MAS’ monetary policy focuses on inflation, does not consider potential impact on profits: Alvin Tan

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SINGAPORE: Singapore’s monetary policy focuses on keeping inflation low and “does not take into account any potential impact” on the central bank’s profits, said Minister of State for Trade and Industry Alvin Tan on Wednesday (Aug 2).

This is a similar approach taken by other major central banks around the world, which have also reported losses from monetary policy operations over the last year, he added in a parliamentary reply.

“MAS’ monetary policies focus purely on keeping inflation low and ensuring medium-term price stability. It does not take into account any potential impact on MAS’ profits because to do so would undermine its mission.

“MAS’ financial performance is a necessary consequence of its conduct of monetary policy,” said Mr Tan in response to several parliamentary questions about the record loss posted by the Monetary Authority of Singapore (MAS) in the last financial year.

For the financial year ended Mar 31, MAS recorded a net loss of S$30.8 billion (US$22.8 billion), widening significantly from a S$7.4 billion loss in the year before that.

This was largely due to the central bank’s aggressive monetary policy tightening to bring down inflation, which paved the way for a “broad appreciation” of the Singapore dollar against other currencies – such as the US dollar, euro and yen – that the official foreign reserves were held in.

As MAS’ financial results are reported in the Sing dollar, it saw “significant” negative currency translation effects of about S$21.4 billion, or 70 per cent of the annual net loss, the central bank said in its annual report last month.

MAS also incurred higher interest expenses of S$9 billion as part of mopping up excess liquidity in the banking system. This made up around 30 per cent of the loss MAS incurred in the last financial year.

These two factors outweighed a “small” investment gain of S$0.6 billion made on the country’s official foreign reserves, the central bank had said.

Speaking on MAS’ investment performance, Mr Tan, who is a MAS board member, said last year was an “unusual year” for financial markets where both bond and equity markets performed badly.

The central bank’s investment performance will have to be viewed from a longer-term perspective, he said, while adding that MAS’ investment portfolio had benefited from an unusual period of low inflation and low interest rates since the 2008 global financial crisis.

“Including this latest year, MAS recorded an annual average investment gain of S$11.7 billion in the last 15 years,” he told the House.

“Over a 20-year period, MAS’ average annual investment gain was 3.7 per cent. Notwithstanding the financial loss that we had been discussing, MAS’ (official foreign reserves) position remains strong.”

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As Japan nears inflation target, fiscal policy must be addressed

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Japan’s central bank left interest rates unchanged last week despite rising inflation, but suggested that it could gradually discontinue years of ultra-cheap money, sending the yen soaring and stocks tumbling.

The Bank of Japan (BOJ) said it kept unchanged its short-term interest rate at minus-0.1% and maintained its target for the yield on 10-year government bonds at around 0%.

But the central bank of the world’s third-largest economy also noted that it would employ a more flexible stance to controlling the yield on government bonds, which affects borrowing costs, “diluting a key pillar of its long-standing ultra-loose monetary policy,” as an analyst on CNN recently said.

With Japanese inflation now at 4.2%, there are growing calls, perhaps unsurprisingly, for the BoJ to tighten monetary policy much faster. 

For instance, the sooner the BoJ moves to a “more normal structure and let bond markets, equity markets do their work that they need to do,” the better it will be for financial markets, Kevin Hebner, global investment strategist at TD Epoch, told CNBC’s Squawk Box Asia on Monday.

However, instead of rushing to increase interest rates, the Bank of Japan should focus on complementing its monetary policy with clearer fiscal plans, as advocated by Prime Minister Fumio Kishida’s government. 

Enhancing worker productivity and supporting innovation in the private sector would be instrumental in achieving sustained wage growth, aligning with the 2% target. 

However, the current debate in Japan primarily revolves around the government’s inclination to raise defense spending and fund it through methods like the potential sale of shares in telecoms company NTT, which can be seen as mere gimmicks. 

If Japan is indeed approaching sustainable inflation levels and is getting closer to achieving its target, it is crucial for the government seriously to consider implementing a fiscal policy that aligns with this economic environment. 

While the BoJ governor’s initiatives may have shown promising results, it’s essential now to recognize that the Bank of Japan cannot tackle this challenge singlehandedly. 

Collaborative efforts between the government and the central bank are necessary to ensure the success of any economic measures aimed at maintaining stable and on-target inflation.

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

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Fed, Fitch thicken plot for Asia’s economic outlook 

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TOKYO – Few policymakers in Asia, if any, are more anxious to see the US Federal Reserve halt its tightening cycle than Rhee Chang-yong in Seoul.

Data show that no major financial system in the region is getting whipsawed more by Fed interest rate hikes than South Korea’s. According to Bloomberg, investors who bet on Korean debt over the last year lost 15%, the worst in developing Asia.

This puts Governor Rhee’s team at the Bank of Korea directly on the frontlines of all 11 rate hikes Fed Chairman Jerome Powell executed over the last 17 months. It follows that the BOK is a top beneficiary of the Fed declaring it’s done tightening.

Powell hasn’t formally done that. On July 26, when the Fed raised its benchmark to roughly 5.3% from 5.1%, highest level since 2001, Powell left the door open for another tap of the brakes in September.

For all intents and purposes, though, the Fed’s most aggressive rate cycle since the mid-1990s is done. Already, US consumer prices have fallen to a 3% pace of increase from more than 9% a year ago..

The breathing room that a cessation of Fed austerity creates is stellar news for the Bank of Japan and People’s Bank of China, both under new leadership.

The Fed isn’t the only Washington variable preoccupying Asia. On Tuesday, Fitch Ratings stripped the US of its AAA rating, echoing a 2011 move by Standard & Poor’s. The step comes as the US national debt approaches US$33 trillion and lawmakers in Washington play politics with borrowing policies.

“The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions,” Fitch says.

These challenges come as the new leaders of the BOJ and PBOC face their own unique challenges at home. One glaring similarity, though, is that both Kazuo Ueda in Tokyo and Pan Gongsheng face the central banking equivalent of a baptism by fire.

Ueda, just 115 days in the BOJ top job, has gotten a serious wake-up call in recent days. On July 28, the BOJ announced that 10-year yields would be allowed to exceed 0.5%.

Kazuo Ueda, governor of the Bank of Japan. Photo: Wikipedia

For most central banks, it would be dismissed as a highly technical tweak to account for a widening spread between US and Japanese rates. Yet for an institution stuck in the quantitative easing matrix for 23 years now, it was nothing short of shocking in market circles.

