TIGHTEN SANCTIONS The G7 will aim to tighten sanctions on Russia to prevent it skirting measures already in place, Germany’s leader, Olaf Scholz, said on Thursday. The US will have a package of sanctions associated with a G7 statement that will centre on such an issue of enforcement of RussianContinue Reading
TOKYO — Japan’s decision to hold this weekend’s Group of Seven (G-7) summit in Hiroshima is appearing more and more “on the nose” with each passing day.
Worries that Russia might use nuclear weapons on Ukraine were part of Japanese Prime Minister Fumio Kishida’s calculus in choosing the city that was the first military target of such armaments in human history. Since that call, though, two economic nuclear options have emerged to fuel a bull market in Hiroshima symbolism.
One is the default drama that risks restoring the US to developing nation status. Republicans toying with financial Armageddon have US President Joe Biden truncating his Asia trip, scrapping stops in Australia and Papua New Guinea.
The other is how to play the China “decoupling” dynamic threatening to blow up world markets — and the Global South nations that host Kishida is inviting to the G-7. Along with Canada, France, Germany, Italy, the UK and the US, Japan has invited leaders from India, Brazil, South Korea, Vietnam, Australia and African Union and Pacific Islands nations.
Yet try as they may to send a clear message of unity versus China, G7 officials are likely to find that domestic disunity undermines any grand pronouncements, let alone bold joint actions.
Biden is sure to confront a torrent of questions about default risks. In just a matter of weeks, says US Treasury Secretary Janet Yellen, Washington will run out of cash. If so, all hell would break loose for every economy represented in Hiroshima – and those far beyond.
“If it does ultimately default on US Treasuries this would undermine the integrity of the world’s most popular ‘risk-free’ asset used in central bank reserves, low-risk private investments and as collateral,” says economist Will Denyer at Gavekal Research. “It would disrupt the global financial system and undermine the reserve status of dollar-denominated assets.”
Between Japan, China and other major Asian holders of US government debt, this region is sitting on somewhere near US$3.5 trillion of Treasuries. Yet Asia’s real exposure is its trade-reliant economies, which would be completely upended by the resulting surge in global bond yields, plunging share prices and gyrating exchange rates.
Even just the risk of the US missing a bond payment would do monumental damage. Joseph Abate, strategist at Barclays Plc, thinks US coffers might dip below $50 billion between June 5 and June 15. “Even this amount is too close for comfort a week or so ahead of mid-June tax date,” Abate says.
Adding to the dramas facing the G-7, this is a 100% self-inflicted threat to the global system manufactured in Washington by craven US lawmakers.
Sushil Wadhwani, chief investment officer at PGIM Wadhwani, notes that “in an increasingly polarized environment, politicians will need to see significant market turbulence in order to reach an agreement.”
As such, Wadhwani adds, “there’s a concern that the market is being complacent and that investors could be in for a sudden shock. Investors would not want to see unexpected fiscal tightening at a time when the risks of a US recession are already rising, and the possibility of a hard landing is increasing.”
All this plays right into China’s hands. To be sure, Chinese leader Xi Jinping won’t welcome how a US default derails his economy’s ability to meet this year’s 5% growth target. Nor would Beijing be happy suffering epic losses on the $865 million worth of US Treasury securities it owns.
Yet Kishida’s Japan would lose more on its $1.1 trillion of US government debt. And by playing Russian roulette with America’s credit rating again, the Republicans led by US House of Representative Speaker Kevin McCarthy would make Xi’s case for him that the global economy needs an alternative to the dollar.
“Again,” because the last time Republicans played games with raising the debt ceiling on Washington’s ability to borrow, in 2011, Standard & Poor’s yanked away its AAA credit rating.
As this reckless game plays out anew, Xi’s pro-yuan lobbying effort gets that much easier. If not the yuan, perhaps a “BRICS” currency, as Brazil, Russia, India, China, South Africa, and other anti-dollar-hegemony factions join forces.
One could argue decoupling efforts are a nuclear option all their own. The trade wars that former president Donald Trump launched against China from 2017 to 2021 disrupted US-China dynamics plenty. But Biden’s surgical focus on Chinese companies’ access to vital technology – and US prodding of allies to join in – accelerated the decoupling train.
This weekend’s stop in Hiroshima is an opportunity to gain broader clarity on what would constitute an economic divorce from China Inc and, more importantly, how to do it without wrecking Asia’s 2023 and beyond. Even the basic terminology is complicated, with some G-7 members and other leaders visiting Hiroshima favoring “de-risking” phraseology.
Biden’s White House has ambitious plans for the weekend. As the Wall Street Journal reports, “the US and its allies are poised to increase pressure on China” with “an expected joint statement rejecting use of economic retaliation against nations over policy disputes and other disagreements.”
The WSJ adds that “the anticipated statement isn’t expected to mention any country by name” but “comes as concerns mount among the US and its allies over Beijing’s increasing use of what its critics call ‘economic coercion’ to show its displeasure with other countries.”
A wrinkle that few saw coming is how Europe’s position toward China has in many ways become more adversarial than Biden’s. This might open an opportunity for the US to take something of a middle ground. Even so, leaders of the largest and mid-size industrialized economies will find severing commercial ties with China all but impossible.
Even just discerning where G-7 economies end and China begins will be a Herculean task. Chatter about reshoring industry, ring-fencing supply chains and tech self-sufficiency makes for great politics but precarious economics from Washington to Berlin to Tokyo.
Yet a recent report from S&P Global Ratings calls the process “unavoidable” despite the growing knowledge that it “will be costly” for the global economy.
“Global tech’s transition away from China will strain efficiencies and may consume much management focus over the next three to five years,” argues S&P credit analyst Hins Li. “Moreover, firms that move capacity out of China risk losing some access to that market, which many entities rely on for much of their growth.”
Nevertheless, Li points out, all available data show that the tech industry’s biggest global players are loosening their China ties. The catalysts range from China’s production disruptions amid Covid-19, geopolitical tension and a sharp escalation in curbs on tech exports. This generated a bull market in “concentration risk” in boardrooms around the globe.
In its report, S&P zeroes in on global laptop production. In 2021, China’s share of global laptop production topped 80%. By 2025, S&P thinks that share will fall by at least 10-20 percentage points. This will be a direct result of tech’s biggest names redistributing manufacturing capacity out of Xi’s economy.
For handsets, S&P estimates China’s share of production will drop by between 5 percentage points and 15 percentage points by 2025. The proportion of iPhones that Apple Inc makes in China will drop as rivals like India raise their manufacturing games. S&P notes that India’s iPhone industry will likely at least double by 2025. That compared to today’s mid-single digit percentage of total production.
