Sri Lanka crisis: Central bank lays out extent of economic problems

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People wait to buy kerosene at a petrol station amid a fuel shortage in Colombo, Sri Lanka.EPA
Submitted by Mariko Oi
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The size of Sri Lanka’s worst economic crises in more than 70 years has been determined by the country ‘ central banks.

The bank explained in its yearly report how wages fell short of the skyrocketing cost of everything from bread to fuel last year.

According to the bank,” a number of natural flaws” and” policy mistakes” contributed to causing the South Asian country to experience severe financial problems.

The lender next anticipates a resurgence of economic growth in the coming year.

The Central Bank of Sri Lanka forecast the economy will shrink by 2% this year, but expand by 3.3% in 2024.

Compared to the International Monetary Fund ( IMF ), which predicted a 3.5 % contraction in 2023 and 1.5 % growth the following year, the prediction is more upbeat.

The report from the central bank also described how prices of fresh fruit, wheat, and eggs more than doubled in September, causing headline inflation to reach almost 70 %.

The cost of travelling and basic services like electricity and water increased even more quickly at the same time.

The nation’s economy contracted by 7.8 % last year, and it made its first foreign debt default since gaining its independence from the UK in 1948.

Failures occur when governments are unable to fulfill all or some of their debt obligations to debts.

Its history with creditors was damaged as a result, making it more difficult to take out loans on foreign markets.

According to the state,” the Sri Lankan business experienced its most difficult year in its post-independence history.”

It continued,” An” unsustainable” financial style” steered the country towards a varied catastrophe.”

Sri Lanka owes China and India approximately$ 7 billion(£ 5.7 billion ). Both nations decided to rebuild their payments in February, giving Sri Lanka more time to pay them back.

The IMF agreed to lend Sri Lanka$ 3 billion last month. That was on top of the World Bank’s$ 600 million payment from the previous year.

Before the IMF evaluates the environment in September, Sri Lanka’s authorities is presently negotiating its mortgage payment with borrowers and creditors.

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BOJ chief Ueda won’t shock markets yet

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TOKYO – Judging by the dearth of volatility in yen trading, investors aren’t expecting fireworks from the Bank of Japan tomorrow (April 28).

Surprises do happen at BOJ headquarters, of course. But this being Kazuo Ueda’s first policy meeting as governor, the odds are low that Tokyo is about to shock global markets with an about-face in its 20-plus-year experiment with quantitative easing.

That would be wise considering the worrisome mix of troubles bubbling up under the surface of the world’s third-biggest economy. Those include worries about a Silicon Valley Bank-like blowup among Japan’s 100-plus regional lenders.

Another: the high likelihood of political blowback in Tokyo if Ueda made radical monetary policy moves right out of the gate.

This latter point is often underappreciated in analyses of the BOJ’s latitude to take risky steps. Though “independent,” the BOJ in reality is on a shorter leash than many observers like to admit. Case in point: Haruhiko Kuroda leaving the BOJ governorship earlier this month with zero effort to wind down QE.

Granted, the BOJ had already been deep in the QE matrix for 13 years by the time Kuroda arrived in 2013. But he turned Japan’s QE era up to 11 and then some. And with limited success, clearly, as wages flatlined amid record corporate profits compliments of a plunging yen.

Still, the big gains in Nikkei stocks and relative macroeconomic stability earned Kuroda considerable political capital at home. Capital he could’ve spent on his way out the door plotting ways to reduce the BOJ’s US$5 trillion balance sheet.

Kuroda didn’t, leaving Ueda with what’s arguably the worst job in global economics. As Ueda presides over his first policy deliberation as governor, memories of December 20, 2022 loom large.

Outgoing Bank of Japan Governor Haruhiko Kuroda. Photo: AFP / Jiji Press

On that day, all hell broke loose in markets after Team Kuroda announced the slightest of tweaks to its “yield curve control” policy. The move to let 10-year bond yields rise as high as 0.5% was meant to limit the gap between US and Japanese interest rates. That, Kuroda figured, would reduce pressure on the BOJ to intervene in markets day after day.

The Kuroda BOJ spent the next two weeks cleaning up the move’s mess by making countless unscheduled asset purchases to reassure global investors that QE is here to stay.

Then came the Silicon Valley Bank crisis in the US. Next, UBS having to save Credit Suisse, which served to spike global paranoia levels to the next level.

Now, comes news this week that San Francisco-based First Republic Bank’s troubles are far from over. And, it follows, concerns about new US bank failures are intensifying by the day.

This is the limited option environment into which Ueda steps. Reports from Bloomberg that US regulators may downgrade First Republic’s prospects are making headlines just as Ueda sits down to mull BOJ policy. It’s worth noting, too, that Japan’s economic performance thus far in 2023 has not been stellar.

“Although the recent decline in government bond yields might seem to open the door for tweaks to yield-curve control, such a step could backfire,” says economist Stefan Angrick at Moody’s Analytics. “Economic data of late haven’t been good. Disappointing GDP growth means the economy is still smaller than before the pandemic. Employment conditions are showing signs of softening, and wage growth is trailing inflation.”

