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The dollar’s strength is placing pressure on economies around the world, including in developing Asia. What makes this bout of dollar strength unique is that the stress is not limited to Asia’s developing economies. Asian economies are diverse and the direct financial impact of dollar strength varies. Some regional economies have significant foreign currency debts and limited foreign currency reserves. Unsurprisingly, these economies are in financial trouble. Sri Lanka defaulted on its bonds earlier in the year and is now trying to restructure its external debt. Pakistan has had to seek an emergency financing package from the International Monetary Fund, backstopped with pledges of additional support from both China and the Gulf. Bangladesh has proactively sought out IMF financing in the face of a terms of trade shock. Laos is, in all probability, relying on the continued forbearance of China’s policy banks to manage its unsustainable debt loads. All these countries are struggling to pay for imports of oil and natural gas. A broader set of Asian economies have relatively strong foreign currency balance sheets and are not at risk of immediate financial distress. Many have been able to rely on their local currency bond markets to finance fiscal deficits, limiting their direct financial vulnerability to swings in the dollar. India is in a much stronger position than during the 2013–14 ‘taper’ tantrum. It started 2022 with US$650 billion in foreign reserves, more than double the US$250 billion it held in 2012. The Indian government’s external debt, primarily to the multilateral development banks, only totalled US$125 billion. Thailand’s government started 2022 with over US$250 billion in foreign exchange reserves — or over 50 per cent of its GDP — while owing a bit over US$30 billion to external creditors. Other countries have more subtle strengths. For example, a substantial share of Indonesia’s US$80 billion in international sovereign bonds are denominated in yen. At the same time, balance sheet resilience is not sufficient to insulate a country’s broader economy from the impacts of a strong dollar. Even countries that have little to fear financially worry about the impact of currency weakness on households’ costs of living. There has been little correlation to date between the extent of currency depreciation across the main Asian currencies and the underlying strength of countries’ foreign currency balance sheets. The currencies of advanced Asian economies have actually depreciated more than the currencies of developing Asian economies. Japan — with plenty of reserves, significant foreign assets in its government pension fund and insurance companies that are structurally ‘long’ dollars — has experienced the largest depreciation. Taiwan and South Korea have followed. Meanwhile India, Indonesia, Malaysia and Thailand have experienced smaller depreciations. The reason for this is simple. Up until Japan’s heavy intervention in late September 2022, lower income Asian economies had been more willing to defend their currencies through a combination of rate increases and foreign reserve sales. There are signs that this is changing. Japan intervened heavily in September and October. South Korea is now worried that the won  has become too weak and is seeking to join Japan in obtaining a standing Federal Reserve swap line to meet dollar liquidity needs in its financial sector — potentially freeing up more of its existing reserves for intervention. Even though the dollar is now off its October peak, developing Asian economies continue to face several risks. The first is that certain economies may overestimate their balance sheet strength and sell foreign exchange for longer than is prudent. The basic principle is that temporary shocks can be financed with borrowed or reserve sales while permanent shocks require adjustment. The longer global energy prices remain high and the dollar remains strong, the more difficult it will be for countries to avoid adjustment. The second risk is the possibility of an additional shock from Japan. Japan’s efforts to limit the yen’s depreciation through intervention may fail, as it is harder for Japan to defend its currency through intervention than it is for smaller economies, whose financial markets remain less integrated into global markets. There is the additional risk that yen weakness and imported inflation could lead the Bank of Japan to abandon its policy of ‘yield curve control’ and that the associated rise in long-term Japanese government bond rates could push up interest rates globally. Many emerging economies would likely need to raise their domestic interest rates to avoid importing additional inflation, and to limit popular pressure for fiscal subsidies to offset higher fuel prices. This would be the Asian version of what is now called a reverse currency war. The third risk is a currency shock from China. China has long relied primarily on the signal sent by the People’s Bank of China’s daily fix — the central reference point for daily trading — to manage the yuan with only limited direct intervention by its central bank. To date, the pressure on China appears manageable. News reports suggest that the PBoC has leaned on China’s large state banks to use their balance sheets to help maintain the trading band around the yuan, but there is little evidence of pressure on the central bank’s reserves. However, if its economy remains weak, China may choose to allow more depreciation — both against the dollar and against the currencies of its trading partners to restart its economy. This would be an admission that China’s ability to avoid a prolonged stall through internal demand is limited and that exports are again required for growth. A yuan that is as weak as the yen could easily trigger a race down across the currencies of developing Asia. Many, though not all, developing Asian economies are less vulnerable to a repeat of the 1997 crisis. But few countries will be able to escape the fallout from the dollar’s current strength. A broader overshoot of many currencies that amplifies concentrated pockets of debt difficulties and complicates the fight against inflation globally remains a real risk.

At the end of March, the negotiations that started in June 2021 on the accession of the United Kingdom to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) were successfully concluded, reflecting radical changes in British trade priorities after Brexit. More broadly, this move by London undoubtedly confirms the special importance that the Indo-Pacific region has acquired in the concept of "Global Britain" and in its subsequent relevant updates. The signing ceremony is scheduled for July 2023, for which the trade ministers of the participating countries and the United Kingdom will meet in Auckland (New Zealand). As a result of London's accession, this bloc will surpass the EU in terms of the combined population of its constituent countries. However, unlike the European Union, which the United Kingdom, on the contrary, left, the CPTPP does not have - to the satisfaction of British Eurosceptics - its own court like the EU Court of Justice, or a supranational budget. The union operates as a multinational trade agreement. An important obstacle that hindered reaching an agreement more quickly was London's refusal to weaken national food standards. But in the end, Ottawa (Canada) backed down on calls for London to lift the ban on importing beef with growth hormones. Beijing has also applied for membership in the CPTPP following London (the Chinese application is dated September 16, 2021, but negotiations have not yet begun). However, with London's accession as a full member of the agreement, China's chances of joining the bloc look somewhat weaker, as London is likely to obtain veto power on this issue. It is possible that they will use this veto under the pretext of ensuring higher trade standards within the agreement (including issues related to ecology and food safety). In any case, as It is known, the current British Prime Minister Rishi Sunak refers to China as a "systemic challenge", which London intends to respond to with "dynamic pragmatism." Currently, the CPTPP includes 11 states (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam), none of which are European. These countries collectively account for 13% of global GDP. The new partnership replaced the Trans-Pacific Partnership agreement of 2016 with 12 participants, after former US President Donald Trump withdrew the US from the agreement in 2017. In 2020, the 11 countries of the CPTPP accounted for 8.4% of goods and services exported from the United Kingdom. In turn, 6.8% of imports to the United Kingdom came from these countries. The terms of the Trans-Pacific Partnership eliminate unnecessary barriers to mutual trade of services by opening financial markets and reducing obstacles to cross-border investment, facilitating data exchange, increasing business mobility, and ensuring regulatory transparency. All of this will support the British government's plans to turn the country into a global technology and service hub, strengthen semiconductor and critical mineral supply chains to produce electric vehicles and wind turbines.London already has trade agreements with most members of this trading bloc, but now these relationships can deepen, and 99% of British goods exported to the bloc countries will be subject to zero import tariffs. Tariffs on imports of Peruvian bananas, Vietnamese rice, crab sticks from Singapore, and Malaysian palm oil into the UK will be reduced (this is a controversial issue that has sparked discussion in the UK, as the production of palm oil, as ecologists point out, leads to deforestation of tropical forests). At the same time, according to assessments by the British government itself, joining the CPTPP is expected to add no more than 0.08% per year to the country's economic growth in the long term (while the slowdown in growth due to Brexit is estimated at 4%). Many politicians and trade experts rightfully point out that participation in the Trans-Pacific Partnership is not capable of compensating for the economic losses that the UK is experiencing due to its departure from the EU. Moreover, due to differences in its rules and standards from European regulations, Britain's accession will prevent it from returning to the European Union in case of a change of priorities. In other words, this agreement is like driving an additional wedge into the relationship between London and Brussels, which are just starting to improve. It is worth remembering in this regard that it was Liz Truss, a former trade minister in Boris Johnson's cabinet and one of the main advocates of independence from the EU, who submitted the British application to join the CPTPP. So far, for London, it is not so much a direct economic, but rather a strategic and symbolic acquisition, firstly due to the rapid growth (according to some estimates, up to 65% by 2030) in the number of middle-class consumers in a dynamically developing region, committed to innovation, and secondly, because of the fact that in the foreseeable future, mid-ranking trading powers such as Thailand and South Korea, which have already submitted applications, are planning to join the Trans-Pacific Partnership. Membership in the TPP is becoming more important for Britain due to the unattainability of a large trade agreement with the United States and the crisis in the World Trade Organization, which is currently unable to firmly enforce the rules of global trade. The matter is not limited to trade alone as London's foreign policy is clearly shifting towards the Indo-Pacific region. In this sense, Australia and Japan, concerned about economic pressure from China and its military ambitions, see Great Britain as a natural ally in opposing Beijing. It is assumed that stronger economic ties will lead to the strengthening of geostrategic alliances. Due to the high dependence of countries such as Chile on Beijing, which is the largest trading partner and main investor for Chileans, Britain's participation in the CPTPP, according to London's opinion, will contribute to the establishment of necessary connections that are seen by Britain's partners in the region as an attractive alternative to ties with China.

Only days after Cambodia’s recently elected national assembly endorsed Hun Manet as the country’s new prime minister, the young leader revealed his vision for the next 25 years of economic growth and prosperity. Cambodia is aspiring to become a high-income country by 2050. To make this happen, Manet released his Pentagonal Strategy, centring on the five objectives of sustained economic growth, more and better employment, human capital development, diversification of the economy and increased competitiveness. For those who have been advocating sweeping reforms to Cambodia’s economy, the new strategic objectives comprise all the right catchwords. But it remains uncertain whether the ambitious new strategy will help Cambodia reach its targets. Despite GDP forecasts for 2023 not living up to expectations, the Cambodian government forecasts 6.6 per cent GDP growth in 2024. The Asian Development Bank and International Monetary Fund downgraded their 2023 economic growth projections to 5.3 per cent, down from 5.8 per cent in April 2023, while the World Bank projects 5.4 per cent growth, down from 5.5 per cent in May 2023. The minor adjustments were made in response to global geopolitical tensions and a worldwide economic slowdown, as well as the country’s structural issues, which include limited productivity and competitiveness, a lack of economic diversification and dependence on a small number of external markets. The government’s optimistic growth projection for 2024 is based on the anticipated revival of key sectors including garment manufacturing. Cambodia’s garment sector showed continuing decline throughout 2023 but is expected to surge by around 8 per cent in 2024. For Manet’s pentagonal ambitions to become a reality, Cambodia must diversify its product range, upgrade its production capacity and productivity and process resources at home instead of exporting them. The garment sector is not conducive to such transformations. The sector is already on life support — a tax break is in place for garment factories until the end of 2025 — but a continued reliance on garment manufacturing also exacerbates Cambodia’s economic vulnerability. Primarily a cut, make and trim industry employing low-skilled labour, garment manufacturing relies on the import of raw materials sourced from other Asian countries, predominantly China. It exports to the major economies where Cambodian products enjoy increasingly precarious preferential treatment under the European Union’s Everything But Arms scheme. To move Cambodia beyond being a cheap labour hub, the Pentagonal Strategy outlines a comprehensive makeover of three sectors identified as the engines of future economic growth — agriculture, micro, small and medium-sized enterprises (MSMEs) and tourism. With nearly 70 per cent of Cambodian households depending directly on agriculture, an overhaul of this sector is long overdue. The new strategic objectives bolster agribusiness to better serve Cambodia’s export markets. The turn to ‘smart farming’ advances local processing of Cambodian crops and high-value products instead of high-volume cash crops. Loans have also been made available for agribusiness and are being directed to ‘economic poles’ spread across the country. The transformation of over 500,000 MSMEs in Cambodia is a core agenda under the new strategic plan. MSMEs closely entwined with agribusiness and digitisation will have access to a new loan scheme established in partnership with the private sector and Wing Bank. Efforts will also be made to integrate the informal sector into the formal economy under the National Strategy for Informal Development 2023–2028, encouraging informal businesses to register and receive benefits such as penalty waivers, tax incentives and skills training. Tourism, heavily impacted by the COVID-19 pandemic, is forecasted to bolster GDP as international arrivals, particularly from China, begin to surge. Foreign tourists are returning to Cambodia, with 4.4 million arriving in the first 10 months of 2023. But the rising numbers have not generated the desired income, as most of the arrivals are low-spending visitors from neighbouring countries. Crowds from China are not as anticipated despite major efforts including the new Siem Reap airport operating direct flights to and from a variety of Chinese destinations, the reintroduction of Chinese package tours and the launch of the China Ready program. Efforts to diversify the tourism sector are ongoing, with India and Indonesia identified as likely markets for outbound tourism. The Ministry of Tourism is also implementing a new tourism strategy and action plan with a focus on cultural heritage, coastal and eco-tourism. As the new government pushes economic reforms with vigour, old habits die hard. International attention was recently drawn to a new investigation by Amnesty International into the 2022 evictions of 10,000 families making a living on the premises of the Angkor Archaeological Park. The Angkor Archaeological Park, Cambodia’s biggest tourist attraction and a UNESCO World Heritage site, is pivotal to the new tourism action plan. While the Cambodian government claims these families were squatters causing overdevelopment at the complex, the report revealed that the evicted families were relocated to a remote site lacking infrastructure, jeopardising their livelihoods. Similarly, the voluntary registration of informal businesses under the new development strategy was temporarily suspended due to pushback from small business owners concerned about the regulatory burden imposed by the measure. The economic reforms outlined in the Pentagonal Strategy are long overdue and will have beneficial impacts on Cambodia’s socioeconomic development. But as Cambodia’s new leadership pursues growth, it should consider that even well-intentioned interventions can have detrimental bearings on people’s livelihoods and may be reminiscent of past injustices suffered at the hands of authorities. This article is part of an EAF special feature series on 2023 in review and the year ahead.

