Saudi-S Korea in a rich and wide mega-project embrace

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South Korea and Saudi Arabia announced their intent to “deepen and advance” bilateral relations in a joint statement issued on the occasion of President Yoon Suk Yeol’s visit to Riyadh from October 21-24.

The announcement was a reminder that while the US and Europe focus on the conflict between Israel and the Palestinians, Saudi Arabia’s turn to Asia continues – and that China is not the only East Asian power displacing Western influence in the Middle East.

South Korean President Yoon led a delegation of government officials and business leaders that met with Crown Prince and Prime Minister Mohammed bin Salman and other Saudi counterparts to discuss trade and investment, infrastructure, energy and defense.

The result was a long and detailed list of initiatives building on the “Future-oriented Strategic Partnership” announced by the two sides when the Saudi leader visited Seoul in November 2022. A Strategic Partnership Council will be established to coordinate their joint activities.

The Saudi-Korean Investment Forum 2023 was held during Yoon’s visit, with representatives of both countries’ public and private sectors participating. It resulted in more than 50 agreements ranging from hydrogen energy, water desalination and agriculture to electric vehicles, tourism and cybersecurity. The total value of the deals was reported at $15.6 billion.

The Saudi Arabian Oil Company (Aramco) alone reached 10 agreements with Korean companies covering collaboration in ammonia off-take and logistics, low-carbon energy exploration, information exchange related to Aramco’s Thermal Crude to Chemicals technology and collaboration in venture capital investment and start-up financing.

Four of the agreements were with S-Oil, which is 63.4%-owned by Aramco. Agreements were also clinched with Doosan to establish a casting and forging facility in Saudi Arabia to produce valves, pumps, compressors, gas and wind turbines, and other products; Korea Electric Power Corporation for a study of the ammonia supply chain; POSCO and Hyundai Oilbank to explore potential collaboration in blue hydrogen and ammonia; and the Export-Import Bank of Korea to develop strategic financing.

Separately, Saudi Aramco signed contracts with Hyundai Engineering & Construction for the construction of a gas processing plant and with the Korea National Oil Corporation for a joint oil storage project during Yoon’s visit. South Korea is the third largest buyer of Saudi oil after China and Japan and depends on Saudi Arabia for nearly 40% of its crude oil supply.

A handout picture provided by Energy giant Saudi Aramco, Saudi Arabia’s state-owned oil and gas company, shows its Shaybah Producing and Shaybah NGL in eastern Saudi Arabia. Photo: Asia Times Files / AFP / Musleh Al-Khthami

Private investments in refining, petrochemicals and hydrocarbon resource technology are a priority for both sides. The joint statement noted that work on the Shaheen petrochemical project in Ulsan has been progressing smoothly since a groundbreaking ceremony last March.

The joint statement laid out a scenario that sums up the Future-oriented Strategic Partnership in the energy sector, with South Korea acknowledging Saudi Arabia’s “pioneering role” in the future of energy and avowing to “strengthen cooperation” across the gamut of nuclear, renewable, wind, solar and clean hydrogen energies.

On the latter, the two sides signed the Hydrogen Oasis Initiative (H2Oasis) to strengthen their partnership and support project developments in the fuel.  

Moreover, Hyundai Motor and Saudi Arabia’s Public Investment Fund will form a joint venture to build an auto-assembly plant in Saudi Arabia with a capacity of 50,000 internal combustion engine and electric vehicles per year. Production is scheduled to begin in 2025.

Naver, South Korea’s largest internet company, signed an agreement with the Saudi Ministry of Municipal and Rural Affairs and Housing and Ministry of Investment to create a cloud-based digital twin platform for smart city urban planning, monitoring and disaster prevention in the cities of Riyadh, Medina, Jeddah, Dammam and Mecca.

Naver senior executive Chae Seon-ju hopes that “Naver will serve as a bridge for the export of Korean IT [information technology] startups to the Middle East.” His efforts should be supported by cooperation between the two countries in the protection of intellectual property.

The joint statement notes that the dispatch of South Korean experts has contributed to the development of Saudi Arabia’s National IP Strategy of Saudi Arabia and capacity-building for Saudi patent examiners.

In addition, a South Korean consortium led by food and beverage company Nongshim will provide “smart farm” infrastructure to Saudi Greenhouse for year-round production of strawberries. Temperature, humidity and sunlight in the indoor gardens are monitored and regulated automatically.

The two countries also celebrated the 50th anniversary of Korea-Saudi cooperation in the field of construction and agreed that South Korea would support Saudi Arabia’s large-scale economic development projects.

These include the NEOM industrial, residential and recreation project in the northwest of the country, which will be powered by renewable energy, and the Red Sea tourism project along the coast.

The joint statement does not provide much detail on military matters, but does contain a brief section entitled “Strengthening Cooperation in the fields of Defense, Defense Industry and Combating Terrorism.”

President Yoon was reported to have had a successful meeting with Saudi Defense Minister Khalid bin Salman Al Saud and Minister of National Guard Abdullah bin Bandar bin Abdulaziz Al Saud.

According to South Korea’s Yonhap news agency, Defense Minister Khalid “said that the two countries’ defense industry cooperation, which is close to producing results, will be a new milestone in their partnership. He also expressed hope for next-generation defense industry cooperation and proposed a comprehensive partnership that includes technological collaboration and joint production.”

Yoon’s office told the media that he had “called for deepening the scope of defense cooperation to include defense training, joint exercises, visits to military bases and people-to-people exchanges.”

His security advisor Kim Tae-hyo said that discussions in areas including missile defense and artillery are “in the final stage,” according to Yonhap.

