Category: Economy

On Monday, France’s Finance Minister said the country is creating a multi-billion euro fund to boost investment in Europe’s tech sector, so it can compete against US and Asian firms.

Mr. Bruno Le Maire said if European tech start-ups are to reduce their dependence on foreign firms, they will need far higher levels of financing.

On Tuesday, he added that a new fund of funds will be announced along with his German counterpart Christian Lindner, who said it would feed between 10 and 20 funds worth up to one billion euros (S$1.5 billion) to finance tech companies.

Mr. Le Maire said, “Our ultimate target is to have 10 technology companies worth more than 100 billion euros each by 2030”.

According to the German minister said in a statement Berlin will one billion euros to the fund.

It is often too difficult for Europe’s venture capital funds to fund European tech start-ups, leaving them with no choice but to turn to much bigger US funds.

Moreover, many US and Chinese tech companies have benefited from public funding during their development, something that was more difficult for European firms due to strict EU state aid rules in the past.

On Wednesday, India’s Prime Minister Mr. Narendra Modi announced the digital currency’s launch by the RBI and said that the digital rupee can be exchanged for cash. The statement was proposed in the Union Budget will open new opportunities in the fintech sector.

PM said, “The digital rupee will revolutionize the fintech sector by creating new opportunities and lessen the burden in handling, printing, logistics management of cash”. He further added the Central Bank Digital Currency (CDBC) will be in the digital form for the physical rupee which will be regulated by the RBI.

This system will enable the exchange of physical and digital currencies. This will directly help in improving the digital economy within the nation and if anyone which to make payment in the digital currency he will be able to change it into cash.

In addition to its potential to revolutionize the fintech sector, he said the digital rupee will reduce the burden of handling, printing, and storing cash.

As part of its digital currency initiative, Finance Minister Nirmala Sitharaman announced earlier that India will launch a digital currency in 2022-23 based on blockchain and other technologies.

On Wednesday, The House Of Representatives along with the Senate ratified a reconciled bill amending the 85-year-old law that stopped foreign ownership of public utilities to 40%. The new bill allowed full foreign ownership of telecommunication and railway services.

The announcement came from the Philippine Congress regarding opening up one of the world’s most restrictive economies. Earlier the lawmakers agreed in their version of the bill regarding railway, shipping, and telecommunication should be further opened to foreign investors.

The bill’s sponsor, Senator Grace Poe said that all the industries will be liberalized except the electricity distribution, water distribution, petroleum pipeline transmission, seaports, and public utility vehicles. Poe further added that the bill will still restrict foreign state-owned enterprises from owning capital in public utility or critical infrastructure within the nation.

According to the Organization for Economic Cooperation and Development, the Philippines is one of the world’s most restrictive economies for foreign direct investments.

Before the bill was passed, the European Chamber of Commerce of the Philippines President Lars Wittig said, “The Philippines must act quickly in terms of carrying out economic reforms that further trade and investment activities”

On Thursday, the Purchasing Manager’s Index (PMI) released survey data which shows UAE’s non-oil sector continuing to expand sharply in January. The report showed a high increase in new work led to a further significant increase in output in the non-oil sector

Strong sales in Expo 2020 had boosted the business activity once again within the nation along with a broad recovery in economic conditions from the pandemic.

IHS Markit UAE Purchasing Managers’ Index (PMI), which measures operating conditions in the non-oil private sector economy, fell from 55.6 in December to 54.1 in January.

The indices range between 0 and 100, with readings over 50 representing an overall improvement, and those below 50 representing a decrease.

The January PMI showcased a powerful improvement in operating conditions, which was the slowest seen since September last year

However, previous reports of the year-end of 2021 showed that after reaching the record high, the growth had begun to slow down as the rate of expansion in both activity and sales softened to its low of four months. This low was linked to the rise in Omicron cases that directly affected the customer’s spending.

On Tuesday (Feb 1), Nirmala Sitharaman, India’s finance minister, proposed a $713 billion (39.5 trillion rupees) expansion in the economy’s annual spending for the fiscal year beginning in April.

As India stages a world-beating recovery from the pandemic, the government is vowed to devote more resources to promoting growth. India is targeting a deficit of 6.4% of GDP for the next fiscal year and hopes to build high tax revenues and increase the privatization of state firms.

Finance Minister said that she will be left with a budget shortfall of 6.4% of gross domestic product, this is 6.1% wider than the median seen in a Bloomberg survey. With a deficit of 6.9%, the government will end the current financial year of GDP against its previous target of 6.8%.

In Parliament, she said, “This budget continues to provide the impetus for growth”. He further announced to spend 200 billion rupees on the program for highway expansion and pledged to manufacture 400 new trains over the next three years.

India’s 1.4 billion people look to the budget for direction on policy and spending priorities. It is the country’s one of the most closely watched economic events.

For the first time in the United Arab Emirates history, the government plans to introduce a federal tax on corporate earnings. As part of this effort, it is dismantling a levy-free tax regime that had made it a global magnet for businesses.