한국어로 읽기 Читать на русском Leer en español Gap In Deutsch lesen اقرأ بالعربية Lire en français When U.S. President Biden and Chinese President Xi met in November 2023, Biden remarked that the countries must “ensure that competition does not veer into conflict.” A recent ODI report Hedging belts, de-risking roads: Sinosure’s role in China’s overseas finance illustrates the scale of the competition and reveals how one of China’s less-known institutions – Sinosure – has been giving China the edge. This blog offers some thoughts about how the U.S., through its U.S. International Development Finance Corporation (DFC) can better compete. Competing requires resources, but really not as much as you think Competing credibly requires money, dedicated staff, and creativity. It requires studying the competition. Infrastructure development requires low-cost financing, capacity-building, and getting everyone aligned. As Sinosure has demonstrated again and again, deploying guarantees and insurance – particularly from official financing – can de-risk overseas investment, reducing costs of finance and mobilising commercial investment from the private sector. When it comes to infrastructure, China has a far more robust, albeit imperfect, track record when compared to others. The U.S. and its G7 partners have not been much of a match for China in financing infrastructure worldwide. The G7 could successfully compete with China, and doing so does not have to cost hundreds of billions of dollars. The U.S. Congress, despite its strong desire to counter BRI, has yet to appropriate the resources necessary to compete credibly in a battle of influence against China in developing countries. There’s been plenty of rhetoric, repurposing of existing programs and resources into initiatives like the Partnership for Global Infrastructure and Investment (PGII) and the Global Gateway. Each time the U.S. launches a new overseas economic development initiative, however, it rarely dedicates sufficient resources to help it scale – examples include the Partnership for Growth, Power Africa, Prosper Africa, and PGII. When it was fully funded, Power Africa, which coordinated the efforts of 12 U.S. government agencies, helped 120 power projects in Africa get across the finish line in just a few years, building a strong brand for the U.S. in Africa for economic development for the first time in decades. Then the U.S. cut Power Africa’s budget by 75% because of political shifts. The initiative stalled in its progress on new infrastructure, while still helping 200 million Africans get access to more reliable electricity. PGII, which has no dedicated budget, involves a handful of smart people working hard to deliver on a G7 promise of $600 billion in global infrastructure by 2025. Other than the Lobito Corridor project, it has not been clear to date what PGII is able to deliver at scale in Africa without additional resources. That could be about to change, though. The State Department just requested another $4 billion from Congress to up its game against China, which should help tremendously if that funding is secured to support PGII. Why Sinosure has been such an effective tool for China, despite its low margins BRI has not been particularly innovative, but it’s been steady. Sinosure, along with other Chinese export credit agencies, offers highly favorable terms and longer-term finance – this approach has well suited Global South governments in advancing their development and political objectives. While some projects have been problematic, Chinese creditors have provided the low-cost, patient capital at scale that many countries need for long-term productive infrastructure investment. But as the report shows, this approach has challenged established regimes governing the use of public money (link to blog 2). Sinosure insurance covers non-payment up to 95% of the insured equity or debt for up to 20 years, but most OECD Export Credit Agencies (ECAs) only provide 85% coverage for up to 10 years – though this policy soon will soon change [link to blog 2] Sinosure can work anywhere, except where there’s a live conflict or in cases of repayment arrears. By contrast, the U.S. International Development Finance Corporation (DFC) has a list of over 100 countries where it cannot do business. Sinosure’s premiums max out at 7% of the total debt servicing cost of a project, making it relatively cost-effective. In this aspect, it is surprisingly transparent. DFC’s fees and costs are numerous and opaque, with DFC passing some of its own costs on to its clients. By the end of 2022, Sinosure had provided over $1.3 trillion-worth of insurance on export and investment, with a quarter of this going only to BRI countries. In 2022 alone, it supported a total portfolio of $900 billion through its insurance for over 170,000 clients, of which $80bn went to overseas investment and long-term finance, which mostly supports projects in infrastructure such as power, transportation, construction, telecoms and shipping. It received a total net insurance premium of $1.9 billion and paid out $1.5 billion in insurance claims. Despite its significant payouts, however, Sinosure continues to earn a modest profit of $102 million – not much of a margin, but enough to propel China’s global leadership on trade and infrastructure development.     By contrast, DFC’s current total portfolio-wide exposure is $41 billion, with just over $9.3 billion committed in fiscal year 2023 for 132 transactions – of which only around $3.5bn of this was for guarantees and risk insurance. DFC has many of the same tools available to it as the Chinese government, and DFC is not even legally required to earn a return on its investments. Yet DFC has not made full use of its capital resources and has not deployed its capacity for risk-mitigation finance in the same way. An unleashed DFC could make the U.S. more competitive It’s not too late for the U.S. and others to compete. The U.S. has an opportunity to further change how it conducts business to compete with China, while promoting sustainable development. DFC is starting to flex its competitive muscles with its own insurance product, recently using political risk insurance to support a $1.6 billion debt-for-nature swap in Ecuador and another $500 million debt-for-nature swap in Gabon, which support broader debt relief efforts, as well as channelling money towards climate and conservation goals. Moreover, those deals come at a very low cost to the U.S. government given DFC’s pricing models. DFC is up for reauthorisation in 2025. It has both foreign policy and development mandates. In a previous blog, we laid out 10 recommendations about how DFC could be more effective in achieving its development mandate. Here are 9 recommendations to help DFC be more effective in competing with China and achieving its foreign policy mandate: 1. Spend some money and spend it right All it took for Sinosure’s expansion in the early 2010s was a capital injection of $3 billion. To make its financial institutions just as competitive, the U.S. only needs to commit a few extra billion dollars of appropriated resources per year, just as State Department has proposed, not hundreds of billions. Sinosure, with its somewhat loose investment criteria, still managed to earn over $100 million profit on a $900 billion portfolio in 2022. Even if DFC were to spend $1 billion/year of additional budgetary resources – for the purpose of leveling the playing field with China and providing developing countries with the type of inexpensive financing they need – that could be money well spent for the U.S. taxpayer. That money could cover legal fees that DFC currently passes on to clients. It could be deployed through innovative instruments: to take on some of the currency risk on strategic transactions, to cover first loss on strategic investments, or to provide technical assistance that does not need to get repaid–comparative advantages that Chinese financial institutions still sorely lack. That funding also could be used, simply, to reduce interest rates and fees, at a time when borrowing costs for lower-income countries have risen astronomically. 2. Structure deals to outcompete China Encourage DFC to structure transactions to use its funding to maximize competition with China in a way that promotes a more level playing field. DFC should not crowd out competitively tendered and transparent private sector investment, but where inexpensive or even concessional DFC co-financing might help the private sector out-compete opaque Chinese investment, DFC should be equipped to support those projects. 3. Don’t obsess over returns Even though DFC is not legally required to earn a return on a portfolio-wide basis, most members of Congress expect DFC to be revenue neutral to the U.S. Treasury. If members of Congress would adjust their return expectations even slightly, DFC could significantly advance its development and foreign policy goals. Effective development and foreign policy are not free – especially when competing with China. Even earning back $.95 on the dollar on a portfolio-wide basis would be a significant leverage of 1:20 of appropriated resources to private investment – giving DFC broad flexibility to structure deals that prioritise development impact and foreign policy. 4. Remove DFC’s limits Eliminate ceilings on DFC financing – including the $1 billion transaction limit, the $10 billion annual portfolio limit, and the $60 billion total portfolio exposure. It really doesn’t cost anything to do this. It’s like raising its credit card limit. 5. Let DFC work anywhere when necessary Give DFC the authority to determine the countries where it can do business on a case-by-case basis, depending on what the foreign policy and development priorities are. DFC should be required to continue to prioritize investments in low and lower-middle income countries, but it should have flexibility to respond quickly and selectively anywhere that doing so will credibly advance a compelling U.S. national security interest, such as financing a strategic port or lithium processing. To prevent DFC from sliding into becoming just a national security tool, abandoning its development mandate, DFC should be required to clearly articulate the compelling national security interests of projects and should provide a detailed report to Congress each year on its investments in upper-middle income and high-income countries to explain these interests (even classified, if necessary). 6. Empower DFC to support “nearshoring” DFC can help the U.S. diversify its supply chains and reduce dependencies on China. To encourage companies to move operations out of China and into the Americas (if operating in the U.S. is not commercially viable), give DFC broader authority to support strategic transactions in the region. 7. Make it easier for DFC to support equity investments in strategic infrastructure When DFC takes an equity position in a company or an investment fund, it gets a seat at the ownership table. That allows DFC to drive decisions regarding sourcing of goods and services (i.e., making sure contracts do not always go to Chinese companies). Investing in equity funds that develop and finance a portfolio of infrastructure projects is an effective way for DFC to increase and spread its strategic influence -- except that DFC often struggles to make these types of investments because U.S. legal requirements make DFC a slow and clunky, and hence, an unattractive investment partner. DFC needs flexibility to bypass some of these requirements. 8. Help DFC scale its risk insurance instrument For years, DFC has been hugely innovative in deploying its insurance products to leverage capital from others. DFC used its political risk insurance tool to crowd in private investment in Ukraine, and to catalyze pioneering debt-for-nature swaps worth hundreds of millions of dollars in Ecuador and Belize. But according to recent reports, the U.S. Office of Management and Budget has been threatening to start treating insurance investments like guarantee instruments from a budgeting standpoint. This will make it more expensive for DFC to deploy this tool. If it ain’t broke, why fix it? As we’ve shown, one of the main factors behind China’s competitiveness abroad is through Sinosure’s expansive use of its insurance tool: OMB’s changes will make it more expensive and difficult for the U.S. to scale its own. OMB needs to read the room. We’re not going to suddenly balance the U.S. budget by tinkering with a formula that has worked for decades. Let DFC do more of what it does well. 9. Help speed DFC up Before committing any transaction over $10 million, DFC is required to notify Congress in advance. This “Congressional notification” requirement provides a valuable extra level of oversight to ensure that DFC does not doing anything out-of-whack with Congressional priorities. But the process slows DFC down, when Chinese financiers are known for their speed. Even though DFC only is required to “notify” Congress of its deals, and not seek “approval,” practically and politically speaking nobody wants to run afoul of any one of the 535 members of Congress. Consequently, DFC rarely moves forward on a project until it can resolve the concerns of members of Congress. DFC needs to work with Congress to come up with a reasonable alternative to the Congressional notification process that balances speed with continued close collaboration with Congress. In addition, DFC’s Board can help speed things up by focusing its efforts on high level policy guidance instead of individual transactions. The Board should delegate more decision making on individual deals to DFC’s CEO. It makes no sense for the Secretary of State, who chairs DFC’s Board, to dig into a $20 million investment into a healthcare fund, not to mention the hundreds of State Department staff with little development finance experience who review the documentation before it goes to the Secretary with a recommendation for a vote. U.S. taxpayers probably would prefer to have the State Department focus on resolving the Middle East conflict. From the perspective of many Global South countries, this competition between the G7 countries and China is not inherently bad if it brings them more desperately needed resources and improves the quality of their infrastructure. The U.S. could be more competitive if it empowered its development finance professionals to use DFC’s tools the way they were designed to be used. DFC must be properly resourced with enough people and enough money to allow it to grow its portfolio. While development impact remains the key priority for DFC, delivering for the needs of partner countries is what also will deliver long-term influence. That is how the U.S. can compete – and all at relatively low cost to the U.S. taxpayer.