South Korea’s first prototype of its 4.5-generation fighter, officially dubbed KF-21 Boramae, was revealed at the Korea Aerospace Industries Co facility in Sacheon, South Korea. Image: Screengrab / CNN

This is the realpolitik side of Saudi Vision 2030, the long-term national development strategy developed by Prime Minister Mohammed bin Salman and his Council of Economic and Development Affairs to build “a vibrant society, a thriving economy and an ambitious nation.”

“In order to achieve a thriving economy, the kingdom will diversify its economy and create dynamic job opportunities… through commitments to education, entrepreneurship and innovation, unlocking underdeveloped industries such as manufacturing, renewable energy and tourism,” the vision statement says.

This is not the vision of a Saudi society that wants or needs to choose between only the US or China. And it’s a vision that fits with South Korea’s own modernization ambitions in an increasingly multipolar world.

Follow this writer on Twitter: @ScottFo83517667

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Singapore’s economic growth to improve in the second half of 2024: MAS

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The strong Singapore dollar also helps to filter external inflationary pressures.

Including the impact of the goods and services tax hike, core inflation is expected to average around 4 per cent for the full year, just 0.1 percentage point below the 2022 figure.

In early 2024, both headline and core inflation are likely to see a temporary increase as the Goods and Services Tax (GST) rises to 9 per cent and public transport fare hikes kick in. Headline inflation may also rise due to higher Certificate of Entitlement (COE) premiums and petrol prices.

Prices of services may increase due to a lag effect, but overall, core inflation is forecast to be on an easing trajectory with easing domestic cost pressures and modest imported costs.

MAS highlighted geopolitical conflict, adverse weather events and faster wage increases as risks to the inflation outlook.

RISKS FOR MIDDLE-INCOME WORKERS

Singapore’s middle-income earners experienced the fastest wage growth in the past decade, but could be impacted by demographic constraints and technological changes in the coming years, MAS said.

The nominal income of those between the 21st and 80th percentile rose 42 per cent, compared with 36 per cent for higher- and lower-income earners.

Workers who improved their educational qualifications or moved to more productive or larger companies commanded higher wages, according to a study by MAS.

The average economic growth rate slowed in the past decade and the trend is expected to continue as Singapore’s population ages.

Middle-income workers could be displaced if new technologies replace labour or if they do not have the right skills to transition into new roles, said the central bank.

Workers should refresh their skills, and policies should focus on raising the absolute income of lower- and middle-income workers.

“Securing the real income growth of the broad middle is the basis for the sustained and inclusive economic progress of the country,” MAS said.

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Counting on coal: Cambodia’s fossil fuel push flounders with delays

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The skeletal exterior of one of the newest coal power plants in Cambodia sat silent amongst farmland in Oddar Meanchey. On a still afternoon at the very end of June, weeds entangling brick stacks, cement mixers and truck tires showed construction at the Han Seng plant had been long paused.

Locals toasting to happy hour down the road from the front gate of the site complained of months of delayed pay for a relative working there as a security guard, adding there was no set date for operations to resume. There was little more information at the nearby Ou Svay commune hall.

“Maybe the plan changed to complete construction by 2025?” questioned Roeun Phearin, who was a commune consultant for the plant. “The construction is now paused and we don’t know the reason because it is the internal information of the company.”

Cambodia bet big on coal in 2020. The Kingdom doubled down on fossil fuel that year with plans to develop three coal power plants to meet rising electricity demand and, in the process, flip most of Cambodia’s power production from renewable sources to coal.

The move bucked the global push for clean energy and dismayed sustainability advocates, but the announced plants are now facing years of delay – raising questions about when, or if, the Kingdom’s last coal projects will go online.

When announced, all three plants were attached to China’s infrastructure-focused Belt and Road Initiative. But while China’s 2021 pledge to cut support for coal power abroad killed projects elsewhere in Southeast Asia, Cambodia’s plans appeared to survive the chopping block.

Southeast Asia Globe documented the slate of projects across three provinces, as well as Cambodia’s original coal-fired power plant. Of these three sites – which the Cambodian government pledged are its last coal plants – two are in varying stages of inertia. The third is finished and operational.

In deep-rural Oddar Meanchey province, the 265-megawatt, semi-built Han Seng project missed its deadline to go online last year. Falling revenue for the Chinese companies in charge pivoted the project to new contractors, who are sticking with coal – but also now investing in solar energy at the same plant.

One of Cambodia’s newest proposed coal-fired power plants in Oddar Meanchey province has been dormant for more than a year. Photo by Anton L. Delgado for Southeast Asia Globe.

Meanwhile, near the coast in Koh Kong province, the politically connected Royal Group conglomerate has yet to even break ground on a 700-megawatt power plant initially scheduled to go online this year. Former residents of the area allege unfair deals and heavy-handed evictions.

Finally, just across the Bay of Kampong Som in Sihanoukville province, Cambodia International Investment Development Group’s (CIIDG) new 700-megawatt coal project appears to be the only of the three to hit its expected completion targets.

Just down the same road from it in Steung Hav district is another plant, the 250-megawatt Cambodian Energy Limited (CEL) coal complex, which was the first of its kind in the Kingdom. Local residents fear for the effects these power plants could have on their health and environment.

“This is not good for us,” said fisherman Hang Dara, who left his job as an electrician at CEL because of health concerns. “But it will be much worse for the next generation in this province since they now have even more coal projects.”

Hang Dara, a former electrician turned fisherman, passes the two active coal-fired power plants in Sihanoukville’s Steung Hav district. Photo by Anton L. Delgado for Southeast Asia Globe.

Future of fossil fuels

While addressing the U.N. in 2021 and in order to stay “committed to harmony between man and nature”, President Xi Jinping pledged China would stop building coal-fired power projects abroad and step up support for renewables and low-carbon energy.

