Frontier Markets Weekly, April 15th 2023

Botswana plays hardball | Japan proposes Bangladesh hub | Iran’s infrastructure play | Ecuador looks for $1b credit line

By Dan Keeler, Ken Stibler, Noah Berman and Nojan Rostami

Welcome to the latest edition of Frontier Markets News. As always, I would love to hear from you at with news ideas, feedback and anything else you find interesting. 

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Sudan rivalry between powerful generals erupts in warfare

Heavy fighting has broken out today in Sudan’s capital between the national army and a powerful militia, Nicholas Bariyo reports in the Wall Street Journal. The fighting represents a dangerous escalation of tensions between the country’s top two generals, who worked together to oust the longtime dictator, Omar al-Bashir, in 2019.

Smoke rises during clashes between the Paramilitary Rapid Support Forces and the army in Omdurman, Sudan. Photo: Mohamed Nureldin Abdallah/Reuters

In competing statements, the army, commanded by Lt. Gen. Abdel Fattah Al-Burhan, the leader of Sudan’s military junta, and the Rapid Support Forces, a state-sponsored militia led by Gen. Burhan’s deputy, Lt. Gen. Mohamed Hamdan Dagalo, blamed each other for starting the conflict. Residents reported gunfire and frequent explosions across the capital Khartoum and Omdurman, its twin city across the Nile River.

Earlier in the day, residents and military officials said the army had surrounded a RSF base in Khartoum, prompting heavy gunfire. State television reported that the Sudanese military had declared the RSF a rebel force.

Ghana approves landmark malaria vaccine as it seeks IMF bailout

Ghana became the first country in the world to approve a new malaria vaccine on Wednesday. The vaccine has been cleared for use in children between six months and three years old. 

The vaccine, designed by scientists at Oxford University, was up to 80% effective in a trial in Burkina Faso. Malaria kills over 600,000 people per year in Africa and is one of the leading causes of child mortality. The World Health Organization has not yet approved the shot.

Faith, 3, who participated in testing the world’s first malaria vaccine (RTS, S) pilot program, at home in Kenya on March 7, 2023. Ghana has become the first country to approve a new malaria vaccine described as a ‘world changer’ by the scientists who developed it. Photo: AFP via VoA

Separately, Ghana has been readying its finances to secure a $3 billion bailout from the IMF. After defaulting last year, it is now restructuring about $47 billion in public debt.

Leaked documents detail Egypt’s plan to supply Russia with rockets

A leaked US intelligence document revealed that Egyptian President Abdel Fatah El-Sisi ordered the production of up to 40,000 rockets to be exported to Russia, the Washington Post reports. El-Sisi reportedly instructed subordinates to keep the arms sale secret “to avoid problems with the West.”

Egyptian President Abdel Fattah el-Sisi. Photo: Charles Platiau/Reuters

The leaked document appeared alongside several other classified US military and intelligence documents on Discord, an instant messaging platform popular with gamers. A senior Egyptian military official denied the report on Tuesday, CNN reports. US officials have denied seeing any evidence that the deal took place.

Egypt is a major recipient of US aid and has long been considered a US partner in the turbulent Middle East region. If true, the allegations that Egypt attempted to supply Russia with weapons could blow up relations between Egypt and the United States, Responsible Statecraft reports. 

Botswana plays hardball with key mining partner amid attempts to capture more diamond revenue

Botswana’s President Mokgweetsi Masisi has warned diamond miner De Beers that the country might end its 50-year partnership in June unless it receives a larger share of the output, report the FT’s Harry Dempsey and Joseph Cotterill. Botswana is entitled to 25% of production, but Masisi is demanding more from industry, which accounts for around a third of GDP.

Botswana’s joint venture with De Beers is a major source of employment and tax revenue. Photo: Calvin Sit/Bloomberg

Recently, Botswana’s government invested an undisclosed sum for a 24% stake in Belgian diamond processor HB Antwerp, which aims to increase transparency in the diamond supply chain and is seen as a challenge to De Beers. Additionally, the sanctioning of Russia’s diamond industry, the world’s largest, has apparently strengthened the government’s position in negotiations.

