Frontier Markets Weekly, June 2nd 2024

Efforts by Colombia’s President Gustavo Petro to reduce dependence on fossil fuels could hit inward investment. Photo: Diego Cuevas/Getty

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By Ken Stibler, Noah Berman and Nojan Rostami. Executive editor: Dan Keeler


Ghana and Zambia make restructuring progress

Both Ghana and Zambia reached deals with their creditors this week, creating optimism about the prospects for two of Africa’s three recently-defaulted states.

Ghana, which defaulted in 2022, has signed agreements with bilateral creditors including China and France to restructure some $5.4 billion in debt. That step brought Ghana closer to securing a $360 million disbursement from the IMF, Africanews reports. The country completed a domestic debt restructuring last October. 

Meanwhile, Zambia’s finance minister said on Tuesday that holders of the country’s dollar-denominated bonds had approved a long-delayed restructuring plan. The vote sets Zambia up to implement a debt restructuring next month that extends maturities and reduces the face value of bonds by more than 20%, FT reports. Zambia defaulted in 2020. It still needs to iron out deals for $3 billion it owes to private creditors, many of which are commercial Chinese lenders.

Zambia’s government under President Hakainde Hichilema finalized a deal on the bonds only in March after overcoming objections by China, Zambia’s largest creditor. Photo: Reuters 

Last December, Ethiopia became the third African country to default in the past five years. Like Ghana and Zambia, it is pursuing restructuring under the G20 common framework, a program devised by wealthy countries to ease the debt-relief process for low-income nations.

Tens of billions in gold ‘smuggled to UAE from Africa’ annually

More than $30 billion in gold was smuggled out of Africa in 2022, most of which went to the UAE, according to a study by NGO Swissaid. After being smuggled to the UAE, the gold is refined and sold around the world as an Emirati product, the study found. 

An artisanal mining site in Burkina Faso. Photo via Swissaid

The study reported that upwards of one-third of gold produced in Africa is not declared, with major quantities also ending up in Turkey and SwitzerlandGhanaMali and South Africa are the continent’s largest producers of the precious metal.

Gold smuggling in Africa is not a new phenomenon. Last year, Al Jazeera reported that high-ranking Zimbabwean officials and South Africanbusinessmen had used gold smuggling to launder money. Much of it flowed through Dubai.

Burkina Faso junta will stay in power for another five years

The leader of Burkina Faso’s ruling military junta signed a charter last weekend that will keep him in power through 2029.

Ibrahim Traoré had formerly pledged to restore civilian rule by July 1 of this year after seizing power in 2022. Traoré took office after deposing a different coup leader, Paul Henri Sandaogo Damiba, who ousted the democratically elected president eight months earlier.

Burkina Faso’s military ruler Ibrahim Traoré seized power in September 2022. Photo: Reuters

Most political parties boycotted the talks that led to the extension of Traoré’s rule, AP reports. The new charter eliminates an existing quota system that assigns seats to the country’s parliament. Instead, “patriotism” will become the sole criterion for representation, BBC reports. 

Burkina Faso is one of many countries in Africa that have experienced coups in recent years. Its neighbors Mali and Niger are both run by military leaders who took power in a putsch. GuineaGabonChad and Sudan round out the so-called coup belt that stretches across Africa from east to west.


Florizelle Lisser, the head of the US-based Corporate Council on Africa, joins us to talk about new opportunities emerging for American companies to invest into Africa. She also shares some unique insights about investment trends—and how to tap into funding from development finance institutions.

Listen to the full episode on Spotify or wherever you get your podcasts.


Ethnic rebels ‘expand control across Myanmar’

Myanmar’s ruling junta has lost control of the vast majority of the country’s territory, heightening the risk that the country could soon collapse, according to two reports released by conflict monitors this week.

The junta has lost control over 86% of Myanmar’s territory in which two-thirds of the country’s population lives, a report by the Special Advisory Council for Myanmar found. That has allowed splintered groups of ethnic rebel armies to expand and consolidate, and prevented Myanmar’s junta from upholding “the core duties of the state,” according to the report.

National Unity Government soldiers photographed in the south of Myanmar in May 2024. Photo: NUG Ministry of Defence

In a separate study, the International Crisis Group said on Thursday that Myanmar is on a “path toward fracturing into self-governing statelets with the regime hanging on in the center.” Both reports urged neighboring countries and regional blocs to engage with the ethnic rebel groups to deliver aid to the country’s civilians.