From June 2023, the government is set to introduce a 9% federal corporate tax on profits earned by businesses. Employees in the UAE will not be directly affected by this new taxation, but consumers could be indirectly affected if corporations raise prices as a knee-jerk reaction.

Thomas Vanhee, the Partner, Aurifer Middle East Tax Consultancy, said, “With the implementation of CIT, the UAE seems to have also introduced mandatory transfer pricing regulations. Free Zone companies are seemingly outside the scope of the new CIT regime, however, it seems that the carve-out is at least subject to certain conditions, such as complying with all regulatory requirements and not conducting business in mainland UAE. We also anticipate that the implementation of CIT will have an impact on the Economic Substance Regulations that were implemented in 2018”.

The exemption for the SME sector (up to Dh375,000 in income) is an encouraging development. Salaries and individual income are exempt from taxation.

On Wednesday, a free trade agreement stuck between Singapore and a bloc of countries comprising Colombia, Chile, Peru, and Mexico. Through the agreement, local companies will now be able to bid for government projects in the Americas, which together represent the eighth largest economy in the world.

Singapore’s first direct free trade agreement, or The Pacific Alliance-Singapore Free Trade Agreement (PASFTA), is with the Pacific Alliance, a bloc with a combined economic output of more than $2.6 trillion.

These negotiations have lasted over four years. The Pacific Alliance continues similar discussions with Australia, Canada, Japan, and New Zealand.

Singapore traded goods with the alliance for a total of $6.1 billion in 2019, a small amount compared with its global trade of more than $1 trillion in that same year.

More than 100 Singapore companies operate in the four countries, including the online shopping platform Shopee and high-tech software firm Taiger.

Singapore identifies agricultural trade, technology, and infrastructure as potential opportunities for growth as part of the 25-chapter FTA. On Wednesday, in the remark for the 16th Pacific Alliance Summit, Prime Minister Lee Hsien Loong said, “This is a landmark moment in Singapore’s partnership with the Pacific Alliance. Our two regions are in fact more connected than people imagine”.

On Tuesday, in a record 7.95 percent interest rate, Pakistan has raised a whopping $1 billion loan through its Sukuk bond, the highest rate it’s ever paid on an Islamic bond in its history. The media also reported that in return for the much-needed loan, Pakistan also agreed to pledge a portion of the Lahore-Islamabad Motorway.

The country issued the 7-year tenor asset-backed Sukuk bond to raise $1 billion with 7.95%. This rate is half a percent higher compared to the 10-year Eurobond which Imran’s government floated in April last year.

The key difference between the traditional Eurobond and the Islamic Sukuk is that the Islamic bond is backed by an asset that attracts less interest rate.

According to a leading newspaper, Pakistan’s Ministry of Finance stated that ahead of some major foreign loan’s repayment, the nation had to raise the loan to keep the official foreign reserves on point.

As of January 14, the gross official foreign exchange reserved was brought down to $17 billion due to spending $2 billion of the $3 billion borrowed from Saudi Arabia one-and-a-half months ago. This led Prime Minister Imran Khan to go to the international capital market.

India’s imports from China soar to almost $100 billion for the first time in the calendar year 2021 due to imports of electrical and electronic goods, machinery, and particularly smartphones. A massive surge was also seen in imports of special chemicals including APIs, fertilizers like ammonia sulfate, urea, and other varieties, industrial goods, telecom equipment, machine tools, and auto components.

According to China’s General Administration of Customs of the People’s Republic of China (GACC), India’s imports from China have reached $97.52 billion in 2021, whereas the total two-way bilateral trade touched $125.66 billion.

Based on India’s Ministry of Commerce and Industry’s Foreign Trade Performance Analysis (FTPA), the import of petroleum (crude) and petroleum products, pearls, precious and semi-precious stones, as well as coal, coke, and briquettes increased significantly in the first eight months of the calendar year 2021. During this period, the items accounted for nearly $60 billion of the total imports from China. Data for December for a commodity is yet to be released by India.

Trade economist and professor, Centre for Economic Studies and Planning, School of Social Science, JNU, Biswajit Dhar said, “India’s overall relationship with China seems to mirror the US-China relationship, in which economic and political relations have their own distinct dynamics”.

On Monday, the oil prices rose on worries regarding supply disruption amid rising tensions in Eastern Europe and the Middle East. This can make an already tight market even tighter. Meanwhile, Opec and its allies are struggling to raise their output.

On Friday, the US West Texas Intermediate (WTI) crude futures gained 57 cents (0.7%) to US$85.71 a barrel which fell to 0.5%. By 0742 GMT, Brent crude futures were up 58 cents, or 0.7 percent, to US$88.47 a barrel, reversing Friday’s losses of 0.6 percent.

Since October 2014, both the benchmarks rose for a fifth week in a row last week. It gained around 2% to hit its highest. However, the prices are already up more than 10% in the current year on the concerns over tightening supplies.

Chief analyst at Fujitomi Securities, Kazuhiko Saito said, “Investors remained bullish due to geopolitical risk between Russia and Ukraine as well as in the Middle East, while Opec+ continued to fail to reach its output target”. He further added that the expectation for higher heating oil demand in the US amid cold weather had also added the pressure.