Tag: Business and Economy

G7 leaders agree to $50bn loan for Ukraine at annual summit | Business and Economy News

G7 nations have agreed upon a $50bn deal to fund Ukraine through profits on frozen Russian assets, Italian Prime Minister Giorgia Meloni has said.

“I confirm to you that we have reached political agreement to provide additional financial support to Ukraine of approximately $50bn by the end of the year,” Meloni, who is hosting the G7 this year, said on Thursday.

Meloni had invited President Volodymr Zelenskyy to join a special summit session on the Ukraine war with US President Joe Biden and the leaders of France, Germany, Canada, Japan and the United Kingdom.

Addressing the meeting at the luxury Borgo Egnazia resort, Zelenskyy thanked the leaders for their support, which he said would go towards “both defence and reconstruction”, though he emphasised the need for more weapons.

The G7 plan for Ukraine is based on a multiyear loan using profits from some $300bn of impounded Russian funds.

The issue is complicated, however, because if the Russian assets one day are unfrozen, then the windfall profits will no longer be able to be used to pay off the loan.

Each G7 country will contribute to the loan package, European Commission President Ursula von der Leyen said.

“All G7 are contributing to this loan. It is the windfall profits from the Russian immobilised assets in Europe that will serve it,” von der Leyen told reporters on the sidelines of the G7 summit in southern Italy.

“The finance ministers are now going through the details – for example, the topic of backstops that are necessary – and [will] clarify this as soon as possible.”

Germany’s Finance Minister Christian Lindner hailed “unity” following the agreement.

“Good news from the G7: another $50 billion for Ukraine,” he wrote on X.

The deal on Ukraine’s loan agreed upon at the three-day summit, where leaders of the Group of Seven (G7) major democracies are convening, marks “a very historic step and a historic decision,” German Chancellor Olaf Scholz said on Thursday.

“The next step will be just to create the technical conditions for implementation in the shortest possible time,” Scholz said.

Scholz added that G7 leaders are sending a clear message to Russian President Vladimir Putin and demonstrating their unity and determination.

“The Russian president has a very obvious plan: he wants to push ahead with his war until everyone else gives up supporting Ukraine. This plan has failed today,” the chancellor said.

“With the G7 states’ plan to mobilise $50bn, which will be financed from the windfall profits of the frozen Russian assets, the foundation has been laid for Ukraine to be able to procure everything it needs in the near future, not only in terms of weapons, but also for reconstruction or energy infrastructure.”

‘Significant military force’

French President Emmanuel Macron said that finance ministers would now work on the details of the agreement.

Reporting from Moscow, Yulia Shapovalova said Russian Foreign Ministry representative Maria Zakharova said using those profits would be “extremely painful for Brussels”, as Russia owns significant European property and funds.

“So Europe will first have to pay for all its madness out of its own wallet,” said Zakharova.

Earlier, Finance Minister Anton Siluanov said actions against Russian assets in the West would receive a “reciprocal response” because in Russia essentially the same amount of Western funds have been frozen. He noted recently Russia has “income” from those assets.

US-Ukraine security deal

Also on Thursday, US President Joe Biden and Zelenskyy signed a 10-year bilateral security agreement aimed at bolstering Ukraine’s defence against Russia’s invasion.

The agreement, signed on the sidelines of the summit, is meant to be a step towards Ukraine’s eventual NATO membership, according to the text of the deal.

“The parties recognise this agreement as supporting a bridge to Ukraine’s eventual membership in the NATO alliance,” the text says.

Zelenskyy has long sought NATO membership but the allies have stopped short of taking that step. The Western alliance regards any attack launched on one of its 32 members as an attack on all under its Article Five clause.

President Joe Biden and Ukraine’s President Volodymyr Zelenskyy pose for a photo, as they attend an event with G7 leaders to announce a joint declaration of support for Ukraine [Kevin Lamarque/Reuters]

In the event of an armed attack or threat of such against Ukraine, top US and Ukrainian officials will meet within 24 hours to consult on a response and determine what additional defence needs are required for Ukraine, the agreement says.

Under the agreement, the United States restates its support for Ukraine’s defence of its sovereignty and territorial integrity, amid a renewed push by Russia on Ukraine’s eastern front.