한국어로 읽기Leer en españolIn Deutsch lesen Gap اقرأ بالعربيةLire en françaisЧитать на русском In recent years, Malaysia has emerged as a strategic economic hub in Southeast Asia. In recent years, Malaysia has become a key node in the global production chains of electronic components, especially in the semiconductor sector. The nation can also rely on abundant natural resources, such as oil and natural gas, of which it is an important exporter. Along with other Southeast Asian countries like Vietnam and Indonesia, Malaysia presents itself as an attractive destination for foreign investors looking to relocate their manufacturing plants. The trend towards de-risking, in the context of the geoeconomic competition between China and the United States, sees multinationals and governments committed to diversifying their supply chains and strengthening domestic production to minimize dependence on Beijing. Malaysia is a dynamic and complex country. Its society is composed of numerous ethnic groups whose diversity sometimes makes it more difficult for the government to satisfy their different interests. This social complexity is also reflected in the intricate state system, which combines a monarchical aspect with a federal system, where citizens elect their representatives at both the state and federal levels. Despite the multiparty system, for over six decades, Malaysia was governed by a single party, the United Malays National Organization (Umno), which dominated the political landscape [1]. However, this continuity was interrupted in 2018, with four different governments taking turns in power due to corruption scandals and internal political struggles: an unprecedented upheaval in Malaysian history, which from independence in 1957 until then had only seen six prime ministers. The establishment of a new administration in November 2022, under the leadership of Anwar Ibrahim, has not brought the hoped-for stability, and tensions remain in the country, risking the exacerbation of internal divisions and undermining the confidence not only of citizens but also of foreign investors. The Malaysian political system between complexity and unusual instability Malaysia is a federal constitutional monarchy, where power is distributed among the monarchy, the federal government led by the prime minister, and the central bicameral parliament, as well as the state governing bodies. The political landscape of the country is characterized by strong multiparty politics, meaning that coalitions rather than a single majority party tend to govern, leading in recent times to the formation of fragile alliances and frequent shifts in alignments among parliamentary groups. Malaysia is composed of thirteen states, nine of which are kingdoms led by a sovereign (or sultan), and three federal territories. Each state has its own constitution, an executive council, and a legislative assembly elected by the citizens. The nine sultans, gathered in the Conference of Rulers, every five years appoint the head of state of Malaysia, or Yang di-Pertuan Agong [2]. The core of the country's democratic life is the central Parliament, composed of 70 members of the Senate (26 members elected by the state assemblies and 44 appointed by the head of state, also on the advice of the prime minister) and 222 members of the House of Representatives (elected every five years during the general elections) [3]. Another element of complexity in the country's structure is the dual legal system: a state system, which has jurisdiction over the entire population, and a Sharia-based system for the Muslim community. In fact, Islam is the state religion, and the majority ethnic group of Malays (also known by the English term ‘Malays’) is constitutionally Muslim; therefore, about two-thirds of the population are subject to Sharia. The Islamic authority has jurisdiction over the Muslim population on religious issues, matters of morality, and family affairs [4]. Despite the complexity of its political system, Malaysia, as mentioned, had a stable government from 1957 to 2018 under the Barisan Nasional (BN) coalition, composed of parties representing ethnic groups and conservatives such as Umno, the Malaysian Chinese Association (MCA), and the Malaysian Indian Congress (MIC). However, in 2018, the BN was defeated by the multi-ethnic opposition coalition Pakatan Harapan (PH), which brings together more progressive and liberal parties [5]. The downfall of the BN government was partly due to an internationally resonant corruption and financial fraud scandal related to the sovereign wealth fund 1 Malaysia Development Berhad (1MDB), involving key figures of the ruling coalition, including then Prime Minister Najib Razak [6]. After Pakatan Harapan's victory in 2018, Mahathir Mohamad, who had previously served as Prime Minister with Umno from 1981 to 2003, returned to office. However, internal conflicts and changes in parliamentary alliances within PH led Mahathir to resign [7]. He was succeeded by Muhyiddin Yassin, one of the parliamentarians who had defected from the PH, leading the newly formed coalition Perikatan Nasional (PN). However, Muhyiddin also lost the majority after 17 months, handing over the reins to seasoned politician Ismail Sabri Yaakob of Umno in August 2021 [8]. Ismail Sabri, leading a government with a fragile majority, was compelled to call for early elections driven internally by his party's push and with the aim of securing a stronger mandate [9]. The succession of these governments through internal political maneuvers in parliament has further eroded public trust in the political class, already damaged by corruption scandals. Moreover, the timing of the political system crisis did not favor government officials, who also had to simultaneously manage the pandemic period and the disastrous economic and social consequences that ensued. In this climate of dissatisfaction and growing political polarization, the 2022 elections resulted in Malaysia's first ‘hung parliament’, where no party managed to secure enough seats to govern outright. The Pakatan Harapan, Anwar's coalition, secured 82 seats out of 222, surpassing the PN – which includes the nationalist Malaysian United Indigenous Party (PPBM) and the conservative Pan-Malaysian Islamic Party (PAS) – which garnered 74 seats [10]. Meanwhile, the BN managed only 30 seats, demonstrating Umno's struggle to rebuild its image after corruption scandals [11]. The Islamic-inspired PAS, however, won the most seats as a single party, with 41. After lengthy negotiations, the head of state tasked PH with forming a unity government, with cooperation from Umno. Anwar, a key opposition figure for decades, succeeded in obtaining the position of prime minister [12]. Since November 2022, Anwar has been leading the country, but political uncertainties have not ceased with the establishment of his government. Anwar is not seen as a leader capable of forcefully imposing his political line, due to the breadth of his coalition which relies on coexistence and compromise among different political factions within the majority, threatening the government's stability. The need to find broad consensus within his coalition has so far prevented Anwar from implementing significant reforms in the country, especially those that could affect the protections guaranteed to the Malay majority. Umno, with which he governs, despite losing some support from the Malaysian electorate in the recent elections, has historically represented the interests of this segment of the population and does not seem inclined to support Anwar's more liberal and inclusive policies [13]. Furthermore, Muhyiddin's PN coalition, and particularly the PAS party, are proving to be formidable opponents for Anwar's unity government, confirming the positive trend of the 2022 elections. This was evident in the recent state elections where PAS reaffirmed its government in three Malaysian states [14]. A more polarized society: socioeconomic tensions intensify. Disillusionment towards traditional political parties has accentuated political, ethnic, and religious fractures in Malaysia, which have long undermined social cohesion and contributed to the persistence of economic inequalities in the country. One of the major challenges for the government is to mitigate economic disparities among ethnicities and promote social harmony in a country where bumiputera or bumiputra (indigenous populations, including the Malay majority, comprising over two-thirds of the total population), Chinese ethnicity (approximately 20%), and Indian ethnicity (around 6%) coexist [15]. Economic differences between indigenous populations and foreign-origin citizens became more pronounced after independence: during this period, the most prosperous economic activities were predominantly controlled by the Chinese community, which was also gaining increasing political prominence. This led to heightened tensions with Malays, culminating in ethnic riots on the streets of Kuala Lumpur in 1969 [16]. To address these disparities, the government has instituted a regime of preferential policies to promote the prosperity and economic empowerment of bumiputera, which have expanded and evolved over the years. For instance, the New Economic Policy (NEP) of 1971 introduced quotas for ethnic representation in public institutions and universities, along with increased support for bumiputera businesses [17]. While these policies have improved the social conditions and historical economic disparities of bumiputera, the regime of ethnic-based affirmative action has also led to economic inefficiencies and social tensions, fostering patronage and clientelism practices by parties seeking political support from the broader Malay population [18]. Another factor of increasing division in the country is the tension between the Muslim majority and religious minorities (Buddhist, Christian, Hindu) [19]. For instance, the strict implementation of Sharia law has often clashed with civil laws, creating tensions among different religious communities. In recent years, there has also been a rise in religious conservatism at the social level, manifested in the strong electoral performance of PAS, a party that advocates for Malay interests and promotes further Islamization of society, absorbing much of Umno's electorate [20]. To counter this phenomenon of Islamic conservatism, known as the "green wave" [21], Anwar's PH politicians leverage the fear that a more Islamized society may erode civil liberties, resonating particularly among more liberal or non-Malay segments of the population. Conversely, the PN seeks support by accusing Anwar and PH of aiming to limit rights and the preferential system that protects Malays [22]. As a consequence of these socio-economic tensions, Malaysian politics has become increasingly fragmented and polarized, with voting reflecting a radicalization of ethnic and religious identities. Balancing the promotion of socio-economic equity among the country's diverse ethnic groups on one hand and building a more competitive and inclusive social fabric on the other, remains a crucial challenge for Malaysia. The country continues to seek policies that effectively address the needs of all citizens regardless of ethnicity or religion. Challenges to Malaysia’s economic development While Malaysia's political and social situation remains uncertain, the country's economic prospects appear more promising, albeit with some challenges. Thanks to targeted industrial development policies and facilitation of foreign investment, the country has transitioned in a few decades from an agriculture-based economy to an industrialized economy. Particularly, the services sector drives the country's economic growth, accounting for approximately 50% of Malaysia's GDP in 2022, followed by the manufacturing sector at about 23% [23]. The mining sector is also pivotal to the country's economy, alongside the extraction of oil and natural gas. Malaysia is rich in commodities such as tin, bauxite, and copper, which help diversify the Malaysian economy. However, oil and natural gas remain among the most valuable natural resources for Kuala Lumpur, enabling Malaysia to be nearly self-sufficient in energy production. Petronas (Petroliam Nasional Berhad), Malaysia's national oil company, is one of the largest players globally in the energy and oil sectors. As a state-owned entity, Petronas significantly contributes to Malaysia's fiscal revenues, in addition to providing employment and training to the population [24]. In this regard, given the centrality of gas and oil in the country's energy mix, one of the challenges Malaysia will face in the coming decades is transitioning towards renewable energy sources [25]. To advance the country's development, the government is outlining measures to transform Malaysia into a leading production hub, while also fostering growth in the domestic industrial ecosystem. This direction is reflected in the New Industrial Master Plan (NIMP) 2030 introduced in September 2023, which aims to boost the nation's manufacturing sector, targeting an annual GDP growth of 6.5% in this sector. Specifically, Kuala Lumpur is focusing on technology with a specific emphasis on the semiconductor sector. As early as the 1970s, Malaysia was an important hub for semiconductor production, but in the subsequent decades, other players such as Samsung from Korea and TSMC from Taiwan took over the sector. However, the recent geopolitical competition between China and the United States has once again made Malaysia an attractive destination for microchip multinationals, with significant investments revitalizing the sector in the country. Currently, Malaysia holds a significant position in the final stages of microchip production — namely ‘packaging’, assembly, and ‘testing’ — with a 13% share of the global market. Recently, several leading companies in the industry have announced new investments in the country [26]. For instance, Intel has announced $7 billion investments in facilities for microchip packaging and testing, while the U.S. giant Nvidia is planning to invest over $4 billion in collaboration with Malaysian company YTL Power International to create infrastructure for artificial intelligence and ‘supercomputing’ [27]. Additionally, the government has announced the ambitious construction of one of the largest ‘integrated circuit design parks’ in Southeast Asia, aiming to transform the country from a critical hub in the final stages of the value chain to a powerhouse in semiconductor design as well [28]. However, competition with other Asian countries such as Vietnam and Indonesia, requires Malaysia to continue investing to attract capital and strengthen the national industrial ecosystem. To this end, on May 28, 2024, Anwar announced the National Semiconductor Strategy, which plans to mobilize approximately $5.3 billion in fiscal support over the next ten years to drive sector growth. Kuala Lumpur aims to mobilize domestic and foreign investments totaling over $100 billion under the new strategy. The government also aims to train more than 60,000 highly skilled engineers to help the country become a leader in the semiconductor supply chain [29]. However, there are additional critical factors for the development of Malaysia's economy, such as its dependence on exports and the presence of multinational corporations and foreign capital, which make the economy vulnerable to external factors. Global demand and fluctuations in international markets can significantly influence Malaysia's economy, as evidenced by the slowdown in GDP growth from 8.7% in 2022 to 3.7% in 2023, primarily due to weaker external demand and a decline in commodity prices. Exports, crucial for the country's economy, declined by 7.8% in 2023, with contractions also seen in Malaysia's key export sectors such as palm oil, petroleum, and electrical and electronic products. The reduced demand for Malaysian products is also attributed to economic uncertainties in major trading partners such as the United States and China – the former dealing with uncertain monetary policy and the latter seeking new stimuli for economic growth while addressing the real estate sector crisis [30]. Malaysia must also be cautious not to overly rely on the presence of foreign companies to drive its economic development. So far, Malaysia, along with other Southeast Asian neighbors like Vietnam and Indonesia, has been among the beneficiaries in the geo-economic competition between China and the United States. Many multinational corporations, especially in the tech sector, have set up manufacturing facilities or initiated partnerships in Malaysia. However, the resurgence of current conflicts and geopolitical tensions could lead to fragmentations along value chains and further relocations. In an increasingly polarized international system, excessively relying on economic development from the presence of foreign firms could become a risky choice. Despite these challenges, the Malaysian economy has benefited from foreign investments and domestic consumption, supported by government subsidies and price controls to contain inflation [31]. Economic growth for 2024 is projected at 4.5%, driven by increasing domestic demand and higher export demand [32].   