards and through what has been euphemistically referred to as the Fourth Industrial Revolution.
NB: Warwick Powell is an Adjunct Professor at Queensland University, Chair of Smart Trade Networks and Author of China Trust and Digital Supply Chains and Dynamics of a Zero Trust World.
African and Middle Eastern Nations Withdraw Gold Reserves Amid American Economic Concerns
By Jillian Bennett
In a move reflecting growing concerns over the stability of the American economy, several African and Middle Eastern nations have begun withdrawing their gold reserves from the United States in recent months. This trend marks a significant shift in global economic dynamics and underscores the increasing skepticism among nations regarding the traditional safe haven status of the US dollar and American financial institutions.
The decision to repatriate gold reserves is not merely symbolic; it reflects a deeper unease among these nations about the trajectory of the American economy. Among the countries taking such actions are Nigeria, South Africa, Ghana, Senegal, Cameroon, Algeria, Egypt, and Saudi Arabia, each representing crucial regions in Africa and the Middle East. Their actions are prompting questions about the future of the US dollar as the world’s primary reserve currency.
The deteriorating state of the American economy serves as the primary impetus behind these withdrawals. Persistent inflation, mounting debt levels, and concerns about the Federal Reserve’s ability to maintain stable monetary policy have eroded confidence in the US dollar. Additionally, geopolitical tensions and uncertainties surrounding trade relations have further fueled apprehensions among foreign governments.
For African and Middle Eastern nations, safeguarding their gold reserves is not merely a matter of economic prudence but also a strategic imperative. Gold has historically been viewed as a store of value during times of economic turmoil, offering a hedge against currency depreciation and geopolitical instability. By repatriating their gold reserves, these countries aim to insulate themselves from potential financial contagion and secure their wealth within their borders.
Nigeria, Africa’s largest economy, decided to repatriate gold reserves held in the United States earlier this year. The move was met with domestic support, with Nigerian officials citing concerns about the long-term stability of the US economy and the need to diversify risk exposure. Similar sentiments have been echoed by other nations in the region, highlighting a broader trend of reevaluation of traditional economic dependencies.
In the Middle East, Saudi Arabia’s decision to withdraw its gold reserves from the United States sent shockwaves through global markets. As one of the world’s largest oil exporters and a linchpin of the global economy, Saudi Arabia’s actions underscore the growing disillusionment with the American financial system. The kingdom’s move is seen as a strategic maneuver to safeguard its financial assets amidst heightened geopolitical tensions and uncertainties in the region.
Egypt and South Africa, two other major economies, have also taken steps to repatriate their gold reserves, signaling a coordinated effort among African and Middle Eastern nations to reduce their exposure to US economic risks. While the immediate impact on the US economy may be limited, the long-term implications of this trend are profound and could potentially reshape the global financial landscape.
The withdrawal of gold reserves from the United States by African and Middle Eastern countries represents a shift in international finance. It reflects a loss of confidence in the traditional pillars of the global economic order and underscores the need for diversification and risk management strategies. As these nations assert greater control over their financial assets, the balance of power in the global economy is poised to undergo significant recalibration, with far-reaching implications for the future of international finance.
Read more here.
Egyptians Are Buying and Selling Gold Just to Stay Afloat
Clamour for the precious metal is growing as the buying power of the country’s currency plunges in value against the dollar, and inflation eats away at savings.
By Vivian Yee and Nada Rashwan
For this article, the reporters spent time with gold sellers and customers at the Khan el-Khalili market in Cairo.
Inside the wood-panelled shop in Cairo’s famed Khan el-Khalili market, the price of gold was slumping fast, and Rania Hussein was feeling the future slip through her fingers. She and her mother watched the gold merchant weigh the necklace and three bangles they had brought in — jewelry Ms. Hussein had bought for her mother as a present five years ago but which they now needed to sell. Her brother was getting married, an expensive undertaking even in normal times, but the economic crisis and soaring inflation that have gripped Egypt for more than two years left the family no choice.
Years of reckless spending and economic mismanagement had come to a head in 2022, when Russia’s invasion of Ukraine helped plunge Egypt into a financial crisis. The war in Gaza has only deepened the pain.
The crisis has jacked up the price of eggs at the grocery store as well as the new furniture her brother is required, by tradition, to buy for the marital home, Ms. Hussein said. It also has shut her clothing design business and wiped out three-quarters of the value of her brother’s salary as an accountant.
And, in an odd side effect, it upended Khan el-Khalili’s normally placid gold jewelry and bullion stores, with their old-fashioned curly lettered signage and the Quranic recitations drifting ceaselessly from dusty speakers. In the past two years, speculators buying gold descended on the market as a crashing Egyptian currency drove up demand for gold as a safe haven from the turmoil.
While the price of the metal has generally risen despite the occasional reverse, its value has ebbed and flowed along with demand, depending on the vagaries of daily economic news, a volatility that has baffled both consumers and merchants.
On the day Ms. Hussein visited the market, the price of gold was dropping fast on news that Egypt might have found a lifeline to save it from what had, until then, looked like looming financial ruin. The country late last month struck a $35 billion deal for the United Arab Emirates to develop a new city and tourism destination on Egypt’s Mediterranean coast.
Within hours of the deal’s announcement, Egypt’s pound strengthened, the dollar’s black-market value fell and gold prices dropped with it.