“Spreading out operations won’t be as efficient as utilizing giant factories in China, which maximize economies of scale and draw on existing robust supplier networks, infrastructure, and talent pools,” S&P writes. “Some companies may retain redundant capacity in China in case they encounter production hiccups while ramping up new sites.”
Even so, this weekend’s G-7 talks are just as likely to get bogged down in petty infighting and a torrent of sideline topics that leaders will bring to Hiroshima. In addition to Biden’s debt default nightmare, French President Emmanuel Macron faces public outrage back home over steps to raise the national retirement age from 62 to 64 later this year.
Macron’s team, meantime, is feuding with Italian Prime Minister Giorgia Meloni, which it has called a “far-right government” with a policy mix “incapable of fixing Italy’s migration problems.”
The G-7 confab also comes as Ukraine seeks additional aid, both financial and military, and Russia continues to dig in for the long haul. Along with worries about Vladimir Putin’s threats to use tactical nukes in the conflict, G-7 leaders are sure to be questioned about how Moscow’s economy is skating around global sanctions quarter after quarter. Support for Taiwan will come up early and often, too.
Also likely to come up in G-7 discussions and press conferences: Turkish President Recep Tayyip Erdogan’s political survival instincts ahead of a May 28 runoff election. This drama in Turkey, a NATO member, will matter greatly for the course of everything from Russia-Ukraine dynamics to the state of play in the Middle East.
Still, the 800-pound gorilla in the room during any of these discussions will be the default insanity following Team Biden at every turn. Defusing that existential threat to global stability 7,000 miles away in Washington will be easier said than done.
Follow William Pesek on Twitter at @WilliamPesek
Convening war rooms, planning speedy bailouts and raising house-on-fire alarm bells: Those are a few of the ways the biggest banks and financial regulators are preparing for a potential default on US debt.
“You hope it doesn’t happen, but hope is not a strategy – so you prepare for it,” Brian Moynihan, CEO of Bank of America, the nation’s second-biggest lender, said in a television interview.
The doomsday planning is a reaction to a lack of progress in talks between President Joe Biden and House Republicans over raising the US$31.4 trillion debt ceiling – another round of negotiations took place on May 16, 2023.
Without an increase in the debt limit, the US can’t borrow more money to cover its bills – all of which have already been agreed to by Congress – and in practical terms that means a default.
What happens if a default occurs is an open question, but economists – including me – generally expect financial chaos as access to credit dries up and borrowing costs rise quickly for companies and consumers.
A severe and prolonged global economic recession would be all but guaranteed, and the reputation of the US and the dollar as beacons of stability and safety would be further tarnished.
But how do you prepare for an event that many expect would trigger the worst global recession since the 1930s?
Jamie Dimon, who runs JPMorgan Chase, the biggest US bank, told Bloomberg he’s been convening a weekly war room to discuss a potential default and how the bank should respond. The meetings are likely to become more frequent as June 1 – the date on which the US might run out of cash – nears.
Dimon described the wide range of economic and financial effects that the group must consider such as the impact on “contracts, collateral, clearing houses, clients” – basically every corner of the financial system – at home and abroad.
“I don’t think it’s going to happen — because it gets catastrophic, and the closer you get to it, you will have panic,” he said.
That’s when rational decision-making gives way to fear and irrationality. Markets overtaken by these emotions are chaotic and leave lasting economic scars.
Banks haven’t revealed many of the details of how they are responding, but we can glean some clues from how they’ve reacted to past crises, such as the financial crisis in 2008 or the debt ceiling showdowns of 2011 and 2013.
One important way banks can prepare is by reducing exposure to Treasury securities – some or all of which could be considered to be in default once the U.S. exhausts its ability to pay all of its bill. All US debts are referred to as Treasury bills or bonds.
The value of Treasurys is likely to plunge in the case of a default, which could weaken bank balance sheets even more. The recent bank crisis, in fact, was prompted primarily by a drop in the market value of Treasurys due to the sharp rise in interest rates over the past year. And a default would only make that problem worse, with close to 190 banks at risk of failure as of March 2023.
Another strategy banks can use to hedge their exposure to a sell-off in Treasurys is to buy credit default swaps, financial instruments that allow an investor to offset credit risk. Data suggests this is already happening, as the cost to protect US government debt from default is higher than that of Brazil, Greece and Mexico, all of which have defaulted multiple times and have much lower credit ratings.
But buying credit default swaps at ever-higher prices limits a third key preventive measure for banks: keeping their cash balances as high as possible so they’re able and ready to deal with whatever happens in a default.
Financial industry groups and financial regulators have also gamed out a potential default with an eye toward keeping the financial system running as best they can.
The Securities Industry and Financial Markets Association, for example, has been updating its playbook to dictate how players in the Treasurys market will communicate in case of a default.
And the Federal Reserve, which is broadly responsible for ensuring financial stability, has been pondering a US default for over a decade. One such instance came in 2013, when Republicans demanded the elimination of the Affordable Care Act in exchange for raising the debt ceiling. Ultimately, Republicans capitulated and raised the limit one day before the U.S. was expected to run out of cash.
One of the biggest concerns Fed officials had at the time, according to a meeting transcript recently made public, is that the US Treasury would no longer be able to access financial markets to “roll over” maturing debt.
While hitting the current ceiling prevents the US from issuing new debt that exceeds $31.4 trillion, the government still has to roll existing debt into new debt as it comes due. On May 15, 2023, for example, the government issued just under $100 billion in notes and bonds to replace maturing debt and raise cash.
The risk is that there would be too few buyers at one of the government’s daily debt auctions – at which investors from around the world bid to buy Treasury bills and bonds. If that happens, the government would have to use its cash on hand to pay back investors who hold maturing debt.
That would further reduce the amount of cash available for Social Security payments, federal employees wages and countless other items the government spent over $6 trillion on in 2022. This would be nothing short of apocalyptic if the Fed could not save the day.
To mitigate that risk, the Fed said it could could immediately step in as a buyer of last resort for Treasurys, quickly lower its lending rates and provide whatever funding is needed in an attempt to prevent financial contagion and collapse. The Fed is likely having the same conversations and preparing similar actions today.
Ultimately, I hope that Congress does what it has done in every previous debt ceiling scare: raise the limit.
These contentious debates over lifting it have become too commonplace, even as lawmakers on both sides of the aisle express concerns about the growing federal debt and the need to rein in government spending.
Even when these debates result in some bipartisan effort to rein in spending, as they did in 2011, history shows they fail, as energy analyst Autumn Engebretson and I recently explained in a review of that episode.
