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Emerging economies push to end dollar-dominance, raising doubts about the alternative


Business has vanished at Kingsley Odafe’s clothing shop in Nigeria’s capital, forcing him to lay off three employees.

One culprit for his troubles stands out: The US dollar’s strength against the Nigerian currency, the naira, has pushed the price of garments and other foreign goods beyond the reach of local consumers. A bag of imported clothes costs three times what it did two years ago. The price these days is running around 350,000 naira, or $450.

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“There are no sales anymore because people have to eat first before thinking of buying clothes,” Odafe said.

Across the developing world, many countries are fed up with America’s dominance of the global financial system — especially the power of the dollar.

They will air their grievances next week as the BRICS bloc of Brazil, Russia, India, China and South Africa meet with other emerging market countries in Johannesburg, South Africa.

But griping about King Dollar is easier than actually deposing the de facto world currency.

The dollar is by far the most-used currency in global business and has shrugged off past challenges to its preeminence.

Despite repeated talk of the BRICS countries rolling out their own currency, no concrete proposals have emerged in the run-up to the summit starting Tuesday. Emerging economies have, however, discussed expanding trade in their own currencies to reduce their reliance on the buck.

At a meeting of BRICS foreign ministers in June, South Africa’s Naledi Pandor said the bloc’s New Development Bank will seek alternatives “to the current internationally traded currencies” — a euphemism for the dollar. Pandor was sitting alongside Russia’s Sergey Lavrov and China’s Ma Zhaoxu — representatives of two countries that are especially eager to weaken America’s international financial clout.

The BRICS grouping dates to 2009. Originally, it was just BRIC, a term coined by Goldman Sachs economist Jim O’Neill to refer to the rising economies of Brazil, Russia, India and China. South Africa joined in 2010, adding the “S” to the name. More than 20 countries — including Saudi Arabia, Iran and Venezuela — have expressed interest in joining BRICS.

In 2015, the BRICS countries launched the New Development Bank — an alternative to the US and European-dominated International Monetary Fund and World Bank.

“Developing nations are itching to loosen the grip of Western dominance and open the door to a new world order where the East commands equal, if not greater, influence,” said Martin Ssempa, a Ugandan political activist.

Critics in the developing world are especially uneasy about America’s willingness to use the dollar’s global influence to impose financial sanctions against adversaries — as it did to Russia after the invasion of Ukraine last year.

They also complain that fluctuations in the dollar can destabilize their economies. A rising dollar, for instance, can cause chaos abroad by drawing investment out of other countries. It also increases the cost of repaying loans denominated in dollars and buying imported products, which are often priced in dollars.

Kenyan President William Ruto has grumbled this year about Africa’s dependence on the dollar and the economic fallout from its ups and downs, while the Kenyan shilling plunges in value. He’s urged African leaders to join a fledgling pan-African payments system that uses local currencies in a push to encourage more trade.

“How is US dollars part of the trade between Djibouti and Kenya? Why?” he asked at a meeting, to applause.

Brazilian President Luiz Inácio Lula da Silva has supported a common currency for commerce within the South American bloc Mercosur and for trade among BRICS nations.

“Why does Brazil need the dollar to trade with China or Argentina? We can trade in our currency,” he told reporters this month.

But if the dollar’s drawbacks are easily apparent, the alternatives to it are not.

“At the end of the day, if you want to keep your reserve safe, you’ve got to put it in the dollar,” said Daniel Bradlow, a senior research fellow at the University of Pretoria and a lawyer specializing in international finance. “You’re going to need to borrow in dollars. Everybody can see all the problems with doing this, but if there was an alternative, people would use it.”

As it stands, 96 percent of trade in the Americas from 1999 to 2019 was invoiced in dollars, 74 percent of trade in Asia and 79 percent everywhere else, outside of Europe, which has the euro, according to calculations by US Federal Reserve researchers.

Still, the dollar’s hold on global commerce has loosened somewhat in recent years as banks, businesses and investors have turned to the euro and China’s yuan.