Ueda’s team spent the last few days cleaning things up. On Monday, as 10-year yields topped 0.6% for the first time in nine years, the BOJ scrambled to buy yen to halt the rise in rates. That day alone, Ueda’s team bought in excess of US$2 billion of government bonds.

By Tuesday, BOJ officials were signaling to local media that the big policy changes aren’t assured. This sets the stage for a tug of war between the BOJ and bond traders.

“The markets are likely to test the BOJ’s resolve, as it probably will seek to engineer a gradual shift away from its [yield curve control] policy over the next year or so, while leaving the short-term rate target unchanged, as it still believes that Japan needs supportive monetary policy,” says economist Duncan Wrigley at Pantheon Macroeconomics.

Yet there’s no doubt that a BOJ’s U-turn is now in motion. That will have far-ranging implications far and wide, says economist Mathias Dollerup Sproegel at Sydbank A/S in Copenhagen.

Though Tokyo’s policy shift seems “a matter of fine-tuning” it can have “a major impact on Danish homeowners with fixed-rate loans,” he says. If the BOJ “continues to tighten monetary policy and thus allows higher and higher interest rates in Japan, this may mean that it will become more expensive to buy a home in Denmark.”

Yet the Fed wrapping up its tightening cycle buys some time for Ueda’s team in Tokyo. For one thing, the BOJ can look forward to fewer strains in local credit markets. Each Fed rate hike forces the BOJ to regulate liquidity flows accordingly. The wider the US-Japan yield gap, the more work the BOJ must do to address market dislocations.

Though few expect actual BOJ rate hikes anytime soon, less rate turbulence from the US gives Ueda space to figure out how to normalize Japanese rates. Devising a plan to withdraw from a government bond market in which the BOJ owns more than half of all outstanding issues won’t be easy.

The same goes for the stock market. During the decade Ueda’s predecessor spent running the BOJ, Haruhiko Kuroda grew its balance to the point where it topped the size of Japan’s US$5 trillion economy. During that time, the BOJ became the biggest holder of Japanese stocks via exchange traded funds.

That multi-year buying binge made the BOJ the largest holder of Japanese shares — even bigger than Japan’s US$1.4 trillion Government Pension Investment Fund, the largest such entity in the world. It also makes it hard for the BOJ to withdraw without cratering the equity market.

In recent months, the Nikkei Stock Average surged to 30-year highs. The BOJ will be loath to pull the rug out from under a rally in which Warren Buffett has played a headline-grabbing role. This unwinding process may have a greater chance of success if global debt markets are calm.

Pan Gongsheng, governor of the People’s Bank of China. Photo: Wikimedia Commons

In Beijing, Pan’s first week on the job proved supremely hectic. Pan assumed the role of PBOC governor on July 25, three days before Ueda’s big splash in global financial circles.

Tumbling home sales are adding to already extreme pressures on developers grappling with a multi-year credit crisis. News that Country Garden, a top Chinese private-sector developer, scrapped a US$300 million stock offering added to the sense of gloom hovering over the economy.

Right out of the gate, Pan confronts a worsening slowdown, an economy on the verge of deflation, a property sector in crisis, record youth unemployment and capital leaving the second-biggest economy.

This week also brought fresh reminders that manufacturing is sputtering. Activity contracted for a fourth consecutive month in July, a dynamic that makes reaching this year’s 5% growth target less and less likely. The Caixin/S&P purchasing managers index fell to 49.2 in July from 50.5 the previous month.

“Looking forward, policy support is needed to prevent China’s economy from slipping into recession, not least because external headwinds look set to persist for a while longer,” says economist Julian Evans-Pritchard at Capital Economics.

Recent data, says economist Xu Tianchen at the Economist Intelligence Unit, point to a “potential death spiral” in the real estate sector that spreads more widely around the economy.

Economist Katrina Ell at Moody’s Analytics notes that “forward indicators, including new export orders, suggest ongoing near-term weakness. Goods demand will remain soft from the US and Europe through the remainder of 2023.”

Thomas Gatley, economist at Gavekal Dragonomics, notes that there are probably two main reasons China’s manufacturers ended up holding more inventory than normal. “First,” he says, “they were concerned about disruptions in their supply chains, and wanted to hold more raw materials in case deliveries of those key inputs were halted or delayed. Second, they anticipated higher levels of consumer demand than actually materialized, which caused finished goods to pile up in warehouses.”

Explanation No. 1, Gatley says, looks most relevant to the machinery and electronics sectors, where many products are produced by complex global supply chains that were particularly vulnerable to the disruptions in global shipping which occurred during the pandemic. Inventories of raw materials held by the machinery and electronics sectors rose from around 1.15 months of sales before the pandemic to a peak of nearly 1.3 months of sales in 2022.

At the same time, China’s service sector also faced intensifying headwinds. In July, activity in the non-manufacturing sector fell to 51.5 from 53.2. Economist Robert Carnell at ING Bank notes that while mainland authorities have been vocal in their support for the economy, “so far, that has not translated into the sort of sizable fiscal policy stimulus many in the market have become used to expecting. We don’t think it’s coming.”

Carnell says that the one component that stands out from the rest, is expectations, which looks like an unrealistic outlier compared with what is going on elsewhere.

“We can only put this down to continued hope that the government will pull something out of the bag that will re-invigorate the economy,” Carnell says. “However, while we believe that a great many micro measures will be implemented to improve the functioning of the economy, including a reduction in constraints on the private sector, we aren’t at all convinced that there is a fiscal bazooka waiting to fire up the economy. So, if those expectations aren’t fulfilled and begin to wilt, then this PMI could well join the manufacturing sector in contraction.”

As China slows and Japan underperforms, officials in Beijing and Tokyo are hopeful for a quieter second half of 2023 from the external sector.

Clearly, the Fitch news throws a new wrinkle into the mix. US Treasury Secretary Janet Yellen called the downgrade “arbitrary” and “outdated.” But for officials in Japan and China, which hold the world’s largest stockpiles of US Treasury securities, the downgrade is a stark wake-up call. Tokyo is sitting on US$1.1 trillion of Treasuries, while China is stuck with more than US$870 million.

Amid extreme uncertainty, this much is true: Doubts about the dollar’s trajectory, and peak Fed rates, are a game changer in global markets, adding to the reasons for Asia investors to fasten their seatbelts. 