That’s why one of the most important ways banks are preparing for such an outcome is by speaking out about the serious damage not raising the ceiling is likely to inflict on not only their companies but everyone else, too. This increases the pressure on political leaders to reach a deal.
Going back to my original question, how do you prepare for such a self-imposed catastrophe? The answer is, no one should have to.
John W Diamond is Director of the Center for Public Finance at the Baker Institute, Rice University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
The Russian invasion of Ukraine has put tremendous strain on the strategic partnership between South Africa and the United States. Since the invasion, the South African government has been unwilling to demand that Russia unilaterally put an end to hostilities and withdraw its forces from the sovereign territory of its neighbor.
This is despite the fact that South African foreign policy is supposed to be conducted in accordance with the values and principles set forth in the constitution. This includes the advancement of human rights and promotion of democracy.
The South African government has not appeared especially bothered by this apparent contradiction in their international relations. From its perspective, it has assumed a reasonable stance in a world characterized by an “unequal application” of Western principles in armed conflicts and other insecure environments. To be fair, South Africa is not alone. Just ask India and Vietnam.
The Russian invasion of Ukraine has exposed the practical limits of the strategic partnership between South Africa and the United States. Recent events suggest those limits include the provisioning of military products and services to the Russian government and Russian private military contractors.
Now, questions have been raised as to whether the South African government crossed that line and, if so, does that count as a redline in the strategic partnership for the US government. While the world awaits the answers, it is important for regional observers to reflect on the series of events that led to this historic low in relations between South Africa and the United States.
That requires a rapid tracing of the series of events that led to US Ambassador, Reuben Brigety, going out and leveling public accusations against the African National Congress and the South African government. When viewed in this context, it becomes clear that the ambassador’s remarks are effectively an acknowledgment of the structural instabilities that exist in the strategic partnership between South Africa and the United States.
The Ramaphosa administration and Biden administration will need to mitigate those instabilities with haste. Otherwise, the strategic partnership could very well collapse before next year’s national elections in both countries. That is the reality.
Last March, South African President Cyril Ramaphosa insinuated that the North Atlantic Treaty Organization (NATO) instigated the Russian invasion of Ukraine. In his words, the “war could have been avoided if NATO had heeded the warnings from amongst its own leaders and officials over the years that its eastward expansion would lead to greater, not less, instability in the region.”
For that reason, he indicated that South Africa would not take “a very adversarial stance against Russia.” In October, the South African government went further. It gave permission to dock to a Russian superyacht that was under Western sanctions. This was justified on the grounds that the South African government does not have a “legal obligation to abide by sanctions” that are imposed by Western governments.
Last December, a Russian cargo ship was dispatched to South Africa. In the vicinity of Naval Base Simon’s Town, its crew may have switched off its maritime tracking system. Soon, local residents observed the Western-sanctioned vessel docked at the largest base of the South African Navy. There, local residents reported materials being loaded and unloaded the ship “under the cover of darkness.”
When questioned, Defense Spokesperson Kobus Marais responded that, to the best of his knowledge, the ship had docked to offload “an old, outstanding order for ammunition.” According to Julius Malema of the Economic Freedom Fights, there was nothing inappropriate with such a transfer since it is “consistent with international best practice to honor contractual trade obligations and relationships.”
A few weeks later, the African National Congress hosted its 55th National Conference. There, the African National Congress openly criticized American foreign policy. In the Resolution on International Relations, the African National Congress observed that “US-led expansionist military strategies” had resulted in “Western imperialist dominance over Eastern Europe.”
As an anti-imperialist and anti-colonial party, the African National Congress not only decried “a conspicuous failure of the current global institutions to resolve conflicts fairly, justly and equitably in order to safeguard the interests of all nations.” It went further. It concluded that the Russia-Ukrainian War was “provoked” by an American government pursuing an imperialist agenda that was informed by the Wolfowitz Doctrine.
In February, Airports Company South Africa proposed structural changes to its fueling operations at its airports. These changes were designed to separate refueling operations from thru-putting to ensure that “a sanctioned friend of the South African government” would receive “servicing and refueling” as needed.
This division was intended to break forced alignment “with the stance the oil companies’ headquarters and home countries take in terms of sanctions against Russia.” Note, this move followed at least two earlier incidents where international oil companies had actually refused to refuel the Russian aircraft under Western sanctions that had been granted permission to land at commercial airports in South Africa.
These refusals had angered some members of parliament from the African National Congress who demanded public assurances that the state-owned airport management company would not “indirectly impose” Western sanctions on Russia. After those assurances were given, Air BP decided to cease all operations in South Africa.
Around the same time, the South African government hosted a major military exercise between China, Russia, and South Africa. Those exercises coincided with the one year anniversary of the Russian invasion of Ukraine. They also involved the Russian frigate Admiral Gorshkov, which was armed with Zircon hypersonic missiles.
Prior to the exercises, there was an official visit by Russian Foreign Minister, Sergei Lavrov, with the South African Minister of International Relations and Cooperation, Naledi Pandor. On the sidelines, Minister Pandor stressed that it would be “an abuse of international practice” to prevent the South African government from conducting ”military exercises with friends.” In the end, the US government expressed public concern about the exercises.
The US Embassy in South Africa cautioned that the exercises would not only present the South African government with a diplomatic challenge. It would lead South Africans to ask whether their country should be “associated with the symbol ‘Z’ painted on the side of the frigate the Admiral Gorshkov.”
In April, a Russian cargo plane owned by an American-sanctioned company was permitted to land at Waterkloof Air Force Base. The plane purportedly delivered diplomatic mail to the Russian embassy.
However, the company reportedly has “handled cargo shipments for sanctioned Russian Federation defense entities” in the past. A few weeks later, Assistant Secretary for Arms Control, Verification and Compliance Mallory Stewart was dispatched to South Africa and Egypt.
Note, Egypt is another country where suspicions have been raised about illicit weapons transfers to Russia. Between May 9-10, Assistant Secretary Stewart held talks with senior government officials at the Department of International Relations and Cooperation Republic of South Africa. Around the same time, the main opposition party, Democratic Alliance, issued a public statement chastizing the African National Congress for abusing Air Force Base Waterkloof and Naval Base Simonstown for their “narrow political interests.”
They also submitted a Promotion of Access to Information Act (PAIA) application requesting the disclosure of “who authorized the landing at Waterkloof and the docking at the naval base, including the type of goods that were brought in and out.”
On May 11, bilateral relations finally boiled over. During a press briefing, US Ambassador Reuben declared that “the South African government is in fact not not aligned” with Russia. This led to a rapid deterioration in the strategic partnership between South Africa and the United States.