“To ensure Ukraine’s security, both sides recognise Ukraine needs a significant military force, robust capabilities, and sustained investments in its defense industrial base that are consistent with North Atlantic Treaty Organization [NATO] standards,” the text says.

“The United States intends to provide long-term materiel, training and advising, sustainment, intelligence, security, defense industrial, institutional, and other support to develop Ukrainian security and defense forces that are capable of defending a sovereign, independent, democratic Ukraine and deterring future aggression,” it says.

The summit comes at a time of extraordinary global turmoil.

Apart from the conflict in Ukraine, Israel’s continuing assault in Gaza is raging and economic tensions are rising between China and Western countries.

Leaders’ last summit?

Many G7 countries are also in political flux, with summit attendees aware this could be Biden’s last G7 summit if he loses to Donald Trump in November’s elections.

The UK’s Prime Minister Rishi Sunak is tipped to be toppled in July 4 elections, while France’s Emmanuel Macron and Germany’s Scholz are both under pressure after gains by the far right in EU Parliament elections last weekend.

By contrast, Italy’s Meloni is riding high after her far-right party came out on top in her country’s EU Parliament vote.

The summit talks began with a short session on Africa, development and climate change, before turning to the Middle East.

G7 leaders have already announced their support for a Gaza truce deal outlined by Biden, which would also see the release of captives taken in Hamas’s October 7 attack on southern Israel.

Meanwhile, Biden said he has not lost hope of getting an agreement on a Gaza ceasefire, but called on the Palestinian Hamas group to step up.

Biden, asked if he was confident there would be a ceasefire deal between Hamas and Israel soon, said, “No”.

“I haven’t lost hope, but it’s going to be tough,” he told reporters. “Hamas has to move.”

Mediators from the US, Qatar and Egypt have tried for months to broker a ceasefire amid Israel’s deadly assault on Gaza, which has killed more than 37,200 Palestinians and devastated the heavily populated enclave.

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How can Europe become more competitive? | Business and Economy

Dubbed a ‘competitiveness crisis’, the EU’s investment, income and productivity are lagging behind the US and China.

Struggling with slow growth, weak productivity and changing demographics, Europe’s share of the global economy is shrinking and lagging behind the United States and China.

Its leaders are worried the continent might not be able to catch up and want to make the European Union more competitive.

To achieve that, former President of the European Central Bank Mario Draghi says the bloc needs “radical change”. But getting more than two dozen nations in the bloc to act jointly and carve out a way forward is challenging.

Can India’s prime minister push through economic reforms? Plus, What are the economic benefits of Hajj?

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‘Meloni wants to present Italy as the new European face in Africa’ | Business and Economy News

Bari, Italy – Africa is set to be high on Italy’s agenda this year at the Group of Seven (G7) leaders’ meeting, as Prime Minister Giorgia Meloni aims to position the country as a key energy hub between Europe and the continent.

But whether there is a clear vision and economic resources to do so remains to be seen, experts have warned.

A dozen heads of state are expected to attend the three-day forum, which starts Thursday in the southern region of Puglia, to discuss global politics.

Africa, climate change and development are up as the first themes of the initial G7 session.

Signalling Meloni’s outreach ambitions, a relatively high number of guests from the Global South have been invited to this year’s forum.

Russia’s invasion of Ukraine, Israel’s war on Gaza, and rising competition with China are expected to dominate talks, but Meloni wants the crown jewel of her foreign policy to feature prominently: the so-called Mattei Plan.

The project embodies her vision to project power in Africa and turn Italy into a bridge for gas to be distributed from Africa and the Mediterranean to the rest of Europe, as well as supporting economic growth to stem mass migration from the African continent.

But Meloni’s objectives seem to be centred on investment rather than development.

She has selected financial institutions, banks and private and state-owned companies for her push. The involvement of NGOs and humanitarian organisations is less prominent.

At the G7, experts have said, she will be seeking partnerships, money and legitimacy.

The timing could not be better for the prime minister who will be presiding the summit as Europe’s rising star following victory at the recent European Parliament elections.

A new face

“It’s about presenting a new strategy appealing to both the electorate and enterprises – Africa is seen as an opportunity to grow when diversifying energy partners and resources [are] key,” said Maddalena Procopio, a senior policy fellow in the Africa programme at the European Council on Foreign Relations.

