Tuesday, 26 June 2018

China’s leader, Xi Jinping, is one of the most powerful people on the planet.

He is also a soccer fan.

Since taking office in 2013, Xi has put soccer squarely at the center of his ambitious plan to turn China into a wealthy superpower. Xi has a “World Cup dream.” He wants China to qualify for, host and eventually win the World Cup by 2050.

To date, China has qualified for this global soccer tournament just once, in 2002, and it has never scored a goal in the World Cup.

Can China go from soccer dud to soccer superpower? My guess is probably not – at least not in Xi’s lifetime.

Not a winner

I’m a China expert who has researched the country’s top-down political system and its approach to economic development. I also lived in Shanghai, in 2012 and 2013, where I shuttled my three school-age children to and from soccer practice.

China certainly has the money and political wherewithal to expand its commercial and political influence over this global sport, just as it has lately done with the Olympics and international relations.

Chinese companies have bought several major European soccer teams, including the U.K.‘s Wolverhampton and Italy’s AC Milan. Chinese brands like Mengniu and Luci bought serious advertising space in this year’s World Cup, publicizing these little-known companies alongside global giants like Budweiser and Rozneft.

Xi can also ensure that his countrymen see and play more soccer. China’s 2016 plan for Chinese soccer greatness proposes to build 70,000 new stadiums and develop 20,000 new specialized schools, with the aim of having 30 to 50 million Chinese children playing soccer by 2020.

China’s ferocious academic culture

So Chinese soccer may well improve dramatically over the next two decades. But I believe China lacks the culture and institutions to achieve Xi’s third goal: winning the World Cup.

For one, history shows that investment from China’s soccer plan will inevitably be directed mostly to coastal megacities and capitals because of the country’s administrative hierarchy. That hierarchy systematically benefits provincial capitals and large municipalities. My experience is that the trickle-down to rural areas, where about half of the population still lives, is slow and minimal.

China’s fierce academic culture is also a barrier to nurturing soccer talent. The drive to achieve at school starts early, intensifies during elementary and middle school and culminates with the “gao kao” – the infamously difficult college entrance exam.

Even when students have great athletic talent, test preparation and homework inevitably crowd out all but the most traditional extracurricular activities, like classical music training. In some Chinese cities, severe air pollution even makes having recess outside hazardous.

Parental pressure has been found to be one of the most significant sources of Chinese teenagers’ high levels of stress and anxiety. As a parent, too, I heard many other parents complain that their kids were maxed out. Adding athletics to their children’s agendas seems an unlikely choice.

Schools also frequently underemphasize athletics because this is not how reputations and strong student demand are earned in China. High academic performance, measured through testing, is the singular goal.

I see no evidence that China is currently training the next generation of global soccer stars.

Not enough space

Even China’s economic boom does not work entirely in soccer’s favor.

The bulk of China’s 1.38 billion people live in central and eastern China, where cities are among the most densely populated in the world. Urban real estate prices there are sky high, so recreational space in cities – like soccer fields that can be used for pickup games and local leagues – are few and far between.

Japan has 200 sports fields for every 10,000 people. China has seven, and most of them are owned by schools or the military. Your average American has access to 19 times more sports space than the average China resident.

China is massive – bigger than Germany, Brazil and South Africa combined. But that doesn’t mean there is a lot of free space. Land in rural China is still dominated by small-scale agriculture.

Basketball courts are far more common in China, which may explain why more Chinese people play basketball. Some 33 million Chinese follow the NBA’s account on Weibo, China’s answer to Twitter.

Culture gap

The central government’s 2016 soccer plan addresses China’s deficit in youth talent development and infrastructure by proposing more childhood soccer training and building more soccer stadiums.

The culture gap may prove harder to overcome, though. China just isn’t a soccer country. I rarely saw kids playing informal games in the streets of China with a soda can or a half-deflated ball as one does across Latin America and Africa.

Only 2 percent of Chinese play soccer, compared to 7 percent in Europe and Latin America. China does not rank in the top 10 nations of youth participation in soccer, according to FIFA’s last survey.

China does not have the same culture of pickup soccer games as virtually all Latin American countries do. Moises Castillo/AP Photo

Will China follow the US’s lead?