Conclusion In recent years, Malaysia has emerged as a strategic economic center in Southeast Asia: the country has attracted investors due to its expanding manufacturing sector and has shown remarkable adaptability, becoming a key player in global production chains-especially in the semiconductor sector. To minimize uncertainties related to current global geoeconomic tensions, the country should continue to focus on a more robust and self-sustaining domestic industrial ecosystem. In addition, recent political instability, characterized by frequent changes of government and growing ethnic and religious tensions, is likely to undermine the confidence of investors and the population.  In sum, Malaysia's success will also depend on its ability to balance economic growth with social cohesion, while addressing challenges arising from economic disparities, ethnic tensions, and economic dependence on foreign markets. The performance of inbound foreign direct investment (Ide) in Malaysia.   [1] M.M.N. Nadzri, “The 14th General Election, the Fall of Barisan Nasional, and Political Development in Malaysia, 1957-2018”, Journal of Current Southeast Asian Affairs, vol. 37, n. 3, dicembre 2018, pp. 139-71. [2] ”List of The Yang Di-Pertuan Agong”, The Government of Malaysia’s Official Portal. [3] “Introduction”, Portal Rasmi Parlimen Malaysia – Pengenalan, 10 dicembre 2019. [4] Malaysia 1957 (Rev. 2007) Constitution, Constitute. [5] R.C. Paddock, “Malaysia Opposition, Led by 92-Year-Old, Wins Upset Victory”, The New York Times, 9 maggio 2018; “MalaysiaGE: full results”, The Straits Times, maggio 2018. [6] “Explainer: Malaysia’s ex-PRIMO MINISTRO Najib and the Multi-billion Dollar 1MDB Scandal”, Reuters, 23 agosto 2023; “Goldman Sachs and the 1MDB Scandal”, The Harvard Law School Forum on Corporate Governance, 14 maggio 2019; S. Adam, L. Arnold e Y. Ho, “The Story of Malaysia’s 1MDB, the Scandal That Shook the World of Finance”, Bloomberg, 24 maggio 2018. [7] S. Lemière, “The Never-ending Political Game of Malaysia’s Mahathir Mohamad”, Brookings, 30 ottobre 2020 [8] “The Rise and Fall of Malaysia’s Muhyiddin Yassin”, Reuters, 16 agosto 2021; Y.N. Lee, “Malaysia’s New Prime Minister Has Been Sworn in – but Some Say the Political Crisis Is ‘far From Over’”, CNBC, 3 marzo 2020. [9] A. Ananthalakshmi, R. Latiff e M.M. Chu, “Malaysian PM calls for early polls as ruling party seeks to rise above graft cases”, Reuters, 10 ottobre 2022. [10] A. Ananthalakshmi, R. Latiff e M.M. Chu, “Malaysia Faces Hung Parliament in Tight Election Race”, Reuters, 19 novembre 2022. [11] K. Ganapathy, “‘End of an Era’ for Malaysia’s Barisan Nasional, After Corruption Issues Hurt Candidates at GE15: Analysts”, Channel News Asia, 21 novembre 2022. [12] “Anwar Ibrahim: The Man Who Fulfilled His Goal to Lead Malaysia”, BBC News, 24 novembre 2022. [13] F. Hutchinson, “Malaysian Unity Government’s Power Was Retained but Constrained in 2023”, East Asia Forum, 28 gennaio 2024. [14] R.S. Bedi, “Analysis: Strong State Poll Performance by Perikatan Nasional Boosts Stock for Some PAS Leaders, but Obstacles Lie Ahead”, Channel News Asia, 16 agosto 2023. [15] Bumiputera Statistics 2022, Department of Statistics Malaysia Official Portal. [16] “Malaysia: Majority Supremacy and Ethnic Tensions”, Institute of Peace and Conflict Studies, 1 agosto 2012; N. Bowie, “Fifty Years on, Fateful Race Riots Still Haunt Malaysia”, Asia Times, 29 maggio 2019; “Ethic Tensions Boil Over in Malaysia’s 13 May 1969 Incident”, Association for Diplomatic Studies and Training. [17] K.S. Jomo, Malaysia’s New Economic Policy and ‘National Unity’, Londra, Palgrave Macmillan, 2005, pp. 182-214; H. Lee. “Malaysia’s New Economic Policy: Fifty Years of Polarization and Impasse”, Southeast Asian Studies, vol. 11, n. 2, Agosto 2022; M.A. Khalid e L. Yang, “Income Inequality Among Different Ethnic Groups: The Case of Malaysia”, LSE Business Review, 11 settembre 2019; “2021/36 ‘Malaysia’s New Economic Policy and the 30% Bumiputera Equity Target: Time for a Revisit and a Reset’ by Lee Hwok Aun”,ISEAS-Yusof Ishak Institute, 25 marzo 2021. [18] H.A. Lee. “Perpetual Policy and Its Limited Future as Reforms Stall”, New Mandala, 17 aprile 2018. [19] M. Mohamad e I. Suffian “Malaysia’s 15th General Election: Ethnicity Remains the Key Factor in Voter Preferences”, FULCRUM, 4 aprile 2023. [20] “Buddhism, Islam and Religious Pluralism in South and Southeast Asia”, Pew Research Center, 12 settembre 2023. [21] K. Ostwald e S. Oliver, “Continuity and Change: The Limits of Malaysia’s Green Wave From a Four Arenas Perspective”, ISEAS-Yusof Ishak Institute, 27 ottobre 2023; O.K. Ming. “Debunking the Myths of Malaysia’s ‘Green Wave’ in GE15”, Channel News Asia, 28 giugno 2023. [22] D.A. Paulo, “Malaysia’s ‘Green Wave’: A Threat to the Country’s Politics and Religious Restraint?”, Channel News Asia, 10 giugno 2023. [23] “Manufacturing, value added (% of GDP) – Malaysia”, The World Bank Open Data, “Services, value added (% of GDP) – Malaysia”, The World Bank Open Data. [24] “Petronas’ Role in the Larger Economy”, The Malaysian Reserve, 30 agosto 2019; “Petronas Payout to Malaysia Govt Seen Higher at 55-59 Bln Rgt This Year”, Reuters, 22 luglio 2022. [25] G. Musaeva, “Greening Pains: Can Petronas Make the Leap to Renewables?”, The Diplomat, 15 settembre 2022. [26] T. Cheng e L. Li, “Malaysia Aims for Chip Comeback as Intel, Infineon and More Pile In”, Nikkei Asia, 28 settembre 2023. [27] R. Latiff e F. Potkin, “Nvidia to Partner Malaysia’s YTL Power in $4.3 bln AI Development Project”, Reuters, 8 dicembre 2023. [28] “Malaysia Plans Southeast Asia’s Largest Integrated Circuit Design Park”, Reuters, 22 aprile 2024. [29] N. Goh, “Malaysia to train 60,000 engineers in bid to become chip hub”, Nikkei Asia, 28 maggio 2024; D. Azhar, “Malaysia targets over $100 bln in semiconductor industry investment”, Reuters, 28 maggio 2024. [30] Asian Development Outlook April 2024: Malaysia”, Asian Development Bank, aprile 2024, pp. 218-24. [31] Ibid. [32] Ibid.

한국어로 읽기Leer en españolIn Deutsch lesen Gap اقرأ بالعربيةLire en françaisЧитать на русском The pursuit of critical minerals does not come at the expense of the environment; a global moratorium on deep-sea mining should be the natural course of action The world is looking at a potential geopolitical and environmental point of conflict, which will affect every country in more ways than one. This dispute stems from a search for critical minerals in the deep sea. Critical minerals are considered the building blocks of contemporary technology. To say that they are crucial to the economic and national security of every country would be an understatement. Due to the inherited complexities of mining and attaining critical minerals from challenging geographies, the hunt for them has intensified. Beyond land, many countries are now looking at space as an alternative. Finding and commercially harnessing minerals from celestial bodies like the Moon and asteroids, however, is still a challenge. Therefore, the search for critical minerals in the deep sea has now entered a new phase of competition, where countries are no longer waiting but are actively engaged in the process of deep-sea mining. In this race, while some countries such as China, India, and South Korea (see Table 1) are preparing to grab the opportunity and are trying to build capacities and capabilities, others have raised the environmental and ecological impacts of deep-sea mining. Against this background, it is crucial to identify the key players in this race and understand the accompanying international legal nuances. Table 1: Exploration Contracts issued by the International Seabed Authority (ISA)   Source: ISA. What’s the rush? The urgency of the critical mineral problem is exacerbated by two factors: Fast-depleting reserves of critical minerals for human use and their rising demand. Behind this sudden rush are two important reasons: Firstly, the focus on clean and renewable energy, which is crucial in driving the green energy transition, and secondly, the increasing consumption of high-technology products, which depends on the heavy use of critical minerals. As an illustration, consider its application in high-tech items of various sizes, such as smartphones, electric car magnets, and intricate machinery like F35 stealth aircraft. A F35 aircraft, for example, needs 920 pounds of rare earth elements, demonstrating the significance of these minerals for any nation. Although deep-sea mining is not an exclusively Indo-Pacific phenomenon, competition is most felt in this region due to the high stakes involved. The major actors involved in this race are China, India, South Korea, and even non-state actors, such as private companies such as the Metals Company (TMC, a Canada-based company, which have considerable stakes in the space. International Seabed Authority: China and influence politics Under the 1982 United Nations Convention on the Law of the Sea (UNCLOS), the International Seabed Authority (ISA) was constituted with the mandate to ‘organise and control all mineral resources-related activities’ and guarantee ‘effective protection of the marine environment’ on the seabed of international waters, which are a global commons. ISA is constituted by the Assembly, Council, and Secretariat. ISA’s key advisory body, the Legal and Technical Commission (LTC), should help the authority frame the rules, regulations and procedures (RRPs) to govern mining activities on the international seabed. While the conversation on setting a legal framework for undersea mining has been in process since 2016, ISA has garnered increasing international attention due to the triggering of the ‘two-year rule’ by the island nation of Nauru back in 2021. As per UNCLOS, if the Council of ISA fails to adopt the relevant RRPs within two years of receiving the application for approval of a plan of work for exploitation, the council will have to consider and approve such plan ‘based on the provisions of the Convention and any rules, regulations and procedures that the Council may have adopted provisionally, or based on the norms contained in the Convention and the terms and principles contained in this Annex as well as the principle of non-discrimination among contractors.’ Since this incident, negotiations have naturally picked up, with China playing the leading role in shaping the deep sea mining code, as it wants to influence and is eager to push forward the negotiations in its infancy phase. In the 2023 ISA Council’s July meeting, China blocked the motion introduced by France, Chile, and Costa Rica to discuss a moratorium on deep sea mining. The absence of the United States (US) from the ISA elevates Beijing's role to a prominent position. This discussion will likely have severe implications for the future of the high seas, which cover 60 percent of the world’s oceans. At the ISA’s Council meeting in July 2023, China and other states like Nauru, Japan, Australia, India, Norway, and Russia supported deep-sea mining against a group of 20 countries that opposed it due to lack of scientific evidence and are pushing to put a moratorium in place. France was the exception, calling for a total ban on deep-sea mining. Apart from nation states, many international Multinational Corporations (MNCs) like Google, Samsung, BMW, Volvo Group, and Tesla have also joined the call for a moratorium on deep-sea mining. This call includes 804 marine science and policy experts from 44 countries recommending a ‘pause until sufficient and robust scientific information’ is obtained. The call for a moratorium has increased since the discovery of “dark oxygen” on the seafloor. Even the European Union has adopted a resolution to support a moratorium in response to Norway’s decision to initiate deep-sea mining in the Arctic . Stuck in a limbo As commercial deep-sea mining comes closer than ever to being a reality, it is critical to analyse and take stock of the complex interplay of geopolitical, environmental, and legal challenges that will define the future of international relations and environmental stewardship. As nations such as China, Norway, South Korea, and even India accelerate their efforts to exploit these untapped resources, the world faces a crucial decision: To prioritise immediate economic and technological gains or the fragile ecosystems of the deep ocean. China's geopolitical and strategic goals and its growing influence on international organisations, including the ISA, must be kept in mind while taking a call when the stakes are undeniably high, not just for the Indo-Pacific but for the entire planet. The moratorium is also being proposed as per the established precautionary approach. This approach is a broad legal and philosophical principle that suggests a pause and reassessment in case of a human innovation/activity that could potentially result in harm given the lack of scientific knowledge. In light of the pressing concerns raised by scientists, environmentalists, and several nations, a global moratorium on deep-sea mining should be the natural course of action. While some have argued that such a precautionary pause would not be in accordance with UNCLOS, including the current Secretary General of ISA, it would be an obligation under the constitution of the oceans. In an advisory opinion, the International Tribunal on Law of Sea (ITLOS) has confirmed a trend of precautionary approach becoming a part of customary international law and stated that it is a ‘binding obligation’ on both states and the ISA. This approach is enshrined in Principle 15 of the Rio Declaration. An example of such a moratorium under international law is the International Whaling Convention, which was adopted based on the precautionary approach and has been largely followed for the past 35 years. As the global community navigates this uncharted territory, it must ensure that the pursuit of critical minerals does not come at the expense of the environment that sustains us all. The choices made today will have far-reaching consequences, shaping the geopolitical landscape and determining whether the international community can unite in the face of shared challenges or whether the race for resources will lead to further fragmentation and conflict.