“Meloni wants to present Italy as the new European face in Africa and to place emphasis on the continent at the G7 is a smart move because she knows there is an unprecedented global interest in it,” Procopio said.

Africa is home to some 30 percent of the world’s mineral reserves, many of which are critical to renewable and low-carbon technologies including solar and electric vehicles. It also stores 8 percent of the world’s natural gas, according to the UN.

Such resources are key as Western nations try to wean themselves off Russian gas after Moscow invaded Ukraine. Since last year, Algeria has accounted for nearly 40 percent of Italy’s gas imports.

Some observers say there is also a geopolitical calculus.

Italy’s ambition is to step in at a time when competitor France is suffering major setbacks.

Italy has a lighter colonial baggage compared with France and aims at striking a tone that is neither paternalistic nor imposing to African partners. Anti-French, anti-American sentiments have been brewing recently across the continent, especially in Francophone Africa where French troops have departed from several countries.

‘Just narrative’

Amid growing competition between the Western bloc and the China-Russia front, the EU and US will follow Meloni’s plan with interest, but there is a degree of scepticism about its viability.

During an Italy-Africa summit early this year, Meloni fleshed out five areas of investment –  energy, agriculture, water, health, and education – and a few pilot projects.

Observers were left unimpressed.

“It was vague and most of the projects presented were a rebranding of some already up and running,” said Bernardo Venturi, head of research and policy at the Agency for Peacebuilding NGO.

He said that no additional resources were allocated for the plan – other than 5 billion euros ($5.38bn) formerly taken from other budgets, and claimed most African partners had not been consulted.

Since then, a working group was set up where the foreign ministry and NGOs with decades of experience on the ground were left with a marginal role, he added.

Italy’s Prime Minister Giorgia Meloni speaks following the announcement of the partial results of the European Parliament elections, in Rome, Italy [Alberto Lingria/Reuters]

“Italy also lacks the economic resources to invest in new projects and has a marginal institutional presence across the continent,” said Venturi, who has closely watched the development of the project.

For that, it needs EU member states to financially support it, but Meloni has given a fairly a low degree of responsibility  to the foreign ministry, raising questions about its international reach.

Further criticism came from rights groups, who said the plan is an attempt to dress up anti-immigration policies as an energy investment scheme.

Meloni built up much of her election campaign on promises to address migration.

Human rights groups have accused her government of trying to impede the work of search and rescue organisations in the Mediterranean by restricting refugees’ rights to reach its shores.

An Italian official who spoke to Al Jazeera on condition of anonymity dismissed the initiative, saying, “There is not such a thing as the Mattei Plan, it’s just narrative”.

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UK’s Starmer says ‘wealth creation’ top priority in pitch to voters | Business and Economy News

Labour Party leader rules out any rise in income tax, for national insurance or VAT.

The UK’s opposition leader Keir Starmer has pledged to make wealth creation the top priority of his government in a pre-election pitch to voters.

Speaking ahead of the release of the Labour Party’s election manifesto on Thursday, Starmer said he would prioritise economic growth and not raise taxes.

“We will not raise tax on working people. That means no tax rises for income tax, for national insurance, for VAT [value-added tax],” Starmer said on Wednesday during a leaders’ debate hosted by Sky News.

“The manifesto tomorrow will be a manifesto, a plan, for wealth creation,” Starmer added. “Now you may not hear a Labour leader say that very often, but for me, that is the most important thing.”

Starmer, a former human rights lawyer-turned-prosecutor, is widely expected to win next month’s election after 14 years of Conservative Party rule.

Opinion polls have for months shown centre-left Labour to be leading the Conservatives by about 20 points.

Still, Starmer, 61, has sought to assure voters that Labour will govern with a pro-business and pro-growth agenda, after Jeremy Corbyn, the party’s most left-wing leader in decades, presided over its worst performance since 1935 at the last election.

As well as pledging not to raise personal taxes, Labour has ruled out raising corporation tax and said its plans do not require a hike in capital gains tax, although it has not committed to leaving the rate unchanged.

“I want to do things differently. I want to grow our economy. I accept that previous Labour leaders have sort of pulled the tax lever every single time and driven up spending,” Starmer said.

The UK has been among the worst-performing major economies in recent years.