In his remarks, the ambassador went on to outline a series of accusations against the African National Congress. He observed that its senior leadership had published “outrageous” and “patently false” statements in the Resolution on International Relations that were openly “hostile” to the national security interests of the US government.
Moreover, he maintained that the African National Congress Headquarters, Luthuli House, had been unresponsive to his repeated attempts to open dialogue on these matters. To rub salt in the wound, Ambassador Reuben confirmed the existence of intelligence that showed that weapons and ammunition were loaded onto the Russian vessel at Naval Base Simon’s Town.
In his words, the US government was “confident that weapons were loaded into that vessel, and I would bet my life on the accuracy of that assertion.” He characterized such behavior by a strategic partner as “fundamentally unacceptable.”
The South African government was quick to respond to the allegations regarding the arms transfer at Naval Base Simon’s Town. The spokesperson to the President, Vincent Magwenya, claimed that the ambassador had undermined “the spirit of cooperation and partnership” that existed between the two countries in resolving the matter.
He noted that the South African government had launched “an independent inquiry” into the accusations made by the US government, and the two countries had agreed to allow that investigation “to run its course,” with the United States Intelligence Community providing supporting evidence.
For its part, the South African Department of Defense issued a statement in support of the independent investigation as it would provide “an opportunity to ventilate its side of the story with concrete evidence,” and thereby “deal with allegations surrounding the purpose of such a visit in front of a competent officer of the law instead of hearsay or speculation.”
Separately, the South African government issued a démarche to the ambassador through diplomatic channels. This led to the arrangement of a meeting between Ambassador Reuben and Foreign Minister Pandor. Following that meeting, the South African government reaffirmed that the National Conventional Arms Control Committee had never approved of a “sale of arms to Russia related to the period and incident in question.”
Noting that the independent inquiry would provide a “platform to establish facts and role players in the incident in question,” the South African government promised that anyone “found to have broken the law will face consequences.”
Moving forward, the South African government claimed that an agreement had been reached to “use established diplomatic channels to raise whatever issue may arise in the management of the bilateral relations between the two countries.”
For his part, Ambassador Reuben noted that the meeting had provided a platform to “correct any mis-impressions left by [his] public remarks.” Perhaps not surprisingly, he never provided clarification on what, if any, mis-impressions had arisen.
This breakdown in bilateral relations brought about a wide array of secondary effects. One of the first dominos to fall was the South African economy.
Almost immediately, South African bond yields skyrocketed due to investor concerns quoted in Bloomberg that “a diplomatic row” between Pretoria and Washington could put “preferential trade access … worth billions of dollars to South Africa at risk.” In parallel, the South African rand fell “to the weakest level on record against the dollar.”
This was after the rand had recently fallen to a three-year low due to increasing fears “of scheduled blackouts known as loadshedding worsening during winter.” Investors were spooked. And, they seemed to have good reasons for it. The main opposition party pointed out that “close to 77% of foreign direct investment stock” of South Africa has come from the European Union, the United Kingdom, and the United States in recent years.
Domestic politics was another arm to cascade. In South Africa, Clement Manythela cautioned his listeners that the South African government “has been cagey about this Russian vessel for so long – since its arrival and dawn departure. There has been no official explanation from the Department of Defense. No explanation from the South African National Defense Force. No explanation from the Navy either.
“This is despite a number of calls from politicians. Repeated media requests for information. So whatever information the government gives you now, take it with a pinch of salt. They were never interested in transparency from the word go. So anything is possible.”
With such doubts being expressed by the media a year out from a national election, it is not surprising that national politicians tried to capitalize on the controversy for political gain.
The strongest recriminations have been leveled by the Democratic Alliance. That party not only suggested that “President Ramaphosa and his government have already lied to South Africa and the world as to our country’s involvement in this devastating conflict.”
They said that it “signals” that South Africa has, under the leadership of the African National Congress, “regressed into a nation that has abandoned the principles of freedom, fairness, and equality.”
As the Shadow Minister for International Relations and Cooperation volleyed, the South African government is now “complicit in a war of aggression that … risks undermining both our domestic priorities and international peace and security.” ActionSA leadership expressed similar beliefs that the South African government has “never had a non-aligned approach to the Ukraine-Russian war.”
Rather than “supporting Russia during the ongoing war,” its politicians demanded that the South African government “come clean about … support for a dictatorial regime which is alleged to be actively funding” the African National Congress.
The Economic Freedom Fighters have waged a radically different attack. Its leader, Julius Malema, argued that “American concerns are misplaced.” He claimed that the South African government “has got no capacity to empower Russians with weapons against their own handlers.”
Using inflammatory language, he went even further. He alleged that the US government “is just becoming a crybaby trying to find a way into punishing South Africa because of our position on the Russia-Ukraine war.”
The National Freedom Party charted a similar tack. Its leadership condemned the decision by the South African government “to establish a commission of inquiry into the alleged supply of weapons to Russia.”
In their words, the United States government has no “moral authority to make any demands or claims against the South African Government given the fact that it is the USA and its allies that are supplying arms and ammunition to the Ukrainians in this proxy war with Russia.”
In the United States, the harshest criticisms have been voiced by a Member of Congress from the Republican Party. After the news of the incident broke, the Ranking Member of the Senate Foreign Relations Committee, Jim Risch, publicly rebuked the South African government for its “anti-American screeds” and maltreatment of an American ambassador. As for the démarche, he added that such behavior “doesn’t reflect friendship or a neutral partner.”
Afterward, Ranking Member Risch extended a jab across the domestic political aisle when he publicly criticized the US government for failing to stand behind an American ambassador who “spoke honestly about an issue of grave concern to US national security.”
These words will resonate with other Members of Congress who have previously called on the US government to keep Congress better apprised of the strategic partnership by providing regular and comprehensive briefings on subjects relating to South Africa.
Michael Walsh is an Adjunct Fellow at the Center for African Studies at Howard University and a Visiting Researcher at the School of Foreign Service at Georgetown University.
The year 2023 is bringing a renewed focus on the US-Japan partnership as a fulcrum of global and regional diplomacy.
With an eye to this weekend’s G7 Summit in Hiroshima, Prime Minister Fumio Kishida began the year with visits to G7 counterparts in Europe and North America. Later in the spring, he toured Africa in an effort to gain understanding from countries of the Global South.
The Joe Biden administration looks ahead to a lively economic agenda, as it hosts the APEC Summit in November on the heels of the G20 Summit in New Delhi in September. National Security Advisor Jake Sullivan laid out in detail the economic ambitions of the Biden national strategy on April 27, giving further clarity to how the administration thinks its foreign policy will meet the needs of the American middle class.