As a major financier and equipper of coal-fired power plants, China’s announcement was hailed as a major step toward achieving the Paris Agreement’s goal to limit global temperature rise by cutting greenhouse gas emissions.

The fate of 77 Chinese-backed coal projects around the world that were in varying stages of development before Xi’s pledge were still uncertain as of October, according to the Helsinki-based Centre for Research on Energy and Clean Air (CREA).

Almost half of those power plants would be in Southeast Asia.

If these 37 projects in Indonesia, Vietnam, Laos, Cambodia and the Philippines are operated for their standard 25-to-30-year lifespans, CREA calculated they’d emit a total of nearly 4,230 million tons of carbon. That’s a little less than U.S. emissions for just last year, the centre said.

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The three coal projects in Cambodia continued after China’s pledge, but 14 power plants were officially cancelled in Indonesia and Vietnam, according to CREA, nixing the production of 15.6 gigawatts of coal-fired energy.

“With the very dramatic drop of costs for clean energy and the increase of costs for coal, the Cambodian government has the chance to re-evaluate if those coal plants are the best way to meet Cambodia’s power needs,” said Lauri Myllyvirta, lead analyst at CREA.

Cambodia is opting into an especially precarious position, Myllyvirta said, as the country mostly depends on foreign imports of coal.

“The wild swings in coal prices and global coal markets in the past three years have vividly demonstrated the economic risks of depending on fossil fuels,” he said, adding that price fluctuations would only “become more volatile.”

In 2021, Cambodia imported approximately $222 million worth of coal, according to records from the U.N. Comtrade Database processed by Harvard Growth Lab’s Atlas of Economic Complexity.

The trade data underlines the role of Indonesia as Cambodia’s largest coal exporter for more than a decade. Nearly 85% of coal imported by Cambodia from 2012 to 2021 came from Indonesia.

A shipment of coal is piled onto a dock in Sihanoukville’s Stueng Hav district, home to two of Cambodia’s coal-fired power plant complexes. Photo by Anton L. Delgado for Southeast Asia Globe.

Zulfikar Yurnaidi, a senior officer at the ASEAN Centre for Energy in Jakarta, agreed with Myllyvirta that the future of coal is increasingly uncertain. Yurnaidi said the international “allergy towards coal” continues to be an unaddressed ASEAN issue.

“We cannot wish coal and fossil fuels gone right away,” Yurnaidi said. “Support from foreign financial institutions is still required. Maybe not to install a dirty power plant, but to help us reach the end goal of reducing emissions by upgrading fossil fuels and investing in renewable energy.”

As coal funding runs dry, international climate finance has risen in Southeast Asia with millions of dollars going into the ‘just energy’ transitions in Vietnam and Indonesia. After the third Belt and Road Forum in mid-October, Cambodia’s Prime Minister Hun Manet announced Chinese state-owned power companies had offered the Kingdom more than $600 million for renewable energy projects.

Despite foreign funding, Yurnaidi said ASEAN’s emphasis on economic growth will continue to require coal while bloc member-states shift to renewable energy sources.

“ASEAN is a very huge ship with hundreds of millions of people and trillions in GDP,” Yurnaidi said. “With the energy transition, we know this ship needs to take a turn. But we cannot just make a sudden roundabout because then everyone will fall into the sea.”

A fisherman in Sihanoukville province passes the coal power plants on the coast of Steung Hav district. Photo by Anton L. Delgado for Southeast Asia Globe.

Counting on coal

Cambodia’s bet on coal seemed to embody that idea.

In the aftermath of Covid-19, Cambodia’s Power Development Master Plan charts the way for the country’s energy expansion from 2022 to 2040 and predicts a steady rise in national demand for energy.

The first five years of every “energy scenario” within the plan prioritises the development of Cambodia’s proposed roster of three new coal sites.

At a meeting before the 26th U.N. Climate Change Conference in 2021, also known as COP26, Cambodia’s Minister of Mines and Energy Suy Sem said the country would no longer approve additional coal projects.

The years of construction delays facing two of the power plants have some experts wary of potential energy shortages. Chea Sophorn, an energy project manager who specialises in renewable developments, said shortages would depend on how quickly the Kingdom’s post-Covid economy, and thus energy demand, recovers.

But with international investors turning away from fossil fuels, Sophorn emphasised that securing support to jump-start the two stalled projects could be difficult.

“What type of investor will still be able to finance stranded assets like this?” questioned Sophorn, explaining that without China there are few to no places for these projects to turn.

Cheap Sour, an official with the Ministry of Mines and Energy, declined to comment and referred to the ministry spokesman, Heng Kunleang, who left Globe’s text and voice messages on read. Eung Dipola, the director-general of the ministry’s Department of Minerals, was unavailable for comment.

The sprawling site of the 265-megawatt, semi-built Han Seng coal power plant in Cambodia’s Oddar Meanchey province. Surrounded by fields of cassava and other crops, the project missed its deadline to go online last year and was silent when reporters visited at the end of June. Photo by Anton L. Delgado for Southeast Asia Globe.

Construction in Cambodia

In Oddar Meanchey, financial difficulties have already pushed the companies backing the $370 million Han Seng power plant to pivot.

The state-owned Guodian Kangneng Technology Stock Co. suffered a massive decrease in its net profit for shareholders in the first half of last year and brought in a new contractor, Huazi International, in September. 

The plan to install 265 megawatts of coal-fired power hasn’t changed – but Huazi has since announced intentions to add 200 megawatts of solar capacity to the site. This is the first time any other type of energy production has been associated with the struggling Han Seng power plant.

Farmer Boy Troch, who neighbours the Yun Khean coal mine in Cambodia’s Oddar Meanchey province. Photo by Anton L. Delgado for Southeast Asia Globe.