De Beers says it wants to continue the partnership and pointed to efforts to set up local cutting and polishing facilities that employed nearly 4,000 people by the end of 2022. For Botswana, quitting Da Beers would be costly and time-consuming but its tough stance on the multinational reflects political realities in the run-up to next year’s elections.

Podcast: Charlie Robertson, Renaissance Capital

If you’ve got a bad dose of FOMO from missing the start of the EM recovery late last year, it’s not too late to jump on the bus. According to Charlie Robertson, the always entertaining and thought-provoking chief economist at Renaissance Capital, now’s (still) a good time to buy EM. As long as you’re looking to the long term.

Listen in to our latest podcast to hear Charlie serve up the good stuff on a whole host of key topics for EM and FM investors.


Military bombings kill over 100 in Myanmar

Myanmar’s ruling military junta killed over 100 people and injured dozens more in an airstrike on Tuesday. The attack, which targeted villages in the Sagaing region of central Myanmar, was one of the deadliest since the military took power in a coup in February 2021.

The aftermath of shelling and airstrikes on Pa Zi Gyi village in Myanmar’s Sagaing region. Photo: Citizen journalist via RFA

Most of the dead were women and children, Radio Free Asia reports. The junta frequently launches air strikes against regions that are known for their opposition to the ruling military regime such as Sagaing, local outlet the Irrawaddy reports. Thousands of people have been killed and over a million have been displaced in Myanmar since the coup began, according to the UN.

UN Secretary-General António Guterres strongly condemned the attack and called for those responsible to be held accountable. Human rights organization Amnesty International asked wealthy countries to suspend sales of aviation fuel to Myanmar that could be used to conduct air strikes. 

Japan proposes industrial hub in Bangladesh

Japan proposed a hub in Bangladesh that would create supply chains to service NepalBhutan and landlocked states in northeastern India. The proposed plan would see Japan create a port and transportation hub in the Bay of Bengal, which is bounded by Bangladesh to the north and India to the west.

Japanese officials said the port could become operational by 2027. The proposal comes after a visit to the region last month by Japanese Prime Minister Fumio Kishida prompted Japan to approve $1.27 billion in funding for three infrastructure projects in Bangladesh, Reuters reports.

Japanese Prime Minister Fumio Kishida. Photo: Reuters

This is not the first time a wealthy Asian state has sought to woo Bangladesh by building a port on the Bay of Bengal. China agreed to construct a port in the area in 2006, the Diplomat reports, but the project never materialized. A port that is instead built by Japan could mark a win for the so-called Quad—an informal alliance between Japan, India, Australia and the US—as it seeks to counter Chinese influence in the Indo-Pacific region.

Apple considers making computers in Thailand

The world’s most valuable company is in talks with suppliers to shift MacBook production to Thailand, Nikkei reports. These suppliers have existing manufacturing capabilities in the country, which could be used to make MacBooks, according to Nikkei.

For Apple and other tech companies, Thailand is emerging as an important alternative production base to China. Photos: Reuter

It’s the latest development in Apple’s turn toward Southeast Asia. Earlier this year, Apple said it would begin manufacturing MacBooks in Vietnam with workers from Cambodia and Laos. The company has been producing watches in Thailand for more than a year.

Apple has also ramped up its production elsewhere in Asia. It has tripled its production of iPhones in India in the past fiscal year, Bloomberg reports, and now makes 7% of its iPhones in the country. The majority of iPhones are still made in China.

Middle East

Saudi Arabia makes further progress on diplomatic realignment

This week, Iran reopened its embassy in Saudi Arabia after a high-level diplomatic visit, Reuters reports. In a parallel move, a Saudi Arabian delegation landed in Tehran to discuss reestablishing the kingdom’s diplomatic presence in Iran.

The reopening of embassies is one of several major steps taken recently in normalizing Iran-Saudi Arabia relations, and is part of Saudi Arabia’s regional foreign policy realignment which includes exploring the possibility of peace in Yemen. After talks between Saudi Arabia’s ambassador to Yemen and Iran-backed Houthis, nearly 900 prisoners are to be exchanged, Al Jazeera reports.