Regional collaboration continues to expand. Both leaders will be present in Australia on May 24 as Prime Minister Anthony Albanese hosts the third in-person meeting of the leaders of the Quad.
Also noteworthy is the progress in ties between Japan and South Korea. Trilateral consultations began early in the Biden administration and, after the election of President Yoon Suk Yeol last spring, the groundwork for resolving the many difficulties in the bilateral relationship began. This spring, Yoon and Kishida revealed their progress in a set of visits to each other’s capitals. A trilateral summit is planned for the G7 Summit, which Yoon will attend as an observer.
Overshadowing this active multilateral calendar is the continuing war in Ukraine. Both Kishida and Biden have visited President Volodymyr Zelensky in his capital. The United States and Japan remain stalwart supporters of the Ukrainian defense effort as Ukrainians prepare for the spring counteroffensive against Russian forces. Yet questions have arisen within the US Congress over the scale and duration of military aide provided to Zelenskyy.
Interestingly, there remains little doubt about the Kishida cabinet’s support of Ukraine. While Japan does not provide lethal aid, it has joined in solidarity with European nations to contribute humanitarian relief.
Political choices will also shape the remainder of the year. President Biden on April 25 announced his run for a second term in the 2024 election.
In Tokyo, talk of a national snap election continues, with the latest rumors suggesting that Kishida, coming off his party’s good showing in local elections in April, might opt for a ballot after the G7 Summit.
Early in the year, Kishida began consultations with other G7 partners for the summit to be held in Hiroshima from May 17-19. As host, Japan will set the agenda for the meeting, and the prime minister aimed to highlight his home constituency as a gathering place for global leaders. Traveling first to Europe and then to North America, Kishida met the French president and Italian, British, and Canadian prime ministers before his final stop at the White House for talks with Biden.
High on the agenda was rallying global support for Ukraine. Kishida then visited Ukraine in March, quietly traveling there from India, where he had met with Prime Minister Narendra Modi. While in Kyiv, Kishida pledged to provide additional aid and create a “special global partnership” between Japan and Ukraine. In addition, he invited President Zelensky to speak to the G7 leaders at the summit.
There are other aims as well. Notably, Japan intends to highlight the repercussions to the Global South of the war in Ukraine. Kishida traveled to Africa on a week-long trip beginning April 29 to offer assistance to those suffering from the global hike in food and energy prices caused by the war. Similarly, Tokyo will be looking to engage developing countries to ensure they avoid becoming overdependent on Chinese largesse. On May 1, during his meeting with Ghanaian President Nana Addo Dankwa Akufo-Addo, Kishida pledged $500 million in financial support to Africa.
The Japanese prime minister will have Indo-Pacific security balance on his mind as G7 leaders gather in Japan. As Kishida made clear throughout last year, a conflict similar to the Ukraine war is easily imaginable in the Indo-Pacific as cross-Strait tensions between China and Taiwan have intensified. Gaining deeper European understanding of the strategic challenges he sees being posed by China will be high on his priority list. Some European nations, such as France and Germany, see economic ties with China as indispensable, especially as sanctions on Russia have been costly.
Finally, Kishida will have the opportunity to remind the world of the nuclear risk. A visit by Biden and other G7 leaders to the Hiroshima Peace Park, and possibly to the Nagasaki Peace Park, will highlight the consequences of nuclear weapons and provide a platform for global condemnation of the threat to use them again.
The Biden and Kishida governments have continued to expand their regional agenda. Striking this spring was progress made in improving trilateral US-Japan-South Korea ties. Security cooperation began in the early months of the Biden administration in 2021 and gained momentum with the election of Yoon last year. This year consultations deepened. Foreign ministers met on the sidelines of the Munich Security Conference, where the three democracies restated their joint condemnation of recent North Korean missile tests. Further agreement is expected at a trilateral leaders’ meeting to be held during the Hiroshima G7 Summit.
Nonetheless, concerns over US extended deterrence in South Korea prompted a significant statement of reassurance during the state visit of President Yoon to Washington in April. Yoon gained a clear statement of the US commitment to South Korean defenses in the so-called “Washington Declaration.” Speaking during a joint press conference in the Rose Garden, Biden said that “a nuclear attack by North Korea against the United States or its allies or partners is unacceptable and will result in the end of whatever regime to take such an action.” In return, Biden received Yoon’s reassurance of South Korea’s commitment to the Nuclear Non-Proliferation Treaty.
Strategic stability on the Korean Peninsula has a significant impact on Japan as well, and North Korean missile tests continued to make it clear that a robust trilateral agenda of security cooperation was all the more necessary.
The new National Defense Plan put forward by Prime Minister Kishida suggests an early purchase of counterstrike capabilities, ensuring that Japan, like South Korea, will have its own conventional deterrent. But close coordination between Tokyo, Seoul, and Washington will be indispensable.
US Special Representative for the DPRK Sung Kim, Japanese Director-General of the Asian and Oceanian Affairs Bureau Takehiro Funakoshi and South Korean Special Representative for Korean Peninsula Peace and Security Affairs Kim Gunn met in Seoul on April 7 and called for joint efforts to block North Korea from sending workers abroad and engaging in malicious cyber activities to fund its nuclear program.
Most welcome have been the accompanying improvements in bilateral ties between Tokyo and Seoul. Washington has been supportive of the bilateral diplomacy that produced first Yoon’s visit to Tokyo on March 16 and then Kishida’s visit to Seoul on May 7. The former produced a Japanese commitment to improve favorable treatment of South Korean companies under the export control laws.
Progress made by the Yoon administration on ensuring compensation for the plaintiffs in the Supreme Court forced labor decision has also been a major signal of progress. On April 17, Japan and South Korea held their first bilateral security dialogue in five years. Finally, Kishida’s visit suggested far greater cooperation on strengthening supply chain resilience and advancing high-tech industries will be coming in the months ahead.
Yoon’s attendance at the G7 Summit will provide the opportunity for US-Japan-South Korea leaders to move their agenda forward, with Yoon hinting in press remarks that the leaders might use the meeting to form a new trilateral security forum. Media reports also suggest that the three countries hope to reach an agreement on linking radar systems, to better detect North Korean missiles, when their defense ministers meet in Singapore in early June.
The US and Japan have continued their cooperation in the Quad. The Quad foreign ministers met in New Delhi on March 3 in preparation for the leaders’ summit planned for May 24 in Australia. Already, Quad working groups have produced considerable progress across a host of issues. From April 10-14, the US, Japan, Australia, and India hosted the Quad Cyber Challenge, a coordinated campaign to promote responsible cyber habits across corporations, schools, and individuals in the four nations.