Just two kilometres from the semi-constructed project site, the Yun Khean coal mine, which would supposedly one day supply the plant, is operating as usual.

Boy Troch, who lives a stone’s throw away from the mine’s slag heaps, believes mining operations contaminated the groundwater beneath his farm, damaging crops and sickening wildlife.

“There are a lot of lands affected by the mine, but village and commune chiefs do not care,” Troch said, pointing at shifting heaps of coal-streaked earth across the road from his land.

Heaps of earth from the Yun Khean coal mine contrast with the surrounding farms and forest two kilometres from the Han Seng power plant in Cambodia’s Oddar Meanchey province. Photos by Anton L. Delgado for Southeast Asia Globe.

With his grandchildren by his side, Troch said he feared coal mining would proliferate in his district if the power plant went online.

“We are afraid to protest because our voice isn’t heard,” Troch said. “We are ordinary people. We are more afraid that they will evict us from this land.”

In Koh Kong, stories from evicted residents may validate these fears.

Royal Group, one of the largest investment conglomerates in Cambodia with direct ties to former Prime Minister Hun Sen, received a nearly 170-hectare land concession in 2020 within Botum Sakor National Park for the coal power plant.

People living on the site without land titles complained of rough, uncompensated evictions. Former resident Keo Khorn’s home was torn down in 2021 by a government task force. With 37 evictees, he petitioned for reparations.

Residents who were evicted or sold their land to Royal Group, signed petitions and wrote letters to provincial and national authorities for fairer compensations to no avail. Photos by Anton L. Delgado for Southeast Asia Globe.

“We all came together to complain about the company,” Khorn said. “Everyone heard us, the provincial ministries and the national ministries. But no one did anything.”

The project site is currently vacant, but workers are clearing forests around the location. These areas, also within the national park, were given to Royal Group in a second, nearly 10,000-hectare land concession this year.

Thomas Pianka, with Royal Group’s energy division, flatly refused to speak with Globe reporters.

“No, I don’t need to talk to you,” he said before hanging up a call.

While the first land concession Royal Group received from the government for the coal project has seen little to no activity, the area given to the company in a second concession within the national park is steadily being cleared. Photo by Anton L. Delgado for Southeast Asia Globe.

Where coal plants are actually operating, residents in Sihanoukville province have different worries. 

A plant security guard for the older Cambodia Energy Limited site said other workers have told him about health concerns, but said the company has never mentioned any risks.

The guard’s deputy village chief, Ly Socheat, said she regularly fields complaints about the smell from the power plant. Socheat said many of the families in her village have stopped collecting rainwater in fear of contamination from the coal.

While Socheat attended several meetings about potential employment opportunities at the power plant, she has also never been informed of any potential health impacts.

Residents complained of respiratory issues and headaches. But coal-fired power plants have also been linked to cancer – a 2019 study estimated 1.37 million cases of lung cancer around the world will be linked to such plants by 2025.

In the waters just off the coast, fisherman Hang Dara recounted why he left his job as an electrician at CEL to instead cast for crabs by the power plant. He believed the plant’s discharged water was heating the bay and harming the environment.

Loy Chaem, a crab fisherman in Sihanoukville province, passes the coal power plants on the coast of Steung Hav district. Photo by Anton L. Delgado for Southeast Asia Globe.

“I was very worried about my health,” said Dara, who explained he had severe headaches and chronic coughs while working at the power station. “But now I am very worried about the health of the fish.”

As Dara stood by the bow, his fishing partner Loy Chaeum drove from the stern. As they passed coal loading docks supplying the two power plants, Chaeum excitedly pointed out a vulnerable Indo-Pacific humpback dolphin surfacing for air.

“I don’t see many dolphins now, they don’t like the coal. Like us, they must go farther and farther away to survive,” said Chaeum, who explained he motored across the bay every morning in search of a better catch.

That brings him closer to Koh Kong, where one day there may be another coal-fired power plant.

“If they build it, there will be nowhere for them or us to go,” he said, turning back to land, having lost sight of the dolphin.

Contributed reporting by Andrew Haffner and Sophanna Lay. A Khmer-language version of this story can be found here, with translations by Sophanna Lay and Nasa Dip.

This article was supported by a ‘News Reporting Pitch Initiative’ from the Konrad-Adenauer-Stiftung Foundation in Cambodia.

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India’s demographics finally paying dividends

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India’s demographic dividend began in the early 1980s and will end by 2040. In contrast, China’s dividend ended in the mid-2010s, but it took full advantage of its 9–10% annual growth rate for three decades.

Both countries had similar gross national incomes (GNI) per capita in 1980, but in 2022, China’s GNI per capita in terms of purchasing power parities was around Int$20,300, while India’s was Int$8,200. Until its demographic dividend ends, India needs to ensure a consistent annual GDP growth of at least 8% to generate sufficient non-farm jobs for its young population.

India achieved 7.9% growth on average over 2004–14, despite the 2008 global financial crisis. Over this period, the population grew on average 1.4% per annum and GNI per capita grew on average 5.5% per annum. 

Between 2004–5 and 2011–12, the economy created on average 7.5 million new non-farm jobs every year. This kept youth and total unemployment low and pulled workers out of agriculture at an unprecedented scale — a characteristic of the structural transformation undergone by China and other industrialized countries.

Rapid growth was accompanied by a hastening of structural change in employment. Manufacturing’s share of employment rose from 10.5 to 12.8% of total employment over 2004–11. The share of workers in agriculture had been falling since 1973–74, but the absolute numbers had always increased until 2004–05 after which it began falling.

Like China, most low-skill agricultural workers were absorbed into the construction sector where employment increased from 26 million in 2004 to 51 million in 2012. Public and private investment in infrastructure drove this growth, as well as growth in the services and manufacturing industries.