Complicating matters, recent “shunto” wage negotiations yielded the biggest wage gains since 1993 – an average 3.8%. Trouble is, coming amidst the highest inflation in 40 years, the timing of the pay bump could fan overheating risks. Here, China’s rebound adds to the risk of global inflation getting a second wind.

As Angrick notes, “notwithstanding a strong shunto spring wage round, it is unclear that this year’s gains will be repeated next year. Recent financial market disruptions abroad have only added risk. Given the BoJ’s history of premature policy tightening, the bungled yield curve control tweak in December, and the cold water poured on the idea of a change at the first press conference with the BOJ’s new leadership, it is unlikely the BOJ will move soon.”

The reference here to wage uncertainties for next year deepens the plot for Ueda. On the one hand, the new governor doesn’t want to let inflation become even hotter. On the other, Tokyo’s political establishment would pounce if BOJ “tapering” spooked CEOs into closing their wallets anew.

As Naoko Tochibayashi, a World Economic Forum analyst in Tokyo, notes, even now “it remains to be seen if similar wage rises can be seen in small and medium-size enterprises, which make up 70% of employers and are key to Japan’s economic revival.”

Japanese workers are negotiating for higher wages. Photo: AFP / Charly Triballeau

This dramatizes the precarious balancing act Ueda faces. So does the fragile state of Japan’s regional bank network. Many of these lenders service rapidly aging communities in already sparsely populated areas of the country. That squeezed profits well before the banking shocks of the last 15 years, including fallout from the 2008 “Lehman shock.”

That episode, graying customer bases and an accelerating exodus of companies to Tokyo had regional banks hoarding government and corporate bonds instead of lending BOJ liquidity. It was a similar practice that blew up SVB and New York-based Signature Bank.

As of the end of December, SMBC Nikko Securities estimated that regional lenders were sitting on about $10.5 billion of unrealized losses on foreign bonds and other securities. Such figures raise a difficult question Ueda now has to answer: how big might losses get on domestic debt if Japanese government bond yields rose above, say, 1% or more?

The good news is that many Japanese banks tend to prioritize bonds that can be sold rather than holding to maturity SVB-style. As such, SMBC Nikko analyst Masahiko Sato reckons the threat to capital ratios, on average, is only about 2%. Therefore, Sato does “not think potential losses are on a scale with systemic implications.”

BOJ tapering or even a rate hike or two could change this calculus, and fast. If regional banks face profit pressures with rates at zero – and the BOJ is still in 24/7 ATM mode – just imagine the valuation losses if Ueda were to hit the monetary brakes.

Yet Ueda’s pedigree suggests he could be more of an out-of-the-box thinker than currency strategists grasp.

During his time as a BOJ board member in 2000, Ueda dissented on a move to end the zero-rate strategy. His background as a Massachusetts Institute of Technology-trained economist, meanwhile, could be its own wildcard.

At MIT, Ueda was a pupil of Stanley Fischer, a former senior official at the Fed, the Bank of Israel and the International Monetary Fund. Fisher also taught former Fed chief Ben Bernanke, former European Central Bank head Mario Draghi and former Treasury Secretary Lawrence Summers.

Other members of the MIT monetary club: Reserve Bank of Australia Governor Philip Lowe and former Bank of England governor Mervyn King.

In February, Summers called Ueda “Japan’s Ben Bernanke.” Ueda and Bernanke, it’s worth noting, made their economic reputations exploring the lessons from the Great Depression, including Japan’s late-1920s to mid-1930s policies.

For Ueda, that entailed a keen focus on the 1930s policies of Korekiyo Takahashi, who’s often called the John Maynard Keynes of Japan.

Kazuo Ueda has arguably the most difficult job in finance as the Bank of Japan’s next governor. Image: Facebook / Asahi / Screengrab

Takahashi served as finance minister, BOJ governor and even prime minister in the 1920s and 1930s. His super-aggressive monetary easing, fiscal expansion and “debt monetization” efforts were as pioneering as economic policy gets.

There’s also reason to think Ueda could be a rather conventional central banker. He’s said so far, for example, that there’s no urgency to alter the BOJ-government framework that mandates the central bank target 2% inflation.

“If needed, Ueda likely will request the government to revise the joint statement so that the BOJ can respond flexibly, without sticking with the continuation of monetary easing,” says JPMorgan Chase & Co economist Benjamin Shatil. “We continue to see an exit from yield-curve control in coming months.”

Yet odds are decidedly low that Ueda would choose tomorrow (April 27) to toss financial explosives into jittery markets. And that seems wise for now.

Follow William Pesek on Twitter at @WilliamPesek

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US lifts import ban on Malaysia’s Smart Glove

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KUALA LUMPUR: The United States lifted a 17-month import ban on products from Malaysian rubber glove maker Smart Glove, saying the company has addressed exploitative labour practices. US Customs and Border Protection (CBP) in November 2021 sanctioned imports from Smart Glove and its group of companies over the alleged useContinue Reading

Missing the point on explosive dollar risks

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TOKYO – Few professions are better at making straw-horse arguments than the economics trade. The reason: it’s always easier to refute an unserious argument than tackle the biggest questions of the day.