Rich countries without much of a soccer culture can build it – over time. That’s what soccer advocates in the United States have been trying to do for decades.

The country got its professional league, Major League Soccer, in 1988. By the early 1990s, the league was establishing teams and building stadiums across the country. Managers imported popular – if aging – global stars like England’s David Beckham to boost the sport’s American profile. Former U.S. National Team Coach Jurgen Klinsmann, who was fired in late 2016, also put emphasis on youth soccer development.

The U.S. hosted the World Cup in 1994 and will host it again, alongside Mexico and Canada, in 2026.

But for all this money and effort, the results have been middling. The U.S. men’s soccer team did not even qualify for this year’s World Cup.

The U.S. women’s team, on the other hand, won the 2015 Women’s World Cup. Chinese women have also seen more global success than male players.

That’s because many traditional soccer powers have marginalized women’s participation in the sport. If Xi wants China to make its mark as a soccer upstart, the women’s team may be his best investment.


Mary Gallagher, Professor of Political Science, University of Michigan

This article was originally published on The Conversation. Read the original article.

Published in World

Rosewood is the generic name for several dark-red hardwood species found in tropical regions across the globe.

It fetches very high prices because it’s strong, heavy, has a beautiful red hue and takes polish very well – and because the trees are becoming increasingly scarce. On the Chinese market in 2014, for example, prices were in excessof USD$17,000 per ton. That’s ten times higher than the price of more standard tropical hardwood.

There’s a huge demand in China for rosewood logs to make hongmu – antique furniture. Hongmu was used historically by the imperial elite and is now coveted by China’s rising middle class. Supplies of the wood from markets in Latin America and South-East Asia have dwindled in recent years, so Africa has become a key source. Within Africa, Zambia has become one of China’s main rosewood exporters in the past decade.

But the harvesting of rosewood is often not done sustainably. Several African species have already received protection under the Convention on Trade in Endangered Species.

We researched the rosewood trade between China and Zambia in 2016 and 2017. We wanted to study the relationship between global and local sources of capital, rural development and environmental impacts. We also wanted to see whether regulations, adopted to preserve natural resources like rosewood, provide the right set of incentives and disincentives for business to be sustainable.

The most common name used to identify rosewood in Zambia is mukula. But because several different species are categorised as mukula, and because comprehensive inventories are lacking, current rosewood stocks are not known. Legal uncertainties and corruption mean that laws, regulations, or sustainable forest management plans, related to rosewood, are rarely implemented and monitored.

This means that Zambia doesn’t benefit much from rosewood trade. Its forests are being decimated, causing serious environmental degradation. And though rural Zambians and their families do profit, this is short-lived. We also found that because the trade isn’t being effectively monitored or taxed, the government loses about USD$ 3.2 million in potential revenue every year.

Monitoring challenges

A couple of big factors have allowed this situation to thrive.

The first is that mukula was only recently added to Zambia’s list of official commercial species. It was previously recorded under the general term “other”, so its trade wasn’t properly recorded or taxed appropriately. In addition, even though there’s an export ban on mukula leaving in log form, it has been allowed to leave the country almost exclusively in log form. Aside from legal considerations, this defies the purpose of the ban, which is to boost local processing and job creation in Zambia.

The second is that the government has been issuing and lifting various regulations in rapid sequence over the years, which have left enforcement agencies on the ground unclear about what rules applied where and when. This has boosted corruption, which means many officials have no incentive to ensure the trade is well regulated. About US$1.7 million is paid in rosewood-linked bribes each year. Most of which are collected along Zambian roads where trucks must make payments to proceed towards the points of export.

The results of these legal uncertainties can be seen in the graph below which shows log exports, as recorded by Zambian authorities through the Food and Agriculture Organisation of the United Nations, and log imports as recorded by Chinese authorities.

The discrepancies, in volume and value, between the declarations are huge. For example, in 2016, Zambia declared exports for about 3,000 cubic metres at an approximate value of USD$900,000. China, meanwhile, declared imports of about 61,000 cubic metres for an approximate value of USD$87 million. Because Chinese customs do not recognise mukula as rosewood, we cannot determine the amount, but because Zambia exports only a few species whose volumes haven’t changed much over the years, we are sure that mukula represents the vast majority of those volumes.