Pakistan to revive stalled Belt and Road projects

Pakistani officials believe they have found a remedy for the country’s lingering economic crisis: China’s Belt and Road Initiative. Pakistan is currently looking at joint ventures with China in the renewable energy and agriculture sectors, the country’s minister for planning, development and special initiatives told Bloomberg. The move comes amid a wider resurgence in Chinese activity worldwide (see Global section below.)  

Once a flagship destination for BRI investment, Pakistan’s China-funded projects have stalled amid a severe economic crisis. However, the economic relationship appeared to gain momentum last week when the two countries agreed to pick up a tabled $6.7 billion project to extend a Pakistani railway, Arab News reported.

The national flags of China and Pakistan raised to make a visit by Chinese Vice Premier He Lifeng in July 2023. Photo: AFP

Most BRI projects in Pakistan are collected under the China-Pakistan Economic Corridor program, a $62 billion infrastructure network that connects the western Chinese city of Kashgar with a Pakistani port (partially operated by Chinese companies) in the Arabian Sea city of Gwadar. Next week, Pakistani Prime Minister Shehbaz Sharif will visit Beijing to inaugurate the “second phase of CPEC,” Dawn reports.

Cambodia hopes Japanese investment will help curb dependence on China

Cambodia will be less economically dependent on China if it receives more investment from Japan, Cambodian Deputy Prime Minister Sun Chanthol told Nikkei. 

The comment comes amid a Cambodian push to diversify its sources of foreign investment as it attempts to meet a government goal of becoming a high-income country by 2050. Phnom Penh recently set up a task force to speed up the tax refund process for Japanese companies. Some firms may have already taken note. Last month, mechanical components manufacturer MinebeaMitsumi said it would spend $214 million on a new plant in Cambodia.

Cambodian Deputy Prime Minister Sun Chanthol. Photo: Satoko Kawasaki

However, Cambodia is not putting its push for Japanese investment over its relationship with China. Cambodian Prime Minister Hun Manet wrote on Facebook on Tuesday that his country shares with China “a historic long-term relationship that cannot be broken,” and he pledged to maintain “steel” ties with Beijing, Radio Free Asia reports. Those comments came ahead of a visit by US defense secretary Lloyd Austin to the country, where American officials fear China is building a naval base. 

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Middle East

Saudi Arabia’s Public Investment Fund to pivot to domestic investments

Saudi Arabia’s flagship sovereign wealth fund the PIF is in the process of reorganizing its management and shifting its focus away from ambitious “giga-projects” to lower risk local investments, Reuters reports. The change in strategy comes after reports of a cash crunch at the fund, which has had to tap international debt markets recently to support heavy spending on Vision2030 projects and on international investments.

A file photo of Saudi Crown Prince Mohammed bin Salman at a 2021 PIF meeting. Photo: Saudi Press Agency

Despite the reorganization and reports of belt-tightening, the  PIF still plans on deploying some $70 billion a year towards its goal of supporting Saudi Arabia’s transition away from oil and gas towards a more tech and consumer oriented economy, Bloomberg reports. That money, however, is reportedly more likely to be invested locally, rather than in international M&A and passive stakes in foreign private equity and hedge funds. 

China raises profile in Middle East at summit with Arab leaders

Representatives of 22 Arab states and China issued a joint statement following this week’s 10th ministerial meeting of the China-Arab States Cooperation Forum in Beijing, calling for a ceasefire in Gaza and a concrete commitment to a two-state solution, Al Monitor reports.

The summit also produced two formal diplomatic agreements: the Beijing Declaration, a pledge by China to deepen its involvement in the Middle East on counterterrorism and human rights issues, and the Action Implementation Plan, which laid out a framework for economic and infrastructure cooperation. 

In a speech on Thursday addressing the Gaza crisis, Chinese President Xi Jinping said that China was committed to “upholding fairness, justice, and achieving long-term peace and stability,” perhaps indicating a shift in China’s hands-off approach to the crisis. Xi also said that China would commit energy companies and financial institutions to work on renewable energy projects in the region with a total installed capacity of more than three million kilowatts.


Sanctions fail to sink Russian economy 

The West’s Russia sanctions are having little effect outside the US and Europe, according to Hamad Buamim, chairman of Dubai’s main trading hub. Buamim said in the FT that sanctions are prompting trade to flow through alternative channels, with Dubai, in particular, benefitting from its location and neutral stance. 