The arguments US leading economists Lawrence Summers and Paul Krugman are making these days about the rivalry between the Chinese yuan and US dollar are Exhibit A.

Take Summers, the former US Treasury secretary, who made headlines this week detailing why the yuan isn’t a threat to the dollar’s dominance as reserve currency anytime soon. Trouble is, virtually everyone already knows a currency that isn’t fully convertible or backed by deep capital markets can’t acquire significant reserve status.

The reason top economic minds do this, of course, is to avoid the proverbial elephant in the room. In this case, that’s the US national debt racing toward US$32 trillion.

Dysfunctional politics putting Washington on a path to possible default doesn’t help. Nor does a US Federal Reserve team losing global confidence with distressing speed.

The yuan isn’t the issue. It’s a fragile dollar problem that isn’t being treated, nurtured or reenergized at an epochal moment.

That hasn’t stopped the financial world from obsessing over questions with little relevance in 2023. Here, Summers is a case in point as he explains what everyone already knows about the challenges facing China’s currency.

“Is [China] really going to be a place where people are going to decide they want to hold reserves on a massive scale?” he rhetorically asked Bloomberg.

Summers adds that “there has never been a country where there was a strong desire to move as much capital out of the country as we’re seeing in China right now, albeit blocked by controls.”

Lawrence Summers in Beijing, China, October 31, 2016. Photo: Twitter

Nobel laureate Krugman, meanwhile, makes a force-of-habit argument. The dollar’s dominance — and the power of incumbency — makes it somewhat untouchable as a linchpin of global finance and trade. To him, it would require “exceptional circumstances” for the dollar to be eclipsed in global circles.

Yet isn’t what’s afoot in Washington exactly that, as Congress threatens to renege on US government debt?

The last time Republicans in the House of Representatives played chicken with the debt ceiling didn’t end well. That was back in 2011, when Congress members hinted at letting the US default to buttress their fiscal hawk bona fides. Standard & Poor’s abruptly yanked away Washington’s AAA credit rating.

A dozen years on, this game is a far more precarious one. The trajectory of US debt is one problem. So is how the Fed’s campaign to tame the worst inflation in 40 years is causing collateral damage from Latin America to Africa to Asia.

Political chaos in Washington also raises the stakes. In the post-Donald Trump era, legislative polarization has hit a fever pitch — as evidenced by the default debate spooking world markets.

To be fair, Summers and his ilk aren’t oblivious to these toxic dynamics. Summers notes that “if the dollar loses its status, it will be because the United States is no longer respected and strong in the world. It will be because we’ve accumulated a set of untenable debts.”

Yet this seems far less of an “if” than most top US economists let on. Just ask officials here in Japan, which holds the world’s largest stockpile of US Treasury securities at about $1.1 trillion. Beijing holds just under $1 trillion of US debt.

Cumulatively, Asia’s top central banks are stuck with nearly $3.5 trillion of US debt at a moment when the US government isn’t operating effectively. From time to time, fears that America’s top bankers will start reducing their exposure to the dollar fuels mini-panics in currency markets.

It’s a long-standing source of paranoia, of course. Back in 1997, for example, then-Japanese prime minister Ryutaro Hashimoto dropped a bombshell on an audience in New York. “Several times in the past, we have been tempted to sell large lots of US Treasuries,” Hashimoto said, a comment that sent bond prices sharply lower.

At the time, the late Japanese leader cited contentious US-Japan auto trade talks as one such moment when Tokyo mulled dumping US Treasuries. Fourteen years later, in 2011, China’s state-run People’s Daily ran an editorial saying: “Now is the time for China to use its ‘financial weapon’ to teach the US a lesson” regarding its support for Taiwan.

Back in 2011, economists like Brad Setser, a former US Treasury staffer, began stressing that big stockpiles of US debt held by China and other geopolitical rivals represent a growing national security threat.

China holds over US$1 trillion worth of US debt. Image: iStock

But then, officials in China also have raised concerns that Beijing is essentially trapped with its mountains of dollars. In 2009, for example, then-premier Wen Jiabao implored Washington to protect its AAA status.

“We have made a huge amount of loans to the United States,” Wen said. “Of course, we are concerned about the safety of our assets. To be honest, I am a little bit worried.”

Washington, Wen stressed, must “honor its words, stay a credible nation and ensure the safety of Chinese assets.”

Nearly a decade later, in 2018, Cui Tiankai, then China’s ambassador to the US, hinted that Beijing might reduce its Treasuries holdings due to concerns about losses. “We are looking at all options,” he said.

Also in 2018, Fan Gang, a top adviser to China’s central bank, talked publicly about diversifying away from the dollar.

“We are a low-income country, but we are a high-wealth country,” Fan said. “We should make better use of capital. Rather than investing in US government debt, it’s better to invest in some real assets.”

