Power and Wealth

US inflates war, pervasive Polycrisis, fractured world, Vietnam veers north, ASEAN QR codes, cross-border is multilateral, Asia's payment landscape, Cambodia Riel pay

Feb 3

UPDATE: In the Ukraine and Taiwan, the United States has been trying to regain its global military dominance and political pre-eminence since former US president George W. Bush launched the disastrous "War on Terror" in 2001.

Is the global economy facing a polycrisis: increasing climate change, Russia’s war in Ukraine and capital flight from emerging markets and developing countries?

António Guterres offered an unusually frank assessment of the international order’s current predicament. With the world “plagued by a perfect storm on a number of fronts,” he said, “we need cooperation, yet we face fragmentation.”

Does Nguyen Phu Trong’s anti-corruption purge mean Vietnam is moving in a more ideological and less pro-Western direction?

ASEAN central banks of Singapore, Indonesia, Thailand, Malaysia, and the Philippines would look to "enhance cooperation on payment connectivity to support faster, cheaper, more transparent, and more inclusive cross-border payments" - and Cambodia has joined the QR payment code network too. In fact, the region’s cross-border payments account for an increasingly large share of a global market expected to reach US$156 trillion globally this year.

NATO part of US ocean-front strategy

Across three oceans, the Atlantic, Indian and Pacific, and two fronts, the First Island Chain centered on Taiwan, and the Baltic to Black Sea Cordon centered on Ukraine, the United States has been trying to regain its global military dominance and political pre-eminence since former US president George W. Bush launched the disastrous "War on Terror" in 2001 to supposedly fight global terrorism.

Washington's strategy to thwart any power that has the potential to become a regional leader and threaten the US' global primacy is focused on the Eurasian super-continent in Eastern Europe to counter Russia and the Western Pacific to counter China.

Vacillating India in 'Indo-Pacific' strategy

Back in 1972, by acknowledging that "all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China" in the Shanghai Communique, Washington fulfilled its need to establish a détente with China so it could disengage from Southeast Asia (the Vietnam War) in order to concentrate its efforts on thwarting the Soviet Union.

However, the US' 2016 "Indo-Pacific" strategy shows that it is desperate to curb China's rise but cannot do so without the help of Japan and India (or other major allies). The Quadrilateral Dialogue (or Quad which comprises the US, Australia, India and Japan) and AUKUS alliance (Australia, the United Kingdom and the US) are testament to the fact that, unlike Australia and the UK, Japan and India and are not mere US auxiliaries in the implementation of the "Indo-Pacific" strategy.

Despite US inducements and coercion, India has been promoting multipolarity and de-dollarization. And apart from maintaining, rather strengthening, its energy and arms trade with Russia despite the Russia-Ukraine conflict, India has also become more influential globally thanks to its participation in the Quad, the Shanghai Cooperation Organization and BRICS (Brazil, Russia, India, China and South Africa).

Read the full article here.

Amid Polycrisis, the IMF and the World Bank Should Do More to Stabilize the World Economy

The global economy is facing polycrisis: increasing climate change, Russia’s war in Ukraine and capital flight from emerging markets and developing countries, leading to declines in their foreign exchange reserves, local currency depreciation and difficulties to repay dollar denominated loans.

A recent book by Leonce Ndikumana and James K. Boyce found that between 1970-2018, the African continent lost $2 trillion to capital flight. The authors tracked the sources, the channels and destinations of capital flight, revealing that it is not unrelated to the premature capital account liberalization and the weak global governance system around tracking the flows of trade mis-invoicing, money laundering, tax evasion and illicit financial transactions, which African countries frequently struggle to track.

Given this situation, policymakers and development practitioners must ask tough questions. First, who should be held accountable for the consequences of these misleading policies? Washington-based Bretton Woods Institutions, namely the International Monetary Fund (IMF) and the World Bank, have the responsibility and ability to inject liquidity at times of foreign exchange and financial crisis. However, World Bank lending has not kept up with economic growth since 2017. In fact, it declined in fiscal year 2022, and the IMF has not done much better, which should be unacceptable to the shareholders of the IMF and the World Bank.

Everyone Loses in a Fractured World

At the latest annual meeting of the World Economic Forum in Davos, United Nations Secretary-General António Guterres offered an unusually frank assessment of the international order’s current predicament. With the world “plagued by a perfect storm on a number of fronts,” he said, “we need cooperation, yet we face fragmentation.”

In fact, the perfect storm is better likened to a tsunami. Its components – including supply-chain disruptions, an energy crunch, a cost-of-living crisis, slowing global growth, and a lurch toward climate disaster – are all at least partly consequences of the tectonic rift between China and the United States.

If what Guterres calls the “Great Fracture” plays out, the world will have “two different sets of trade rules, two dominant currencies, two internets, and two conflicting strategies on artificial intelligence.” The costs would be tremendous. World GDP would shrink by 1.5%, or more than $1.4 trillion in annual terms; prices would rise virtually across the board; and the delivery of global public goods would be severely diminished.

Indeed, sceptics will reasonably ask whether speeches from the attendees at WEF can ever offer the necessary solutions to prevent further fracturing of the world economy and the oncoming tidal wave of crises in developing countries. Especially so when many of the institutions the Davos elite represent—financial giants, technology companies and other multinational corporations—have been beneficiaries of that system.

Corporate power over markets, societies and the environment is a fact of everyday life around the world. It is visible in inflated prices for consumer goods, rent extraction from developing markets, ‘greenwashing’ and vaccine apartheid. But the structural underpinnings of that power—and, crucially, of corporate impunity—remain mostly invisible.

