A new scramble for Africa is underway. What is different this time around is that African countries are playing a role. Currently South Africa, Angola, and several East African States are developing infrastructure to allow for the export of Central African Minerals. For geographic regions the East African States are particularly well situated to profit from exports to East Asian and South Asian Markets. This reality is having an impact on regional monetary policy which will influence the extraction of natural resources as well as the region’s transformation into a manufacturing center and the further development Kenya’s technology sector.
On November 30th Kenya, Tanzania, Uganda, Rwanda and Burundi signed a monetary union which sets the stage for a common East African currency. Such a currency could facilitate intraregional trade and promote investment in an area that is beginning to see significant economic development. A larger currency bloc could also aid the development of an East African financial center to rival Johannesburg’s status in Southern Africa. Presumably, Nairobi would fill this position due to its status as the gateway to East Africa. Such a development would also localize startup capital for Kenya’s burgeoning technology industry and serve as a channel for investment into East Africa’s rapidly expanding infrastructure and the development of manufacturing hubs in areas such a Mombassa, Bagamoyo, and potentially Lamu. Though it has historically taken decades for a city to establish itself as a financial center we must note that the rapid development of cities like Dubai combined with advances in communication technology serve as indication that this process can be expedited. This is an important factor to take into account when looking at potential investments in East Africa. Despite these positive signs we must pay attention to potential instability in Uganda and its implications for the development of East Africa.
Uganda occupies a unique geographic role in the region, as a great deal of minerals extracted from the Eastern Congo would pass through its territory. This reality is impacting investment in the country. On December 4th the Bank of Uganda sold 40.67 billion shillings ($16.1 million) of the 80 billion shillings worth of 15-year bonds. Despite the relative success of the issuance the Ugandan Election of 2016 could result in instability which could undermine investment in the country. Such instability would impact the whole of East Africa. After all it is a challenge to transport raw materials through a conflict zone. It has been speculated that President Yoweri Museveni’s son Muhoozi Kainerugaba is being groomed to succeed him. This rumor has caused a great deal of discontent. Even if Kainerugaba does not run for president his promotion to the status of brigadier in 2012 and the fact that he is in charge of the Special Forces Group, which oversees oil security, has caused resentment amongst officers in his age range who feel that his promotion was not based upon merit. In addition to this, many of the older members of the armed forces, who are loyal to Museveni, are retiring while the younger officers are not necessarily loyal to either Museveni or Kainerugaba. An erosion of this power base could set the stage for conflict. That said, the fact that Kainerugaba is in charge over oil security could give him the ability to expand his patronage network thus allowing him to purchase some modicum of stability.
Another reason to be concerned about the stability of Uganda is the passage of the Public Order Management Act (POMA) which Museveni signed into law in September. The law imposes restrictions on public meetings and affords the police powers to regulate them. The nature of this act heightens the possibility of a conflict which could escalate. Despite the resentment that POMA and the succession have generated it must be noted that the opposition Forum for Democratic Change is having their own internal disputes which weakens them. That said, common grievances could breed solidarity. This dynamic could help the Forum for Democratic Change overcome its internal divisions and form a united front with other concerned interests which would increase tensions in the country and undermine confidence in the region.
Events in Uganda in the coming years will have a significant impact on the continuing development of East Africa. Despite the challenges that Uganda faces we must note that Kenya’s recent elections went relatively smoothly. Part of this stems from investment in the country. When money is coming in political opponents can have an incentive to play nice. Hopefully, this will be the case with Uganda.