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A new era for DCM? | FinanceAsia

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The repercussions of recent black swan events are contributing to a new dealmaking landscape – one that continues to ebb and flow as geopolitical tensions rise and governments work to ensure that regional emissions fall.

As regulators respond to global inflation with interest rate hikes, market participants are adapting to the post-pandemic outlook, where the structural integrity of systemic lenders has been called into question; bank runs have been navigated; and a debt ceiling default, narrowly avoided.

“Volatility is the only constant,” Elaine He, head of Debt Capital Markets (DCM) Syndicate for Asia Pacific at Morgan Stanley, told FinanceAsia.

“Bond issuance has been slow as issuers wait on the sidelines because of uncertainty and the increasing rates environment,” Barclays’ head of Debt Origination, Avinash Thakur, motioned. “The biggest factor impacting dealmaking continues to be the US Federal Reserve’s tightening bias.”

“Even if there is a lot of liquidity in the market, the cost of borrowing is too high,” Singapore-based corporate practice partner at DLA Piper, Philip Lee, told FA.

“Most CFOs, CEOs or other corporate decision makers who are in their late 30s or early 40s, would not have even started their careers when interest rates were this high – in the late 1990s, or early 2000s. I suspect it will take some time for companies to adjust to this higher interest rate environment.”

But Sarah Ng, director for DCM at ANZ, holds some positivity amid current market uncertainty. She noted how recent headline events are influencing short-term market sentiment and shaping deal-focussed behaviour, for the better.

“We are seeing narrower open market windows. This has meant that issuers have had to adopt an opportunistic and nimble approach when accessing primary markets,” she offered.

“We did see a degree of caution and a flight to quality, especially post-Silicon Valley Bank (SVB) and Credit Suisse, but the sell-off was largely contained to specific bank capital products. What has been surprising, has been the speed of bounce-back in both primary and secondary market activities, with a robust pipeline of issuers and receptive investor base back in play,” she explained.

FA editorial board member and head of DCM for Asia Pacific at BNP Paribas, Manoj Agarwal, agreed that unexpected developments have made market activity very much “window-driven”.

“From an issuer perspective, being prepared and able to access markets at short notice, as and when market windows are optimal, has become important,” he said. 

Furthermore, he noted that market recovery has been much faster this year, compared to the protracted period of indecision brought about by the Covid-19 pandemic.

“Although the year has been peppered with volatility and disruption, market efficiency is also improving, helping to reduce the impact these events have on dealmaking,” he emphasised.

Going local

George Thimont, head of ESG Syndicate for Asia Pacific and leader of the regional syndicate (ex-Japan) at Crédit Agricole, observes three notable trends emerging amid the current, Asia-based dealmaking environment.

“Issuance is broadly down across the board – in spite of good demand from the investor community. From a sectoral perspective, the notable absentees are the corporates, and local market conditions in certain jurisdictions, such as South Korea, have offered good depth and pricing versus G3 currencies.”

Citing Bloomberg data, Agarwal noted that for Asia ex-Japan, 2023 year-to-date (YTD) G3 DCM volume as of mid-June was down by 35.4% year-on-year (YoY), with 2022 already down by 54% compared to the same period in 2021.

But he agreed that South Korea displays some optimism, given that its 2023 YTD deal volumes remain flat, compared to the same period in 2022.

In fact, some of the market’s larger institutions have been quite active overseas. In February, the Korea Development Bank (KDB) issued $2 billion in bonds via Singapore’s exchange (SGX) in what constituted one of the largest public market issuances by a Korean institution in recent years.

Debt from issuers such as sovereigns, supranationals and agencies (SSA) or state-owned enterprises (SOEs) has benefitted, managing director and head of Asia Pacific Debt Syndicate at Citi, Rishi Jalan, told FA. 

“We expect corporate issuance in the US dollar bond market to be a bit more robust in the second half of the year,” he explained. In the meantime, Jalan said that some issuers are selectively tapping local currency markets where financing terms are lower, such as in India, China and parts of Southeast Asia.

However, not everyone feels that Asia’s regional markets can cater to the demands of the significant dry powder at play.

“Most liquidity in the local currency market comes from the banking system,” Saurabh Dinakar, head of Fixed Income Capital Markets and Equity Linked Solutions for Asia Pacific at Morgan Stanley, told FA.

He is sceptical of the current capacity for local markets to meet the requirements of internationally minded issuers. However, he noted as an exception the samurai market, which he said had proven vibrant for some corporates with Japan-based businesses or assets.

“Larger long-term funding requirements can only be satisfied through the main offshore currencies, such as dollar securities,” he explained.

Turning to the regional initiatives that have been set up to encourage participation in Asia’s domestic markets such as Hong Kong’s Connect schemes – the most recent of which, Swap Connect, launched in May – Dinakar shared, “What we need to see is broader stability.… These developments are great, but for investors to get involved in a meaningful way, general risk-off sentiment needs to reverse.”

“There was huge optimism around reopening, post Covid-19. This has since faded as corporate earnings have disappointed and there has been no meaningful stimulus. The markets want to see policy stimulus and, as a result, corporate health improving. Performance across credit and equities will then follow.”

Sustainable momentum

One area of Asian activity that stands strong in the global arena, is ESG-related issuance.

In March, the International Capital Market Association (ICMA) published the third edition of its report on Asia’s international bond markets. The research highlighted that, in 2022, green, social, sustainability and sustainability-linked (GSSS) bonds accounted for 23% of total issuance in Asia – higher than the global ratio of 12%.

“Demand is still more than supply, and investors tend to be more buy and hold, so we’ve seen that sustainable bond issuance has been more resilient than the market as a whole,” shared Mushtaq Kapasi, managing director and chief representative for ICMA in Asia.

“ESG has come to form an integral part of the dealmaking conversation in Asia. Over 30 new ESG funds have launched here in 2023; the number of ESG-dedicated funds is up 4% YoY; and Asia makes up 11% of the global ESG fund flow as of 1Q23 – up from 5% a year ago,” said Morgan Stanley’s He. 

“The Hong Kong Special Administrative Region (HKSAR) government recently came to market as the largest green bond issuer in Asia so far this year,” she added.

Discussing the close-to-$6 billion green bond issuance, Rocky Tung, FA editorial board member, director and head of Policy Research at the Financial Services Development Council (FSDC), shared that the competitive pricing contained a variety of durations and currencies that “help construct a more effective yield curve that will set the benchmark for other issuances – public and private – to come.”