한국어로 읽기Leer en españolIn Deutsch lesen Gap اقرأ بالعربيةLire en françaisЧитать на русском The concept of a multipolar (or polycentric) world order [1] was first coined by Academician Yevgeny Primakov in 1996 [Primakov 1996]. Like everything new, it was not immediately accepted, but ultimately became a significant contribution to both domestic and world theory of international relations, offering a compelling alternative to Western approaches, particularly the one proposed in Samuel Huntington’s The Clash of Civilizations [Huntington 1993]. It informed the idea of trilateral cooperation between Russia, China and India, implemented by Primakov and later embodied in the BRICS group. By now, the idea of multipolarity has been recognized in global political science, has entered the conceptual framework and the language of international diplomacy and is used in Russia’s doctrinal documents. In 2015, we proposed the scenario of a new bipolarity [2] as one of the possible trajectories for global development. Today, many scholars, both Chinese and American, [3] suggest that China-centric and U.S.-centric poles are emerging. This article discusses the “multipolarity — new bipolarity” dichotomy. Long Global Macro-Transformations World history shows that a new world order typically emerges after the end of a major war (see Table 1). Table 1. International system (world order)    Source: systematized by A.A. Dynkin, IMEMO RAS Europe was usually the “kitchen” where the world order was cooked. Take the last 200 years. After the end of the Napoleonic Wars, the Concert of Europe emerged and lasted for 100 years. The century-long stability of that system could be explained by the homogeneity of the political organization of its guarantor states. All members of the Concert of Europe were monarchies. World War I produced the Versailles system, which lasted only 20 years. One of the reasons for its short life was the exclusion of the Soviet Union, Germany and China. The Yalta-Potsdam system was formed by the victors in World War II. Its guarantors were the “Big Three” powers—the Soviet Union, the U.S. and the UK—along with France and China. The three defeated powers—Germany, Japan and Italy—were discriminated and disenfranchised. This system existed for 45 years and was initially thought to be polycentric, but quickly degenerated into a bipolar order, and the Cold War commenced. With the collapse of the Soviet Union and dissolution of the Warsaw Pact, the system became unipolar, dominated by the West, primarily the U.S. It disregarded Russia’s interests and, from 2018 onward, began discriminating against China as well. February 2022 can be considered the formal date of the unipolar world’s demise. However, today’s predictions suggest it will take at least 10 years before the new post-unipolar system becomes stable. The economic center of gravity is a spatial indicator of the economic strength of states, borrowed from physics. To put it simply, this is a geographical point of equilibrium for GDP, trade and investment flows of different countries. Figure 1 shows a map of how the world’s economic center of gravity shifted for over a thousand years. It appeared in Central Asia, on the territory of the Ghaznavid Empire (modern-day Afghanistan). The center then migrated northwest, while the devastation in post-war Europe forcefully pushed it (within just 10 years) to the West, toward Greenland. Then it turned east again. The sharpest shift, to the southeast, occurred in 2000–2010 and is associated with the rise of China. The economic center of gravity has almost returned to the same meridian but remained more than 2,000 km north of the starting point, which indicates a return to the millennial balance of economic power between the West and the East. Figure 1. “Journey” of the three-dimensional economic center of gravity    Source: Dobbs R., Remes J., Manyika J. et al. Urban world: Cities and the rise of the consuming class. McKinsey Global Institute, 2012. https://www.mckinsey.com/featured-insights/urbanization/urban-world-cities-and-the-rise-of-the-consuming-class. Statistic calculations by IMEMO RAS for 60 years of peace (1960–2021) indicate the stability of the center’s latitudinal (horizontal) position. This suggests a relatively consistent proportion of GDP production by the countries in the Global South and Global North, under the economic leadership of the Northern Hemisphere. The shift to the East has also been clearly confirmed. According to our projections up to 2050, the future position of the globe’s center of economic activity will lie on the border of India and China. This method of analysis reveals a high level of inertia in time and geographic monotonicity of changes in the balance of economic power of states. It also shows that wars can drastically disrupt the natural course of events. The center of gravity method can also be applied to the arsenals of strategic and tactical weapons (see Figure 2). For example, during the Cuban Missile Crisis, the U.S. had a huge advantage, but then there was a clear pivot to the northeast—the creation of superior nuclear capabilities in the Soviet Union. With the onset of arms control in 1993, a reversing loop emerged, heading southwest. This was followed by a curve to the east with an implied southward inclination, which reflects the growing nuclear stockpiles of India, Pakistan, North Korea, and the rapid buildup of strategic and tactical nuclear forces in China. The military center of gravity follows its economic peer with a lag of 20 years, reflecting the geopolitical ambitions of Asian powers. These interpretations also clearly demonstrate the end of unipolarity and point to the rise of multipolarity. Figure 2. Movement of the nuclear center of gravity Source: calculations by K.V. Bogdanov, Center for International Security at IMEMO RAS, based on the data from the Bulletin of the Atomic Scientists. https://thebulletin.org/nuclear-notebook/. Technology. Politicians tend to be techno-optimists. Barack Obama predicted that 3D printing would transform the entire world. [4] George W. Bush promised that decoding the human genome would revolutionize medicine. [5] All false starts. Economists traditionally measure the rate of technological progress (TP) using the total factor productivity (TFP) index. To put it simply, this is the part of economic growth driven not by an increase in inputs—labor and capital—but rather by improvements in the efficiency of their use. Technological progress means not only the generation of new scientific and technological ideas but also their mass replication. Without economic validation of the impact of wide dissemination of innovations, scientific or technological achievements remain in history as brilliant breakthroughs with only local economic effects, giving rise to journalistic generalizations at best, such as the “Fourth Industrial Revolution” or “the sixth techno-economic paradigm.” Statistical metrics rely on data of technologically advanced nations, while catching-up countries have room for growth by approaching the TP frontier, i.e. adopting and improving existing ideas and technologies. Technological leaders spend more resources pushing the TP frontier, while those catching up can accelerate at lower costs, effectively staying in the “wind shadow” of the leaders. The TFP index growth rate has been steadily declining in developed countries for many years, but this has been especially conspicuous since the mid-2000s. Today, the growth is below 1.5% and even 1% per year (see Figure 3). Figure 3. Average annual growth of total factor productivity, % Source: calculations by IMEMO RAS based on the data from the International Productivity Monitor. No. 38, Spring 2020. http://www.csls.ca/ipm/ipm38.asp#:~:text=Martin%20Neil%20Baily%2C%20Barry%20P.%20Bosworth%20and %20Siddhi%20Doshi%0ALessons%20from%20Productivity%20Comparisons%20 of%20Germany%2C%20Japan%2C%20and%20the%20United%20States%C2%A0; Innovative China: New Drivers of Growth. World Bank Group, and the Development Research Center of the State Council, P.R. China. 2019. Washington, DC: World Bank. https://doi.org/10.1596/978-1-4648-1335-1. License: Creative Commons Attribution CC BY 3.0. https://documents1.worldbank.org/curated/en/833871568732137448/pdf/Innovative-China-New-Drivers-of-Growth.pdf. A similar pattern of dramatic TFP deceleration was observed in China. The consensus interpretation of these figures is that the main effects of the Third Industrial (i.e., computer) Revolution have largely been exhausted, and no new general-purpose breakthrough technologies (such as electricity, internal combustion engines, or computers and mobile communications) have emerged. However, it seems that the intellectualization of technologies and approaches to project management, as well as informatization, simply do not fit into the traditional factor-based view of progress that was established many years ago. The scale of knowledge is growing, new professions are springing up, the role of emotional intelligence and cognitive functions is increasing. All this dramatically changes the structure of capital assets (see Figure 4). From the beginning of the 21st century and until the 2008 crisis (2000–2007), equipment accounted for over 50% of the increase in capital’s contribution (investment) to output growth, whereas in 2019–2021, almost 63% of this increase was attributable to intellectual property assets. This result of our research suggests a refocusing of technological progress from final products to intellectual technologies, enabling the production of a range of innovative goods and services tailored to highly segmented demand. Figure 4. Transformation of the capital structure in the U.S. private sector Source: Total Factor Productivity for Major Industries—2022. U.S. Bureau of Labor Statistics. https://www.bls.gov/news.release/archives/prod3_03232023.htm. There are now hopes that the pace of technological progress may accelerate due to the development of artificial intelligence (AI) technologies, which will spark a new industrial revolution. An indirect sign of its imminence is the sharp rise in the rate of business births and deaths in the U.S. economy in 2020–2022. [6] The spillover of labor from companies that are losing efficiency to corporations with increasing market shares has also accelerated. These are some sort of leading indicators that suggest the structural results of TP are approaching. Similar developments occurred 30 years ago, on the cusp of the computer revolution. The above-mentioned intellectualization of fi ed capital, where trusted AI will be applied, adds credibility to these hopes. In addition, AI is one of the critical areas of technological sovereignty. It is no coincidence that Vladimir Putin described AI as “crosscutting, universal and essentially revolutionary technology.” [7] The Russian President announced the preparation of a new edition of the National AI Development Strategy and a respective decree. I believe that this prioritization is justified. China’s experience in the semiconductor race is a good model to be emulated (see Figure 5). Its distinguishing feature is the focus on companies as drivers of development, with massive, cumulatively growing state support. Figure 5. Focusing on China’s priorities (nanometer chip race) Source: Systematized by I.V. Danilin, IMEMO RAS The U.S. strategy of curbing technological development of Russia (in all areas) and China (in semiconductors, artificial intelligence and quantum computing and electric cars) leads to stiff competition in high technology, which is fraught with fragmentation, diversification of technical standards, legal norms and rules. And this is another argument in favor of a new bipolarity. Demographic processes. According to UN projections, by the middle of the 21st century, Russia will drop from its current 9th place to 14th in terms of population, while remaining the most populous country in Europe. [8] A more significant problem for Russia is population aging. The proportion of elderly people, who are typically not part of the labor force, is increasing. Japan, Spain and Italy are leading this process today, but neither China nor India will be spared. Nigeria appears to be the only major country where population and the share of young people will continue to grow until the end of the 21st century. As of December 2023, one in 10 people worldwide was aged 65 or over, with health spending taking up 10% of global GDP. [9] In this context, the importance of medical technologies cannot be overstated, as they can extend not only people’s life expectancy but also the duration of their healthy and socially active life, thereby easing labor market pressures. Needs always steer technological progress toward overcoming economic growth constraints tied to the scarcest resource in any given historical period. A serious risk associated with the problem of aging is a slowdown in innovation, since it is people under 40—the age group that will shrink throughout the 21st century—who are the primary drivers and consumers of innovation. So far, this risk has been mitigated by the large youth cohorts in China and India. This is why these two nations are experiencing almost exponential growth in patenting, massive reengineering and, consequently, in middle-class numbers. Demographics give India an edge until around 2060, which is already evident in the growth rates of Indian economy. Combined with the influx of hi-tech investments and the contribution of the Indian diaspora, India has good prospects, making its position crucial to the future architecture of the world order, regardless of how it evolves. The U.S. understands this and has been figuratively “clinging” to this nation for the past 20 years. I believe that the Russian Academy of Sciences should significantly bolster scientific and educational ties with India and its dynamically developing neighbors in Southeast Asia—Vietnam, Malaysia and Indonesia. The anticipated tension in the global market of new generations of innovators aggravates inter-country competition for this scarcest resource. I think that the international reputation of the Russian Academy of Sciences is a powerful tool to attract and retain young people and foster their creative motivation. We should reassert this as we celebrate the 300th anniversary of the Academy of Sciences. Ideology. Dirigisme [10], or statism, is the main trend in both economic theory and economic policy of the West. A pivot to a more state-controlled economy began with the disappointing outcomes of the Washington Consensus, which aimed to guide post-socialist countries from planned to market economies. The 2008–2009 financial crisis cemented the trend toward statism, and the COVID-19 pandemic elevated it to unprecedented proportions. In the U.S., Democrats are among the