But this achievement has reversed under Prime Minister Narendra Modi as annual GDP growth fell to 5.7% over 2015–22. The number of new non-farm jobs fell from 7.5 million per annum to just 2.9 million in 2019. Total manufacturing jobs have also fallen since 2015. The contribution of manufacturing to GDP, which was a constant 17% in 1992–2015, fell to 13% before returning to 17% in 2022–23.

The structural factors at play during 2004–14 included corporate overborrowing that became problematic when the post-global financial crisis fiscal stimulus was rolled back from 2012. Many corporations stopped repaying loans, especially those from public banks. Banks subsequently reduced lending due to growing non-performing assets.

Slowed GDP growth was exacerbated by poor economic policies. Exports fell from 25% of GDP in 2013 to 22% in 2022 as the real effective exchange rate was allowed to appreciate. Then came Modi’s snap demonetization in 2016 covering 86% of India’s currency notes. This sent the majority of cash-dependent micro, small and medium enterprises (MSMEs) into a tailspin — many closed, never to recover.

MSMEs, which generate most non-farm jobs, were dealt another blow six months after demonetization when a national Goods and Services Tax was introduced. Though it subsumed 17 state and indirect taxes, poor planning caused further damage to largely unregistered MSMEs. GDP growth slowed for almost three years and dropped down to 4% before the Covid-19 pandemic broke out.

The government then encouraged public banks to resume lending to the construction sector through non-banking financial companies. Construction was revived temporarily. As slower job growth suppressed consumption, the real estate sector and the new lenders collapsed.

Modi announced a national Covid-19 lockdown in March 2020 when there were only 600 identified cases in India. The world’s strictest lockdown stopped all economic activities, including those of MSMEs. Sixty million city workers returned to agriculture, its share of employment rising from 42 to 46% — a reversal of the earlier structural transformation.

The post-Covid-19 K-shaped recovery meant that the informal sectors shrunk while the formal sector grew. Many new jobs are also in the services sector but require highly skilled workers which, much of the population is not. Realizing the demographic dividend in India means creating non-farm jobs for three population groups. India needs to pull millions out of agriculture to counter the reverse migrations of 2020–21.

The second group is better-educated youth, especially girls, since India achieved a secondary education gross enrolment rate of 80% in 2015. India still has one of the world’s lowest female labour force participation because of constraints on how far they can travel for work as well as a lack of the skills and training required in non-farm jobs.

The final target is the openly unemployed. The current government inherited about 10 million openly unemployed people which grew to 38 million by 2022.

India needs at least 10–12 million new jobs each year to absorb these three groups. For India to restore non-farm jobs and resume high GDP growth, it needs a manufacturing strategy akin to China and East Asia that raises the share of labor-intensive manufacturing in output. A slow global economy may not generate export demand, but boosting domestic demand can create jobs.

A renewed focus on MSMEs is also needed to regenerate jobs. The quality of education then needs more attention, especially one that improves non-farm job prospects for girls. Such policies can help sustain GDP growth and the realization of the demographic dividend.

Santosh Mehrotra is Visiting Professor at the Center for Development Studies, University of Bath.

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For Astana, diplomacy, investment not a zero-sum game

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Roman Vassilenko, Kazakhstan’s deputy foreign minister, captured the essence of his country’s foreign policy at a press conference in Astana on October 23: “Kazakhstan has positioned itself as a unifying mediator between East and West.”  

His words evinced his country’s pragmatic approach to foreign affairs and the precedence it gives to diplomacy even in our gravely troubled times. As such, they were devoid of the ideological cant that so often marks pronouncements from Brussels and other centers of global influence.  

The president, Kassym-Jomart Tokayev, Vassilenko said, “has highlighted the troubling state of current geopolitical confrontations and eroding international principles. He has urged nations to join Kazakhstan in reaffirming their commitment to diplomatic solutions grounded in the United Nations Charter and universally recognized [norms of] international law.”

He reiterated Kazakhstan’s view that international engagement is not a zero-sum game.  He does not consider diplomatic give-and-take to be a sign of weakness, nor does he equate negotiation with a loss of standing in the international order. 

In this connection, Vassilenko stated that “Kazakhstan maintains good relations with all our neighbors, including Russia and China, as well as with the EU and the United States.” He added that “this balanced approach to international relations would bring a valuable, multifaceted perspective to the UN Security Council,” an allusion to Astana’s support for expanding the membership of the UN’s supreme decision-making body.

Expanding on this theme, Vassilenko noted that President Tokayev continues to “call for a comprehensive reform of the Security Council” so that “the middle powers and all developing countries have a voice at the highest level of UN decision-making.”  

The Kazakh leadership believes expanding the membership of the UNSC will help it get beyond gridlock and stasis (a result of ideology and great power ambition), and, ultimately, serve the interests of developing and low-income countries. 

Be that as it may, Vassilenko said, “Kazakhstan has consistently demonstrated a staunch commitment to multilateralism,” an approach to international relations that gives smaller nations a greater voice in decision-making, particularly at times of heightened international tensions and irresponsible statecraft.  

Vassilenko gave the impression that Kazakhstan would be willing, if asked, to use Astana’s good offices to bring states together for the sake of peace and reconciliation. 

Kazakhstan’s approach to engagement (as evidenced in its annual Astana International Forum and the biennial Congress of Leaders of World and Traditional Religions) springs from Central Asia’s tradition of optimism and hospitality, and for the need for win-win outcomes when dealing with larger, more powerful neighbors. 

Eurasian integration

Nearly half of Vassilenko’s press conference focused on Eurasian connectivity and integration, which continues to move forward despite the efforts of some to chuck a monkey-wrench into the process. He noted that Kazakhstan is a pivotal transport and logistics hub in the heart of Eurasia. 