It’s clear that a series of measures, in particular log-export and production bans adopted over the years, don’t work. Bans only make sense when coupled with other measures, like effective enforcement or a system of incentives. In fact, bans have contributed to keep the rosewood market underground without really affecting harvest and trade. But solutions are possible.

Focus areas

Our research suggests that four points need immediate attention.

  1. The strategy of continuously adopting and lifting production and export bans is not working and should be abandoned. If a ban is deemed necessary, a coherent enforcement strategy must be adopted, enforced and monitored. If not, The Zambian Forestry Department should propose a revision of the legal framework and ensure logs for export are appropriately taxed.

  2. The Zambian government must support the Forests Act of 2015. This aims to protect the country’s forests and people’s long-term livelihoods by implementing innovative management and monitoring measures, including community, joint and private forest management approaches.

  3. The governments of Zambia and China need to engage in discussions with their respective CITES management and scientific authorities and list mukula as a species that may be threatened with extinction, should the trade not be closely controlled. This would hopefully limit international demand.

  4. Countries in sub-Saharan Africa should learn from each other’s environmental challenges and work better together. While Zambian forests were emptied of rosewood – and the government was deliberating potential countermeasures – buyers and traders had already moved into Malawi, the Democratic Republic of Congo and Mozambique. While trying to perfect domestic laws, the precious resource will already be gone.

By working together, the battle to save these fragile forests could be won.


Credit: The Conversation.