most vocal proponents of greater government intervention in all spheres of life, but they are not alone. Republicans are also actively advocating industrial policy, repudiation of free trade, as well as strict control over Big Tech, among other measures. The popularity of the so-called cultural Marxism is on the rise. [11] Its origins go back to the critical theory of the Frankfurt School (H. Marcuse, E. Fromm and others). These ideas are moving from the realm of ideological and theoretical confrontations into political activism. For example, the leaders of the BLM movement publicly self-identify as “trained Marxist organizers.” The essence of the strategy inspired by “cultural Marxism” is the rejection of direct political struggle on the barricades, since the proletariat has been “bought off by the bourgeoisie and is no longer capable of anything,” and the ranks of the classic proletariat are rapidly thinning. The direction of social change is set, on the one hand, by intellectuals with personal power and, on the other hand, by marginalized groups seeking to assert their “right to identity.” The strategy of activists who form this paradoxical combination of intellectuals and marginalized individuals is the creeping takeover of the main institutions of power and society by planting “correct” ideas in the mass consciousness. In the U.S., the fighters for political correctness have already hijaked the school system, university campuses, major media outlets and the entertainment industry (Hollywood). Civil servants are forced to take courses in critical race theory, which postulates not only the socially constructed nature of race and the recognition of systemic racism [Delgado, Stefancic 2017: 45] but also a sense of guilt in one part of society toward another. This, in turn, allegedly requires addressing moral and material injustices by organizing public life in line with such an ideology. Similar concepts are being pushed into public discourse as well. It is already dominated by the ideas of radical feminism, cancel culture, anti-systemic racism and postcolonialism, the fight against global warming and the green agenda, which claims to be universal and non-negotiable. As a result, the energy transition is motivated more by ideology than by the comparative market efficiency of energy supplies. Different environmental-political discourses—eco-nationalism, eco-imperialism and green growth—are competing in shaping the green agenda, eroding the attractiveness of the dominant sustainable development model. Another universal weapon in fighting any dissent is political correctness. Large corporations, government agencies and universities are developing and implementing strategies to promote DEI (Diversity, Equity, and Inclusion) principles, which are nothing but tools of ideological control over employees. Universities are required to fi reports on their compliance with such principles and efforts to promote them, which causes mounting criticism as they violate academic freedom and cultivate ideological conformity. [12] However, ideological censorship has already taken deep root in various spheres of public life, and questioning its compatibility with democracy is deemed politically incorrect. Revising cultural norms has become a cultural norm in and of itself, deepening divisions in modern polarized societies, primarily in the U.S., but also in Old Europe [Semenenko 2023: 27-35]. Another curious phenomenon is associated with the new agenda. In the 20th century, the left championed progress, advocating faster economic growth, rapid technological advancement and better social welfare. Now the ideas of zero or even negative growth and post-growth are popular among them. [Buchs, Koch 2017: 218]. Such ideological narratives exacerbate the question of how to treat the poor countries of the South, but also their own poor: the welfare state for all no longer fit into this agenda. On the contrary, it becomes a selective tool of backing the “right” minorities. This creates a breeding ground for stronger positions of populist forces. Such contradictory internal political processes distort public consciousness as well as domestic and foreign policy decision-making. The new elites are extremely ideologized. The U.S. political system is becoming less effective at regulating the economy. Two rating agencies, Standard & Poor’s and Fitch Ratings, have downgraded the U.S. credit rating to AA+ from the top mark of AAA. In November 2023, Moody’s lowered its outlook on the U.S. credit rating to “negative” from “stable.” All three agencies agree on the main reason for the downgrade: the growing dysfunctionality of the political system. In foreign policy, the U.S. has withdrawn from 16 major international treaties and agreements on arms control, global trade, climate and the Arctic since the beginning of the century [Dynkin 2020]. In other words, the unipolar world order with its unbridled appetite for expansion has brought the world into a zone of extra-high risks. And the paradigms that are dominant in the West have proven incompatible with either Russian or Chinese value-oriented political projects. Therefore, the ideological sphere will inevitably see increased confrontation, marking another step toward bipolarity. IMEMO RAS researchers have repeatedly warned about the West’s miscalculated strategic hopes: 1) that Russia would face an economic catastrophe because of an unprecedented sanctions war in modern history; 2) that the unipolar world order would remain unchallenged; 3) that a global blockade of Russia’s export-oriented economy would be feasible. And we were not the only ones who made these warnings. In response, we only heard propagandistic clichés like “a gas station masquerading as a country,” “a regional power” and “Russia is isolated with its economy in tatters”. This kind of “expertise” led the Washington establishment to believe that Russia is a “declining power” whose strategic interests could be safely neglected. This “strategic lunacy” is a consequence of a universalist mindset—a product of the West’s political experience and culture, which tends to elevate Anglo-Saxon and European historical tradition to absolutes—and of a failure to understand the shifts in the balance of power in the 21st century. Today, Russia is the world’s fourth-largest economy by purchasing power parity (PPP), while the top fi e global economic powers include three BRICS nations and none from the blooming “garden” of Josep Borrell, the EU foreign policy chief who has recently been fired. Now a new narrative has been launched into the propaganda orbit: “Russia is about to attack Eastern Europe.” The logical gap between the image of a declining power and that of an “aggressive bear” is conveniently ignored. This primitive, one-dimensional perception of complex non-linear processes can only lead to disappointment—just as it did when the West lulled itself into believing that Chinese reforms would eventually lead to political pluralism. As a result, the West has an inexhaustible stream of surprises. It appears that their experts are increasingly out of touch with Russian (and any other non-Western) realities. Figuratively speaking, they are staring into a distorting rearview mirror constructed by their own rhetoric and propaganda. But the main real surprise was the fantastic resilience of the Russian economy. I dare say that no other economy in the world, not even China’s, could withstand such aggressive pressure. The high resistance of the Russian economy to external shocks can be explained by three fundamental reasons. First, it is the result of difficult, sometimes agonizing institutional and structural reforms. These efforts have ultimately produced a self-sufficient, adaptive and highly diversified market economy. Second, the crisis of 2022 was the fifth (!) in the history of post-Soviet Russia. The government, federal regulators and the Bank of Russia have accumulated hard-earned professional experience in crisis management and counter-cyclical strategies. The same can be said about business. Our economic entities have demonstrated time and again that there are always more effective solutions than there are problems. Finally, the West miscalculated its ability to isolate our economy. The dual containment of Russia and China, in fact, only strengthens ties between the BRICS member states. Transformations of the 2020s. The first half of the 2020s has fi y buried what was once known as “European security.” It is impossible to glue this “broken cup” back together without Russia. The unwillingness of the Ukrainian side and the West to stop the armed conflict at its very beginning, the dangerous escalation, NATO’s constant violation of its own “red lines” and the accession of Sweden and Finland to the North Atlantic Alliance are all symptoms of the European security system transforming into a transatlantic one. Meanwhile, the Eurasian security system is taking shape. The outcomes of Russian President Vladimir Putin’s visit to China hint that the “political East” is starting to form, if not as an alternative to the long-standing “political West,” then at least as an equal partner. Without considering its interests, any debate about “rules-based” global security will be mere fantasy. Indian Prime Minister Narendra Modi’s first visit to Moscow after his recent reelection is in the same vein. Of course, geography cannot be changed, and Russia has been and will remain a European power. However, it is also the geographic center of Eurasia, providing the infrastructure backbone for the Eurasian partnership—from the Northern Sea Route and up to the Trans-Siberian Railway, Baikal–Amur Mainline, Trans-Asian Highway and cross-continental pipelines. The “post-Ukrainian” world seems to be moving toward a new, indivisible Eurasian security architecture, relying on existing institutions: the Union State, CSTO, EAEU, CIS, BRICS, SCO and ASEAN. Minsk has put forward an initiative to develop a Eurasian Charter for Diversity and Multipolarity—a strategic vision for a new system of international relations to replace the “rules-based” world order. An important event of 2024 in this context is the expansion of the BRICS club (see Figure 6). Its combined economic power could potentially reach $67 trillion, surpassing the total GDP of the G7 countries. Figure 6. Economic potential of BRICS countries Source: calculations by A.A. Dynkin, IMEMO RAS, based on the data from the IMF, Food and Agriculture Organization, World Steel Association, Energy Transition Institute, Statistical Review of World Energy 2023, International Energy Agency. And there are still 28 more countries on the “waiting list”. In several important markets such as metals, automotive industry, oil and mineral fertilizers, BRICS already matches or exceeds the potential of the G7 nations. Russia, which took over the BRICS rotating presidency in 2024, faces the task of energizing the harmonized economic and technological policies of the members. This approach is the institutional cornerstone of the future polycentric world. What will the coming world order look like? It is difficult to say which of the two trends—bipolarity or polycentrism—will prevail in the end. It is more likely that they will coexist: for example, rigid bipolarity in the Global North and polycentrism in the Global South. Signs of military, economic and technological bipolarity are already visible in the North. Interestingly, New Delhi tends to categorize China as a country of the North [Jaishankar 2020: 240]. This viewpoint has substance, as China is far ahead of other countries of the Global South in terms of GDP per capita ($12,541). For comparison, India’s GDP per capita is $2,612. [13] The decoupling of the U.S. and Chinese economies has not affected trade flows yet, but only technology and investment. In 2023, China saw a reversal of foreign direct investment inflows, with funds previously invested being withdrawn. Negative trends took hold, and the outflow approached negative $1.5 trillion (see Figure 7). Meanwhile, the Asia-Pacific macro-region is gaining greater internal dynamics, unlike Europe or North America. Figure 7. U.S.–China Economic Decoupling Source: UN Comtrade Database. https://comtradeplus.un.org/; State Administration of Foreign Exchange (SAFE) of the People’s Republic of China. https://www.safe.gov.cn/en/. Meanwhile, the trend toward political polycentricity persists. For example, New Delhi and Ankara were initially poles apart on the Palestinian–Israeli conflict. This is also the dawning of post-unipolarity, where the new centers of power are increasingly guided by their own interests in decision-making rather than by any “rules” or advice from Washington, Beijing or Moscow. It would be unrealistic to expect that the future world order will be free of conflict. The world will retain its diversity, with different potentials of countries and their competition. It is crucial that, despite their differences, the interests of larger and smaller nations are respected, and problems are solved through constructive dialogue. Russia was the first to challenge the notorious unipolar world order. Today we can state that most countries in the Global South have responded to this challenge and refused to subscribe to the Western interpretation of the conflict in Ukraine . The future world order is taking shape right before our eyes. I am sure that a multipolar world is preferable for Russia as a developed, self-sufficient and sovereign nation. But this world also requires a new system of global governance, development and strengthening of its institutions, such as BRICS, G20, SCO and EAEU. For instance, the EAEU member states (Russia, Belarus, Kazakhstan, Armenia, Kyrgyzstan) are faring much better than the five other post-Soviet countries. In 2022, GDP per capita in the countries of the Eurasian Economic Union was 3.5 times higher than the average for the fi e other CIS states that are not part of the EAEU (Azerbaijan, Moldova, Tajikistan, Turkmenistan, Uzbekistan) (see Figure 8). Our strategy in these organizations requires a solid approach and “stereoscopic” vision from socio-economic, scientific, technological and political perspectives. Here, the Russian Academy of Sciences should play a major role as a leader of scientific and expert community. Figure 8. Economic trends of EAEU and CIS countries Source: EEC. https://eec.eaeunion.org/?ysclid=lr7rtdg7np631919243; IMF. https://www.imf.org/; World Bank. https://www.worldbank.org/.  