And, the US and Japan are joining with the Philippines to deepen security cooperation. On April 5, Chief Cabinet Secretary Hirokazu Matsuno announced that Japan would begin to offer bilateral Overseas Security Assistance to help smaller Indo-Pacific nations strengthen their defenses. One of the first candidates will be the Philippines.
A month earlier, the Japanese Self-Defense Force (SDF) participated in the annual US-Philippine Salaknib military exercises as an observer to encourage a more formal role for the Japanese SDF participation in contributing to stability in the South China Sea.
This pattern of inviting Japan to join bilateral military exercises with allies proved successful in expanding Japanese security cooperation with Australia and then India in the 2000s, and ultimately to a Quad dialogue on maritime and other regional security needs.
Already, media reports suggest that the US, Japan, and the Philippines are planning to create a trilateral consultative mechanism for their national security advisors.
Kishida faced a series of challenges toward the end of 2022. His decision to host a state funeral for former Prime Minister Shinzo Abe sparked controversy, while growing public discontent arose over Kishida’s management of the LDP’s connections with the Unification Church. The resignation of four Cabinet members due to their ties with the church and other scandals added to the mounting pressure on Kishida’s leadership.
Some polls even indicated that Kishida’s approval rating, which had already been on a declining trajectory, had fallen below 30%, entering the so-called “danger zone” where prime ministers face the risk of losing office.
But Kishida has seemingly bounced back since the start of 2023. His support rating has steadily climbed, with one Nikkei poll in late April finding that support for the prime minister surpassed 50% for the first time in eight months.
What factors contributed to this successful turnaround in public support? Some of it can likely be attributed to Kishida’s vigorous engagement in high-profile diplomacy in the leadup to G7.
Kishida has also benefitted from positive developments on the domestic front. His ruling coalition performed better than anticipated in the unified local elections and parliamentary by-elections held in April. While the LDP and its coalition partner Komeito experienced some setbacks in the two rounds of local elections on April 9 and 23, they managed to secure victories for most of their preferred candidates.
However, it was the LDP’s better-than expected performance in the five parliamentary by-elections on April 23 that was particularly significant for the Kishida government. Although Kishida had set a target of winning three out of five seats, LDP-backed candidates exceeded expectations by securing four victories.
Support for Kishida further increased after he survived an assassination attempt on April 15. While Kishida was delivering a stump speech at a fishing port in Wakayama, an assailant hurled an explosive device at him, but he managed to escape unharmed. The incident evoked memories of the assassination of former Prime Minister Abe, who was shot and killed less than a year ago on July 8, 2022, during an Upper House campaign event in Nara.
With the upswing in Kishida’s support rating, speculation has arisen about the possibility of a snap election for the Lower House. Kishida must call a new election by October 2025 at the latest when the term for the Lower House expires. While concerns exist that voters may experience election fatigue after the busy month of April, Kishida is likely contemplating the optimal timing to secure victory at the polls and strengthen his position before the LDP’s next party leadership election in September 2024.
Another crucial factor influencing Kishida’s decision on election timing is its impact on support for his policy proposals, particularly in terms of how he plans to pay for them. Kishida has made ambitious pledges to double Japan’s spending on defense and childcare, but specific details have been limited, causing some confusion about the prime minister’s plans for implementation. Opinion polls indicate that the public is not inclined toward new taxes, and Kishida himself has said that he would seek a public mandate through an election before considering any tax hikes.
While Kishida has recently dismissed the possibility of an imminent election, only time will reveal whether this stance changes. Meanwhile, observers will closely monitor the performance of the Kishida administration during the G7 Summit and parliamentary deliberations in June, as it is expected that the government will unveil more information regarding its spending priorities.
As for Biden, his support ratings have largely managed to hold steady at just over 40% through the first few months of the year, but significant challenges lie ahead. As Biden heads to Japan to meet Kishida and world leaders in Hiroshima, domestic concerns will likely be looming large on his mind as the US needs to raise the debt ceiling by June 1 or risk default.
The last time the US came within just days of default in 2011, Standard & Poor’s downgraded the country’s top-tier credit rating for the first time. How the Biden administration handles the issue will have substantial implications for the global economy and will also likely continue to be a point of contention as the president seeks reelection in 2024.
Sheila A. Smith is senior fellow for Japan studies at the Council on Foreign Relations. She is the author of Intimate Rivals: Japanese Domestic Politics and Rising China and Japan’s New Politics and the U.S.-Japan Alliance. Charles T. McClean is Japan Foundation CGP postdoctoral associate in East Asian Studies at the Yale MacMillan Center. Previously he was the Toyota visiting professor at the University of Michigan’s Center for Japanese Studies.
This article, abridged from one originally published by the Pacific Forum in Honolulu, is extracted from Comparative Connections: A Triannual E-Journal of Bilateral Relations in the Indo-Pacific, Volumw 25, Number 1, May 2023.
SINGAPORE: Singapore and South Africa on Tuesday (May 16) signed Memorandums of Understanding (MOU) to collaborate on areas like information and communications technology (ICT), and skills development. The MOU on ICT will pursue cooperation in that space, including the exchange of best practices and furthering collaboration in existing and new or emergingContinue Reading
SINGAPORE: Communications and Information Minister Josephine Teo delivered a speech on the evolution of Singapore’s media industry on Tuesday (May 16) at the launch of the book Stewardship of the Singapore Media: Staying the Course, written by Patrick Daniel, former interim CEO of SPH Media Trust.
This is her speech in full:
Good evening, everyone.
Thank you for inviting me to the launch of Patrick’s book, Stewardship of the Singapore Media: Staying the Course.
I wanted to start off by saying the most important thing which is, “Yes, I have read the book, and I highly recommend it to you too.”
It is in fact a compilation of the three lectures Patrick delivered as an IPS Fellow.
Patrick is uniquely positioned to have dealt with these topics. The challenge for him was that in delivering his lectures, he had to synthesise the most important insights that he had gathered over the years. In this regard, Patrick is an expert in summarising complex topics and putting them across in a very accessible manner. His ability was apparent even for me, as a reader, who was looking it from a textual perspective, rather than having the privilege of being in his lectures.
I also say that he is uniquely positioned to answer these topics because before he embarked on a media career, Patrick had been in the government and understood its inner workings.
More recently, he was the interim CEO of SPH Media Trust, and was closely involved in the restructuring process.
Therefore, when Patrick shares his insights on how Singapore media needs to transform to stay the course in these turbulent times, he has a point of view that is well worth listening to.
I will briefly touch on three themes in the book that resonated strongly with me.