This, he explained, would not only be conducive to the development of green and sustainable finance in the region, but would specifically enrich Hong Kong’s debt capital market.

“ESG-related bonds can provide issuers with an additional selling point to attract investors,” Mark Chan, partner at Clifford Chance, told FA.

“They can demonstrate the issuer’s commitment to fighting climate change for example…. Issuers with a social agenda, such as the likes of the Hong Kong Mortgage Corporation (HKMC), can highlight their mission and objectives by issuing social bonds to enhance the investment story.”

In October last year, HKMC achieved a world first through its inaugural issuance of a dual-tranche social facility comprising Hong Kong dollar and offshore renminbi tranches, which totalled $1.44 billion.

“We are also seeing more bespoke ESG bonds such as blue and orange structures,” Chan added, referring to recent deals that the firm had advised on, including the Impact Investment Exchange’s (IIX) $50 million bond offering under its Women’s Livelihood Bond (WLB) Series; and issuance by China Merchants Bank’s London branch, of a $400 million facility – the first blue floating-rate public note to be marketed globally.

FA editorial board member and head of sustainability for HSBC’s commercial banking franchise in Asia, Sunil Veetil, noted that while Asian issuance fell in most segments, green sukuk and social bonds helped sustain momentum.

“For green debt, energy was the most financed project category in Malaysia, the Philippines, Thailand, and Vietnam, accounting for more than 50% of allocation,” he shared, citing a report by the Climate Bonds Initiative (CBI).

“In Singapore, which remains the undisputed leader of sustainable finance in Southeast Asia, around 70% of green debt went to buildings, mainly for the construction of green buildings, and to a lesser extent, for retrofits and to improve energy efficiency.”

“There continues to be regulatory support for ESG bonds, including grants provided by the Asia-based stock exchanges to list green bonds,” added Jini Lee, partner, co-division head for finance, funds and restructuring (FFR) and regional leader at Ashurst. 

A boom for private credit

Crédit Agricole’s Thimont told FA that Asian credit has remained resilient through recent global risk events. Private markets and funds are emerging as alternative sources of capital for those corporates with weaker funding lines, DLA Piper’s Lee observed.

Indeed, the further retrenchment of banks from lending has provided an opportunity for private credit players to swoop in and fill an increasingly large void. Globally, the sector has grown to account for $1.4 trillion from $500 million in 2015 and Preqin estimates that it will reach $2.3 trillion by 2027.

Once a niche asset class, investors are drawn to private credit’s floating rate nature which moves with interest rates and offers portfolio diversification.

Andrew Tan, Asia Pacific CEO for US private credit player, Muzinich & Co, earlier told FA that private credit players aim for investment returns of around 6-8% above the benchmark rate in the current environment.

The firm’s sectoral peers, including KKR, have argued that institutional investors should consider allocating as much as 10% to private credit. Alongside Blackstone and Apollo, the US global investment firm has added to its Asian private credit capabilities in recent years, while new players, including Tokyo-headquartered Softbank, have recently entered the market. In May, media reported that the Japanese tech firm sought to launch a private credit fund targetting late-stage tech startups and low double-digit returns.

Elsewhere in Japan, Blackstone recently partnered with Daiwa Securities to launch a private credit fund in the retail space, targetting individual high net worth investors (HNWIs).

Unlike in the US, where non-bank lenders now outnumber traditional financiers, “Apac remains heavily banked, so we expect to see ample room for private debt to grow in the region,” Alex Vaulkhard, client portfolio manager within Barings’ Private Credit team told FA.

He sees particular opportunity to serve the private equity (PE) space. “Although PE activity has been a bit slower in 2023, we expect activity to return, which will increase lending opportunities for private debt.”

Asia accounts for roughly $90 billion or about 6.4% of the global private credit market, according to figures cited by the Monetary Authority of Singapore (MAS) that highlight the market’s growth potential.

The biggest vehicle in Asia to date is Hong Kong-headquartered PAG’s fourth pan-Asia fund which closed in December at $2.6 billion.

However, overcrowding in some markets – notably India, where investors have amassed since new insolvency and bankruptcy laws came into force from 2016 – has made lenders increasingly compete for deals and acquiesce to “covenant-lite” structures, where investor protection is reduced.

But Tan, who is currently fundraising for Muzinich’s debut Asia Pacific fund – a mid-market credit strategy with a $500 million target, believes this only to be a problem in more developed markets such as Australia and is unlikely to become an issue in the wider region.

“If anything, the trend is in the direction of more conservative structures with increased over-collateralisation and stricter covenant protection,” he told FA.

Fundamentally, seasoned private credit participants are aware of the importance of covenant protection, so their likelihood to compromise on this is low, he added.

With monetary policies tightening at one of the fastest rates in modern history and recession looming in several markets, a key challenge for private credit is borrowers’ ability to service their debts.

“There is no doubt that default rates will go up and I would be cautious of cashflow lends with little or no asset backing,” said Christian Brehm, CEO at Sydney-headquartered private debt manager, FC Capital, calling for adequate due diligence when evaluating opportunities in the current environment.

“We would not be surprised to see an increase in default rates, but these are more likely to occur in more cyclical industries or among borrowers who have taken on too much debt in recent years,” Vaulkhard opined.

The managers suggested a tougher fundraising environment ahead, as the performance of fixed income instruments improves to offer limited partners (LPs) attractive returns.

What’s next?

The banking sector’s evolving regulatory landscape is also contributing to Asia’s changing DCM outlook.

Initially proposed as consequence of the 2008 global financial crisis (GFC) and with renewed rigour on the back of recent adversity across the banking sector, new capital requirements are set to be rolled out in the US and Europe as a final phase of Basel III. Often dubbed “Basel IV” for their magnitude, market implementation was originally scheduled for January 2023, before being delayed by a year to support the operational capacity of banks and market supervisors in response to the Covid-19 pandemic.

Experts caution that while more stringent banking regulation will challenge Asia’s traditional lending mix, it will also offer opportunity.

“There is a big amount of regulatory capital to be rolled out following the new Basel III rules, which will impact the type of debt to be issued,” said Ashurst’s Lee.

“We have been speaking to issuers who have been anticipating this uptrend as well in the coming years and are building in this scenario in their mid- to long-term treasury planning,” she added.

