For geoeconomics power play, settle these two issues

Every country wishes to be on the right side of the history and at the same time be able to play geoeconomics in its favour. For that there are two vital issues to be settled. Here we go:

Firstly, a nation must decide whether any proposed development is to be financed by raising debt or soliciting investment from abroad. To be eligible to raise debt credentials including country credit rating must range between good to excellent. In the case of credential it is all about past history of repayments whereas to get a good to excellent credit rating the current economic growth along with political stability are assessed.

Investment is a different ball game because investors are not looking for present condition but the situation that would prevail tomorrow, next month, next year and so on. For example, Singapore attracts huge quantum of investment for her economic development mainly because of her long-term survival as an industrial, commercial and trading nation.

Second issue relates to the choice between export promotion and import substitution. The former is on the high side of the risk profile due to competition by advanced geoeconomics power centres where butting against them might be suicidal. Here a degree of calibration is required. What China did originally when Deng Xiaoping opened up the economy is to initiate processing of low-tech manufacturing items as he said, “Keep a cool head and maintain a low profile. Never take the lead - but aim to do something big later”. China obediently followed suit and today she is the number one geoeconomics power.

Import substitution on the other hand does not require a long waiting game. It can be started at any time whenever a nation decides to follow through. The crux of the matter is, there is ready market that is already served by the imported goods within a country. Put it the other way, the demand is there what is needed is changing the supply line from imports to domestic production. Indonesia for example saw this coming much before other ASEAN members ever did. She has huge population at 275 million people that is correlated with growing demand for consumer products.

Consumer spending in Indonesia is estimated as USD 730 Billion per annum. It is revealed by IPSOS Global Trends Survey that 87% of Indonesian consumers are more likely to choose local products than global ones. Plainly put, that is a whale of a lot of money for import substitution.

Succinctly stated, the two issues debt or investment as a means of economic progress along with export promotion or imports substitution as a method of production play vital roles in the pursuit of geoeconomics power for emerging nations!

  

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

 

How hegemon conducts geoeconomics warfare?

‘Warfare by other means’ includes geopolitics as well as geoeconomics posturing. At present more than diplomacy it is the economic manoeuvre that does the talking. Here are five of these geoeconomics moves used extensively by a hegemon:

1. An In-built admin system that coordinates geoeconomics pressure brought upon the weaker nations along with military as well as political pressure. It is carried thru by the establishment of an early warning system interwoven within diplomatic representation of the hegemon in host countries. Before a country makes a move, for example, imposing imports quota on the goods & services hegemon exports to that country, a pre-emptive manoeuvre is made to warn the country that, there could be consequences.

2. Constantly hold the balance of power between hegemon and host country in favour of the former and keeps the latter remains beholden to the hegemon. Any departure necessitates response in areas such as: trade & finance, funds transmission, reserve banking and finally reporting to the Financial Action Task Force (FATF) for actual or imagined misdemeanour.

3. Hegemon has strong defence set-up not only in terms of military & diplomatic prowess but also the capacity to counter any moves by host country construed as going against the ‘rules based international order (RBIO)’ where all the rules are set by the hegemon and she has the sole authority to adjudicate any action that is detrimental to him and his allies.

4. If at any time host country rises against the hegemon an unannounced war of attrition is imposed over that country in international platforms such as World Trade Organization (WTO) International Monetary Fund (IMF) in such a manner that host country is bedevilled by caution, criticism, threats and finally removal from these institutions.

5. Indeed hegemon likes quick resolution of a dispute with host nation. But if the host is adamant in not giving into these pressures a long drawn out geoeconomics war would be declared where the escalation dominance would be with the hegemon forever!

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

Red Sea debacle affects geoeconomics posture

Attacking more than 70 vessels and sinking more than 30 of them Houthis have successfully interdicted the Suez-Red Sea Route. Highlights of the debacle and the effects it has on geoeconomics are discussed below:

Beginning October 19, 2023 a ramshackle movement officially called as Ansar Allah but popularly known as Houthis has made the shipping lane Suez-Red Sea let us call it direct route, a non-viable alternative in comparison with the Cape Route let us call it indirect route, that traverses roundabout way passing the Cape of Good Hope in the tip of South Africa. Shipping companies were forced to opt for this indirect passage between Europe to Asia as a counter measure.

Here is the brief comparison of the direct and direct shipping routes:

1. The length of direct route is approximately 8,440 nautical miles whereas Cape Route is about 11,720 nautical miles.

2. Travel time of the Suez-Red Sea route is estimated as 18 days at the speed of 20 knots while roundabout route takes 25 days at similar speed of 20 knots

3. Fuel consumption for opting for Cape Route goes up by 30% over the direct route. Transporting cost has gone up by USD 1000/- per Twenty-foot Equivalent Unit (TEU)

4. An attack on the Greek flagged oil tanker MV Delta Sounion on 21 August 2024 and subsequent leaking of the oil caused the marine insurance to almost double making the direct route economically unviable.

5. The direct route traffic has dropped more than 80% from the pre October 2023 level.

Most shipping companies including Hapag Lloyd, Maersk, and CMA CGM have agreed that navigating integrity of the Suez-Red Sea route is irreparably lost. Until such time the Gaza War ends there is no question of opening up this route for normal transportation. The bottom line is Suez-Red Sea route accounts for 12.5 % of the general transport and 30% of the container ship transport.

Houthi blockade has a big toll on geoeconomics power spectrum. Here are samples:

1. There is a slow motion depreciation of the military power of the America led west that results in the erosion of their geoeconomics sway over the Middle – East

2. Houthis transformed themselves from a nondescript poor nation of camel drivers into a geoeconomics power house with a sway over nations West to East.

3. ‘Sea Denial’ as both military and geoeconomics tool can be employed by even a small nation that borders any international shipping route.

4. The West as a whole has to choose between peaceful co-existence and continuing the conflict in the Levant!

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist