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The introduction of commercial banking in Eritrea

 4 min read / 

Eritrea is one of the few African nations which still adopts the political philosophy of Marxism-Leninism. With this ideology, it severely confines the trading that can be done amongst other nations. The President, Isaias Afwerki, forwards his economic policies with a chauvinistic approach and therefore inoculates the people of Eritrea with the idea that the country does not need any form of foreign investment; regardless of whether it comes from financial aid or the addition of privatised commercial banks. As Eritrea are limited to the amount of trading partners they have due to these policies, this proves to be a serious impediment as they are not able to fully flourish as a new nation with an ample amount of natural resources and minerals available to trade. Regardless, Eritrea have proved that the need of foreign investment is unnecessary as they have reported a GDP growth from 1.3% to 1.9% from 2014 – 15. However, due to the tensions between Eritrea and Ethiopia still lingering after the War of Independence, the growth of GDP have been volatile ever since.

There are no private banks that operate within Eritrea and only one commercial bank that is nationally owned as the government hold all proprietary rights to the financial industry. That being said, if the policies were to change, can Eritrea sky-rocket their economic growth with the income of commercial banks? Ethiopia is its neighbouring country and prior to 1991 it held the same political ideologies as Eritrea; however, since 1991 and the disbandment of the People’s Democratic Republic of Ethiopia, the government have loosened its grip on the economy and permitted the introduction of privatised commercial banking.

 

Note: The bar chart is compared with the left-side of the graph, the line graph is compared with the right-side of the graph

Note: The bar chart is compared with the left-side of the graph, the line graph is compared with the right-side of the graph

 

The chart above represents both Eritrea and Ethiopia’s Annual Growth from 1991. After the War of Independence, Ethiopia lost its Commercial Bank of Ethiopia to nationalisation which then lead Eritrea to renaming it the Commercial Bank of Eritrea. In 1996, Dashen Bank had begun operating in Ethiopia which lead to a dramatic increase in the GDP Annual Growth which is evident on the graph. Through the years of 1998-2000 a second war broke out between the two nations which had resulted in Ethiopia ceding the village of Badme, and consequently ensued in irreparable damages as well as a drop of the Annual Growth GDP in Eritrea. With the potential of an economic boom in Ethiopia, the Cooperative Bank of Oromia had also begun operating in 2005 and since then there have been a string of privatised banks which had also taken this opportunity; paving the way for other countries to impel foreign investment.

From the graph, we are able to see that since then there has been stability in the GDP Annual Growth from Ethiopia; fluctuating from lows of 8.7% to a high of 12.4%. Conversely, Eritrea’s Annual GDP Growth have been experiencing some severe volatility going from 1.4% to a dramatic spike of -9.8% from the years of 2008-2009. Would the volatility been tamed if privatised commercial banks were introduced to Eritrea during the period of 2002 to the present?

Most likely. However, it is difficult to say whether it would improve Eritrea’s economic growth drastically. Intractable factors such as the population, rate of inflation, previous and current conflicts as well as the geography of Eritrea could all play a role in whether the country will share similar favourable affects that had gone on in Ethiopia. That being said, Isias Afwerki should let go of his archaic ideologies which he holds so dearly to and begin to introduce some private commercial banks to the country and see how the economy (and most importantly the people) reacts to it.

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Global Affairs

BP and Iraq Sign Development Deal for Kirkuk Oil Fields

 2 min read / 

BP Kirkuk deal

Iraqi Government and British energy giant BP have signed an agreement for the future development of the Kirkuk oil fields in Northern Iraq.

A statement on the Iraqi Oil Ministry’s website said the “memorandum of understanding” between the government and the London-based oil company would enable further development of the oil fields as well as “to open a new page of work” for the North Oil Company, a subsidiary of the Oil Ministry, on “solid foundations”.

BP Director, Michael Townsend, said the company would conduct the necessary surveys and prepare the required statistics.  He claims the company will increase production by 750,000 barrels of oil a day.

The Kirkuk Oil Field, discovered in 1927, is one of the largest oil fields in the world, producing half of Iraq’s oil exports, a reported million barrels a day. However, it has also been a wellspring for local instability: the fields had been seized in 2014 by the Kurdistan Regional Government, who piped oil across the Turkish border, a few hundred kilometres to the north. The fields were only retaken by government forces in October 2017.

Baghdad is attempting to reassert its authority throughout its provinces and according to Iraq’s Minister for Oil, Jahbar Ali al-Allaibi, Thursday’s announcement will “speed up the rehabilitation process”.

During the Saddam Hussein era, the fields suffered irrecoverable damage due to poor management. Excess production was reinjected back into the ground making Kirkuk’s oil thicker and therefore harder to extract.