“Although the implementation of the Basel III final reform package was postponed in jurisdictions such as Hong Kong, those subject to it will no doubt be grappling with the new capital requirements already,” said Clifford Chance’s Chan, noting how its introduction will likely impact banks’ risk-weighted asset (RWA) portfolios.

“Aspects such as the raising of the output floor could potentially see some banks try to charge more for their lending,” he said.

Hironobu Nakamura, FA editorial board member and chief investment officer at Mizuho and Dai-Ichi Life tie-up, Asset Management One Alternative Investments (AMOAI), agreed that the new Basel reforms will lead to more scrupulous risk assessment by lenders, but how this will affect banks’ portfolio construction more concretely, remains uncertain.

“A heavy return on risk asset (Rora) requirements will likely impact banks’ risk asset allocations, region to region. [But] it is quite early to determine whether Asia is risk-off or -on at this stage, from a bank portfolio perspective.”

FA editorial board member and AMTD Group chair, Calvin Choi, proposed that if lending were to become more expensive for global players, there could be upside for regional banks.

“Updated Basel rules will impact global banks operating onshore, adding costs and making them less able to use their balance sheets. Local banks won’t have this constraint, so they will win market share,” he shared.

However, he noted that  for those Asian banks that want to participate in overseas markets, business will become more costly and compliance-heavy. “It will keep more local banks local.”

“All of this will mean a higher cost of borrowing and less capital available to banks…. It will create opportunities for non-bank lenders such as non-banking financial institutions (NBFI), family offices and private funds to fill the gap,” said DLA Piper’s Lee.

“With stricter capital requirements under ‘Basel IV’, we anticipate that bank loan funding will become more expensive for issuers. As such, we could see a return to capital market funding from issuers who have hitherto heavily relied on loan markets this year,” said ANZ’s Ng.

Choi added that this may even lead to Asia’s bond markets being viewed as more competitive than their global counterparts.

“Overall, the DCM market has become slow and stagnated,” Nakamura observed. “However, there are areas where funding is continually needed,” he said, pointing to the energy transition space as well as digital transformation. 

What exactly the new regulatory environment will mean for Asia’s market participants amid macro volatility, rising interest rates and escalating geopolitical tensions, remains unclear. But the developing outlook could offer those able to structure more creative facilities, more business; drive the advancement of Asia’s local capital markets; and support the region’s wider efforts to transition to net zero.

Proponents of private credit remain optimistic.

“Capital raising might cool down in the short-term, but the true private debt lending market is about to kick off,” said Brehm.

“We believe that there is a lot of growth ahead,” Barings’ Vaulkhard stated, sharing that conditions are likely to improve for lenders this year, with spreads widening, leverage falling, and overall credit quality enhancing. 

“We are only at the start of a multi-year growth journey,” Tan concluded.  

 

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In-depth: Exploring Hong Kong and Indonesia’s strategic potential | FinanceAsia

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Last week (July 26), Hong Kong Exchanges and Clearing Limited (HKEX) and the Indonesia Stock Exchange (IDX) signed a Memorandum of Understanding (MoU) marking strategic collaboration aimed at strengthening ties and exploring mutually beneficial opportunities across both markets.

According to the announcements, the partnership will see the exchanges meet regularly to develop new capital market products, including exchange-traded funds (ETFs) and derivatives; enable cross-border listings; and promote sustainable finance across the region, through shared best practices and the development of carbon markets.  

The releases point to the benefits made available through enhanced cooperation, including access to the international connectivity and vibrance on offer via Hong Kong’s marketplace, as well as the talent, creativity and innovative characteristics of Indonesia’s “new economy” participants.

Discussing the news, Singapore-based Clifford Chance partner, Gareth Deiner, who specialises within the firm’s South and Southeast Asian capital markets practice, shared with FinanceAsia his take on the opportunity presented by forging a deeper connection with the market that is home to world’s largest nickel supply.

“The mutually beneficial aspect of this collaboration is that it offers access to a wide pool of North Asian institutional investors and therewith, an enhanced liquidity pool.”

Shanghai and Singapore-based Clifford Chance partner, Jean Thio, acknowledged the significant number of Indonesian conglomerates that operate outside of the domestic market and seek access to North Asia’s investor community.

She highlighted her work in 2022, advising on the spin-off IPO of Chinese dairy farm operator AustAsia Group, a subsidiary of Indonesian agribusiness, Japfa, as demonstrating this point.

“International issuers look to Hong Kong as a way of accessing international institutional capital. The new collaboration complements other regional initiatives, such as Stock Connect.”

Hong Kong and China’s central banking authorities announced in May the launch of the sixth iteration of the regional bilateral scheme, the northbound channel of Swap Connect. The initiative is the first derivatives mutual market access programme globally and opens up institutional entry to China and Hong Kong’s interbank interest rate swap markets.

In terms of the current trends permeating Indonesia’s capital markets, Deiner shared, “Historically, Indonesia’s future-facing minerals – cobalt, copper and nickel – would be exported. But now these are proving key elements of Indonesia’s onshore energy transition story, as they are core components used in the manufacture of wind turbines, solar panels and electric vehicles (EVs).”

“As such, Indonesia has implemented bans on the export of unprocessed nickel ore, in order to facilitate the development of the EV supply chain onshore.”

Deiner and his team advised the underwriters of Harita Nickel’s IDR9.7 trillion IPO on the IDX in April, which media attributed to being part of a government push to privatise state-owned enterprises (SOEs).

Amit Singh, Singapore-based partner and head of Linklaters’ South and Southeast Asia capital markets practice agreed that the newly formed “super-connection” opens the door to meaningful, increased liquidity for Indonesian companies.

“Hong Kong also gains a valuable link with the growing mining and supply chain powerhouse that Indonesia is developing into,” he told FA.

“Mining, minerals and other supply chain-focussed industries are driving Indonesia’s IPO boom in 2023,” Singh explained, pointing to his involvement in Merdeka Battery’s IDR9.2 trillion ($620 million) IPO in April. The PT Merdeka Copper Gold Tbk subsidiary owns one of the largest nickel reserves globally and has a portfolio of EV battery assets across the Sulawesi region.  

“This trend is likely to continue and grow in the upcoming years, and Hong Kong is clearly seeking to position itself closely with Indonesia and its burgeoning strengths in these areas.”

Dual listings

Tjahjadi Bunjamin, Jakarta-based managing partner and head of the finance practice at Herbert Smith Freehills (HSF) partner firm, Hiswara Bunjamin & Tandjung (HBT), agreed that the MoU means that Indonesia will obtain greater access to Chinese issuers and the related international investment base.