Conclusion In conclusion, there are compelling arguments both for multipolarity and for a new bipolarity. Leading U.S. experts are asking similar questions: “What order will replace the crumbling US-led system is far from certain. Will China push aside the United States as the global hegemon to lead a world according to rules written in Chinese characters? Will the world become bipolar, divided between two more or less rigidly defined blocs led by the United States and China? Will a genuinely multipolar world emerge based on several states or coalitions of more or less equal strength?” [Graham 2023: 272]. These questions are yet to be answered, and definitive conclusions in this case are premature. Given this high uncertainty, one should be prepared for any scenario. The essential prerequisite for such readiness is Russia’s strategic autonomy based on military-strategic parity with the U.S. The fundamental question to which the author has no answer today is: how likely is the emergence of a new world order without a major war? In 2024, presidential or parliamentary elections will take place (or have already taken place) in 50 countries, which account for more than 45% of the world’s GDP and population. Perhaps their results will clarify our vision of the near future. Dynkin A.A. (2024). World order transformation: economy, ideology, technology. Polis. Political Studies, 5, 8-23. https://doi.org/10.17976/jpps/2024.05.02 This article was prepared with the support of a grant from the Ministry of Science and Higher Education of the Russian Federation for major scientific projects in priority areas of scientific and technological development No. 075-15-2024-551 “Global and regional centers of power in the emerging world order”. The author expresses gratitude to his colleagues at IMEMO RAS R.I. Kapelyushnikov, V.D. Milovidov, I.S. Semenenko, I.V. Danilin, S.V. Zhukov, K.V. Bogdanov, A.P. Guchanova for consultations and assistance in preparing this article. References Büchs, M., & Koch, M. (2017). Critiques of growth. In M. Büchs, & M. Koch. Postgrowth and Wellbeing: Challenges to Sustainable Welfare (pp. 39-56). London: Palgrave Macmillan. https://doi.org/10.1007/978-3319-59903-8_4 Delgado, R.,& Stefancic, J. (2017). Critical race theory. Anintroduction. New York: New York University Press. Graham, T. (2023). Getting Russia right. UK: Polity Books. Huntington, S.P. (1993). The clash of civilizations? Foreign Affairs, 72(3), 22-49. https://www.foreignaffairs.com/articles/united-states/1993-06-01/clash-civilizations Jaishankar, S. (2020). The India way: strategies for an uncertain world. New Delhi; New York: Harper Collins Publishers India. Kupchan, C. (2021). Bipolarity is back: why it matters. The Washington Quarterly, 44(4), 123-139. https://doi.org/10.1080/0163660X.2021.2020457 Yan Xuetong. (2016). Political leadership and power redistribution. The Chinese Journal of International Politics, 9(1), 1-26. https://doi.org/10.1093/cjip/pow002 Dynkin, A.A. (2020). International turbulence and Russia. Herald of the Russian Academy of Sciences, 90(2), 127-137. https://doi.org/10.1134/S101933162002001X. Primakov, E.M. (1996). Mezhdunarodnye otnosheniya nakanune XXI veka: problemy, perspektivy [International Relations on the eve of 21st century: problems, prospects]. Mezhdunarodnaya zhizn’, 10, 3-13. (In Russ.) Semenenko, I.S. (2023). Razdelyonnye obshchestva [Divided societies]. In I.S. Semenenko (Ed.), Identichnost’: lichnost’, obshchestvo, politika. Novye kontury issledovatel’skogo polya [Identity: The Individual, Society, and Politics. New Outlines of the Research Field] (pp. 27-35). Moscow: Ves’ Mir. (In Russ.) https://www.imemo.ru/files/File/ru/publ/2023/Identichnost-Semenenko-2023.pdf Литература на русском языке Дынкин А.А. 2020. Международная турбулентность и Россия. Вестник РАН. Т. 90. № 3. С. 208-219. https://doi.org/10.31857/S0869587320030032. EDN: WINCQO. Примаков Е.М. 1996. Международные отношения накануне XXI в.: проблемы, перспективы. Международная жизнь. № 10. С. 3-13. Семененко И.С. 2023. Разделенные общества. Идентичность: личность, общество, политика. Новые контуры исследовательского поля. Отв. ред. И.С. Семененко. М.: Весь Мир. С. 27-35. https://www.imemo.ru/files/File/ru/publ/2023/Identichnost-Semenenko-2023.pdf. EDN: NTQYRB. 1. The world order or international system is a stable set of institutions and norms of military-political and economic relations, which is institutionalized and legitimate in the international legal sense. The world order remains stable during the active life of at least one generation—a universal measure of social time. However, in the wake of geopolitical macro-crises, illegitimate systems emerge, forcibly imposed by the winner. This was the case with the unipolar world order. 2. Dynkin A., Burrows M. Here’s the Playbook for Getting U.S.–Russian Cooperation Back on Track. The National Interest. 07.12.2015. https://nationalinterest.org/feature/heres-the-playbook-getting-us-russian-cooperation-back-track-14527. 3. For example, see: [Yan Xuetong 2016; Kupchan 2021]. 4. Remarks by the President in the State of the Union Address. The White House. President Barack Obama. 12.02.2013. https://obamawhitehouse.archives.gov/the-press-office/2013/02/12/remarks-president-state-union-address. 5. President Bush Calls on Senate to Back Human Cloning Ban. Remarks by the President on Human Cloning Legislation. The East Room. The White House. President George W. Bush. 10.04.2002. https://georgewbush-whitehouse.archives.gov/news/releases/2002/04/20020410-4.html. 6. Private sector establishments birth and death, seasonally adjusted. U.S. Bureau of Labor Statistics. 25.10.2023. https://www.bls.gov/news.release/cewbd.t08.htm. 7. Artificial Intelligence Journey 2023 conference. President of Russia. Official website. 24.11.2023. http://www.en.kremlin.ru/events/president/transcripts/72811. 8. World Population Prospects 2024, Online Edition. United Nations, Department of Economic and Social Affairs, Population Division (2024). https://population.un.org/wpp/Download/Standard/MostUsed/. 9. Global Health Expenditure database. World Health Organization. https://apps.who.int/nha/database. 10. Dirigisme is a policy of active state intervention in the national economy, pursued by France and the UK in mid-1940s. 11. Mendenhall A. Cultural Marxism is Real. The James G. Martin Center for Academic Renewal. 04.01.2019. https://www.jamesgmartin.center/2019/01/cultural-marxism-is-real/. 12. AFA Calls for an End to Required Diversity Statements. Press Release. AFA. Princeton, NJ. 22.08.2022. https://academicfreedom.org/afa-calls-for-an-end-to-required-diversity-statements/. 13. World Economic Outlook Database (October 2023 Edition). International Monetary Fund. 10.10.2023. https://www.imf.org/en/Publications/WEO/weo-database/2023/October.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The AIFTA and CECA have increased India-ASEAN trade, but recent talks aim to address trade imbalances and adjust tariffs for improved Indian export access. India's Act East Policy, initiated in the early 1990s (previously Look East Policy), is a cornerstone of India's foreign policy to strengthen economic, strategic, and cultural ties with the Asia-Pacific region, particularly Southeast Asia. Free Trade Agreements (FTAs) play a central role in this strategy. India's approach to trade policies, particularly in FTAs with the Association of Southeast Asian Nations (ASEAN), reflects a complex balancing act between protecting domestic industries and fostering international trade partnerships. The India-ASEAN Free Trade Area (AIFTA), established in 2009, aimed to enhance economic cooperation by offering tariff concessions on goods traded between India and ASEAN countries. However, recent talks have focused on revising tariff structures to address disparities and improve trade flows, highlighting India's commitment to deepening economic engagement with ASEAN for mutual benefits and regional integration. To be sure, ASEAN remains a crucial trading partner for India, accounting for 11 percent of its global trade, with bilateral trade reaching US$ 122.67 billion during 2023-24. The India-ASEAN Comprehensive Economic Cooperation Agreement (CECA) comprises three key agreements covering Goods, Services, and Investment. India’s trade with ASEAN experienced astounding growth after signing the ASEAN-India Trade in Goods Agreement (AITIGA). However, the trade disproportionately benefits the ASEAN region. Between FY 2009 and FY 2023, imports from ASEAN to India grew by 234.4 percent while exports from India rose only by 130.4 percent, expanding India’s trade deficit from US$ 7.5 billion annually when the agreement was enacted in 2011 to approximately US$ 44 billion in 2023.    The potential adjustment of tariffs is influenced by the need to protect burgeoning sectors within India's economy, aligning with the government's “Make in India” initiative to transform India into a global manufacturing hub. For instance, raising tariffs on mobile phone parts and automobile components could incentivise domestic production and reduce import dependency. In the goods trade category, India eliminated import duties on approximately 74 percent of tariff lines and reduced duties on an additional 14 percent of tariff lines—highlighting one consolidated offer to ASEAN. At the same time, each ASEAN member made separate offers to India. This asymmetry in negotiation power also hinders India’s flexibility in protecting vulnerable domestic industries from competitive ASEAN imports.  ASEAN economies are inherently export-oriented with flourishing manufacturing bases. In contrast, India’s economy is significantly service- and agriculture-oriented, and it has not fully capitalised on the FTA, resulting in higher penetration of ASEAN countries into the Indian market. Indian exports have struggled to gain similar traction in ASEAN countries. Moreover, the inverted duty structure on certain items, like ferroalloys, aluminium, copper pipes and tubes, textile staple fibres, and several chemical preparations, puts Indian industries at a disadvantage.  To boost local manufacturing, India has implemented specific measures such as Production-Linked Incentive (PLI) schemes, higher import tariffs, and import monitoring, but several trade agreements negotiated earlier are seen as impediments. Domestic firms in India, particularly in the electronics and automotive sectors, have pressured the government to raise import tariffs to protect local industries, rooted in the desire to safeguard domestic manufacturers from cheaper imports and promote self-reliance and technological advancements. The implications of such tariff hikes extend beyond immediate economic protection. By fostering a robust industrial base, India can create jobs, stimulate economic growth, and enhance technological innovation. However, it is crucial to implement these measures in a way that does not significantly disrupt trade relations in the region. India-ASEAN trade talks  The 5th meeting of the AITIGA Joint Committee at the ASEAN Secretariat in Jakarta, Indonesia, in July 2024 marked a significant step forward in strengthening economic cooperation between India and ASEAN where all eight sub-committees focused on market access, rules of origin, standards, sanitary measures, and trade facilitation. India will host the next round of negotiations to review the AITIGA in November 2024 to address the pending concerns involving the reciprocity of trade benefits between India and ASEAN. One of the primary concerns is the trade imbalance between India and its FTA partners. To address this imbalance, India seeks greater market access for its goods, particularly in the automotive and agricultural sectors. For instance, India aims to enhance exports of automobiles and agricultural products to ASEAN countries, aligning with its strategic economic goals despite challenges. Reducing non-tariff barriers is another critical issue. Non-tariff barriers, such as stringent customs procedures and regulatory hurdles, impede smooth trade flows and increase business costs. Simplifying these procedures and ensuring compliance with international standards can facilitate more accessible trade between India and its FTA partners. For example, streamlining customs procedures for agricultural exports can help Indian farmers access new markets in ASEAN countries. The ASEAN bloc has already expressed concerns about India’s Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR 2020), which they believe hinder their exports. Indian negotiators also push for tariff cuts in various sectors, including chemicals, metals, textiles, and gems, while addressing non-tariff barriers imposed by ASEAN, such as strict food certification requirements. The outcome of these negotiations will be pivotal in reshaping India-ASEAN trade dynamics. Revising the sensitive and exclusion lists to ensure fair trade practices while protecting vulnerable domestic industries will also be a crucial point of negotiation. This revision can help balance the interests of domestic manufacturers with the need to adhere to international trade commitments. Enhancing the transparency and predictability of trade practices, including establishing consistent and transparent trade policies, will be essential to foster a more robust trade relationship. Finally, by engaging with ASEAN through comprehensive trade agreements like AIFTA and CECA, India aims to boost economic cooperation and solidify its geopolitical influence in the region. India’s efforts to balance protectionism with regional integration reflect its broader economic strategy. For example, the “Atmanirbhar Bharat” (Self-Reliant India) initiative emphasises self-reliance and domestic manufacturing while seeking to integrate India into the global economy by enhancing its trade relationships. This strategy can ensure that India remains competitive in the global economy.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The world economy is underperforming as a result of tight monetary policies, weaker global trade, a slowing Chinese economy and uncertainty around the US election. An escalation of conflict in the Middle East could increase uncertainties, harming inflation reduction efforts and hurting growth. It has been over a year since the Hamas-led attack on Israel. Israel’s response in Gaza has resulted in widespread destruction and significant loss of life. The conflict has since expanded beyond Gaza, involving the Houthis in Yemen, Hezbollah in Lebanon and Iranian strikes targeting Israel. In addition to the awful humanitarian cost of the conflicts, the war and the possibility of its further expansion pose significant repercussions for the global economy. This article discusses three potential ways in which the current conflict and a wider conflict in the Middle East could affect the global economy. Increased geopolitical uncertainties First and foremost, an escalation of the Middle East conflict could lead to greater geopolitical uncertainties. Figure 1 shows the evolution of the geopolitical risk (GPR) and geopolitical acts (GPRA) indices (Caldara and Iacoviello, 2022) – these are text-based measures of heightened uncertainties due to adverse geopolitical events such as wars, terrorism and international tensions. (See this article for more discussion about these measures.) Following the Hamas-led attack on 7 October 2023, both the overall GPR index and its ‘war and terror acts’ component spiked strongly, to a level higher than that seen during the ISIS attack in Paris in November 2015. Both indices eased significantly in the months following October 2023 despite the continuation of the conflict. But they jumped again following Israel’s attack on southern Lebanon in September 2024. As of mid-October 2024, the GPR and GPRA remain, respectively, 21% and 35% higher than their historical averages.   