In this regard, he said Astana is placing “significant emphasis on investments in infrastructure and logistics. Around 80% of the land-based cargo traffic taking place between Europe and Asia passes through Kazakhstan.

“The upgrading and fine-tuning of the Trans-Caspian International Transport Route, more commonly known as the Middle Corridor, is thus among the key priorities of Kazakhstan, together with that of the North-South corridor, including the Kazakhstan-Turkmenistan-Iran railway.

“In the same vein, we are stepping up our efforts to facilitate the transit of goods through the construction of the Dostyk-Moiynty, Bakhty-Ayagoz, and Darbaza-Maktaaral railroads.”

Vassilenko said Kazakhstan welcomes investments from the European Union, the US, Russia and China, the other countries of the region and international financial institutions (IFIs) to achieve its objectives and advance its national interests.  

He said the sooner infrastructure projects are started, the better: “As I have jokingly said to my European counterparts, we have [in our hands] this European Bank for Reconstruction and Development study [that took] one year to prepare, then we have like seven or eight months for the European Union to prepare the investors’ forum [in Brussels] and, then, who knows how much time from that moment it will take to implement these projects?

“So, as I say, well, by the time we are done with all that, our other neighbors will have built three railways already.”

Investors, take note: Vassilenko says “Kazakhstan is looking forward to the investors forum that will take in January 2024 in Brussels, which will have as its goal identifying specific projects and partnerships between European companies, IFIs such as EBRD and the European Investment Bank, and Central Asian countries.” 

Astana is eager to get moving. Vassilenko prodded his country’s partners: “We need to move faster than we are moving now.” 

If the West doesn’t up its game and show greater interest in high-cost infrastructure projects in Kazakhstan, that is, provide affordable long-term finance expeditiously, then no one should be surprised if China, Russia or India wins more contracts and deepens partnerships as Astana pursues its pragmatic, multi-dimensional foreign policy. 

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HK firms mull local expansion

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PUBLISHED : 30 Oct 2023 at 04:30

Hong Kong companies are showing interest in having manufacturers and logistic firms based in Thailand, according to Thai trade representative Nalinee Taveesin.

Speaking after meeting Ronald Ho, director of the Hong Kong Trade Development Council’s Southeast Asia and South Asia in Bangkok yesterday, Ms Nalinee said Hong Kong has been Thailand’s ally in trade, investment and tourism for a long time.

The meeting was a follow-up to Prime Minister Srettha Thavisin’s visit to Hong Kong to meet potential investors early this month. The meeting also focused on exchanging information and tightening trade relations, she said.

A Covid-19 abated, Hong Kong became interested in expanding its market to Asean, including Thailand, with 30 companies looking to invest and set up production bases and logistics systems in the kingdom, she said.

This cooperation will help Thai businesses, particularly small and medium-sized enterprises and start-ups, acquire channels for product distribution and knowledge development in various fields, including e-commerce.

During the meeting, Mr Ho also invited Mr Srettha to attend the Asian Financial Forum in Beijing in January.

Ms Nalinee also met Kevin Yang, chairman of the Hong Kong Fashion Designers Association, to discuss ways to promote Thai silk in the world market.

Mr Yang suggested Thailand present stories of its silk to the world to show that it is not only used to make clothes but also decorations and furniture through exhibitions.

The design of Thai silk dresses should also reduce the formality to make them more accessible to teenagers, he said.

“Hong Kong is a bridge connecting China with the rest of the world,” Ms Nalinee said. “Hong Kong is also known as a financial and investment hub and a centre of international trade, goods and human resources.”

She added that last year, the trade value between Thailand and Hong Kong was worth about US$11.8 billion.

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Commentary: ‘Like it was with Jack Ma’: China puts world’s biggest Apple supplier in its crosshairs

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IRKED BY TERRY GOU’S PRESIDENTIAL BID

Beijing has made clear that Gou – who stepped down from Foxconn’s board last month but still holds a 12.5 per cent stake – has violated that rule.

His presidential bid has irked the Chinese leadership because it further fragments votes for Taiwan’s opposition and makes a victory for the Democratic Progressive party – which refuses to define the island as part of China – more likely, said a person close to Foxconn.

China claims Taiwan as part of its territory and threatens to annex it militarily if the island resists unification indefinitely.

A person familiar with Foxconn said management was not overly worried about the investigation because China’s frequent tax audits of foreign enterprises regularly hit its affiliates, simply due to the scale of its business. “But the link to the election is concerning because it drags us into politics,” he added.

On Wednesday, the Chinese government’s Taiwan Affairs Office (TAO) said in its first comment on the probe: “While enjoying the dividends of economic growth, Taiwanese companies on the mainland also need to assume appropriate social responsibilities and play a constructive role in promoting peaceful development in cross-strait relations.”

The same phrase appeared in the state media report that publicised the investigation last weekend. This, and the fact that the news was leaked by the Communist party tabloid Global Times citing a Taiwan affairs scholar, pointed to an attempt by the TAO to send a political message, said a senior Taiwanese government official.

China has frequently leaned on Taiwanese businesses to support the Kuomintang, the opposition party that views Taiwan as part of a greater Chinese nation, in past elections. But apart from small-scale tax, labour or environmental audits, Beijing has reserved crackdowns for enterprises viewed as pro-DPP.

The fact that the Chinese leadership is now giving similar treatment to Foxconn and Gou – viewed in Taiwan as the most pro-China on the spectrum – speaks of the dramatic changes under way in Beijing, Taiwanese observers said.

“Such rough treatment of a foreign company would have been unthinkable under Deng Xiaoping, Jiang Zemin or Hu Jintao,” said a senior government official, referring to Chinese leader Xi Jinping’s three predecessors.