“This is particularly important given the dominant role of Chinese companies in the EV ecosystem.”

He explained to FA that the collaboration further enables the exploration of dual listings by both parties: “Both will benefit from a more coordinated approach to listing in the two jurisdictions, as well as more clarity on listing requirements for issuers and investors.”

“Dual listings and increased regulatory cooperation will accelerate the maturation of the Indonesian capital markets, allowing them to more quickly adapt as deal sizes and investor interest and scrutiny in the market widens,” Singh added.

David Dawborn, HSF partner and senior international counsel at HBT, noted that a challenge for the partnership will involve the fact that Indonesia’s capital markets system remains primarily focussed on basic equity and debt securities.

“It could benefit from new ideas and products available through Hong Kong’s capital markets system, which is more flexible and easier to navigate in many aspects.”

In prior discussions with FA, experts have commended Indonesian regulators for their efforts to make the market’s domestic exchange more accessible and attractive as a listing destination.

In late 2021, the Indonesian financial services authority, Otoritas Jasa Keuangan (OJK), approved amendments to the listing regime to allow firms with multiple voting rites (MVR) to participate on the domestic exchange. The move signalled continued progress to bring Indonesia’s capital markets in line with other global exchanges, such as those of the US and Hong Kong, which have had dual class share frameworks in place since the 1980s.

Recent research by the Hong Kong Trade Development Council (HKTDC) citing Refinitiv data suggests that more than 70% and 25% of companies currently listed on IDX meet the minimum capital requirement for listing on Hong Kong’s GEM (which serves small and mid-sized issuers) and main board, respectively. “This implies that there is a huge potential pool of candidates for dual primary and secondary listing,” the report noted.

However, the research added that so far, “only three Indonesian companies domiciled in Indonesia are currently listed overseas, and none are listed in Hong Kong.”

Tech story

Poised to become the seventh largest global economy by 2030, Dawborn underlined Indonesia’s endeavours to become a regional leader for Southeast Asian capital markets, following its success as host of last year’s G20 summit, in Bali.

Already home to a variety of tech unicorns (companies valued at over $1 billion) including Blibli, Bukalapak, Traveloka and GoTo, Indonesia is fast-emerging as a Southeast Asian tech hub, with its internet economy expected to double in value to be worth $146 billion by 2025.

Experts suggest that Indonesia holds significant potential to elevate Asia’s prominence on the global tech stage.

“Where we are in the macroeconomic cycle, with interest rates at an all-time high following another bump by the Fed last week, the landscape is challenging – high interest rates are not the friend of the tech sector. But the minute that inflation starts to settle, I think we’re going to witness the next chapter of Indonesia’s tech story,” Deiner said.

“Traditionally, Southeast Asian companies have always thought of the US when it comes to tech, but the HKEX has worked to be increasingly accommodative for these firms and Hong Kong is starting to prove a very attractive listing venue for those active in biotech,” explained Clifford Chance’s Thio.

“So-called US stock orphan listings (where a company has no operations, investor relations or management in a particular market but chooses to list there) are becoming a real discussion point across the Asian IPO landscape. I agree that Hong Kong may become an increasingly compelling venue for tech firms. In doing so, it supports the regional sector growth story,” Deiner added.

The tech sector is also set to support Indonesia’s efforts in the sustainability space. The market published the first version of its green taxonomy in January 2022.

“The ESG frameworks and disclosure standards of listing venues have become a hot topic in the IPO execution process and in equity offering documents more generally, and the variation in ESG disclosure standards across different international markets is creating a degree of execution friction across transactions in different markets,” Deiner explained.

“I was interested to read that the exchanges highlighted ESG considerations in the MoU as this will hopefully present an opportunity for the two markets to converge on ESG standards.”

“If this leads to a greater uniformity in ESG disclosures across primary equity markets, this could really be a game changer for market activity, and would be a very exciting development to monitor,” he added.

“As Hong Kong already has more developed carbon related, ETF and derivative products and trading systems, Indonesia and the market’s investors will benefit from access to this knowhow and technology,” noted HBT’s Bunjamin.

Jakarta-based corporate partner and capital markets lead, Viska Kharisma, told FA that following the introduction of Indonesia’s Financial Services Omnibus Law in 2023, OJK has been considering marketing more types of offshore securities in Indonesia, including carbon-related instruments.

“We understand that OJK and IDX propose to issue a new carbon market trading regulation in the near future, which should facilitate access by international investors to carbon credit opportunities through Indonesian industrial and mineral companies,” she said.

Reflecting on the opportunity on offer as a result of the official partnership, Deiner shared, “Where there is a cross- or secondary listing as part of a primary offering on any two international exchanges, you’re going to have an element of friction between their respective listing standards and the requirements that one legal jurisdiction or one regulator will impose versus another – and in many ways, the art of dealmaking in large-scale equity capital market (ECM) transactions of this nature, involves getting these two pieces to fit.”

“There’s nothing particularly apparent that has created a roadblock between the markets until now, but then that’s why you have the MoU. Hopefully it will provide a robust basis to ensure that any future obstacles can be navigated or removed,” he concluded.

HKEX declined to comment beyond the press release. IDX, the Indonesian Chamber of Commerce and Industry (KADIN) and a number of Indonesian banks did not respond to requests for comment.

 

¬ Haymarket Media Limited. All rights reserved.

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Ukraine harnesses spirit of Tuskegee Airmen in quest for victory

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The spirit of the Tuskegee Airmen, the black American World War II fighter pilots who overcame racial discrimination to become the most lauded and decorated combat pilots in US aviation, has become more than inspirational for Ukraine’s own underdog battle against its Russian invaders.

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Italian Prime Minister Giorgia Meloni speaks to Capitol Intelligence/CI Ukraine using CI Glass on Oval Office meeting with President Joe Biden on July 27, 2023 with comment from Campomarino mayor Piero Donato Silvestri and Tuskegee Airmen (Italy) historian Giuseppe Marini

Tuskegee Airmen of the US Army’s 332nd Fighter Group, whose heroism led Star Wars director George Lucas to produce the Hollywood film Red Tails, is connecting critical allies of Ukraine, from the incoming chairman of the Joint Chiefs of Staff, Air Force General Charles Q (CQ) Brown, to US President Joe Biden, Italian Prime Minister Giorgia Meloni, the American owner of AC Roma soccer club, Dan Friedkin, and South Korean President Yoon Suk Yeol.