It’s tantalizing to think, too, of how America’s bonds held abroad are often the tail wagging the economic dog. In 2009, for example, then-US Secretary of State Hillary Clinton asked former Australian prime minister Kevin Rudd: “How do you deal toughly with your banker?”

In February of that year, in her first trip to China as a top US cabinet official, Clinton downplayed discussions over human rights and played up Washington’s hopes of prodding China to buy more government debt.

The Trump era did serious damage to global confidence in the dollar. Along with a record $1.8 trillion tax cut, Trump’s disastrous handling of Covid-19 necessitated $7.4 trillion of fresh government spending. Equally worrisome were Trump’s flirtations with defaulting on US debt to hurt China.

President Joe Biden has since drawn accusations of wielding the dollar as a tool in efforts to sanction Russia over its Ukraine invasion.

As strategist John Mauldin at Millennium Wave Advisors notes, “the Biden administration made an error in weaponizing the US dollar and the global payment system. That will force non-US investors and nations to diversify their holdings outside of the traditional safe haven of the US.”

But the coming fight over the debt ceiling could trump all. “A reason to think this time may be different,” says economist Will Denyer at Gavekal Research, “is the make-up of the Republican Party in the House of Representatives. The fractious caucus only elected Kevin McCarthy as speaker in January with a tiny majority after an epic 15 rounds of voting.”

Speaker Kevin McCarathy is leading House Republicans in yet another messy credit ceiling fight. Photo: Wikimedia Commons

It’s possible, Denyer says, “that Tea Party-type Congressional Republicans use their leverage over the party leadership to veto a compromise deal and impose a hostile negotiating stance. Hard-line ‘small government’ Republicans may argue on principle that destroying the government’s bond market credibility will make it harder for it to borrow and so help starve the beast.”

Strategist Brian Gardner at Stifel Nicolaus & Co adds that this “dysfunction is a clear signal.” Markets, he adds, “should be on guard as the summer approaches” because “brinkmanship over the debt ceiling could lead to market volatility.”

Yet this standoff between Republicans and the White House could trigger what Treasury Secretary Janet Yellen calls an “economic and financial catastrophe”, whereby US institutions shoot the reserve currency in the foot, irrespective of the status of the Chinese yuan.

Follow William Pesek on Twitter at @WilliamPesek 

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US sovereign risk soars as debt ceiling battle rages

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Insuring US Treasury notes against default now costs more than insuring Mexican debt, as House Republicans threaten to push the US into technical default rather than give the Biden administration more room for deficit spending.

If April tax receipts turn out to have been weaker than expected, default could hit as early as mid-June. US Treasury Secretary Janet Yellen has warned of “catastrophe.”

The cost of five-year credit default swaps (insurance against US default) now exceeds the cost of similar protection against Mexican foreign debt – something that hasn’t happened previously in financial history.

Barring an actual default six to eight weeks from now, the jump in US credit default swap spreads is a technical bad in a small and illiquid market. Gold remains stuck in a trading range around $2,000 an ounce. If the world really thought America’s credit had turned bad, gold would break out to higher levels.

The wrangle over Treasury default, though, adds to uncertainty about the US economy and financial markets. Those markets took a body blow in mid-March when depositors fled regional banks, forcing the Fed and Treasury to provide emergency liquidity and guarantee bank deposits.

Tightening financial conditions are pushing the US into recession.

UPS stock plunged by nearly 10% on April 25 after the delivery company reported much lower-than-expected volume for the first quarter. Revenue fell to US$22.9 billion compared with $24.4 billion in the first quarter of 2022. The company blamed lower retail sales and falling consumer demand.

The Conference Board meanwhile reported on April 25 that consumer expectations fell to the lowest level in more than a year.

US commercial banks tightened lending standards and reduced new lending after the March run on regional banks. First Republic Bank, one of the banks that suffered March deposit runs, lost another 10% on April 25 after its first-quarter results revealed a bigger deposit loss than anticipated.

Survey data from regional Federal Reserve banks meanwhile showed that the US is on the edge of recession. The Philadelphia Fed’s index of nonmanufacturing business activity (shown in green on the chart below) fell to its lowest level since the 2020 Covid lockdowns.

The Philly Fed index is widely considered one of the best leading indicators of general business activity.

$6 trillion of consumer stimulus in response to Covid kept the US economy growing for the past two years, but retail sales have been falling for two years after deducting inflation.

Follow David P Goldman on Twitter at @davidpgoldman

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Panel pours cold water on party cash handout policies

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Critics at a forum yesterday took aim at populist policies touted by political parties ahead of the May 14 general election, saying they could plunge the country into further debt.

The issue was raised at the forum co-organised by the Third Council Speaks and the Relatives’ Committee of May 1992 Heroes, which had panellists including Adul Kiewboribun, head of the relatives’ committee, Preeda Tiasuwan, head of the Social Venture Network Asia (Thailand), and Banyong Pongpanich, chairman of the executive committee of Kiatnakin Phatra Bank.

Mr Adul said that appropriate populist policies should be designed to yield sustainable results for future generations and create activities to help boost the economy rather than only handing out money to people who will use it up in the short term.