If the Emirati funds materialize as promised, analysts say, the cash, along with a new bailout agreement with the International Monetary Fund expected within weeks, will help Egypt stabilize its economy. It will help the country avoid a debt default, pay for a backlog of needed imports and undercut the black market in dollars created by a shortage of foreign currency.
But for Egyptians, the damage has been done.
As they watched the value of their paychecks and savings evaporate over the past two years, the poor skimped on food, the middle class pulled their children out of good schools for cheaper or free ones, and even the better-off went without vacations and meals out. Millions of people descended into poverty.
“It’s not guaranteed that it’ll go up, and I’m afraid that it’ll go down again,” Ms. Hussein said of the falling price of gold as she sat in the market shop, explaining why she had decided to sell. “And the price of furniture should go down, but we have yet to see it.”
She sighed, adding, “Everything is a joke.”
The turbulence has turned many people into reluctant speculators, their lives ruled by uncertainty and rumors. Checking the black-market price of the dollar has become as commonplace as checking the weather forecast.
On paper, Ms. Hussein would collect more for the jewelry than what she had paid for it five years ago, but two years of rampant inflation and a sliding pound would probably cancel any gains. The price of many goods is now set by the black-market value of the dollar, which rose to around 70 pounds to the dollar last month, compared with about 16 before the crisis. “Even vegetable sellers are worried about the dollar price,” said Ms. Hussein’s mother, Tamrihan Abdelhadi. “Everybody is pricing in dollars.”
The family had already sold one of Ms. Abdelhadi’s gold rings to afford the three new rings a groom’s family traditionally gives an Egyptian bride, and still there was the couple’s apartment to think about.
“It’s so expensive, the living room set for example,” Ms. Hussein said. “This isn’t going to be enough for that, but it’ll go into the fund.”
Since early 2022, a crippling dearth of foreign currency triggered by Russia’s invasion of Ukraine and Egypt’s heavy debt load has sent inflation to record highs and the value of the local currency plummeting to record lows.
The war in Gaza has deepened the crisis, threatening tourism, a key source of foreign currency, and halving Egypt’s dollar revenue from the Suez Canal as the Iran-backed Houthi militia has attacked ships in the Red Sea.
Egypt imports oil, wheat and many other goods that it must pay for in dollars. That has made the United States currency both indispensable and scarce, creating a murky black market in which the dollar’s value far outpaces the exchange rate artificially set by the government of about 31 pounds to the dollar.
Looking for safe financial harbors, Egyptians with savings began plowing them into gold, real estate and cars — anything they thought would hold its value better than the foundering Egyptian pound.
Traditionally, Egyptians have bought gold jewelry as a long-term saving strategy, but speculators have now turned to coins and ingots to try to turn a quick profit, said Saeed Imbaby, the founder of iSagha, a gold trading platform.
Demand for gold doubled and then some, driving up the price. The market grew so fevered that the government announced in November that it was partnering with a financial technology company to install A.T.M.s that would dispense gold bars instead of cash.
Before the pound’s value began slipping, “I never thought about gold, not even jewelry,” said Nermin Nizar, 52, a translator in Cairo. But “in this panic, I needed anything I could get to protect the value of my money.”
She put her savings into a single gold coin in September. Its value in pounds has risen 30 percent, though inflation would slash the buying power of the profit if she sold now.
The speculation wreaked havoc in the Khan el-Khalili gold market as shop owners confronted an ever-fluctuating price for the raw material they bought to turn into rings, necklaces and earrings. Many stopped selling altogether.
“I can’t work, because I don’t have a stable price to sell at,” said Amir Salah, the owner of a small gold jewelry store. “I don’t even understand that much of what’s going on.”
Now a new uncertainty is gripping the market, though one tinged with optimism. The Emirates, a longtime political ally and financial patron of Egypt’s president, Abdel Fattah el-Sisi, has already begun transferring billions of dollars to Egypt for the development deal, Mr. el-Sisi said on Wednesday. The president, who until the war in Gaza began had been hemorrhaging popular support, appears to have won a reprieve.
“It’s reassuring,” said Nasser Badawi, the proprietor of the Bullion Trading Center in Khan el-Khalili, which sells tiny solid-gold lollipops and baby bottles as gifts for newborns, along with regular ingots that he said had become popular investments last year. “Anything that brings me funds and helps me get through this crisis, why not?”
Preventing the economy of the Middle East’s most populous country from collapsing has likewise taken on new urgency for Egypt’s Western partners amid the war in Gaza. The I.M.F. has announced that it will increase a previously agreed loan of $3 billion within weeks, with the amount expected to total about $8 billion, according to five diplomats in Cairo who were briefed on the talks.
But few details about the Emirates deal were available. The funds would stave off default, analysts said, but Egypt risked another crisis if it did not make meaningful reforms to cut spending, attract more private investment, produce more exports and reduce the military’s dominance over the economy.
Before the deal, growing economic pressure had forced the government to make some changes, including freezing some costly megaprojects ordered up by Mr. el-Sisi that had piled on the debt, among them a showy new capital in the desert.
But Egypt now has less incentive to change course.
The deal is “a game-changer,” said Tarek Tawfik, the chairman of the Cairo Poultry Group and president of Egypt’s American Chamber of Commerce. “The question is, how will the money be used?”
Read more here.