First, the importance of local media, or legacy media, as Patrick describes it
This is a pivotal period for mainstream media outlets. Trusted and credible news media has never been more important than in this period of rapid change in the digital realm.
Clickbait content vies for the limited attention of consumers. False information has become pervasive. We sometimes find ourselves in this awkward position of not knowing what to believe.
At the same time, the business models of traditional media outlets have been disrupted by large online platforms, and quality journalism must find ways of paying for itself.
Singapore’s media outlets have not been spared this digital onslaught. As Patrick candidly says in his first lecture “Our customers had decided to have their lunch at Google and Facebook. And they did not come back.”
Based on the findings from the Reuters Institute Digital News Report 2022, trust in news media in Singapore has remained largely stable over the last five years, and is amongst the highest levels in the Asia Pacific region.
Singapore’s level of trust in news media, at 43 per cent in 2022, is comparable to the global and regional average.
Our local media has managed to preserve and build public trust throughout the years because they have always striven to provide accurate, objective, and timely reporting.
As I have said before and will say again, the government is committed to supporting our local media players to stay the course. They continue to reach the vast majority of Singaporeans, even as the competition for attention intensifies.
We want local media to thrive and be able to provide high quality, credible local content to all Singaporeans. This is why we are funding both Mediacorp and SPH Media Trust in their transformation efforts.
The second theme I would like to touch on is the relationship between media and the government, for now and in the future.
It is vital that the government and the media can operate on the basis of mutual trust and respect.
This relationship has been instrumental throughout our existence as an independent nation.
Like all relationships, it is not without tension. It has to be constantly managed, but it has worked. Patrick described the relationship in his first lecture; he did not shy away from acknowledging the difficulties.
At its heart, this relationship is built on the significant value that the government places on our local media’s role in nation-building. This will continue under the 4G leadership.
If you are wondering how we will engage with the media, consider how we functioned during the COVID-19 pandemic:
The Multi-Ministerial Taskforce held regular press conferences to share the latest developments and public health measures, as well as addressed the media’s questions candidly, and very often they were tough, inconvenient questions.
We shared information – including details of cases – promptly and fully. No vital information was withheld from the media or the public.
As a result, the local media was able to reflect the situation accurately and present information to the public in ways that were easily understood. Unlike in many other countries, Singaporeans did not become divided along ideological lines about mask-wearing, vaccinations, or safe distancing measures.
This did not mean that journalists saw eye-to-eye with the government on all issues concerning the pandemic. On some occasions, they wrote op-eds expressing their disagreement. There was editorial independence, but the media and government operated on the same set of facts.
Will the government’s provision of funding change this? We see no value in putting the trust that our legacy media has built with the public at risk, if the products they create lack credibility and are ignored by audiences. It doesn’t do anyone any good. Especially in these troubled times with external challenges expected to test our model of governance, the 4G leadership will look to the media to play its role in nation-building and to help unite Singaporeans.
This leads me to the final theme. In return for government’s support, our ask of the media companies is to strive towards successful digital transformation and be effective providers of media and news, whether in print, broadcast or on the internet.
In his third lecture, Patrick lays out a future for SMT. He describes a SMT in 2045 that is able to fully harness the benefits of technology to deliver better, more customised products to their audience. It has strong regional reach, and is financially independent because it is able to leverage technology to regain subscription and advertising revenues. What remains unchanging in this version of SMT is that it continues to provide trusted news as a public good.
I urge our media companies, whether SMT or Mediacorp, to look closely at Patrick’s scenario and his assessment of the capabilities required to get there, in line with the process that he described as “backcasting”.
To conclude, I would like to congratulate Patrick on a book that challenges us all in thinking about the role of our local media players, and what it will take for them to continue playing this role far into the future.
Congratulations again and thank you, Patrick!
The sentencing comes as US President Joe Biden is travelling to Hiroshima, Japan this weekend for the summit of the Group of Seven major industrial nations, followed by a visit to Papua New Guinea, a Pacific island nation in a region where China has sought to expand its economic, militaryContinue Reading
In early March 2023, General Laura Richardson, head of the United States Southern Command, told a US congressional hearing that Chinese actions in South America posed a threat to US safety. According to General Richardson, China is on a relentless march to replace the United States as the leader in the region.
While China’s presence in the region has grown substantially in the past decade, it is unlikely that China will replace the United States as the dominant political, economic and military power in Latin America for the foreseeable future.
On the economic front, China has made inroads into South America and the Caribbean, a region where US power once went unchallenged. Starting in the late 1990s, Chinese interest in South America and the Caribbean began to grow.
In order to sustain its unprecedented economic growth China began to search the globe for oil and other raw materials. In 2000, Chinese trade with the region totalled US$12 billion, reaching $314.8 billion in 2021. In 2023, China is the largest trading partner of nine countries in the region: Argentina, Brazil, Bolivia, Cuba, Chile, Peru, Paraguay, Uruguay and Venezuela.
While the growth in trade between China and the region is impressive, the United States remains Latin America and the Caribbean’s largest trading partner. In 2020, US trade with the region was $758.2 billion. But 71 per cent of this trade was with Mexico. In 2021, Chinese foreign direct investment in the region totalled $130 billion.
Before the Covid-19 pandemic, China was the biggest lender to the region, with Chinese development banks having issued $66.5 billion in loans — mostly for infrastructure projects that offer Chinese companies better access to the region’s rich natural resources. A small portion of these loans were provided under China’s Belt and Road Initiative (BRI).
While China’s economic footprint in the region has increased significantly, the United States and the European Union remain the largest foreign investors, accounting for 36 per cent and 34% of total investment respectively.
As China faces an economic slowdown due to the Covid-19 pandemic, Chinese loans have dried up. When countries in the region fall into financial crisis, Western institutions such as the International Monetary Fund have provided the lion’s share of structural adjustment loans, not China.
The extent to which China’s economic gains in the region have resulted in political and diplomatic influence is unclear. While China has been Brazil’s largest trading partner for over a decade, tensions have arisen under both left- and right-wing Brazilian governments.
In Panama, after relentless US pressure, several multibillion dollar infrastructure contracts initially awarded to Chinese companies were cancelled and given to South Korean and Japanese companies.
During her testimony to Congress, General Richardson also warned that China has increased its support for anti-US regimes in the region including Venezuela, Cuba and Nicaragua.
But with the exception of Venezuela, Chinese investment and trade with these countries is minimal compared with its presence in most other countries in the region. In the cases of Cuba and Nicaragua, their desperate economic situations and US sanctions render them less attractive to China.