The country slipped into recession in the last three months of 2023, with gross domestic product (GDP) declining 0.3 percent, following a 0.1 percent contraction in the previous quarter.

The Organisation for Economic Co-operation and Development (OECD) has forecast the UK to grow 0.4 percent this year, slower than any other G7 economy apart from Germany.

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How can Europe become more competitive? | Business and Economy

Dubbed a ‘competitiveness crisis’, the EU’s investment, income and productivity are lagging behind the US and China.

Struggling with slow growth, weak productivity and changing demographics, Europe’s share of the global economy is shrinking and lagging behind the United States and China.

Its leaders are worried the continent might not be able to catch up and want to make the European Union more competitive.

To achieve that, former President of the European Central Bank Mario Draghi says the bloc needs “radical change”. But getting more than two dozen nations in the bloc to act jointly and carve out a way forward is challenging.

Can India’s prime minister push through economic reforms? Plus, What are the economic benefits of Hajj?

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‘The future is dark’: Inside the Brazilian businesses shattered by floods | Floods News

Rambo’s store is one of around 45,000 businesses in the state capital that have been impacted by these devastating floods. Porto Alegre’s Chamber of Store Managers estimates that the total cost to commerce in the city was 487.7 million reals ($91m) between April 29 through May 26.

The floods began in late April after torrential rains inundated the city and surrounding mountains. The waters poured through towns and funnelled into the Guaiba River, which runs alongside Porto Alegre, causing the water to rise some 5.33 metres (17.48 feet) higher than normal — levels never before seen.

The previous high was 4.75 metres (15.6 feet) above normal, set during the historic floods of May 1941.

The owners of businesses near the Porto Alegre waterfront say they watched the floodwaters rise each day, until the river was at their doorsteps and flowing into their stores and restaurants.

“We were here almost a week without sleeping,” said Eni Verdejo Monteiro, the middle-aged owner of Lanches da Tia, a sandwich shop up the street from Rambo’s office supplies store.

When the waters poured into Monteiro’s premises and the electricity was cut, she and her husband found there was no way to close the large metal gate in the front of their restaurant. Fearing looters, they decided to stay put.

They were right to be vigilant. Dozens of people were arrested and jailed in the first weeks of the flooding after trying to break into and rob unprotected homes and businesses. Just in the town of Eldorado do Sul, $6m in equipment and products were stolen during break-ins at 17 businesses.

“Our son was worried,” Monteiro recalled. “We didn’t have a cell phone, because it ran out of batteries. We didn’t have any contact with anyone. No electricity. And the only thing you heard were the helicopters and the people screaming for help. There is no way to describe it.”

Like Rambo and her husband, Monteiro and her family are now trying to pick up the pieces.

“We have to talk about things a lot,” said Monteiro’s husband, Joao Batista Coelho. “We’re going to take a hit in the next two or three months. It’s all going to be a loss. We have no income. We lost our refrigerator, stove, cabinets, counter.”

And they have to pay rent. “The future is dark,” said Coelho, holding back tears. “But we can’t just give up.”

João Batista Coelho, right, and his wife Eni Verdejo Monteiro are struggling to survive without the income from their sandwich shop [Michael Fox/Al Jazeera]

State officials have said the flooding tragedy was the worst climate disaster in the history of southern Brazil. Experts believe reconstruction costs across Brazil’s southernmost state of Rio Grande do Sul could amount to some $4bn. More than 90 percent of the municipalities in the state were impacted — 2.3 million people.

The scale of the affected area is huge. Rio Grande do Sul is larger than the size of the United Kingdom. Six hundred thousand people were pushed from their homes. Fifty thousand are still in shelters. Rubble lines streets in towns across the state, as residents clear out their once cherished possessions and wait for them to be picked up by city clean-up crews.

Some areas have been hit worse than others. Entire sections of towns in the mountains north and west of Porto Alegre were obliterated by inundated rivers, which carried away homes, stores and businesses.

The town of Arroio do Meio was one of the hardest hit. Brazil’s President Luiz Inacio Lula da Silva visited it last week and walked with residents through city blocks that no longer existed — wiped clean by the floodwaters.

In the state capital, the devastation is best summed up as a tale of two cities. Low-lying areas close to the river, including City Hall and the historic city centre, were inundated like never before. Meanwhile, some neighbourhoods higher up on the hillsides seemed to carry on as usual, except that electricity and water were cut for several days as pumps and the electrical grid went offline.