Published in Opinion & Analysis
Member countries of the East African Community are preparing to simultaneously table the 2018-2019 Budgets in their respective parliaments. In Uganda, finance minister Matia Kasaija will present a 30.9 trillion Uganda shilling (USD$8 billion) budget. Sarah Logan examines the economic context of Uganda’s annual budget and the associated challenges.
What is the context in which this year’s budget is being tabled?
The Ugandan government is facing pressure to deliver on many fronts. Economic growth slowed in recent years, averaging 4.5% in the five years to 2016. That’s down from an average of 7.8% in the previous five year period. Curtailed growth was due to lower commodity prices. Uganda’s main commodity exports of coffee, cotton and copper all experienced diminished world prices.
Other contributing factors were an increased incidence of drought and the conflict in neighbouring South Sudan, Uganda’s main export trade partner. Relatively high population growth, averaging 3.4% in the five years to 2016, eroded much of the gains from economic growth in recent years, resulting in declining GDP per capita and increased poverty.
Constraints to growth and productivity remain notable, particularly in agriculture and manufacturing. These sectors are hampered by infrastructure gaps, high interest rates that have made borrowing expensive, and difficulties accessing high quality inputs. These constraints have had a marked impact on micro, small, and medium enterprises, which constitute 93.5% of Ugandan firms. Such limitations pose obstacles to achieving production at scale, which is needed for firm growth.
In recent budgets, the government has significantly raised investment in public infrastructure (notably in transport, works, and energy) to address these constraints. It’s also tried to cater for relatively rapid urbanisation. But long project timescales, poor project selection and execution, and absorptive capacity constraints mean that maximum gains from these investments have not been realised.
These investments have also necessitated greater government spending in recent years, financed by increased borrowing from both domestic and external sources. As a result government debt has grown to 38.6% of GDP, up from 19.2% in 2009. But debt remains within the confines of what is considered sustainable.
What are the most challenging factors heading into this budget?
Working out the right balance between investing in infrastructure and social sectors is a key challenge. While more spending on infrastructure development is vital, it has necessitated budget cuts to arguably already underfunded social sectors, including health and education. But the right balance cannot be judged on budget allocations alone: these figures don’t take into account off-budget financing, which is common in social sectors.
International targets (where they exist) are also of limited value in guiding allocations as spending needs vary across countries and over time.
Another key challenge is how to fund the budget. The National Budget Framework Paper envisions both external and domestic borrowing, as well as the use of domestic tax and non-tax revenues. Government’s domestic borrowing has contributed to raising interest rates, making borrowing more expensive.
Consequently, a growing portion of government spending now goes on servicing its debt obligations, estimated at 12.3% of total revenues for 2018/19. In time, this figure should be lowered, thus opening up funds for spending on development priorities.
Domestic tax and non-tax revenues are generally a preferred source of budget funding as they do not incur debt. The contribution from these sources is expected to rise to 53% through anticipated improvements to tax administration and compliance. This is a positive sign.
What policy highlights would you want to see and why?
Continued investment in energy and infrastructure should be pursued, but it is necessary to improve the efficiency of these public investments. For example, up to 60% of the works and transport budget was reportedly not spent.
The government has recognised in its National Budget Framework Paper that issues around under-execution of development projects need to be addressed and it is working on ways to better allocate funds based on absorptive capacity. The government is also cognisant of the need to provide funds to cover operations and maintenance costs in coming years to slow infrastructure deterioration.
The government has acknowledged the need to raise the country’s tax to GDP ratio, which at 13.5% is relatively low. The Uganda Revenue Authority is exploring several avenues to improve tax administration and compliance.
More could be done to expand the tax base and minimise distortions through, for example, greater focus on value added tax – one of the more progressive tax instruments – rather than import tariffs. Imports are vital as inputs for manufacturing, and restrictions on imports reduce firms’ productivity and competitiveness.
Rwanda’s experience with raising value added tax through mandatory usage of electronic billing machines is valuable in this regard.
How are Uganda’s growth prospects looking?
In coming years, GDP growth is set to accelerate as recent and ongoing public investments begin to yield returns.
Credit: The Conversation
Published in News Economy
In 2014, the South African government announced a new direction in housing policy. The aim was to phase out smaller low cost housing projects of a few hundred units and focus exclusively on megaprojects – new settlements made of multitudes of housing units combined with a host of social amenities.
Given the uneven access to housing that resulted from apartheid, housing delivery has been a major focus of since 1994. Government’s 20 year review - 1994 to 2014 - reported that 3.7 million subsidised housing opportunities were created, undoubtedly a remarkable achievement.
Nevertheless in 2014 the then Minister of Human Settlements, Lindiwe Sisulu, became extremely concerned that house production had been falling. And, a backlog of 2.3 million families remained. The Minister favoured megaprojects (also referred to as catalytic projects) as a way of getting delivery back on track.
Large human settlement projects weren’t entirely new to South Africa. Several were already at an advanced stage of construction in 2014. What was new in this announcement was the idea that all housing would be delivered exclusively through the construction of megaprojects across the country. From 2014 to 2017, the Department of Human Settlements developed a list of 48 catalytic projects which was finalised last year.
In a recently published academic paper we argue that the policy was underdeveloped. The megaprojects approach moved swiftly from announcement, to discussion documents and frameworks, to the creation of lists of large scale projects. Most of this process occurred behind closed doors, with little consultation. And there has been little space to examine the limitations of the megaprojects approach – as well as the merits of alternatives, such as smaller urban infill projects.
Nevertheless the paper attempts to account for the uptake of the megaprojects idea within the human settlements sector, and understand the motivations and agendas of those who promoted it.