Additionally, over 2,100 multinationals have continued operating in Russia since 2022 despite pressure from the US, EU, and UK to act against companies trading with Russia. Moscow has gradually raised the cost of corporate departure, imposing mandatory discounts on asset sales and exit taxes, while also making it increasingly difficult to find acceptable local buyers.  

Dubai is benefitting from US and European attempts to isolate Russia’s economy. Photo: Reuters

Some companies, such as Avon, Air Liquide, and Reckitt, have decided to maintain their presence in Russia, citing humanitarian reasons or the complexity of the situation.

The resilience of the Russian economy, driven by rising wages and a better-than-expected economic situation, has also made the market more appealing for multinationals, particularly in the consumer sector. While some companies have faced challenges, such as asset seizures or legal battles, others have become more open about their plans to stay in Russia. 

Eastern European countries harden Russian border

Poland has announced plans to fortify its border with Russia’s ally Belarus, reintroducing a buffer zone to stop illegal migrants being pushed into the EU by Russia, the FT reports. The Polish government has accused Russia and Belarus of sponsoring a new attempt to push large numbers of African and Middle Eastern migrants into Poland illegally, as part of a “ruthless hybrid war” aimed at destabilizing its western neighbors.

The reinforced border security has reignited a debate over whether Poland is breaching its EU obligations to those migrants who are entitled to seek asylum and pushing them back illegally after they cross the Polish border.

A drone being prepared during a Nato military exercise in Poland in February. Photo: Sean Gallup/Getty Images

Additionally, Poland and five other eastern european NATO members are planning to develop a “drone wall” along their borders with Russia to prevent smuggling and further provocations, and to enhance defense capabilities. The move comes in response to a series of hybrid attacks from Russia, including the sending of undocumented asylum seekers from Africa and the Middle East over their borders. 

Latin America

Colombia backtracks further as court reverses ban on fossil fuel subsidies

Colombia’s Constitutional Court dealt a significant blow to President Gustavo Petro’s ambitious reform agenda by overturning a law that denied tax breaks to fossil fuel companies. The decision, which could cost the government an estimated $1.7 billion in revenue, adds further pressure on the country’s strained fiscal finances.

This setback comes at a crucial time for Petro, who is approaching the halfway point of his presidency. The leftist leader, elected on promises of transformative change, has faced numerous obstacles in implementing his pro-environment agenda and addressing Colombia’s long-standing social deficits.

Colombia’s President Gustavo Petro. Photo: Diego Cuevas/Getty

Many of his proposed reforms have been blocked by congress or diluted in the courts, while his approval ratings have remained low amid economic stagnation and rising insecurity. If he fails to deliver tangible results to boost the chances of an ally succeeding him, Petro’s historic victory as Colombia’s first leftist president may also be the last for the foreseeable future.

US opens financial sector to Cuban businesses

The US Treasury Department announced measures to boost Cuba’s growing private sector, Reuters reports. The policy changes will allow small entrepreneurs on the island to open and access US bank accounts for the first time in decades, as well as permit them to use US-based social media platforms, online payment sites, video conferencing and authentication services. These steps are intended to fulfill President Joe Biden’s long-delayed pledge to help Cuba’s budding entrepreneurs, despite the ongoing US embargo.

While the moves have been welcomed as a step in the right direction, some analysts have pointed out that Cuban businesses will still face obstacles, such as the requirement to route financing, investment and payments through third countries. Additionally, Cuba’s deputy director of US affairs, Johana Tablada, expressed concerns that the country’s designation as a state sponsor of terrorism may hinder the implementation of these measures.

The announcement has drawn criticism from the Republicans given the lack of progress towards freedom on the island. Despite this, the US officials emphasized that the measures would exclude Cuban officials, military officers, and other government “insiders” to minimize resources that could benefit the Cuban government.

Surging copper demand offers tailwind for Latin American producers

The global energy transition and growing AI investments have led to a surge in copper demand, presenting a tailwind for battered producers Chile and Peru, the AQ argues. As the world’s largest and second-largest copper producers respectively, these nations find themselves at the center of the green revolution, with copper being a crucial component in renewable energy systems, electric vehicles, and related infrastructure.

Despite facing unique challenges, such as Chile’s new royalty bill and Peru’s political instability, both countries are well-positioned to capitalize on the copper boom, given their vast reserves, low extraction costs, and ongoing efforts to attract investments and improve infrastructure.  