The key man who will determine whether Ukraine will achieve an unambiguous victory over Russia is fighter pilot General CQ Brown, whose military mentor was Tuskegee Airmen commander and the first black American air-force general, Benjamin O Davis Jr, while Brown is the first black to head a US military service.

As the president’s military adviser, it will be up to Brown to cancel the “just not in time” policy of his predecessor, General Mark A Milley. Milley advised Biden to delay delivery of F-16s fighter jets and long-range ATACMS ballistic missiles, weapons Ukraine needs to put an end to the fratricidal Russo-Ukraine war.

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Tuskegee Airman William T Fauntroy Jr speaks to Capitol Intelligence/BBN using CI Glass on Tuskegee Airmen and experiences with Dr Martin Luther King Jr, in Washington on October 26, 2018.

CQ Brown, while head of the Aviano Air Forces in the Veneto region of Italy, personally rediscovered the Ramitelli Airfield at Campomarino in the economically depressed region of Molise, where the Tuskegee Airmen fighter escorts distinguished themselves with the lowest losses of US bombers during World War II, a feat recognized by 96 Distinguished Flying Crosses.

The historic importance of the Ramitelli Airfield was marked on July 16 by at a ceremony dedicating a monument and mural of a Tuskegee Airman, with the participation of Tuskegee descendants and the newly elected governor of Molise, Francesco Roberti.

Dan Friedkin, AC Roma owner, is also passionate about the Tuskegee Airmen, owning three functionining P-51 Mustangs and two original Tuskegee T6-G trainer planes, Italian aviation lawyer Claudio Tovaglieri said.

Just as Ukrainian President Volodymyr Zelensky makes no apologies for pushing reluctant Western allies for war materiel like Challenger/Leopold tanks and Shadow/Scalp cruise missiles, the private sector led by Boosteroid chief executive offcer and founder Ivan Shvaichenko, Kharkiv Regional Council Chairwoman Tetiana Yehorova-Lutsenko and Kharkiv Mayor Ihor Terekhov are coming to the United States to meet American CEOs.

Speaking to Capitol Intelligence during an intelligence and national-security summit this year, FBI Deputy Director Paul Abbate said he witnessed “unprecedented support” by US companies to Ukraine just prior to the Russian invasion on February 24, 2022, and specifically called out Microsoft for its work helping Ukraine defend itself.

The public-private initiative of Shvaichenko, Yehorova-Lutsenko and Mayor Terekov is part of Ukraine’s efforts to decentralize power to regional elected officials ahead of membership in the European Union. 

Yehorova-Lutsenko is set to be elected as the next president of the Ukrainian Association of District and Regional Councils after forging partnership agreements with the prosperous Italian region of Emilia-Romagna and the US state of Ohio. The Kharkiv already has a sister-city partnership with Cincinnati, Ohio.

Boosteroid CEO Ivan Shvaichenko and Kharkiv Regional Council Chairwoman Tetiana Yehorova-Lutsenko with US Ambassador to Poland Mark Brzezinski, on a US investment mission and renaming of a street in Kharkiv in honor of his father, Zbigniew Brzezinski and grandfather, Tadeusz Brzezinski, at the US Embassy in Warsaw on June 27, 2023.

Shvaichenko, whose company is now the third-largest cloud gaming company in the world after Nvidia’s GEForce and Sony’s PlayStation Cloud Gaming, and strategic partner of Microsoft, is now headed to the United States to open an US headquarters in Gary, Indiana, as part of the company’s goal to list the $500 million to $1 trillion Kiev-based global company on Nasdaq.

Not only does Boosteroid want to be a force to reckoned with in the world’s largest economy, but Shvaichenko plans to use his US footprint to convince US CEOs such as Oracle founder Larry Ellison, Microsoft president Brad Smith, Advanced Micro Systems CEO Lina Su, Vista Equity Partners founder Robert F Smith and DRW Trading founder and CEO Don Wilson to look at Ukraine, especially his native city of Kharkiv, as the world’s new driver of economic growth and innovation.

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US Commerce Secretary Gina Raimondo speaks to Capitol Intelligence/CI Ukraine using CI Glass Boosteroid looking to establish US headquarters in Chicago or Gary, Indiana at the American Enterprise Institute on July 26, 2023, in Washington DC.

For example, Boosteroid is launching a gaming/IT infrastructure developer academy/boot camp in Kharkiv and plans to launch the same initiative in Gary, thus creating centers of excellence between Ukraine’s second city and the American heartland.

US Commerce Secretary Gina Raimondo, who is leading the effort to create learning academies to train a new generation of IT developers and technicians lessen US dependence on Asian chip manufacturers and software developers, said she is very excited about Boosteroid’s plans for Gary, one of the most economically depressed and segregated cities in the United States.

Boosteroid’s plans for Gary follow the decision of South Korea’s Samkee Automotive to build a $200 million, 170-jobs auto part factory in Tuskegee, Alabama, to supply Hyundai and Kia manufacturing plants in nearby Montgomery.

Korean President Yoon Suk Yeol made a high-level visit to Ukraine this month that followed his state visit to President Biden to further cement economic and military ties with the United States on April 26.

Not only is Tuskegee the home of the Tuskegee Airmen and Booker T Washington’s Tuskegee Institute, but also the congressional district of Mike Rogers, the chairman of the US House Armed Services Committee and a stone’s throw from Auburn University, where Alabama’s populist US Senator Tommy Tuberville coached college football.

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Republican US Senator Tommy Tuberville, Democrat Joe Manchin and US Senate Armed Services Committee ranking member Roger Wicker, a Republican from Mississippi, speak to Capitol Intelligence/CI Ukraine using CI Glass on the legacy of the Tuskegee Airmen and the Ukraine war during the US Senate Armed Services Committee confirmation of Charles Q (CG) Brown as the next chairman of the Joint Chiefs of Staff, at the US Senate on July 11, 2023.

Even while holding up the Senate confirmation of General CQ Brown, and all higher-rank military promotions because of his opposition to military funds used for abortions, Tuberville only had praise for Brown and the legacy of the Tuskegee Airmen.

The spirit of the Tuskegee Airmen helped to further consolidate the special relationship between the United States and Italy as Giorgia Meloni furnished her pro-US and pro-Ukraine credentials during her meeting with President Biden at the Oval Office on July 27.