Rationales for megaprojects:
In a broad sense megaprojects are glamorous because they are much more visible and impressive than diffuse small-scale projects. As a result, politicians can brand their delivery more effectively. Megaprojects convey a sense of decisive action in which the state can flex its muscle in big hit interventions.
South Africa is focusing on new megaprojects to address its housing gap but it’s being urged to look within existing cities. Shutterstock
More specifically, champions of the megaprojects approach believed that large scale projects could deliver more houses quicker. When announcing the policy in 2014, the then minister of human settlements, Lindiwe Sisulu, stated that megaprojects would help deliver 1.5 million units by 2019.
Some advocates of the megaprojects approach, notably the Gauteng provincial government, were particularly attracted to the idea of creating whole new “post-apartheid cities” which could meet the “live, work and play” needs internally. Starting afresh with new settlements would be a way of designing urban spaces to avoid the inequalities and inefficiencies that beset existing cities. They would also bring major projects to poor areas that had little else to drive any significant economic growth.
Megaprojects were also intended to solve a variety of governance problems. In particular, it was extremely difficult to manage the 11 000 human settlement projects that were at various stages across the country. Consolidating these into just a few dozen projects was a way of focusing government’s attention and reducing administrative burdens and costs.
The megaprojects approach also seemed to be a way of managing the division of work and some of the tensions between different spheres of government and various departments. With some local authorities having taken on more responsibility for housing projects, national and provincial government considered megaprojects to be a way of bringing housing under more centralised management.
Some critics are less concerned about the scale of the projects than the fact that they could be poorly located. That’s largely because better located land is more expensive. In addition, there isn’t a great deal of well-located land that is large enough to accommodate new settlements of this scale.
The history of attempting to construct new towns shows how difficult it is to create new urban centres with enough jobs for the people who live there. There is a fear that megaprojects will be no different and once the construction jobs run out, residents would have to bear the cost of travelling long distances to jobs outside the settlement.
Megaprojects on the urban periphery are also counter to the plans expressed in a wide variety of policy documents to curb urban sprawl and densify existing cities. Peripheral locations also have other challenges. If new projects are located far from sewage, water, electricity and roads then these would have to be laid out great financial and environmental costs.
Other concerns have focused more directly on the huge scale of new projects. Big projects take many years to get off the ground, and so delivery can sometimes be suspended for a long time.
Towards a balanced policy:
In a recent parliamentary address, the new Minister of Human Settlements Noma-Indiya Mfeketo stated that catalytic projects “worth more than half a Trillion Rand” had been initiated. Yet she also announced that the budget had suffered a “massive cut” as a result of the fiscal challenges facing the state.
We believe that the moment should allow for some reflection on the now four year old megaprojects direction. This reflection should consider whether all housing should be delivered in megaprojects as originally intended by this policy, or whether a range of project sizes should be encouraged to facilitate, in particular, urban infill projects within existing urban areas.
Planned megaprojects should be evaluated with respect to their location, total cost to the state and long term sustainability. While some are reasonably accessible, others are peripheral, with marginal economic opportunities at best. South Africa cannot afford to construct housing in spaces that have few economic prospects and limited benefits for urban residents and the country.
Published in Opinion & Analysis
JOHANNESBURG - South African markets are pricing in the possibility of an interest rate hike this year as the rand falls, even though economists say this is unlikely as inflation expectations have not breached the upper end of the central bank’s target range.
South Africa’s rand has slumped nearly 9 percent against the dollar year to date, hurt by global risk-off sentiment and poor domestic economic data. It fell to a 7-month low last week.
Capital Economics senior emerging markets economist John Ashbourne said the currency fall has raised speculation that South African policymakers would follow some emerging market countries that have started raising interest rates.
Some have moved as a pick-up in their economy or other factors push up inflation, while others are being forced to act to steady their currencies.
South Africa’s forward rate agreements are implying a 25 basis-point hike in interest rates by the end of the year.
But a Reuters poll found last week that economists expect the South African Reserve Bank to keep its repo rate unchanged at 6.5 percent until 2020.
“We think that markets are getting ahead of themselves by pricing in rate hikes in South Africa... We do not think that this is likely,” Ashbourne said in a note.
“Policymakers have explicitly said that they will not react to currency moves until they see a lasting effect on domestic inflation. And the pass-through between currency moves and inflation is weaker in South Africa than in many other EMs.”
The central bank said in May it would maintain its vigilance to ensure inflation remained within the 3 to 6 percent target range, and would adjust the policy stance should the need arise.
The bank currently forecast CPI to average 5.1 percent in fourth quarter 2018, and 5.2 percent in the last quarters of 2019 and 2020. The next interest rates decision and inflation forecasts are due on July 19.
South Africa’s consumer price inflation slowed to 4.4 percent year-on-year in May as the rise in food prices eased.
“A weaker currency makes (the central bank) more fearful but it depends on how it impacts inflation twelve months out,” Citi economist Gina Schoeman said.
“We don’t think we will see rate hikes in 2018. It doesn’t mean there is no risk of it, and the market is correct to price for that.”
Schoeman said rate hikes over the past five years happened when the inflation forecast for twelve months out had breached 6 percent and stayed above that for two or three quarters.
“So it has to not only breach 6 percent, it has to also breach it for a sustainable amount of time. If it is not doing that, then we don’t have a risk of interest rate hikes,” she said.
Mexico’s central bank raised its benchmark interest on Thursday in a bid to counteract the effects of a peso slump and keep a downward inflation trend on track.
Argentina, Turkey, India and Indonesia are among the other countries hiking rates.
Published in News Economy
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