But 24 years after the euro was introduced, the world’s No. 2 currency still does not rival the dollar for international gravitas: The dollar is used in three times as many foreign-exchange transactions as the euro, Harvard University economist Jeffrey Frankel said in a study last month.

And the yuan is limited by Beijing’s refusal to let the currency trade freely in world markets.

“None of the alternatives to the dollar managed to get to the dominance level,” said Mihaela Papa, senior fellow at Tufts University’s Fletcher School of global affairs. “So the idea that now, overnight, you will have a new BRICS currency that would (cause) a major upheaval — it takes time, it takes trust … I see this path as very long.”

The dollar still has its supporters. In Argentina, Javier Milei, who emerged from primary voting Monday as the front-running presidential candidate in October’s general election, is calling for the dollar to replace the country’s embattled peso.

In Zimbabwe, Lovemore Mutenha’s liquor store collapsed when hyperinflation hit in 2008. He only managed to resuscitate the business when the country abandoned the local currency for a basket of currencies dominated by the dollar.

“The US dollar has given us our life back. We can’t do without it,” Mutenha, 49, said in the working-class suburb of Warren Park near the capital, Harare. “How can one budget with the Zimbabwe dollar that is always changing in value? It is not stable, and we have been burnt before.”

In 2019, the government reintroduced the Zimbabwean currency and banned foreign currencies in local transactions.

But the revamped Zimbabwe dollar floundered. US dollars kept trading in the black market, and the government lifted the ban. Now, 80 percent of transactions in the country are in US dollars.

Finance Minister Mthuli Ncube often pleads with people to embrace the local currency.

But even government workers clamor to be paid in US dollars, arguing that almost all service providers accept only the greenback.

Prosper Chitambara, an economic analyst in Harare, said the US dollar “has always had a stabilizing effect.” But Zimbabwe’s economy, which has little industry, low investment, few exports and high debts, can’t attract enough dollars to meet the needs of everyday commerce.

It has led to a niche business on the streets of the capital: Vendors mend worn out or shredded $1 notes for a small fee.

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World

Crown Prince of Abu Dhabi meets with CEOs of leading Norwegian companies

H.H. Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, has met with a group of CEOs from leading Norwegian companies, as part of their participation in the UAE-Norway Investment Forum, held alongside his official visit to the Kingdom of Norway.

During the meeting, H.H. Sheikh Khaled bin Mohamed bin Zayed underscored the UAE leadership’s commitment to strengthening economic cooperation with its international partners.

He highlighted that investment in innovation and knowledge is a cornerstone for achieving sustainable development, noting that enhancing collaboration with Norwegian companies across key sectors will open new avenues for mutual economic growth between the two countries.

The UAE-Norway Investment Forum, taking place in Oslo, aimed to highlight available investment opportunities and strengthen trade relations between the UAE and Norway, fostering shared interests and supporting innovation and knowledge-based economic visions.

-wam

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At the Indonesia International Book Fair 2024, TRENDS inaugurates 10th global office, releases four books

As part of its Asian research tour, partnership with Aletihad News Center, and
primary sponsorship of the Indonesia International Book Fair 2024, TRENDS
Research & Advisory inaugurated its office in Jakarta, marking its 10th location
worldwide. It also released four books in Indonesian.
The inauguration event was attended by ambassadors of the UAE, Bahrain, and
Jordan to Indonesia, chairpersons of the UAE and Indonesian Publishers’
Associations, the Director of TRENDS’ Jakarta office, and a group of researchers
and academics.
Speaking at the event, Dr. Mohammed Abdullah Al-Ali, CEO of TRENDS
Research & Advisory, stated that TRENDS’ international offices—set to reach 15
by the end of 2024—aim to enhance the Center’s research efforts and deepen its
role in disseminating knowledge, thus serving as a global knowledge bridge.
He emphasized, “At TRENDS, we believe in the importance of cooperation
between think tanks and prioritize this endeavor. We believe the TRENDS office in
Jakarta will enhance the exchange of knowledge and ideas between think tanks in
Asia and the Middle East, opening new horizons for collaboration in various
fields.”

