The U.S. Dept. of State has released a fact sheet entitled, “Economic Statecraft: U.S. Foreign Policy in an Age of Economic Power.” Among stated initiatives and priorities was one that captures the essence of TradeFlow21 in mirrors our focus on the Middle East and North Africa region. Here’s an excerpt:

Using Economic Tools to Solve Foreign Policy Challenges

Many of America’s national security objectives hinge on key economic dimensions, and economics must play a central role in our policy responses. The Department is better harnessing market forces to advance U.S. political and security interests. For example:

The entire release (click here) is worth reading and won’t take much of your time.

University of Baghdad - dated view of quad

George Mason University professor Hugh Gusterson has published a provocative article entitled, “An education in occupation,” about the sad state of Iraq’s once great university system, arguably one of the best in the Middle East until the 1990s.

The importance of having an open, active, funded, and interconnected (with the public and private sectors) cannot be stressed enough. Monies spent on education are not “spent” in the typical manner of consumed goods and services. Rather, education is an invaluable investment that pays dividends for life. Prof. Gusterson’s description of the failure thus far to secure proper funding for restoring Iraq’s universities screams of opportunity.

TradeFlow21 is hopeful that new (or renewed) efforts of domestic (Iraq) and international public or private entities will be undertaken to implement the necessary steps to rebuilding Iraq’s universities. In the process there will be abundant opportunities to create and fill new jobs of all types and likewise there will be great need for materials, products, and human capital. “An education in occupation” is well worth the read. May it also give reason for  pause to Americans to consider the condition of state universities, where tuition hikes and cut backs threaten our own post-secondary education system.

Saudi Aramco Oil Facility

Some may have seen recent news reports of Saudi Arabia targeting $100 oil. TradeFlow21 has tweeted (Jan 18th: “Saudi Arabia is not targeting $100 oil.“) a very helpful article on just the subject. Complementing the article, TF21 adds that triple-digit oil prices are not exactly in the Saudi’s or any oil exporting country’s best interest. Reason being is that often times when oil prices are high, they are accompanied by higher prices almost across the board. In volatile times like now, at home in the U.S. and in countries around the world, wages paid to employees that have not kept up with inflation are partially to blame for discontent. Thus, $100-plus oil is not helpful to Saudi Arabia if it in turn must pay higher prices for materials (and services) for the tens and hundreds of billions of dollars of real investments it’s making.

William J. Holstein writes about “How Coca-Cola Manages 90 Emerging Markets.” The world’s largest beverage company has delegated major decision making to individual markets, but it maintains its global brand strategy through collaborative practices.

Excerpts:

Ahmet C. Bozer, president of the Coca-Cola Company’s Eurasia and Africa Group, has spent his career demonstrating how a large international company can build a strategy and structure itself to compete in emerging markets. Coca-Cola is one of the most globally active international companies, deriving 80 percent of its sales from outside the U.S., and it is therefore one of the most experienced in tackling emerging markets, including Egypt and Pakistan, where political tension renders the business environment uncertain and Coca-Cola’s strategy has proven resilient.

Bozer, who was born and raised in Turkey, has worked for Coca-Cola since 1990 in various capacities, including operations and finance, as well as leading the Coca-Cola bottling company in Turkey. [...]

S+B: Your late CEO Roberto Goizueta charged the company to “think global, act local” in its strategy. How do you accomplish this?

BOZER: I wish it was as easy as repeating the slogan. The key for international companies is finding the right mix of global and local in their operations. The Coca-Cola brand is global, but it must be locally relevant. We may be giving the same happiness message, the same brand architecture may be communicated, but it has to be done differently in each country.

S+B: Your structure has strong regional managers such as yourself, but headquarters in Atlanta maintains global responsibility for sales, finance, and marketing — and for specific product lines like water or juices. How do you manage this?

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Statement by an IMF Mission to Egypt
Press Release No. 11/394
November 3, 2011

Ms. Ratna Sahay, Deputy Director of the Middle East and Central Asia Department and head of the IMF mission in Egypt issued the following statement in Cairo today:

“An IMF mission visited Cairo from October 26 to November 3, 2011, at the request of the authorities, to take stock of recent economic developments and assess financing needs. The mission wishes to thank the authorities for the excellent discussions.