Beyond politics, Foxconn executives believe Beijing wants to warn the company not to shift too much production capacity out of China, which could threaten hundreds of thousands of jobs at a time when the country is under growing economic stress.

“Other Taiwanese companies have been moving out gradually, quietly, but Foxconn is an elephant – they are just too big to do that,” the government official said.

Others believe the opposite could be true. “As supply chains split, the goal is to have their own companies take over electronics manufacturing in China,” said Liu, the CIER economist. “The Chinese government may just have concluded that they do not need Foxconn any more the way they did.”

With Taiwan’s election less than three months away, Gou has resorted to a low profile and suspended all campaign activity since the probe was announced. But he will have to reappear in four weeks at the latest, when all presidential hopefuls have to register their candidacy.

“On Nov 24, we will see if Gou keeps his word and cannot be threatened by the Chinese Communist party,” said the Taiwanese government official.

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Splitting the atom’s supply chain

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Uranium enrichment and the nuclear fuel industry make up a globally integrated complex concentrated in the hands of a few key players. A geopolitically-driven divorce is on the horizon, however.

At the outset of the invasion of Ukraine last year, US Senator John Barrasso, a Republican of Wyoming, led an effort to ban Russian-origin uranium and nuclear products following the West’s break with the fossil fuel industries that had been filling the Kremlin’s war chest.

The bill stalled, but it highlighted America’s reliance on Russian nuclear imports and the need for a comprehensive supply chain rework. When countries are already scrambling to secure supply for nationally critical materials like rare earths or semiconductors, doing so for nuclear fuel – which powers one-fifth of US electricity generation– is not a bold proposition. 

Rosatom, Russia’s sprawling state-owned champion, dominates chokepoints in the front end of the nuclear fuel cycle – 38% of global uranium conversion and 46% of enrichment. This not only gives Moscow leverage over downstream “critical infrastructure” abroad but supports its wider energy statecraft agenda.

Since 2007, nuclear reactor exports have become a key channel in Russia’s foreign influence strategy, accounting for about half of the 53 units under construction worldwide.

Additionally, leading US small-modular reactor companies like TerraPower and X-energy require high-assay, low-enriched uranium (HALEU) for their designs, and that is only commercially available from Russia.

The National Nuclear Security Administration has the ability to downblend weapons-grade material into HALEU for civil use but conflicting national security directives necessitate that it be considered a temporary solution at best.

This year, Barrasso is making more headway. The “Nuclear Fuel Security Initiative” (NFSI) breezed through the Senate as an amendment to the 2024 National Defense Authorization Act rather than as a stand-alone bill.

This would allow Congress more discretionary authority to ensure that disruptions in the nuclear fuel supply chain neither (1) impact existing commercial reactor operations, nor (2) impede the development of advanced nuclear reactors.

A companion bill banning Russian uranium (with allowances through 2027) is working its way through the House.

HALEU in the form of 30–40 kg ingots (photo 1) are recast in a multi-tier crucible system. Image: American Nuclear Society website

Opening the HALEU bottleneck is an acute priority, but the imperative should also address the broader, energy security implications of growing Russian and Chinese influence over Kazakhstan and its industry behemoth, Kazatomprom – the world’s largest uranium miner.

A disruption to the West would equate to a crisis. Nearly all producers are fully booked for years, and soaring uranium spot prices hint that warehoused sources may be depleted.

To avoid sleepwalking into a larger dilemma brought on by a captive Kazakh uranium industry, policymakers not only should empower the Department of Energy to reshore enrichment but also should firm up the broader nuclear fuel supply chain with trusted partners.

A Sino-Russo-Kazakh nuclear industrial complex?

Once known as the steady “floor” for global supply, Kazatomprom has been beset by geopolitical risks, and is on its fourth CEO in two years.

First, its primary transport route through Russia was impacted by international sanctions. Now, the bubbling Azerbaijan-Armenia conflict threatens to complicate the Trans-Caspian Route it had promoted as an alternate solution.

With access to Europe constricted and US influence in Central Asia waning, Kazakhstan has little choice but to be more accommodating towards its two assertive neighbors, who are already (by far) its most important partners in trade.

In May, Rosatom took a bite out of Kazatomprom, acquiring a 49% stake in its prized Budenovskoye-6 and -7 uranium deposits. Several executives quit as a result, fueling speculation that it was a “backdoor deal” imposed by Astana in cooperation with Moscow.

Once developed, this uranium mine complex is expected to become the world’s largest, capable of supporting Rosatom’s downstream dominance in conversion, enrichment, and fuel fabrication for many years to come.

When Russia invaded Ukraine, there were signs of Kazakhstani president Kassym-Jomart Tokayev distancing himself from Vladimir Putin, but the opposite has instead played out. The two have met in person at least a dozen times since, with energy cooperation a frequent focus.

Beijing has also factored Kazatomprom into its energy strategy. China is undergoing a massive buildout of new nuclear power plants, on track to become the world’s top producer by 2030. In his first post-Covid trip abroad, Xi Jinping visited Tokayev to lay the groundwork for deeper bilateral collaboration – with energy, again, a priority area.

Xi Jinping’s first post-Covid trip abroad was to Kazakhstan to see Tokayev. Photo: Xinhuanet

Since then, the China National Nuclear Corporation has secured a major long-term uranium supply contract in excess of 50% of Kazatomprom’s total book value.

Additionally, the China General Nuclear Power Corporation has started receiving nuclear fuel assemblies from the Ulba Metallurgical Plant on the Kazakh-Chinese border – a joint venture slated to provide 200 tons of nuclear fuel each year until 2041.

