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Friday, 19 September 2008

"Frontier Markets" and financial crisis...

As the world's developed markets tumble on the financial crisis in the US, how are the frontier markets (i.e. Zambia - see here), or the less-developed emerging markets, faring? Daniel Broby, CEO of Danfolds, sees opportunities in these markets in the long term.

6 comments:

  1. This day, when the world’s biggest investment corporations Lehman Bros., Merrill Lynch & Co. and Bear Stearns; largest insurance company (AIG); and giant car companies (GM, Ford & Chrysler) – have to be bailed out by government to avoid total meltdown, should be a day of reflection and celebration especially for those of us in Africa. We have been preached to for too long on the beauties of ‘capitalism’. Capitalism after all, has got its own dark days. Billions and billions of dollars are being spent just to prop up the addiction to profits. Too bad!

    Since we know that these guys will chop up this money and come back for some more, may be a caveat should accompany bailouts – that the CEOs of any bailed out corporation automatically goes to jail.

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  2. http://www.businessweek.com/magazine/content/07_50/b4062046700574.htm

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  3. Kaela,

    This day, when the world’s biggest investment corporations Lehman Bros., Merrill Lynch & Co. and Bear Stearns; largest insurance company (AIG); and giant car companies (GM, Ford & Chrysler) – have to be bailed out by government to avoid total meltdown,

    The heroes of Wall Street and Free Trade are asking for the government to bail them out. Bail them out, not bail out the millions of home owners who are about to be turned out of their homes, which would turn this recession into the Great Depression Part 2, and they don't care. They can flee anywhere in the world. Paulson himself is a billionaire. Dick Cheney is setting up in Dubai.

    This is the true face of neoliberalism - when faced with the disastrous economic results of their theory, they can always buy another home in a country without an extradition treaty. They have no connection to the people, and their internationally re-allocated capital allows them to run anywhere in the world then things go bad.

    Neoliberalism is a philosophy by billionairs, for the benefit of billionairs.

    should be a day of reflection and celebration especially for those of us in Africa. We have been preached to for too long on the beauties of ‘capitalism’.

    Not capitalism, a specific form of capitalism - neoliberalism: unregulated markets ('free markets'), the handover of state assets to western corporations ('privatisation').

    This is an essentially utopian philosophy, one that has never been shown to be sustainable, let alone has been shown to develop an economy. Also, you have to look forward and enjoy a world dominated by unaccountable, power mad corporations.

    And yet, it was neoliberalism or else the IMF would destroy the economy.

    I have a remedy to all of his.

    1) We trade with ourselves

    Companies are directed (through policies) to produce to first saturate local, then national, then regional markets, in that order. No country's economy should depend on trade with the EU, NAFTA or South Africa.

    2) We only export finished goods

    We would force anyone who buys our copper to manufacture it into finished goods in Zambia itself. This will attract the right manufacturing businesses to Zambia, instead of exploitative 'foreign investors' who are only interested in not paying their employees as much as they would pay elsewhere. This would potentially create many more and higher paying jobs than mining does, allowing us to keep mining operations in Zambian hands.

    3) We institute a minimum wage for foreign corporations

    That means we make sure that the mininum wage they pay in Zambia is a substantive percentage of the minimum wage they pay at home. This will keep more money inside the economy, as well as help create a consumer base. It is also a good start in protecting the world's workers from exploitation. This will not substantively impact Zambia's attraction of foreign business, but it will create a big shift in the quality of the foreign business that sets up in the country.

    4) We reallocate profits from the mines into agriculture and infrastructure

    This will create a sound basis for a selfsustaining Zambian economy, that is far more resistant to global economic trends, than the current dependency on raw materials gives us. We need to be not only selfsufficient in food production, but export surpluses, have multi-year foodreserves and turn agricultural produce into finished goods (canned and packaged food, bourbon from corn, etc.). If we have enough and well balanced economic sectors, it is much easier to reallocate labour when one sector is doing badly. Miners could be reallocated to the agricultural sector, etc.

    Since we know that these guys will chop up this money and come back for some more, may be a caveat should accompany bailouts – that the CEOs of any bailed out corporation automatically goes to jail.

    If a company is too big to fail, it is big enough to chop up and have it's various departments spun off as individual businesses. Otherwise, it is a hazard to the economy itself.

    And this also underscores why we can never rely on massive corporations to run our economy. We need an econmy of many small and medium sized businesses.

    The recent economic events have completely undermined the rationale for neoliberalism, free markets and privatisation.

    So I hope everyone takes note. Neoliberalism and free market theory have failed. They're done. Except in Zimbabwe, where the MDC thinks that privatisation is wonderful, and everyone agrees with them (see their 2008 manifesto).

    We need to apply the policies that are known to allow industries to grow and for all people to achieve higher incomes and a higher standard of living.

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  4. The so called bailout is not intended to be a bailout. The idea is for the government to acquire the companies distressed debt at today's firesale prices, hold them for a period of time and then sell them at higher prices and hopefully produce a profit for the taxpayer.

    By removing this distressed debt from the companies balance sheets, then companies will not be afraid to lend to one another and the credit flow can start moving and the economy functioning again.

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  5. http://www.reuters.com/article/ousiv/idUSTRE48O4AH20080925

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  6. http://biz.yahoo.com/ap/080928/rescue_winners_losers.html

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