What might be the consequences of such elevated levels of risk? Research tells us that higher geopolitical risk raises oil prices (Mignon and Saadaoui, 2024). It also reduces global investment and increases inflation (Caldara et al, 2022). Greater geopolitical risk has a significantly negative impact on business and consumer confidence in several advanced economies (de Wet, 2023). This is because consumers typically cut non-essential spending and businesses postpone investment decisions during turbulent times. This reduces firm-level investment, particularly for businesses with higher initial investment costs and greater market power (Wang et al, 2023). Higher geopolitical risks also reduce global trade and financial flows, causing greater volatility in capital flows in emerging markets (Kaya and Erden, 2023). Oil production cuts and higher energy prices The second way in which the Middle East conflict could affect the global economy is its impact on energy prices, both directly through production cuts and indirectly through greater uncertainties. In response to Israel’s actions against its neighbours, the Organization of the Petroleum Exporting Countries (OPEC) could reduce oil production to penalise countries supporting Israel. A similar action in the 1970s led to a significant jump in oil prices, which contributed to years of stagflation, with higher global inflation and recessions in major economies. Before Israel's attack on Lebanon at the end of September, oil prices had been declining due to falling demand, particularly from China. On the supply side, oil production had increased in Canada and the United States, countering the production cuts by OPEC, and Saudi Arabia was expected to increase oil production from December. But the situation quickly reversed following Israel’s attack on Lebanon. Oil prices jumped by nearly $10 per barrel within a week, before easing by around $5 per barrel. While the immediate oil price impact of Israel’s attack has mostly faded, the potential for higher oil (and other energy) prices still poses a risk to global inflation and economic activity (Liadze et al, 2022). To provide further context for the potential scale of this impact, we can show what would happen if oil and gas prices were to remain $10 higher for two years than the baseline levels projected in the Summer Global Economic Outlook from the National Institute of Economic and Social Research (NIESR), using NIESR’s Global Macroeconometric Model (NiGEM). The results demonstrate that the $10 rise in oil and gas prices increases inflation by around 0.7 percentage points in major economies in the first year (see Figure 2). The impact is higher in China, where the economy relies relatively more on oil imports for its strong manufacturing industries. The inflationary pressures persist for two years despite central banks’ efforts to curb inflation by increasing interest rates.   The effect of higher oil and gas prices on real GDP is shown in Figure 3. In the scenario described above, GDP would fall by 0.1-0.2% in major economies immediately. Partly due to higher interest rates, real GDP would continue to weaken for three years following the shock. After this, economic activity would start to return to base levels as oil and gas prices revert to their levels in the baseline forecast.   Increased shipping costs and supply chain disruptions A wider conflict in the Middle East could also affect the economy through higher shipping costs and supply chain disruptions. Houthi attacks on commercial ships in the Red Sea in late 2023 showed that such disruptions can have a huge impact on global trade through shipping, which comprises 80% of world trade volume. Following the rocket attacks by the Houthi rebels, some commercial shipping re-routed from the Red Sea to the Cape of Good Hope, leading to significant delays in travel times and increased freight costs. As a result, the Shanghai Containerized Freight Index – a measure of sea freight rates – rose by around 260% in the second quarter of 2024 with additional disruptions to supply chains. Our analysis shows that an increase of 10 percentage points in shipping cost inflation can lead to import prices rising by up to around 1% and consumer inflation increasing by around 0.5% in OECD countries. As Figure 4 shows, the impact of shipping costs on inflation shows its full effects over six quarters. This means that inflationary concerns could be with us for the next year and a half as a result of higher shipping costs that may emerge from any possible escalation of the Middle East conflict.   Wider economic implications and policy responses While rising geopolitical risk and increased oil and shipping costs can each individually exert upward pressure on inflation and may slow down economic activity in the global economy, the combined impacts are likely to be greater. Countries with stronger trade and financial ties to the Middle East and those that rely heavily on oil imports as an input for domestic production would be most affected. On the monetary policy front, central banks may have to take a more hawkish stance in response to rising inflationary pressures from the Middle East conflict. This could lead to higher interest rates, which would further dampen economic activity, particularly in an environment where there are already recessionary concerns in some major economies. Beyond its immediate economic implications, an escalation of the Middle East conflict could trigger large-scale displacement of people, which would increase economic and social pressures on neighbouring countries. Many countries may also have to increase their military spending in response to growing regional tensions. Given that public debt levels are already elevated in many countries due to successive shocks to the global economy over the past decade, any additional defence spending could come at the expense of public infrastructure investments that would otherwise boost productivity growth. Overall, the global economy is already underperforming as a result of the lagged effects of tight monetary policies, weaker global trade, a slowing Chinese economy and uncertainties surrounding the upcoming US election and possible changes to US trade policy. A potential escalation of conflict in the Middle East could exacerbate the situation by increasing uncertainties, harming efforts to bring down inflation and reducing global GDP growth. Over the medium and long term, it could further damage the global economy, with the possibility of refugee crises as well as increased defence spending, making the effects more complex and longer lasting. This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском While the IPCC warns that we should reach the emissions peak this year, greenhouse gases released into the atmosphere will grow by 0.8%, according to the annual report from the Global Carbon Project presented this Wednesday at COP29. A cold shower in the middle of the Climate Summit, or rather, a scorching one. The independent organization Global Carbon Project (GCP), specialized in quantifying greenhouse gas emissions from fossil fuel combustion, has released its latest research. The 2024 edition of the Global Carbon Budget projects, with just over a month and a half left in the year, total annual emissions from fossil fuels to reach 37.4 billion tons of carbon dioxide (CO2). This represents a 0.8% increase compared to 2023 — with a possible error range from a 0.3% decrease to a 1.9% increase — marking a new unprecedented record at the worst possible moment. In the crucial year in which, according to the Intergovernmental Panel on Climate Change (IPCC), humanity should reach its emissions peak if it wants any chance of avoiding a global average temperature rise of 1.5°C, not only has a new historical high been reached, but there is also "no signal" that the world has reached the peak of emissions from fossil industries, warn the team behind the research presented this Wednesday. As Professor Pierre Friedlingstein from the University of Exeter’s Global Systems Institute, who coordinated the study, laments, "we still don’t see any signs that fossil fuel burning has peaked." The figures are actually more concerning, as the emissions from the "changes in land use" —which include deforestation caused by humans and their agroindustry — will add 4.2 billion tons of CO2 (GtCO2). This means that we will emit 41.6 billion tons of CO2 into the atmosphere, one billion more than last year, a period that was already a record. More coal, more oil, and more gas amid the acceleration of the climate crisis Despite significant progress in decarbonization, emissions from the three main fossil fuels will increase in 2024. The GCP’s projection is that coal emissions will rise by 0.2%, with coal responsible for 41% of emissions from fossil fuels; oil emissions will increase by 0.9%, with oil burning accounting for 32% of emissions; and gas emissions will grow by 2.4%, contributing 21% of total fossil fuel emissions. On the other hand, emissions from the cement industry, which account for 4% of global emissions, will decrease by 2.8% in 2024, mainly due to a reduction in the EU, although they will increase in China, the United States, and India, according to the research. By economic poles, while the EU — responsible for 7% of global emissions — will reduce its emissions by 3.8% this year, the United States, accounting for 13% of the total annual emissions, will only reduce them by 0.6%. China, the leading polluting power, with 32% of global annual emissions, is projected to increase its emissions by 0.2%, although the projected range suggests it could end the year with a slight decrease. Another emission hub, India, which produces 8% of greenhouse gases, will increase its emissions by 4.6% in 2024. In the rest of the world, where 38% of global emissions are produced, the forecast is an increase of 1.1%. The GCP highlights the growing importance of aviation and maritime transport in the emissions inventory: their emissions are expected to increase by 7.8%, although they remain below their 2019 level. An unprecedented concentration of gases in human history The report, conducted by researchers from over 80 institutions worldwide, including the universities of Exeter and East Anglia (UK), Ludwig-Maximilian University of Munich (Germany), and the CICERO Center for International Climate Research (Norway), provides an overview of emissions over the past decade. While they mention a certain stagnation in the past decade regarding the total greenhouse gases released into the atmosphere, the reality is that emissions continue to rise, and the previous decade (2004-2013) saw strong emission growth, with an annual increase of around 2%. Such figures mean that the concentration of CO2 in the atmosphere continues to rise. Just two weeks ago, the World Meteorological Organization (WMO) warned of a new record for greenhouse gas concentrations last year: an annual average of 420 parts per million (ppm) for CO2. In addition, surface concentrations of 1,935 parts per billion (ppb) of methane (CH4) and 336.9 ppb of nitrous oxide (N2O) were recorded. These represent increases of 151%, 265%, and 125%, respectively, compared to pre-industrial levels. "During 2023, CO2 emissions caused by massive wildfires and a possible reduction in carbon absorption by forests, combined with persistently high CO2 emissions from the burning of fossil fuels for human and industrial activities, drove the observed increase in concentrations," stated the WMO Annual Bulletin on Greenhouse Gases. Never in human history has the atmosphere been so laden with these gases, which have been released at an unprecedented speed: in twenty years, CO2 concentrations have increased by 11.4%. It is expected that atmospheric CO2 levels will reach 422.5 parts per million in 2024, 2.8 ppm higher than in 2023 and 52% above pre-industrial levels. Half-full glass However, at GCP, there is room for hope amid all the discouraging figures. "Despite another increase in global emissions this year, the latest data shows evidence of widespread climate action, with the growing penetration of renewable energy and electric vehicles displacing fossil fuels, and the decrease in deforestation emissions in recent decades, now confirmed for the first time," says Corinne Le Quéré, Research Professor at the Royal Society in the School of Environmental Sciences at the University of East Anglia. In the same vein, Dr. Glen Peters from the CICERO Center in Oslo points out that "there are many signs of positive progress at the country level, and a sense that a peak in global fossil CO2 emissions is imminent." A total of 22 countries, accounting for a combined 23% of global fossil CO2 emissions, have reduced their emissions in the 2014-2023 decade. Furthermore, countries within the Organization for Economic Co-operation and Development (OECD), in the group of wealthier nations, increased their emission reduction rates in the last decade compared to the previous one, from 0.9% to 1.4%. In the non-OECD group (excluding China), emissions growth decreased from 4.9% in the 2004-2013 decade to 1.8% in 2014-2023. However, Peters warns that "the global peak remains elusive" and emphasizes that "climate action is a collective issue, and while gradual emission reductions are occurring in some countries, increases continue in others." Another positive note is that, globally, emissions from the change in land use have decreased by 20% in the last decade, although they are expected to increase in 2024 under this category. While permanent CO2 removal through reforestation and afforestation (new forests) is offsetting emissions, it is only compensating for about half of the emissions from permanent deforestation. The GCP also issues a direct message to proponents of techno-optimism: "Current levels of technology-based carbon dioxide removal (excluding nature-based methods such as reforestation) account for only about one-millionth of the CO2 emitted by fossil fuels," they emphasize.This article was translated and licensed under CC BY-SA 3.0 ES (Atribución-CompartirIgual 3.0 España)