Political parties have only provided scant details of their populist policies and have failed to specify how the cash handouts will benefit the country, he said.

“Parties’ populist policies do not make enough substantial and constant contributions to development,” Mr Adul said.

Mr Preeda said that populist policies require huge sums of money, and if the government lacks financial discipline and takes loans to finance these policies, they could plunge the country into severe debt, he said.

He said some policy pledges, including the controversial 10,000-baht digital wallet policy touted by the Pheu Thai Party, could lead to people squandering the money.

A decent type of populist policy is a monthly allowance for the elderly, he said before explaining that some may see the monthly allowance as unproductive, but in terms of social value, this is a gesture of gratitude and a morale booster for retired people who once contributed to society.

Mr Banyong said populist policies must be implemented efficiently to ensure sustainability and proper income distribution.

At the same time, its cost-effectiveness and the source of funds must also be taken into account, he said.

Mr Banyong also said he did not believe the 10,000-baht digital money policy would help jump-start the economy and enable authorities to collect 300 billion baht in taxes, as claimed by Pheu Thai.

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RFK Jr takes strong anti-war, anti-empire stance

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Robert Francis Kennedy Jr, near the very beginning of his April 19 announcement to run for US president for the Democratic Party, spoke these words:

“Fifty-five years ago last month, I sat as a 14-year-old boy behind my father as he … announced in a Senate caucus room in Washington, DC, his campaign for president of the United States. And my father at time was in the same, in many ways, the same position that I’m in today.

“He was running against a president of his own party. He was running against a war. He was running against – he was running at a time of unprecedented polarization in our country.” 

In this way the son tells us right away that he is “running against a war,” Joe Biden’s cruel US proxy war against Russia using Ukrainians as cannon fodder.

He reminded us that his father was given very little chance of winning and felt he would likely lose. But on June 6, 1968, the day of his assassination, RFK Sr had won the primary in California, an urban state, and South Dakota, a rural state. 

The son is telling us that his is a candidacy not to be written off lightly. RFK Jr was polling at 14% among Biden voters even before he announced. And nearly 44% of Democrats want anybody but Biden, with only 25% wishing him to run in 2024. 

A video of the entire two-hour speech, impressive in many ways, is to be found here and a transcript here. Kennedy did not read from a prepared text. although the speech appeared to be carefully outlined. It had a refreshing air of informality. And it deserves a careful listen.

Many of the points in the speech are summed up in the section on “Peace” at RFK Jr’s campaign website, Kennedy 2024.com, as follows:

“Annual defense-related spending [by the US] is close to $1 trillion. We maintain 800 military bases around the world. The peace dividend that was supposed to come after the Berlin Wall fell was never redeemed. Now we have another chance.

“As president, Robert F Kennedy Jr will start the process of unwinding empire. We will bring the troops home. We will stop racking up unpayable debt to fight one war after another.

“The military will return to its proper role of defending our country. We will end the proxy wars, bombing campaigns, covert operations, coups, paramilitaries, and everything else that has become so normal most people don’t know it’s happening. But it is happening, a constant drain on our strength. It’s time to come home and restore this country.

“When a warlike imperial nation disarms of its own accord, it sets a template for peace everywhere. It is not too late for us to voluntarily let go of empire and serve peace instead, as a strong and healthy nation.”

And on Ukraine:

“In Ukraine, the most important priority is to end the suffering of the Ukrainian people, victims of a brutal Russian invasion, and also victims of American geopolitical machinations going back at least to 2014.

“We must first get clear: Is our mission to help the brave Ukrainians defend their sovereignty? Or is it to use Ukraine as a pawn to weaken Russia? Robert F Kennedy will choose the first. He will find a diplomatic solution that brings peace to Ukraine and brings our resources back where they belong.

“We will offer to withdraw our troops and nuclear-capable missiles from Russia’s borders. Russia will withdraw its troops from Ukraine and guarantee its freedom and independence. UN peacekeepers will guarantee peace to the Russian-speaking eastern regions.

“We will put an end to this war. We will put an end to the suffering of the Ukrainian people. That will be the start of a broader program of demilitarization of all countries.

“We have to stop seeing the world in terms of enemies and adversaries. As John Quincy Adams wrote, ‘Americans go not abroad in search of monsters to destroy.’”

Those are strong words and realistic categories like “empire,” “proxy wars,” “coups,” “geopolitical machinations going back to 2014,” all ugly imperial facts alluded to euphemistically or not at all in the mainstream media.  

This is a candidacy that cannot be ignored or reduced solely to the pros and cons of mRNA vaccines or Kennedy family squabbles over the candidacy as the mainstream media have done. For example, in its brief back-page coverage, The New York Times, the foremost mouthpiece of the imperial establishment, there is nary a mention of war with another nuclear power now hanging over Americans’ heads.

This is not to say that we should accept all of RFK Jr’s words at face value. But given the present enthusiasm for war in every corner of the Democratic Party’s political establishment and among much of its base, it is difficult to see his candidacy as opportunistic. 