Four books in Indonesian
As part of the Jakarta office’s inaugural activities, four books were released in
Indonesian, including the 11th and 12th books of the Muslim Brotherhood
Encyclopedia and Global Trends in AI and Automation and the Future of
Competition between Man and Machine: An Analytical Forward-looking Vision.

Hostility to Arab states
The 11th book of the Muslim Brotherhood Encyclopedia, The Concept of the State
According to the Muslim Brotherhood, highlights its hostile stance toward Arab
states since its inception. The group views them as an obstacle to its ascent to
power. It opposed the modern principles upon which these states were built,
considering them incompatible with the group’s unique interpretation of Islam,
which it claimed to embody exclusively.

Exclusion of nonconformists
The 12th book, The Muslim Brotherhood: Rejection of Tolerance and Exclusion of
Nonconformists, examines the Muslim Brotherhood’s stance towards
nonconformists, individuals, and entities. The book reveals the group’s binary view
of the world, categorizing others as allies or adversaries. It ties these relationships
to the Brotherhood’s internal power struggles and self-serving interests.

Global Trends in AI
The third book, Global Trends in AI, explores significant developments in AI and
its impact on various aspects of life, including the economy, society, and
governance. It also offers a comprehensive analysis of technological advancements
in AI, its applications across sectors, the ethical and social challenges it presents,
and its future trajectory.

Automation

The fourth book, Automation and the Future of Competition between Man and
Machine: An Analytical Forward-looking Vision, addresses the growing challenges
faced by the human workforce in the face of widespread automation and AI
applications. The book concludes that while automation presents a significant
challenge to the labor market, it simultaneously creates new opportunities. It
emphasizes the importance of preparing for this shift through skills development,
continuous education, and adopting economic and social policies that support the
workforce.

Prominent pavilion and active presence
The TRENDS’ pavilion at the Indonesia International Book Fair has attracted
numerous visitors, including academic researchers and officials, such as the
ambassadors of the UAE, Bahrain, Qatar, Jordan, and Turkey. Additionally,
chairpersons of Arab and Indonesian publishers’ associations, authors, publishers,
and students visited the pavilion. All were impressed with and praised TRENDS’ diverse, valuable publications. They also commended TRENDS’ active
international presence and ability to address global developments with rigorous
analytical research.
Dr. Mohammed Abdullah Al-Ali honored the esteemed guests, including
ambassadors of the UAE and Bahrain to Indonesia, Wedha Startesti Yudha,
Chairperson of the Indonesia International Book Fair Committee, Arys Hilman
Nugraha, Chairman of the Indonesian Publishers Association, and others,
presenting them with TRENDS’ publications and commemorative shields.
Additionally, he awarded TRENDS’ Research Medal to Ni Made Ayu Martini
Indonesian Deputy Minister of Marketing, Tourism and Creative Economy
It is worth noting that during its current Asian research tour, TRENDS announced
the launch of the TRENDS Research Medal, awarded to individuals who make
significant contributions to the development of scientific research and promote collaboration with TRENDS in strengthening a culture of research across various fields.

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US determined to prevent full-scale war in Middle East, Joe Biden tells UNGA79

US President Joe Biden highlighted the US Administration’s determination to prevent a wider war that engulfs the entire Middle East region, noting that a diplomatic solution “remains the only path to lasting security to allow the residents from both countries to return to their homes on the border safely”.

In remarks he made today before the 79th Session of the United Nations General Assembly (UNGA79), the US President said, “Full-scale war is not in anyone’s interest,” adding that a diplomatic solution is still possible.

He also touched on “the rise of violence against innocent Palestinians on the West Bank”, and the need to “set the conditions for a better future”, which he said featured “a two-state solution, where the world — where Israel enjoys security and peace and full recognition and normalised relations with all its neighbours, where Palestinians live in security, dignity, and self-determination in a state of their own”.

President Biden underscored the ceasefire and hostage deal put forth by Qatar and Egypt, which the UN Security Council endorsed. He said, “Now is the time for the parties to finalise its terms, bring the hostages home,” adding that this would help ease the suffering in Gaza, and end the war.

-WAM

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