An exchange of nearly 900 prisoners from Yemen’s civil war started on April 14, the biggest swap since 2020. Photo: Saleh al-Obeidi/AFP

This shift in Saudi Arabia’s foreign policy follows a deal with Iran brokered by China, which is seen as having sufficient leverage over both countries to guarantee a deal as it deepens its engagement in the Middle East. However, Saudi Arabia has not shown itself willing to fully break ties with the US, its most important security partner, as shown by high-level talks this week with the US on the normalization process with Iran.

Iran moves to deepen infrastructure links with trading partners

Seeking to carve out a niche in regional transit networks, Iran’s transport minister held meetings with his counterpart in Iraq this week to finalize bilateral agreements on bridge and railway construction linking the two countries. The project would link Iran and Iraq via Basra through a series of bridges, railways and roads, and when complete would link Iran’s railways to Syria and Jordan.

Iraq has allocated $230 million to construct the project, with an expected completion time of 18 months. The project is one of several Iraq’s pursuing to diversify its trade infrastructure and reduce reliance on Arab Gulf ports.

Iran is also looking to capitalize on new trade infrastructure. Deputy foreign minister Mehdi Safari was in India this week, pitching the Chabahar port as a potential regional transit hub for the Indian Ocean. Iran’s only deepwater ocean port, Chabahar is a joint project between Iran and India meant to facilitate trade integration between the two countries and Central Asia.

Diversifying Gulf economies provide a lifeline for embattled VC firms

Large Silicon Valley investors including Andreessen Horowitz and Tiger Global are increasingly looking to build long-term relationships with Middle Eastern sovereign wealth funds, as venture firms face a funding crisis and gulf monarchies are flush with cash and keen to diversify, the FT’s Tabby Kinder and George Hammond report.

Venture capitalists have rushed to court key funds in Saudi Arabia and the UAE that are diversifying into sectors such as artificial intelligence. Booming oil revenues have made the Middle East “the most liquid place on the planet right now,” according to the head of one $1 billion venture fund.


Degrading Hungary-US ties in spotlight after intel leaks

Hungarian Prime Minister Viktor Orban said the US is one of his party’s top three adversaries according to a CIA assessment included in a trove of US documents leaked recently. The designation—and nature of the intelligence collection itself—highlights the widening rift between NATO allies Washington and Budapest, the WSJ’s Thomas Grove reports.

Hungarian Prime Minister Viktor Orban. Photo: Olivier Matthys/AFP/Getty Images

This week, Hungarian Foreign Minister Péter Szijjártó became one of the only officials from an EU country to meet with Russian officials as he sought to secure a new energy deal with Moscow. Dependence on Russian oil and a distrust of the West have led Hungary’s leaders to lobby heavily for weaker sanctions in repeated rounds of EU measures against Russia.

Ukraine attempts to grow economy despite continued war in the east

Ukraine’s GDP fell by a lower-than-expected 29.1% in 2022 as Russia’s full-scale invasion battered the economy. The export-dependent economy saw particularly steep drops in industry and trade, with exports falling 35%, grain production falling to 53 million tons in 2022 from 86 million tons in 2021, and steel production reduced by almost 71%. 

Now, despite limited access to its ports and continued heavy fighting in the east, the government is redoubling efforts to grow exports and shore up its economy. The government expects 1% growth for 2023 on the back of moves toward diversifying overland trade routes into Poland and Romania and a stabilizing security situation.

A Ukrainian soldier with a German self-propelled Panzerhaubitze 2000 on the frontline in Bakhmut, Donetsk region. Photo: AP/Libkos

This week ​​the energy minister announced that electricity exports to Europe would resume after the country moved quickly to recover from Moscow’s bombing campaign against utility infrastructure. Additionally, a reopened rail line that bypasses Russia-controlled Transnistria has provided a new overland route for salt and grain exports to Moldova and Romania.

Latin America

Ecuador requests $1 billion credit line as natural disasters compound insecurity

Ecuador is reportedly asking the IMF for a credit line as a string of natural disasters further undermines the Andean country’s economy. Destruction from a large earthquake, flooding and landslides is contributing to investor skittishness, Bloomberg reports.