He even goes so far as to praise China’s Belt and Road Initiative, contrasting that expenditure to America’s on endless wars, a taboo view, to put it mildly, among the US political establishment. 

RFK Jr’s candidacy deserves to be treated skeptically like all candidacies, but not cynically. His speech merits a respectful hearing.

This article first appeared on Antiwar.com.

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Alignment of incendiary forces torching Sudan

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The worst-case scenario is coming to pass, apparently, in Sudan. That is, at any rate, the apocalyptic message streaming out of Khartoum in the Western media.

US President Joe Biden lent credence to the alarmist perception by confirming that on his orders, the US military had conducted an operation “to extract government personnel from Khartoum.”  

According to the US Department of State, about 16,000 American nationals are currently in Sudan. The US Embassy in Khartoum had an excessive staff strength – on par with its Mission in Kiev – which was unwarranted by the scale and volume of US-Sudanese bilateral ties, leading to speculation that it was a key intelligence outpost.

In the Horn of Africa, the Arab Gulf states traditionally took a deep dive into the complexities of power projection, political rivalry and conflict across the Red Sea, which has lately re-emerged as a geo-strategic space in which competing global and regional players have sought to project influence. 

Saudi Arabia and the United Arab Emirates on the one hand, and Qatar and Turkey on the other, intensely competed to counter each other’s influence and project their rivalries on to the politics of the Horn, but after years of fierce competition, signs have appeared lately that they’ve begun cautiously recalibrating their respective roles.

The post-Covid strain on their financial resources, the drawdown in Yemen, and the eagerness of the Gulf states to appear as constructive and reliable partners, adopting a more pragmatic approach on regional issues – all these contributed to the notable signs of détente replacing the intense intra-Gulf competition in the Horn of Africa. 

In Sudan, Saudi and Emirati efforts to shape the political transition after Omar al-Bashir’s ouster in April 2019 led to partial successes but also significant difficulties, as they came at a severe reputational cost under scrutiny from both the Sudanese population and the international community.

The US and the European Union saw Gulf Cooperation Council (GCC) countries as useful partners in the Horn in terms of their surplus capital to invest that Western powers lacked, as well as their good personal networks. The Faustian deal between the Donald Trump administration, Israel and the Gulf states to lure the Sudanese military leadership into the Abraham Accords in 2020 was a defining moment. 

However, that dalliance proved short-lived, and the Western powers’ game plan to ride on the wings of the Gulf states to counter the growing influence of Russia and China in the Red Sea met a sudden death too, as the ground beneath the feet of the US-Saudi alliance shifted dramatically under the Biden presidency and Riyadh began strengthening its ties with Moscow and Beijing.

Wang Yi, China’s top diplomat (center), in Beijing on March 10, 2023, with counterparts Musaad bin Mohammed Al Aiban of Saudi Arabia and Ali Shamkhani of Iran. Image: China Daily

This, in turn, compelled the Western powers to explore the opportunity to push for greater coordination and constructive engagement directly with the generals in Khartoum, banking on their own efforts and resources running parallel with the Gulf states’ recalibration of their involvement in the Horn. 

In a nutshell, the crux of the matter is that the Western understanding of stability and sustainable development in Sudan through the prism of the neocon ideology that permeates the Biden administration lies at the core of the aggravation of the sluggish internal political crisis in Sudan that has been brewing since 2019 between the army led by the de facto leader Abdel Fattah al-Burhan and armed formations led by Mohammed Hamdan Dagalo. 

The immature, unrealistic political settlements promoted by the Western liberal democracies significantly fueled the military’s infighting.

The Anglo-American dealmaking was largely limited to the Transition Military Council and the Forces for Freedom and Change, an inchoate coalition of hand-picked civilian and rebel Sudanese groups (Sudanese Professional Association, No to Oppression Against Women Initiative, etc) that by no means represented the national forces in Sudan.

Unsurprisingly, these neocon attempts at imposing exotic settlements on an ancient civilization were doomed to fail. 

The spin propagated by the Western media reduces the present crisis in Sudan – manifesting it as conflict within the military establishment – is a grotesque oversimplification and attempt at a cover-up. Simply put, this crisis cannot be reduced to a personal dispute between the two generals – Burhan and Hemedti – who had been friends for a very long time. 

The crisis can be resolved only through a “security solution,” which means an integration process involving the Rapid Support Forces in an appropriate manner as a political partner in governance, not just a military force affiliated with the army.

Lest it is forgotten, Sudan is a vast country of great ethnic and regional diversity, inhabited by something like 400-500 tribes. The country’s stability depends critically on an optimal model of interaction between the elites and clans.

Basically, what drives the special forces in the current conflict is their expectation to increase their importance in the domestic political process of the country. It must be understood that the current strife is not about access to some military resource, but about control over the economy and the distribution of power. 

Meanwhile, the clumsy, inept handling of the formation of the new government by United Nations representative Volker Perthes significantly contributed to the present crisis. Perthes, a German establishment think-tanker, fired up by the neocon ideology, was the wrong man to handle such a sensitive mission.