Friday, December 13, 2013
Friday, December 6, 2013
The Influence of East Asian Demographic Shifts and North Korean Power Struggles on the Establishment of China’s ADIZ
The apparent removal of Kim Jong Un’s Uncle Chang Song-taek from his position of vice-chairman of the National Defense Commission indicates that Pyongyang is facing an internal crisis. This dismissal supports recent analyses that the regime of Kim Jong Un is in trouble. If there is regime change in North Korea, China’s geographic proximity and strong relations with both North and South Korea will make Beijing a key player in promoting stability on the Korean Peninsula and facilitating a potential process of reunification. The ability to perform a role which might remove one of the biggest regional threats could give Beijing greater leverage when dealing with other regional players. Beijing's establishment of an Air Defense Identification Zone (ADIZ) should be seen in this context. As we shall see future demographic challenges and the need to appeal to nationalistic sentiment also appear to be playing roles in the establishment of the ADIZ.
Despite the tensions that China’s Air Defense Identification Zone has caused it must be noted that an ADIZ is a less risky way to stake a claim to a territory when compared to other courses of action. Certainly, if China were to set up settlements on the Senkaku/Diaoyu Islands the consequences could be far graver. It is also important to note that although many military aircraft have ignored the ADIZ most governments have requested that their civilian aircraft respect the Air Defense Identification Zone. This could be viewed as tacit acceptance of China's claim to the territory. If Beijing is able to gain enough recognition of the ADIZ it will cater to nationalist sentiment. This is important as China will have to make some tough economic reforms in the future thus any action that can boost support for the new government is important. Success in establishing an Air Defense Identification Zone in the East China Sea would also set the stage for an ADIZ in the South China Sea which would increase China's claims to the Spratly and Parcel Islands.
Shifting demographics could also be playing a role in Beijing’s establishment of the ADIZ. Japan, China and South Korea all have declining populations and rising dependency ratios (the ratio of dependents - people younger than 15 or older than 64 - to the working-age population). In the coming decades all these countries are likely to suffer some economic difficulties in supporting their aging populations. The difference is that South Korea and Japan are rich (though Japan does have notable debt problems), have more developed infrastructure, and are backed by the US. As things stand now Japan and South Korea are better equipped to deal with this potential period of instability. China must know that this time of relative weakness could allow other parties, such as the United States, to increase their presence in the Western Pacific. Clearly, this goes against Beijing's interests. The fact that Japan will likely have a stronger military in the future is an additional concern. For these reasons Beijing likely feels that trying to force territorial resolutions while China is in a period of relative strength is a strategic imperative. The establishment of the Air Defense Identification Zone could be the first step in such a process.
Despite the tensions that China’s Air Defense Identification Zone has caused it must be noted that an ADIZ is a less risky way to stake a claim to a territory when compared to other courses of action. Certainly, if China were to set up settlements on the Senkaku/Diaoyu Islands the consequences could be far graver. It is also important to note that although many military aircraft have ignored the ADIZ most governments have requested that their civilian aircraft respect the Air Defense Identification Zone. This could be viewed as tacit acceptance of China's claim to the territory. If Beijing is able to gain enough recognition of the ADIZ it will cater to nationalist sentiment. This is important as China will have to make some tough economic reforms in the future thus any action that can boost support for the new government is important. Success in establishing an Air Defense Identification Zone in the East China Sea would also set the stage for an ADIZ in the South China Sea which would increase China's claims to the Spratly and Parcel Islands.
Shifting demographics could also be playing a role in Beijing’s establishment of the ADIZ. Japan, China and South Korea all have declining populations and rising dependency ratios (the ratio of dependents - people younger than 15 or older than 64 - to the working-age population). In the coming decades all these countries are likely to suffer some economic difficulties in supporting their aging populations. The difference is that South Korea and Japan are rich (though Japan does have notable debt problems), have more developed infrastructure, and are backed by the US. As things stand now Japan and South Korea are better equipped to deal with this potential period of instability. China must know that this time of relative weakness could allow other parties, such as the United States, to increase their presence in the Western Pacific. Clearly, this goes against Beijing's interests. The fact that Japan will likely have a stronger military in the future is an additional concern. For these reasons Beijing likely feels that trying to force territorial resolutions while China is in a period of relative strength is a strategic imperative. The establishment of the Air Defense Identification Zone could be the first step in such a process.
Subscribe to:
Posts (Atom)