Now, the city is re-emerging, but it’s a slow process. The Porto Alegre International Airport is expected to be closed until the end of the year. As of last week, the neighbourhoods of Humaita, Sarandi and Ilhas were still underwater.

President Lula has promised $10bn for the state’s recovery. The New Development Bank — previously known as the BRICS Development Bank, established by the BRICS states and led by former Brazilian President Dilma Rousseff — has promised another $1bn.

Nevertheless, it will take time for reconstruction to begin. Continued rains, strong winds and sputtering infrastructure have all slowed recovery efforts.

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Detained Uganda anti-pipeline activist released | Oil and Gas News

Environmental Governance Institute says Stephen Kwikiriza in ‘poor condition’ after ‘severe beatings’ in detention.

An activist with an environmental group campaigning to block a $5bn internationally financed oil pipeline running through Uganda has been released from detention, his employer says.

The Environmental Governance Institute (EGI) said in a statement on Monday that the activist was found abandoned on the side of a road in Kyenjoyo and is now safe.

“Unfortunately, he is in poor condition after enduring severe beatings, mistreatment, and abuse throughout the week. Doctors are conducting various examinations.”

EGI is campaigning to stop the construction of the 1,445km (900-mile) East African Crude Oil Pipeline, which is to carry oil from oilfields in western Uganda to a port on Tanzania’s coast.

EGI said the Ugandan military had detained Kwikiriza on Tuesday.

The International Federation for Human Rights (FIDH) said he was apparently taken by Ugandan army officers in civilian clothing, describing it as a “particularly worrying escalation of repression”.

A senior military officer on Monday confirmed Kwikiriza’s detention to the Agence France-Presse news agency.

“He was taken into custody for questioning regarding his illegal activities, including mobilising fellow activists to oppose the oil pipeline,” the officer told AFP on condition of anonymity, adding that he was released after interrogation.

“I have not been made aware of him being beaten during interrogation. It’s a matter that can be investigated and verified.”

FIDH said 11 environmental activists “were kidnapped, arbitrarily arrested, detained or subjected to different forms of harassment by the Ugandan authorities between May 27 and June 5, 2024”.

Human Rights Watch (HRW) had also voiced concern about Kwikiriza’s disappearance.

“The Ugandan government needs to end its harassment of opponents of oil development in the country, such as the East African Crude Oil Pipeline Project, which has already devastated thousands of people’s livelihoods in Uganda and, if completed, will displace thousands of people and contribute to the global climate crisis,” Myrto Tilianaki, senior environmental rights advocate at HRW, said in a statement.

French energy giant TotalEnergies owns the majority of the stake in the pipeline with the China National Offshore Oil Corporation and the Ugandan and Tanzanian governments holding minority stakes.

“TotalEnergies E&P Uganda does not tolerate any threat or attack against those who peacefully defend and promote human rights,” TotalEnergies said in a statement to the Reuters news agency on Monday.

The company has rejected the allegation by activists and international organisations that the pipeline will displace tens of thousands of people and destroy fragile ecosystems.

The European Parliament expressed its opposition to the pipeline in a resolution adopted in September 2022.

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Onion exports: How Pakistan briefly won at India’s cost in unlikely matchup | Business and Economy News

Islamabad, Pakistan – Pakistani onion farmers and exporters are celebrating a windfall due to an unprecedented surge in exports over the past few months, an unlikely win at the cost of their counterparts across the border in India.

The South Asian nations, bitter rivals in myriad arenas, are also major onion producers. But India is also the world’s second-largest onion exporter after China, and is a dominant force in the global market for the vegetable, its produce often crowding out onions from smaller nations.

So, in December, when India imposed an export ban due to a decline in local onion production, ahead of national elections, Pakistani farmers and exporters jumped at what they recognised was a rare opportunity. In 2023, India exported nearly 2.5 million tonnes of onions. Suddenly the world onion market had a gap — one that Pakistan partly filled.

Pakistan managed to export more than 220,000 tonnes of onions between December and March this year, which was a little more than its usual annual onion export volume.