Finance Minister Pablo Arosemena attempted to reassure money managers on the sidelines of the IMF spring meetings this week that the country is solvent after pro-business President Guillermo Lasso’s crushing referendum defeat in February and a second impeachment attempt sent the country’s bonds below 30 cents on the dollar, according to data compiled by Bloomberg.

Workers remove debris from buildings following an earthquake in Ecuador. Photo: Ariel Suarez/AFP/Getty Images

Ecuador’s challenges run deeper than the recent natural disasters, with oil production being repeatedly halted by frequent political protests. Also, the commercial capital of Guayaquil has been rocked by fighting between rival gangs vying for control of lucrative drug trafficking routes, pushing the country’s homicide rate past those of Brazil and Mexico, long ranked among Latin America’s most violent countries. Investors are concerned such factors will lead to a political revival of the hard-left faction of former president Raphael Correa.

Cuba allows dollar deposits as the island’s economy crumbles

The Cuban government ended a two-year ban on financial institutions’ accepting dollars this week as the island faces a deepening economic crisis, with mounting shortages of food, medicines and fuel reaching critical levels in recent weeks. The reversal is considered necessary to maximize the benefits of a post-pandemic recovery in tourism, France24 reports.

A line of taxis waiting to refuel in Havana. Photo: Yander Zamora, EFE

The move comes after the government ended its parallel currencies system, phasing out a convertible peso pegged to the dollar and leaving only the weaker regular peso. However, the currency has continued falling and its cratering value only exacerbates challenges for Cuban consumers who are facing runaway inflation and critical shortages of basic goods.

  • US and Cuba to hold fresh round of migration talks this week. (Reuters)

Cuban economists argue that the current challenges, including months of blackoutsdue to failing electricity infrastructure, are structural and likely to continue as thousands flee the crisis.

What we’re reading

Kenyan presidential adviser rules out default as cash crunch delays salaries. (Reuters)

Sudan’s military warns of conflict after rival force deploys. (AP)

Pakistan gets closer to IMF deal after UAE pledges $1 billion. (Reuters

Over 1m girls barred from Afghanistan schools as rules sap economy. (Nikkei)

US cast as villain during meeting in Uzbekistan of Afghan neighbors. (VoA)  

JapanIndia and France form common platform for Sri Lanka creditors. (Al Jazeera

ThailandJapan and Vietnam lag in Asia’s digital payments rush. (Nikkei)

Indonesia to propose limited free trade deal with US on critical minerals. (Reuters)

Iran executions up 75% as Tehran seeks to ‘instill fear’ in protesters, rights groups say. (CNN)

Fresh wave of poison-gas attacks reported at Iran girls’ schools. (Bloomberg)

Iran exploits earthquake relief mission to fly weapons to Syria. (Reuters)

China’s Sinopec to take stake in Qatar’s North Field East. (Reuters)

Qatar and Bahrain to restore ties, ending years-long dispute. (Al Jazeera)

Saudi Arabia’s drive to get expats to ditch Dubai is off to a rocky start. (Bloomberg)

Montenegro’s central bank to test CBDC with Ripple. (CoinDesk)

Europe’s eastern half claps back at Macron: We need the US. (Politico)

Russian oil exports back above pre-Ukraine war levels as India and China buy 90% of Moscow’s crude. (The Independent)

Satellite images capture Russian forces preparing for war in Crimea. (Radio Free Europe)

USPanama and Colombia aim to stop Darien Gap migration. (AP)

Argentina’s epic drought is pushing economic crisis to new extremes. (Bloomberg)

China utility powers up South America presence with Peru purchase. (Nikkei)

Brazil’s Lula departs for China, seeking deeper economic ties. (Nikkei)

Brazil recovers the Russian market for its beef exports. (Mercopress)

Renminbi’s share of trade finance doubles since start of Ukraine war. (FT

iShares to convert frontier markets ETF to active management. (FT)

IMF lowers global economic growth outlook as ‘fog thickens.’ (UN)

China in talks for compromise on poor country debt. (WSJ)

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