Signs of deepening Russia-China cooperation over nuclear fuel may further fan this hotspot of security concerns. In March, the US House Armed Services Subcommittee on Strategic Forces was briefed on reports of Rosatom supplying highly enriched uranium to fast breeder reactors in China, a well-established pathway for weapons of mass destruction.

While there is no indication that Kazakhstan collaborates with Russia or China toward nuclear arms, evidence of an increasingly captive uranium industry presents a glaring liability for energy security in the US and Europe.

Reshoring, friend-shoring and the fuel cycle’s end

All this is coming to a head as demand for uranium is returning in force. With grids around the globe struggling to replace coal reliably with the variable generation of wind and solar, nuclear power is gaining recognition as a necessary component in the clean energy transition at large.

Nuclear plant developers from China, France, South Korea and the US are presently vying for business across Africa, Asia and the Middle East – eager to catch up with Rosatom’s lead.

And the most ominous driver of supply chain bifurcation may be the resuming buildup of nuclear weapons between great powers. China has been expanding its arsenal for years, and with Russia’s recent suspension of the “New START” arms control treaty, the US is pressured to modernize its own capabilities.

America should restore long-term nuclear fuel security before a crisis puts critical infrastructure at risk. The Nuclear Fuel Security Initiative can be maximized by (1) stockpiling uranium as disruption insurance, (2) reshoring critical bottlenecks like HALEU manufacturing and enrichment and (3) proactively friend-shoring the upstream stages of the supply chain among trusted allies.

The first two are already off the ground, with a strategic uranium reserve recently established and Ohio-based Centrus Energy beginning enrichment operations just this month.

But they require greater urgency. The reserve’s current inventory would cover only nine days of US commercial demand, and Centrus has a long way to go in scaling up to create a meaningful shift away from Rosatom.

The process building at the American Centrifuge Plant in Piketon, Ohio. Photo: Centrus Energy / American Nuclear Society website

The United States is fortunate that Canada and Australia are the number 2 and number 4 suppliers of uranium after Kazakhstan. However, the problem is that ramping up enough production to quit Kazatomprom would take many years, given the mining sector’s challenging workforce as well as lending and regulatory conditions.

Friend-shoring through policy incentives or consortium-building can accelerate this process by signaling a commitment to decoupling from the Russian nuclear industry – thereby boosting investor confidence and diverting capital otherwise flowing to marginally cheaper producers, like Namibia or Uzbekistan.

The surprising coup in Niger and its impact on France’s nuclear firm, Orano, should be lesson enough regarding dependence on states with elevated political risk for uranium supply.

Since the dual-use nature of uranium and the oligopolistic conditions of the space will never allow it to become a true commodity market, scruples over government intervention should be saved. The United States allowed Russia to maneuver into its commanding position by privatizing, then outsourcing, this critical supply chain.

Expeditiously rebuilding supply security at home and industrial capacity among allies is the first step to making a comeback in an industry that will undoubtedly remain vital within energy, technology and national security arenas for decades to come.

Brandt Kekoa Mabuni ([email protected]) is a resident WSD-Handa fellow at Pacific Forum in Honolulu.

This article was first published by Pacific Forum and is republished with permission. The article is a primer to a longer forthcoming report by the author titled “Splitting the Atom’s Supply Chain: Analysis & 3S Implications for a Disintegrating Nuclear Fuel Industry.”

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ASEAN economies facing a dangerous combo

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A potent combination of factors, including a stronger US dollar, a weaker Chinese economy, and rising oil prices, is creating a dangerous cocktail that threatens to disrupt the stability of Southeast Asian economies. 

A strong dollar makes servicing dollar-denominated debt more expensive, increasing the burden on countries with substantial external debt. 

Additionally, it could lead to capital outflows as investors seek higher returns in the US, putting downward pressure on currencies of the members of the Association of Southeast Asian Nations. As a result, import costs rise, contributing to inflationary pressures.

A slowing Chinese economy translates into reduced demand for ASEAN exports, particularly raw materials and intermediate goods. This has a direct impact on growth and could lead to reduced foreign investment as China’s economic health influences investor sentiment.

Meanwhile, higher energy costs contribute to inflation, which may prompt central banks to raise interest rates to combat rising prices. This, in turn, slows economic growth and impacts business and consumer sentiment.

The combined impact of a stronger dollar and higher oil prices can exacerbate current-account deficits in some ASEAN countries. These deficits lead to currency depreciation, making it challenging to attract foreign investment and service external debt.

Currency depreciation, driven by these factors, increases the cost of repaying foreign-denominated debt. This could prompt greater financial instability, especially for companies that have borrowed in foreign currencies, which may have trouble servicing their debt. As such, investors in these companies face heightened default risks.

Another issue is that the volatile mix of a strong dollar, a weaker Chinese economy, and higher oil prices can trigger stock market corrections, resulting in capital flight. Investors may reduce their exposure to ASEAN equities, leading to bearish market sentiment.

In addition, with slowing economic growth and currency volatility, foreign direct investment (FDI) into the region could slow. International investors may divert their capital to safer havens or more promising emerging markets, diminishing the flow of foreign funds.

Governments in ASEAN countries will need to implement sound economic policies and structural reforms to counteract these challenges. For example, diversifying trade partners and reducing reliance on China will help mitigate the risk of a weaker Chinese economy.

They should also consider targeted fiscal and monetary policies to stimulate domestic demand and investment.

Global investors should closely monitor the economic and financial conditions in ASEAN nations. 

Diversifying their portfolios and incorporating risk management strategies with an independent financial adviser will be crucial in navigating these turbulent waters. 

In the midst of these challenges, opportunities may also emerge for those investors who carefully assess risks and seize them as they arise.

Nigel Green is founder and CEO of deVere Group. Follow him on Twitter @nigeljgreen.

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