This is yet another edifying example of the legacy of UN Secretary General António Guterres to prefer Westerners as envoys to those hotspots where the West’s geopolitical interests are at stake.

FILE PHOTO - U.N. Secretary General Antonio Guterres addresses a news conference during the 30th Ordinary Session of the Assembly of the Heads of State and the Government of the African Union in Addis Ababa, Ethiopia January 28, 2018. REUTERS/Tiksa Negeri
UN Secretary-General Antonio Guterres favored Western envoys in certain hotspots. File Photo: Agencies

The UN meeting on March 15 exposed that the overzealous Perthes was detached from reality by rushing through the transfer of power from the military administration to the civilian one – rather than concentrating on helping to form a government and creating a committee to draft a new constitution – which, alas, provoked the intensification of confrontation between the warring parties.   

The good part is that there is not yet any sign of radicalization in this conflict on religious grounds. Nor is there any power vacuum that could be exploited by a terrorist group. At the same time, mediation by external powers is required.

The countries of the region can help resolve the conflict. A comprehensive settlement may not happen soon, since the internal contradictions that accumulated over time require compromises, and so far at least, the parties are not ready for this. 

In the present climate of conflict resolution enveloping regional politics in the West Asian region and the Persian Gulf in particular, there are no objective prerequisites for the conflict to move to the regional stage. The main countries that are associated with the warring factions have come up with peacekeeping initiatives – the UAE, Saudi Arabia, and Egypt.

In addition, other external partners, especially Russia and China, will make efforts to prevent a prolonged open conflict. By the way, Sudan has an external debt under US$60 billion, and most of it falls on China – and Russia, on the other hand, is well placed to foster rapprochement between Burhan and Dagalo.

Russia takes a balanced position. During his visit to Sudan in February, Foreign Minister Sergey Lavrov met with the leaders of both opposing sides. Russia is a stakeholder in Sudan’s stability.

The Russian Foreign Ministry said in a statement, “The dramatic events taking place in Sudan cause serious concern in Moscow. We call on the parties to the conflict to show political will and restraint and take urgent steps towards a ceasefire. We proceed from the fact that any differences can be settled through negotiations.”

The evacuation is on from Sudan. Image: Screengrab / CNN

However, the Anglo-American agenda remains dubious. Their focus is on internationalizing the crisis, injecting big power rivalries into the Sudanese situation and willy-nilly create pretexts for Western intervention.

But any attempt to reignite the embers of the Arab Spring will be hugely consequential for regional security and stability. The Gulf states and Egypt will need to be particularly watchful. 

Sudan would have figured in the phone conversation between Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin on April 21.

This article was produced in partnership by Indian Punchline and Globetrotter, which provided it to Asia Times.

M.K. Bhadrakumar is a former Indian diplomat. Follow him on Twitter @BhadraPunchline.

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Netflix to invest .5bn in new South Korea films and TV shows

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South Korean President Yoon Suk Yeol meets with Netflix co-CEO Ted Sarandos during a news conference in Washington.Reuters
By Annabelle Liang and Peter Hoskins
Business reporters

Streaming giant Netflix says it will invest $2.5bn (£2bn) in South Korea over the next four years.

The firm’s co-chief executive Ted Sarandos made the announcement after he met South Korea’s President Yoon Suk-yeol in Washington.

Mr Yoon is currently on a state visit to the US where he is expected to meet President Joe Biden on Wednesday.

Netflix has seen success with South Korean productions, including the hugely popular show Squid Game.

Mr Sarandos said the money will be spent on making movies and television shows in Asia’s fourth largest economy.

“We were able to make this decision because we have great confidence that the Korean creative industry will continue to tell great stories,” he said.

The company was also “inspired by the President’s love and strong support for the Korean entertainment industry and fuelling the Korean wave,” Mr Sarandos added.

A Netflix spokesperson said the company did not “have anything to add at this time,” when asked by the BBC about other potential investments in the region.

In 2021, South Korean-made Squid Game became Netflix’s most-popular series of all time. It was streamed by 111 million users in the first 28 days after its launch.

The show tells the story of debt-ridden people competing for a huge cash prize in a series of South Korean children’s games, with a deadly twist.

Earlier this year, South Korean reality show Physical 100 became the platform’s most-watched non-English language show worldwide.

Netflix, which operates in more than 190 countries, now faces increased competition from streaming rivals including Amazon, HBO and Disney.

It has cut prices in tens of countries around the world in an attempt to attract more subscribers.

Last week, the company said its long promised crackdown on password sharing will begin in the coming months.

This means subscribers who want to share accounts with people outside their household will face an extra fee.

Netflix has been looking for ways to re-ignite growth, which has slowed sharply as households grapple with rising costs and it reaches what analysts see as a saturation point in some of its biggest markets.

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Woman fails in lawsuits against surgeons for jaw surgeries, tried to claim S.6m in lost income

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In: South-East Asia

SINGAPORE: A woman sued her surgeons over jaw surgeries she had sought to correct her protruding mouth and lips, claiming that their medical negligence resulted in her having to undergo surgery “so many times”.