Read the two articles here and here.

Vietnam sees a shared future more with China than US

The CPV’s priorities have changed after decades of impressive economic growth. Vietnam is behind only Hong Kong and Singapore in economic dynamism in the region. Nguyen Phu Trong’s anti-corruption purge means Vietnam is moving in a more ideological and less pro-Western direction. The resignation of Vietnamese president Nguyen Xuan Phuc last month had an inevitability about it. The media were rife with speculation for weeks implicating Phuc’s close family members in corruption scandals.

Several dozen officials, including two deputy prime ministers, were earlier removed from their positions in major scandals of price-fixing and kickbacks for Covid-19 test kits, as well as bribes for seats on charter flights returning Vietnamese citizens to the country during the pandemic.

The decade-old anti-corruption drive led by Communist Party of Vietnam General Secretary Nguyen Phu Trong gained momentum in recent years and seems motivated by concerns strikingly similar to those voiced by the Communist Party of China (CPC) and President Xi Jinping. Fundamentally, the impetus behind it is the CPV’s legitimacy as the ruling party.

ASEAN Central Banks Seal Regional Payment Connectivity

Central banks of Singapore, Indonesia, Malaysia, Thailand, and the Philippines have signed an agreement to boost connectivity and facilitate speedier and "more transparent" cross-border payments. The agreement further supports the region's ambition to establish connected payments to drive down the cost of such payments.

The central banks of Singapore, Indonesia, Thailand, Malaysia, and the Philippines would look to "enhance cooperation on payment connectivity to support faster, cheaper, more transparent, and more inclusive cross-border payments". The Memorandum of Understanding was inked by Bank Indonesia, Bank Negara Malaysia, Bangko Sentral ng Pilipinas, Bank of Thailand, and Monetary Authority of Singapore (MAS) on the sidelines of the G20 Leaders' Summit held this week in Bali, Indonesia.

"This is particularly beneficial for micro, small, and medium enterprises as it will facilitate their participation in international markets and include several features, including QR code and fast payment”

The Regional Payment Connectivity pact is touted as an important move to drive economic recovery and inclusive growth across the Asean region, with cross-border payment connectivity key to facilitating cross-border trade, investment, tourism, and other economic activities. The partnership could grow to include other markets within and outside the region.

Read full article here.

Exploring multilateral platforms for cross-border payments

This report provides an assessment of whether and how multilateral platforms could bring meaningful improvements to the cross-border payments ecosystem. It was written by the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) in collaboration with the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank. The report analyses the potential costs and benefits of these platforms and how they might alleviate some of the cross-border payment frictions. It also evaluates the risks, barriers and challenges to establishing multilateral platforms and explores two paths for their evolution. The analysis is based on a stocktake, conducted by the CPMI, of existing and potential multilateral platforms as well as bilateral discussions with existing platform operators.

A multilateral platform is a payment system for cross-border payments that is multi-jurisdictional by design. It can substitute for or operate alongside traditional correspondent banking relationships or bilateral interlinking of domestic payment infrastructures. A multilateral platform can potentially shorten transaction chains by allowing participants in different jurisdictions to send or receive payments directly instead of via multiple intermediaries. Depending on its design, a platform can offer extended operating hours to meet the requirements of participants in different time zones and ease compliance checks related to anti-money laundering and combating the financing of terrorism (AML/CFT). Built as new, it can also reduce dependencies on legacy systems by implementing the latest technology and payment message standards. To the extent a multilateral platform is able to mitigate these underlying frictions, it could reduce the costs and increase the safety, speed and transparency of cross-border payments.

Download full report here.

Boosting interoperability Landscape Review of cross-border payments and Opportunities

Cross-border payments in Asia Pacific have made significant strides in recent years, buoyed by strong economic growth and steady digitization of financial services. Estimated by McKinsey & Co. to have grown at 6% annually from 2011-2019, the region’s cross-border payments account for an increasingly large share of a global market expected to reach US$156 trillion globally this year.

Integral to Asia-Pacific’s payments story are new real-time payment rails. Innovators in this fast-growing segment are not only fintech upstarts but also central banks keen to build faster, cheaper, more transparent, and more efficient conduits for financial flows in the region.

However, fragmentation has grown in tandem with the digital payments boom, characterized by disparate messaging standards, settlement times and operating hours. In Asia Pacific, user preferences for payment methods vary greatly by country. In China, the e-wallets Alipay and WeChat Pay are dominant. Together, they have around a 90% market share. In Singapore, credit cards are popular, though the national real-time payments platform PayNow is gaining traction. In Australia and New Zealand, credit and debit cards together account for almost 40% of online payments.

Download the country by country review here.

ACLEDA Bank chosen for Cambodia-ASEAN cross-border QR code payments

ACLEDA Bank Plc. has been chosen as the Sponsoring Bank for KHR (Cambodian Riels) cross-border payments via QR code with ASEAN neighbouring countries including the Socialist Republic of Vietnam and the Lao People's Democratic Republic in addition to KHR cross-border payment via QR code in the Kingdom of Thailand which have been launched since February 2020 in order to promote the wide use of KHR for settlement in ASEAN region and financial inclusion in line with integration of ASEAN Economic Community (AEC).

In February 2020, ACLEDA Bank Plc. and Siam Commercial Bank (SCB) were selected as sponsoring banks to engage in business cooperation relating to QR cross-border payment for ACLEDA Bank's customers and Cambodian people making the KHR payment in Thailand through scanning QR code. At the end of 2022, the customers and Thai people can make THB settlement and payment in Cambodia via scanning QR code.

Read the press release here.

The Long Mekong