“Egypt’s medium-term economic potential is promising. However, maintaining macroeconomic stability and social cohesion amidst modest short-term growth prospects and a weakening external environment remains challenging. The mission welcomes the authorities’ progress towards preparing a homegrown Egyptian strategy to meet these challenges and implement an inclusive growth and job creation agenda. The IMF looks forward to continuing to engage with the Egyptian authorities.”

http://www.imf.org/external/np/sec/pr/2011/pr11394.htm

Construction sector in Saudi Arabia this year:

• During the first eight months of 2011, domestic cement sales jumped by 28.6% compared to the corresponding period of 2010.

• Private sector imports of building materials financed through commercial banks (LCs settled and New LCs opened) increased y-o-y in August by 1.7% and 17.5%, respectively following annual increases of 39% and 15% in July. The growth in the new LCs opened indicates that imports of construction materials will continue its growth over the following months.

• The latest data published by Saudi Ports showed that discharges from construction materials increased 7.8% during the first seven months of 2011 compared with the same period in 2010.

Data from GulfBase.com

Donald Sull, professor of strategic and international management at the London Business School, write a nice little piece with some business cases:

Chinese appliance maker Haier Group discovered that customers in one rural province used its clothes washing machines to clean vegetables. Hearing this, a product manager spotted an opportunity. She had company engineers install wider drain pipes and coarser filters that wouldn’t clog with vegetable peels, and then added pictures of local produce and instructions on how to wash vegetables safely. This innovation, along with others including a washing machine designed to make goat’s-milk cheese, helped Haier win share in China’s rural provinces, while avoiding the cutthroat price wars that plagued the country’s appliance industry.

More examples in the full article (registration required).

In a new IMF working paper, Assessing Systemic Trade Interconnectedness – An Empirical Approach, authors Luca Errico and Alexander Massara focus on systemically important jurisdictions in the global trade network, complementing recent IMF work on systemically important financial sectors. Using the IMF’s Direction of Trade Statistics (DOTS) database and network analysis, the paper develops a framework for ranking jurisdictions based on trade size and trade interconnectedness indicators using data for 2000 and 2010. The results show a near perfect overlap between the top 25 systemically important trade and financial jurisdictions, “suggesting that these ought to be the focus of risk-based surveillance on cross-border spillovers and contagion. In addition, a number of extensions to the approach are developed that can provide a better understanding of trade dynamics at the bilateral, regional, and global levels.”

Conclusions

The paper has laid out our approach for assessing systemic trade interconnectedness using network analysis and the IMF’s DOTS database. Our results uncover several stylized facts offering additional insights into the changing patterns of global trade over the decade 2000-2010.  We also have shown possible applications of our approach to gain a better understanding of trade dynamics across world regions and the overlapping of trade and financial sectors of systemic importance in the top 25 jurisdictions. Our approach lends itself easily to a wide range of analytical exercises addressing specific global trade issues, as well as global (trade and financial) interconnectedness issues.

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Joe Saddi, Karim Sabbagh, and Richard Shediac (see authors’ profiles) wrote an article about how the the Gulf economies of the Middle East are forming partnerships with other emerging markets, redefining the ancient trade routes that once linked East and West.

Excerpts:

When King Abdullah bin Saud, the current ruler of Saudi Arabia, came to power in August 2005, he wasted little time in demonstrating his vision for the country’s future. His first official overseas visit, in January 2006, was not to U.S. president George W. Bush, U.K. prime minister Tony Blair, or German chancellor Angela Merkel — but to Chinese president Hu Jintao.

The meeting reflected both countries’ desire to forge closer economic ties. Before King Abdullah went on to other emerging markets, including India, Malaysia, and Pakistan, he and President Hu signed an agreement of cooperation in oil, natural gas, and minerals. This agreement built on existing relationships between the countries’ national energy companies, Saudi Aramco and Sinopec, which had formed a partnership in 2005 to construct a US$5 billion oil refinery in eastern China’s Fujian province. In 2011, they signed a memorandum of understanding to build a refinery in Yanbu, on the west coast of Saudi Arabia. Sinopec is also engaged in a joint venture with Saudi Arabia’s petrochemicals giant SABIC; in 2010, they began producing various petrochemical products in a $3 billion complex in the city of Tianjin in northeast China, and have recently announced that they will build a $1 billion–plus facility there to produce plastics.

[...]

But a closer look reveals a separate trend that could shift the economic focus away from the West. Emerging markets are building deep, well-traveled networks among themselves in a way that harks back to the original “silk road,” the network of trade routes between East Asia, the Middle East, and southern Europe, some dating to prehistoric times and others to the reign of Alexander the Great. Most of these routes were central to world commerce until about 1400 AD, when European ships began to dominate international trade.

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