The 39-year-old woman represented herself at trial, claiming damages including S$1.6 million (US$1.2 million) in estimated loss of wages and almost S$100,000 for her medical expenses.

In a judgment published on Tuesday (Apr 25), a district court dismissed her claim with costs, saying she had persisted in her claim despite being advised on her lack of supporting evidence.

THE CASE

Ms Angelina Leong Xiu Ting was 32 in July 2015 when she consulted orthodontist Dr Alfred Cheng and was told she had a dental malocclusion with bimaxillary jaw protrusion.

Dr Cheng referred her to Dr Winston Tan Kwong Shen, who was practising at OMP Alliance at Mount Elizabeth Novena Specialist Centre.

Dr Tan assessed Ms Leong and found that she had significant functional dentofacial deformities, with a protrusive mouth and lips. 

He recommended surgery on both her upper and lower jaws, which involved cutting the jaw bones and repositioning them to address the protrusion and correct the misalignment of the teeth and jaw. The bones would be secured with bone plates, screws and wires.

Ms Leong agreed and the procedure was carried out in December 2015 at the Mount Elizabeth Novena Hospital by Dr Tan and a second surgeon – Dr Lye Kok Weng.

While the surgery significantly corrected Ms Leong’s dentofacial deformities, it resulted in minor facial asymmetry, which caused Ms Leong to seek a second jaw surgery about six months after the first one. After this, she sought a third jaw surgery.

Ms Leong later sued the two surgeons, claiming that they had been negligent in the medical care, treatment and advice given to her. She claimed that their mistakes had caused her to undergo jaw surgery so many times, and alleged that she suffered pain and discomfort from the operations.

She also attributed injuries to the surgeons – including chronic pain in her jaw and mouth, periodontitis or gum disease, inability to open her mouth completely and difficulties speaking properly.

In her lawsuit, she claimed damages that included her loss of income and the cost of any future treatments and surgeries she might require.

The surgeons were represented by lawyers Audrey Sim and Lydia Yeow from Dentons Rodyk & Davidson.

They argued that the first surgery had successfully corrected Ms Leong’s dentofacial deformities, and the resulting minor residual asymmetry was “well within expectations of surgical outcomes”.

The surgeons said they had repeatedly emphasised to Ms Leong that the aesthetic outcome of such surgeries can never be predicted with absolute certainty, and it was unrealistic to expect perfect symmetry when dealing with a complex structure like the human face.

They added that even after the jaw deformities were corrected and Ms Leong’s looks improved, she insisted on proceeding with the second and third surgeries, “seemingly due to her quest for aesthetic perfection”. 

JUDGE’S DECISION

District Judge Tan May Tee dismissed Ms Leong’s claims. Ms Leong had failed to procure an expert opinion to show that the surgeons’ acts or omissions were not in accordance with accepted practices in the field, she said.

“Without such expert evidence, the plaintiff’s case simply cannot get off the ground,” said Judge Tan. “Her reliance on materials sourced from the Internet does not assist her case given their doubtful provenance.”

In contrast, the surgeons obtained the opinion of experienced oral maxillofacial surgeon Dr Andrew Ow Tjin-Chiew as their expert witness.

He said Ms Leong had a severe and complex dentofacial deformity which was one of the more difficult conditions to treat. He found that the post-surgical care and management of Ms Leong after each of the surgeries were reasonable, appropriate and in accordance with the proper standard of care.

Judge Tan found on the evidence that Ms Leong’s gum disease was “caused by her lack of dental hygiene” and not by the three surgeries. 

Her claim of being unable to open her mouth completely was limited to a “mere 5mm” and she rejected an offer for chronic pain management, so her condition may not be as serious as alleged, said Judge Tan.

Despite claiming that she had difficulty speaking, Ms Leong had no supporting medical evidence and did not exhibit any such impediment at trial, said the judge.

“She was articulate and her voice was clearly audible despite being masked even though this was no longer a requirement at the time,” said Judge Tan. 

She said Ms Leong had “no basis whatsoever” to blame the surgeons for her alleged injuries, and her case on negligence fails on this point alone.

Although Ms Leong had made a claim for loss of wages of S$1.6 million for the period June 2016 to August 2022, she did not give any evidence to support this.

She did not call her previous employer, World First Asia, to give evidence. Instead, it appears from documents that she had voluntarily resigned in May 2016 and accepted an ex gratia lump sum payment.

“Hence, any loss of income would have been self-induced,” said the judge.

On Ms Leong’s claim of about S$100,000 for her debt to the bank for her medical expenses, Judge Tan said there was no evidence as to how it was attributable to the surgeons’ alleged breaches of duty. 

Ms Leong also disclosed at trial that her medical bills were in fact covered by insurance, so her “entire claim appears suspect”, said the judge.

The judge noted that while Ms Leong might be accorded “some measure of indulgence” as a self-represented litigant, she is nonetheless subject to the same rules and procedures of the court.

She directed parties to file written submissions on the issue of costs.

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