On Wednesday al-Allaibi met with Britain’s ambassador, John Wilkes, where according to the ministry’s website, they talked about joint cooperation between the two countries in the oil and gas industry.

Keep reading |  2 min read

America

Trump’s Presidency and Russian Relationship: The Future

 4 min read / 

Trump Russia

Much has been said about Donald J. Trump’s love affair with Russia. Questions deserve a thorough and honest investigation. As distasteful and risky it may be, the best outcome of the enquiry is accusations continue to swirl, Trump limps through three more years, and in 2020, he is crushed at the ballot box. The world moves on. If removed from office, odds are Trump whips his base into a frenzy. Only the height and duration of civil unrest is in question. A worse case is that Trump emerges emboldened, eager to settle Putin’s longstanding challenge.

Putin Mocks Trump

The competition is real. Putin’s economic and political dominance gnaws Trump. Putin knows this. So, he taunts the President and dares Trump to employ the same ruthless tactics he exploited to consolidate power and possibly become the world’s richest man. Since Trump only sees green, he took the bait. The race is on to be the world’s first trillionaire.

Russia’s population is 142 million. Its $3.86trn translates into a measly $26,900 per capita GDP. In contrast, the 326 million people of the United States generate $18.62trn in GDP, nearly five times Russia’s total. The US per capita GDP of $57,600 more than doubles Russia’s. Despite Russia’s meek economy and reports  that Putin has embezzled up to $200bn in assets, Putin remains incredibly popular in Russia.

The apathy regarding this unparalleled heist makes Trump and Putin salivate over what they could jointly pilfer from the world economy. To advance their contest, the pair will identify a common threat. US-Russia relations will warm. Under the guise of “Peace through strength,” Russian sanctions will be lifted, and the Magnitsky Act repealed.

The administrative state in retreat, animal spirits will run wild. Trump’s name will be emblazoned across the globe. Countries desperate for jobs will be compelled to forge deals sponsored by Putin and Trump. Ethics be damned, the race to the bottom of the $120trn global economy will prompt a wave of corruption never seen before. Every facet of human decency will be compromised: environmental regulations, free and fair-trade by-laws, intellectual property, and human rights protections. The collusion is real.

In time, complicity will turn to double-crossing. It’s the Trump-Putin way. Makeshift “me-first” trade deals will collapse. Boycotts, divestitures and sanctions will be commonplace. Cooperation will evaporate. New political boundaries will be drawn with little world condemnation.

It doesn’t have to happen this way. Patience is a virtue. The checks and balances of the three branches of government are powerful mechanisms to thwart overt corruption.

Yet, for the impatient who seek Trump’s impeachment or removal via the 25th Amendment, be careful what you wish for. Only Trump can tame his army. To assume Trump will plead mercy at the feet of the administrative state contradicts Trump’s lifelong persona. He will relentlessly counterpunch and encourage his followers to do likewise. The short and long-term political and social risks are astronomical.

If Trump stems the tide, consolidates power and aggressively partakes in Putin’s race for two terms, the risks outstrip his forced removal. The consequences will be multi-generational.

Rope-a-Dope Is the Key to Containing Trump

The only path that possibly prevents extensive collateral damage is to check Trump into policy oblivion. Legislators must play rope-a-dope for as long as it takes, even three years if necessary. If Democrats take back both houses in 2018, the tactic will not set up Trump and his base for a final knock-out punch in 2020. For that to occur, numerous members of the GOP must join the effort. They too must throw periodic jabs at Trump then absorb a barrage Trump’s counterpunches.

With foes in every corner, even Trump – the self-proclaimed greatest counterpuncher in history—and his base will wear themselves out well before 2020. Then the decisive knockout punch can be delivered at the ballot box—without collateral damage.

Trump is severely wounded. If he gracefully and peacefully surrenders the Presidency, great. But don’t expect it. Rope-a-dope deployed by both parties is the countries best hope for a peaceful end to the Trump Presidency. Any other scenario risks the once unthinkable; an ‘American Spring’.

Keep reading |  4 min read

Europe

May Meets Macron

May Macron

The UK prime minister agreed to pay £44.5m towards tighter border security at Calais.

Editor’s Remarks: The French president arrived in the UK for the Anglo-French summit amid widespread complaints from the Tory party about just why Britain is paying another £44.5m for tighter security in France. One Tory MP pointed out that this addition brings the total figure the UK has paid to France in recent years up to £170m. France, meanwhile, says that the amount is necessary because the migrants in Calais are trying to get to the UK, who must, therefore, contribute towards their costs. The talks were also consumed by the imminent task of reaching consensus over the UK’s trade deal with the UK after Brexit goes through.

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