Shortly after a purposely low key Oval Office meeting, Biden went off to make a speech marking the 75th anniversary of president Harry Truman’s executive order desegregating the military forces because of heroism of the Tuskegee Airmen in World War II and their even more courageous “mutiny” against Jim Crow laws in postwar America.

Peter K Semler is the chief executive editor and founder of Capitol Intelligence. Previously, he was the Washington, DC, bureau chief for Mergermarket (Dealreporter/Debtwire) of the Financial Times and headed political and economic coverage of the US House of Representatives and Senate.

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Former candidate Tan Kin Lian applies for eligibility certificate for 2023 Presidential Election

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Potential candidates have been able to apply for a Certificate of Eligibility since Jun 13 – the first step in order to enter the presidential race. Prospective candidates must also submit a community declaration.

To qualify, the prospective candidate must have held a senior public office or helmed a company that has at least S$500 million (US$370 million) in shareholders’ equity for at least three years.

The contender must also be a Singapore citizen, be at least 45 years old on Nomination Day and not belong to any political party.

FORMER PRESIDENTIAL CANDIDATE

In 2011, Mr Tan Kin Lian competed against former deputy prime minister Dr Tony Tan, Progress Singapore Party founder Tan Cheng Bock and opposition politician Tan Jee Say. Dr Tan won the final vote in the 2011 polls, gaining 745,693 (35.2 per cent) of the votes.

Mr Tan won 104,085 (4.91 per cent) of the total 2,274,773 votes and lost his deposit for failing to garner more than one-eighth of the total number of votes polled in the election.

Mr Tan became Chief Executive Officer of NTUC Income in 1977, holding the position for 30 years until he left in April 2007. 

After he left NTUC Income, Mr Tan started a business in computer software and has also travelled regularly to provide insurance consultancy in Indonesia. 

According to the Straits Times, Mr Tan had served as the People’s Action Party’s branch secretary at Marine Parade in the 1970s.

He was picked by former senior minister Goh Chok Tong – then a Member of Parliament – to test a pilot scheme for setting up block committees, now known as residents’ committees. 

Mr Tan left the party in 2008, after being in Marine Parade GRC for 10 years before remaining largely inactive for 20 years when he moved to Yio Chu Kang. 

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Pandemic inequalities and the G20

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With the Covid-19 pandemic bringing the entire world to an abrupt halt in 2020, multilateral groups such as the Group of Twenty (G20), the United Nations and the European Union played an essential role in coordinating efforts and ensuring that recovery initiatives were spread out across the globe, benefiting those nations that could not rise out of this turmoil without international support.

Arguably, vaccination against the virus causing the Covid-19 respiratory ailment was one of the most effective means to mitigate the effects of the pandemic in both developed and developing nations. With global networks and partnerships allowing a single dose of Covid-19 vaccine to be priced between US$2 and $40, governments needed to make inoculation available for all citizens.

The following data indicate how successful vaccine penetration was in G20 member nations.

Total Covid-19 Doses Administered per 100 People (October 14, 2022) | Source: Our World in Data

However, the Global South evidently fell behind developed nations.

A death rate of 4.66% in Mexico was alarming, with Indonesia being at a concerning 2.46%. Poor mortality rates are a significant indicator of a nation’s sub-optimal health infrastructure.

This means that the developing countries of the G20 lagged behind their developed counterparts in terms of the quality of medical services available to their people, and the results are evident in the Covid-19 data made public.

Despite the vaccines’ apparent success in reducing the disease’s severity among vulnerable populations, numerous countries experienced the adverse effects of widely discredited measures like school closures and lockdowns.

These measures created a significant divide between the Global North and South, with certain nations benefiting from better health infrastructure and advanced educational facilities, allowing them to reopen earlier than others.

For instance, in 2020, children in advanced economies lost an average of 15 school days due to the pandemic, while the number increased to 45 days for emerging-market economies and a staggering 72 days for children in the poorest nations.

The Global South

India faced an uphill task due to its inherently large population, relatively small medical workforce and budgetary constraints. Mexico found it challenging to address an influx of immigrants in its southern regions, paired with geographical disparities.

Indonesia, despite being the first Southeast Asian country to commence a vaccine rollout, fell victim to its own low vaccine stocks and bureaucratic hurdles.

Japan found great success in its vaccination numbers due to a robust campaign, and additional efforts spurred on by the nation hosting the Tokyo Olympics. South Korea used tech solutions for evidence-based health targets and ramped up production through an inherent advanced medical sector.

Other developed G20 nations, similarly, had the privilege of abstaining from such problems for the most part. The United States, despite a strong domestic anti-vaccine movement, had crossed 180 vaccinations per 100 persons at one point, primarily due to governmental wealth enabling contracts with pharmaceutical giants, and vaccines to be administered for free.

The European Union also worked together to fund vaccine research and development and produced enough vaccines by July 2021 to vaccinate 70% of its adult population.

The G20 had, in this regard, attempted to bring about vaccine equity in multiple instances. It created the Access-to-Covid-19 Tools (ACT) Accelerator to bring about an equitable distribution of tests and, subsequently, vaccines around the globe. This was assisted by disseminating information and resources, often favouring nations with little or none to spare.

India’s G20 presidency

During its tenure as the president of the G20, the Indian government was deeply committed to driving tech-enabled development in the health sector and establishing digital public infrastructure.

One crucial proposal India and South Africa put forth in 2020 before the G20 was an intellectual property rights waiver. The primary goal was to enhance access to knowledge, making the battle against Covid-19 economically feasible for developing nations.

Despite not gaining significant traction at the time, this proposal resurfaced during India’s presidency due to its potential to address the pressing challenges faced by the health sectors in the global South.

Moreover, the collapse of COVAX, a global vaccine network intended to distribute vaccines equitably, clearly indicated the structural bottlenecks and vaccine politics that needed urgent resolution.

The existing mechanism failed to provide vaccines effectively based on the specific needs of individual countries, underscoring the importance of a comprehensive and united approach to global health crises.

As India’s G20 presidency approaches its conclusion, specific critical issues remain that demand immediate attention. The global value chains suffered disruption due to the pandemic, and the Russia-Ukraine dispute further highlighted the system’s vulnerability to external shocks.

India must recognize the opportunity to lead the coordination of the G20 in addressing these gaps and creating more robust health systems to mitigate future risks.

This article was co-authored with Rohan Ross of National Law School of India University in Bangalore, Karnataka, during his internship at the Observer Research Foundation.

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