Chinese investment surges after post-Covid lull

After a slowdown during the pandemic, Chinese Belt-and-Road-related investments in Africa surged by 114% last year, according to the Griffith Asia Institute. However, the nature of these investments has been largely extractive, with a heavy emphasis on securing minerals for China’s own economic needs and the global energy transition.

As Chinese lending grows, concerns persist about the sustainability and mutual benefit of these engagements. In Africa, the trade deficit with China has widened, and efforts to diversify exports beyond raw materials have faltered.

For Pakistan, which is seeking to revive stalled China-funded projects, the successful completion of delayed projects and the attraction of job-creating investments from China remain critical challenges. Striking a balance between economic cooperation and long-term development will be key to realizing the China’s promise of “win-win” outcomes. 

What we’re reading

How Nigeria’s economy cratered in President Tinubu’s first year (Semafor)

Congo Brazzaville becomes a liquefied natural gas-exporting country (US EIA

Somaliland says its on-hold deal with Ethiopia will deter Houthi attacks (FT)

Sudan army rebuffs US calls for peace talks (Reuters)

US sanctions Ugandan officials over rights abuses (AP)

East Africa rebounds to lead continent’s 2024 growth, AfDB says (Bloomberg)

As Zimbabwe nears IMF deal, food security, social protection top priority list (The Africa Report

Botswana flags synthetic gem threat ahead of $6b diamond project launch (Reuters

Zambia to exit sovereign default as bondholders back restructuring: Deal comes nearly four years after country reneged on debt (FT

South African elections prompt first-ever loss of majority for party that ended apartheid (NYT)

Focus turns to coalition talks as South Africa awaits final election results (The Guardian)

ANC voters defect en masse in South Africa’s coal belt heartland. (Reuters

Egypt quadruples price of politically sensitive subsidized bread (FT

AfDB aims to boost infrastructure funding as African growth accelerates (Reuters

Street currency dealers in Africa face off with governments (Bloomberg

White House backs plan to double African internet access (AP)

Russia to build nuclear plant in Uzbekistan (Radio Free Europe

With Iran port deal, India to expand Central Asia trade (Nikkei

AfghanistanRussia ties warm as Moscow removes terrorist designation (TOLONews)

Cambodia digital payments ‘to nurture local currency’ (Nikkei

Indictment of former Thai PM raises concerns about financial market (Bloomberg)

From Vietnam to Thailand, tech suppliers face tougher battle as China moves in (Nikkei

Indonesia will be one of the top-performing markets in the ASEAN portfolio this year (FrontierView)

Indonesia’s new capital draws water businesses from East Asia (Nikkei

Malaysia targets over $100b in semiconductor industry investment (Reuters)

Sri Lanka begins talks with Russia to end war recruitment of Sri Lankans (Colombo Gazette)

Natural disasters strike Papua New GuineaBangladeshIndia (UNOPS)

Iran registers presidential candidates for early vote after Raisi’s death (Reuters

Iran plans to ‘raise oil output to 4m barrels per day’ (Reuters

Pakistan inks agreements with Kuwait in industrial cooperation and engineering (Arab News

Fintech sector poised for strong growth in Oman (Zawya

Omani foreign minister  hold talks in Tehran, charting course for enhanced Iranties (Tehran Times)

UAE’s DP World makes a play for Africa (The Africa Report

The UAE’s rising influence in Africa (FT

Gulf cash buys assets and influence in Africa (The Africa Report

Saudi stocks trail emerging peers for first time since pandemic (Bloomberg)

Saudi fund invests in China effort to create rival to OpenAI (FT

Poverty in Lebanon tripled to 44%, as high as 62% in rural areas: World Bank (Al Monitor

Arab nations opt for self-interest over solidarity with Palestinians (Nikkei

Rystad says Middle East renewables capacity set to soar (Rigzone

TurkeyBulgaria and Romania unite to clear maritime trade routes on the Black Sea (SeaTrade Maritime

Croatia throws future of country’s central bank chief into question (Bloomberg

Chinese-led consortium to build massive port project on Georgia’s Black Sea coast (Radio Free Europe)

Azerbaijan promises sweeteners to convince students to study in Nagorno-Karabakh (Radio Free Europe

Rising seas force Panama Indigenous families to leave island homes (Reuters)

Caribbean leader blasts ‘empty’ climate promises at small islands summit (Reuters

Jet-setting Argentine President Javier Milei courts top US tech CEOs (FT)

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