In the defence and security sector, China has made modest inroads into the region. While the number of South American and Caribbean military and security officers going to China for training has increased, the United States remains the primary destination for training thousands of officers from the region. The United States has dozens of bases and other installations throughout the region and is the region’s ultimate guarantor of security.
While the power of the United States in the region remains solid, challenges on the economic front are increasing. No other power — not even the Soviet Union — has been able to challenge US economic dominance of the region.
Apart from in Cuba, Soviet trade and aid to the region was negligible and its diplomatic influence limited. While most countries in the region want to maintain close ties with the United States, they also want the benefits of China’s massive trade and investment flows.
On the eve of the pandemic, total trade between China and Latin America had hit $314.8 billion. Chinese foreign direct investment in Latin America was about $130 billion and net development lending by the China Development Bank and Export–Import Bank of China was about $66.5 billion. Taking 2000 as the baseline, the figures in all three categories have grown exponentially.
While trade and FDI inflows dipped slightly during the pandemic, Chinese development lending to the region dropped to zero in 2020. With just two years of operation in Latin America and the Caribbean, the BRI accounts for only a few million of the $43.5 billion disbursed to the region by Chinese policy banks between 2015 and 2019.
China’s growing presence and rising economic importance to the Global South should be expected. But China was able to build such a strong presence in Latin America and the Caribbean in large part due to US neglect of the region.
The United States can no longer take the region for granted. Perhaps Washington should start treating Latin America as its front yard rather than its backyard.
Loro Horta is a diplomat and scholar from Timor-Leste. He has served as Timor-Leste’s ambassador to Cuba and counselor at the Timor-Leste embassy in Beijing.
This article was originally published by East Asia Forum and is republished under a Creative Commons license.
From the fallout of FTX in November 2022, to the collapse of Silicon Valley Bank (SVB) and other US lenders associated with start-up clients, the last few months have been challenging for the crypto industry.
Singapore-based cryptocurrency exchange, Coinhako, however, remains optimistic in terms of its industry outlook as sector participants focus on “rebuilding trust and faith” across the digital asset universe.
Coinhako was conceptualised in 2014 and started off as a bitcoin wallet service for Singaporeans. Today, it is a multi-currency trading platform for cryptocurrencies and is licensed, regulated and headquartered in the city-state.
Receiving its Major Payment Institution licence from the Monetary Authority of Singapore (MAS) in May 2022, the firm is one of nine financial institutions in the market permitted to provide Digital Payment Token (DPT) services.
Confident about Singapore’s future as a Web3 hub, its team wants to play a part in growing the market’s ecosystem. To do so, the company founders recently launched Berru.co, a separate entity that seeks to support Web3 start-ups as they navigate setting up in the city.
In this interview, Coinhako’s co-founder and CEO, Yusho Liu speaks to FinanceAsia about the challenges faced by the crypto industry; the future of Singapore as a digital asset hub; and where exactly the company has its sights set on next.
Excerpts from the interview have been edited for clarity and brevity.
FA: What’s your take on the cryptocurrency market and what developments are you focussed on?
2023 is the year of reset. With the developments of the last few months and bad actors bringing the industry back several steps, we need to rebuild trust and faith in the sector.
Beyond this, we are seeing more regulatory clarity from the likes of the Hong Kong and EU authorities, which paves the way for Asia and Europe to lead when it comes to innovation in the space.
Given that Washington’s current regulatory environment is less hospitable – coupled with the issues faced by the wider US tech industry, it will be challenging for innovation to emerge from the market.
FA: Was Coinhako exposed to any of the US banks that recently collapsed?
We had zero exposure to Silvergate and SVB. We did have some exposure to Signature Bank, but no money parked there. The collapse of these banks has affected many companies but thankfully, our strongest banking relationships are based in Asia.
FA: Is Coinhako looking to raise funds to expand further? How do you view the fundraising environment?
Overall, global and regional venture capital (VC) firms have poured record amounts of money into Southeast Asian technology companies because they consider them to be at the next frontier of growth and these countries have shown very high rates of adoption and interest in digital assets. They have focussed less on companies based in more mature, traditional markets, such as the US, Europe, China, South Korea or Japan.
However, it is currently a challenging climate and investments into crypto start-ups or in the broader technology space have slowed down. While we are continuing conversations with investors, we do not think this is the right timing or environment in which to be actively fundraising.
FA: Do you have any expansion plans?
We do have plans to expand, but this year our focus is on embedding deeper into Singapore, because we think the city-state is going to be a relevant crypto hub, regardless of what the rest of the world is doing.
We see a lot of Web3 founders building a nexus in the market. There is an influx of start-ups looking to establish their presence in Singapore and we’ve set up a separate, professional advisory entity, Berru.co, to support them. Since inception this year, we’ve connected with 10 or more clients and hope to grow this multi-fold further down the road.
Drawing on Coinhako’s experience since entering the market in 2014, we want to help founders navigate the crypto landscape. We’ve done the legwork and we know what works and what doesn’t – whether that be related to finance, accounting, tax or legal considerations. This is in line with Singapore’s status as a hub, and as such, we want to make sure that companies can develop easily. A bad user experience would likely make these founders consider going elsewhere.
FA: Where else in Asia do you see opportunity?
We are watching developments in Hong Kong, with the government having recently come up with a crypto framework to foster growth in the industry. But Hong Kong is just one of the markets we’re looking at for expansion, alongside other countries in Southeast Asian and the broader Asia region.
Coinhako has a domicile-registered licence in Singapore and the beauty of being based here, is that we can use it as a centre from which to reach the rest of the region.
FA: What’s your view on Singapore’s future as a crypto hub, given that many peers have relocated to Dubai?
I’ve always said that time will tell the story.
Dubai was a hot spot when its authorities announced updated licensing frameworks. But I think that, to date, we haven’t really seen or heard much about crypto exchanges moving to the market, except for Bybit, that is trying to establish global headquarters there.
The reality is that Dubai is a regional hub for the Middle East and North Africa (MENA), but if you’re trying to establish a global or Asian base, Singapore might be more suitable.
FA: Is Dubai perceived to be friendlier from a regulatory perspective, compared to Singapore?
I think it’s important to differentiate between what people say, versus what people do.
From our perspective, we don’t see many licensed entities going to Dubai, but we’re seeing unlicensed entities go there to try to obtain a licence.
FA: How optimistic are you about the growth of the Web3 and crypto industries in Asia?
We remain optimistic about the growth of the Web3 sector, in general. Yes, the industry is volatile, but most nascent industries are.
Of course, where money is involved, so too will there be bad actors. And indeed, we are seeing more overlap between the tech and finance industries.
However, as long as builders continue to come in to develop purposeful technology and applications – and good people enter the space, we remain positive.
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