Japan, South Korea, the US: Opening the kimono.
Also: Gabon, Latvia, South Africa, Vietnam, Qatar and the UK.
JAPAN. SOUTH KOREA. UNITED STATES. Open kimono.
A new AUKUS-style agreement is in the works.
Media reported on Wednesday that Tokyo, Seoul and Washington will announce expanded military cooperation at a meeting this Friday. South Korea’s president said on Tuesday it would “set a new milestone in trilateral cooperation.”
INTELLIGENCE. Leaders will gather at Camp David for their first trilateral talks outside an international summit. While North Korea is the public reason, Beijing’s military build-up is the underlying driver. White House officials told Reuters that plans include expanded cooperation on missile defence and technology development. With or without nuclear-propelled submarines, such a deal would mirror that which the US announced with the UK and Australia in 2021.
FOR BUSINESS. There are implications for businesses involved in defence logistics, technology and military services. But arguably the most important dynamic of these talks is South Korea’s desire for rapprochement with Japan, with implications for bilateral economic relations. While enhanced supply chain resilience will be on the agenda, trade dependency with China means there is little chance of overt economic isolation tactics arising from the talks.
GABON. Deals of this nature.
A deal on debt for environmental protection is hailed, by some.
Gabon signed Africa’s first so-called ‘debt-for-nature’ swap on Tuesday, giving it additional time to make debt payments and lowering the interest rate on its foreign debt, in exchange for environmental action.
INTELLIGENCE. The deal is the first of its kind for Africa and is being cited as a template for other developing countries. Led by Bank of America and insured by the US government, it re-finances $500 million of Gabon’s foreign debt. In exchange, Gabon needs to spend at least $125 million on protecting coastal areas and upgrading fishing regulations. While relatively stable and prosperous, Gabon has been under single-family rule since 1967.
FOR BUSINESS. Deal proponents argue this is a novel way to drive down interest costs for poorer countries. Developing countries say they cannot service climate issues while they remain loaded up with crushing debt. But the deal is not without critics, who argue some countries now see environmental issues (such as protecting rainforests) as leverage over the international community and creditors. Gabon’s deal is a test case for effective implementation.
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LATVIA. Not prime time.
Further political instability in the Baltics.
Latvia’s prime minister said on Tuesday he would quit on Thursday after a split over a cabinet reshuffle. Latvia’s defence minister on Tuesday ordered troops to the border with Belarus after almost 100 illegal migrant crossings in 24 hours.
INTELLIGENCE. Prime Minister Krisjanis Karins’ move comes amid disagreements with coalition partners. While Karins and his centre-right party initially said he would try to reform the coalition, the steps are unclear. Since the first post-Soviet elections in 1993, Latvian governments have, on average, lasted a little over a year. The governments of neighbouring Lithuania and Estonia tend to be slightly more stable, but all three share a common challenge: Russia.
FOR BUSINESS. Karins was elected on a platform of security, education, energy and quality of life, and accused partners of “blocking work for welfare and economic growth.” Latvia continues to suffer economically after Covid-19. Tourism, a major economic component, is faltering. Moreover, the Rail Baltica project, a €5 billion scheme to connect freight and passenger rail to Western Europe, flounders amid Baltic bickering over management and routes.
SOUTH AFRICA. Climbing the summit.
Pretoria’s BRICS aspirations remain high, but reality will bite.
Ahead of the BRICS summit next week, South Africa’s foreign minister said on Tuesday that 23 countries have officially applied to join the bloc. The summit will be held in Johannesburg between 22 and 24 August. Putin will attend by video.
INTELLIGENCE. Talking up aspiring entrants to the BRICS group is not unexpected. Some of the major countries said to have applied for membership include Egypt, Saudi Arabia, Argentina, Indonesia and Thailand. But the summit itself could still be a wash-out. Putin has already said he is not going, President Xi is not confirmed for attendance, Modi is likely to be a virtual attendee only, and Brazil has said it wants to go easy on new members.
FOR BUSINESS. On the agenda is a discussion of a common payments system, while a technical committee will look at options for a joint BRICS currency. However, talks of de-dollarisation are premature. While countries have for years talked about moving away from the greenback, around half of international trade is still invoiced in US dollars. Coupled with the technical challenges of alternative payment systems, there is a way to go before a BRICS breakaway.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
VIETNAM. Open for business.
Visa liberalisation signals greater willingness to attract visitors and FDI.
Hanoi announced on Tuesday it would expand its electronic visa-on-arrival to all foreign arrivals, up from 80 countries, starting from 15 August. Citizens of countries who do not need visas will also benefit from an increased length of stay.
INTELLIGENCE. Tourists with electronic visas will now be allowed to stay for up to 90 days, instead of the previous 30 days. French tourism, with its historical links to Vietnam, has been leading a revival in tourist numbers to Vietnam. The move signals further economic openness. Since its 2007 accession to the WTO, Vietnam has signed trade deals with the EU, ASEAN and the CPTPP. In 2018, foreign investment accounted for nearly 30% of fixed capital formation.
FOR BUSINESS. Vietnam has received around $16 billion in foreign investment to July this year; the majority in manufacturing as Vietnam steps up efforts to take manufacturing share from China. Vietnam has said it would install non-tax support and incentives, given investor concerns around a global minimum tax rate. Effective implementation of a global minimum tax rate will remain a challenge as developing countries like Vietnam compete for capital.
QATAR. BRITAIN. Putting their football down.
Gulf countries continue their sports march.
Media reported in recent days that the current owners of Manchester United are reportedly selling the football club to Qatari Sheikh Jassim bin Hamad Al Thani for $9.15 billion. Al Thani has reportedly been eyeing the club for months.
INTELLIGENCE. The contenders for the club included the Qatari royal and the CEO of UK-based petrochemicals company INEOS. For Qatar, there are motivations beyond the commercial arrangement, with enhanced visibility, status, and moving funds into a stable jurisdiction all likely factoring into the deal. Sport continues to be a focus for Gulf countries; Saudi club Al-Hilal has also just reached a deal with Brazilian star Neymar for £86 million.
FOR BUSINESS. The valuation of major sports teams continues to climb, with increased interest from private equity and sovereign wealth funds. Whether these values correspond to commercial gain remains to be seen. Manchester United is being bought out for roughly 10 times revenue, an extraordinarily high valuation in anyone’s books. With such high valuations, expect more clubs to look at foreign investment to recoup existing losses and wipe debt.
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