Waheed Ahmed, patron-in-chief of the All Pakistan Fruit and Vegetable Exporters, Importers and Merchants Association (PFVA), attributed this success to quick thinking — and a government willingness, at least for a while, to allow exports without placing a ban similar to India’s.

“When India placed the ban, we urged the government to allow us to avail the opportunity, and by our timely action, we managed to earn more than $200m in revenue for the country,” Ahmed told Al Jazeera.

The Pakistani government did eventually impose restrictions on onion exports, as the outward flood of the produce meant soaring domestic prices. But exports already under way through deals approved before the restrictions are expected to bring another $50m in revenue by the end of the fiscal year in June, said Ahmed.

By contrast, Ahmed said, the country typically earns between $110m and $150m from onion exports per year. Last year, the country was able to earn more than $235m in total from vegetable exports, with onion exports contributing about $90m.

Domestic shortage and price hike

For Pakistan, which has faced a desperate economic situation over the last two years, the export brought much-needed foreign reserves. The country’s central bank data showed that forex reserves, which were as low as $3bn last year, have recovered to $9bn this month, enough to cover imports for six weeks.

However, like onions, the feel-good story has multiple layers. The success of Pakistani onion exports resulted in a shortage of onions in the domestic market for a few months.

With more than 220,000 tonnes of the harvest being shipped overseas, the availability of onions for local consumption dwindled, pushing prices upwards between December and April, the duration when Indian onions were blocked from being exported, hitting ordinary Pakistanis hard.

The first four months of the year saw onion prices, typically 50 to 80 rupees ($0.18 to $0.29) per kilogramme, rise as high as 250 to 350 rupees ($0.90 to $1.26) per kilogramme, before gradually dropping in May.

“Onions are a staple in our daily meals,” Sumaira a housemaid in Islamabad who goes by one name, told Al Jazeera. “But with everything else getting more expensive, the rising onion price just adds to the burden,” she said.

Hamid Baloch, originally from Pasni in the southwestern province of Balochistan but currently working as a chef in a cafe in Islamabad, said the increase in onion prices impacted his business both in terms of production costs and sales.

“We buy in bulk, and one bag of 5 kilos of onions was going for 1500 rupees to 1800 rupees [$5.39 to $6.47] before it started coming down this month. Now it is available for close to 500 rupees [$1.50],” the 25-year-old told Al Jazeera while slicing onions for the chicken curry he was preparing.

Chef Hamid Baloch prepares chicken curry at his cafe in Islamabad [Abid Hussain/Al Jazeera]

According to the World Bank, more than 39 percent of Pakistanis earn less than $3.5 a day, and one of them is Muhammad Azam.

A daily wage worker in Islamabad, Azam said the rising cost of living meant people like him struggled to afford necessities.

“My children and I cannot even think about eating chicken more than once every two months. All we have are pulses and vegetables like onions or tomatoes, but in the last few months, even those were nearly impossible to buy,” he said.

However, he acknowledged that the last few weeks have seen a declining price trend in not only onions but other items as well.

Godsend opportunity

Inflation data and exporters both concur with the reduction in onion price.

Government figures showed that inflation, which had hit a record high of more than 38 percent May of last year, continued its downward trend, with the inflation figure for May 2024 recorded at 11.8 percent.

According to Imtiaz Hussain, a fruit and vegetable exporter in Karachi, the declining price of onions was due to the Indian government reversing its export ban.

“In early May, the Indian government reopened its onion exports, and markets in the Gulf region and some countries in the Far East, where we were able to sell, went back to procuring their onions from India,” he told Al Jazeera.

Ahmed, the PFVA official, said that exporters and farmers showed “good sense and opportunism” to export as many onions as they could during the short time period, when the government curtailed onion exports in March.

“Our aim was to continue exporting without causing a significant shortage in the domestic market,” he said.

Countering the inflated onion prices, Ahmed said that the increase was due to retailers exploiting customers while blaming exporters.

“In our wholesale markets, onions were continuously available for less than 150 rupees ($0.54) per kilogramme, so why should we get the blame if retailers sell them for more than 300 rupees? This is for the government to address, not us,” he said.

For Ahmed, the opportunity to earn foreign exchange was a balancing act after 2022, when floods destroyed large crops, including onions, in Pakistan’s southern areas, causing immense devastation to farmers.

“We suffered due to the flood, but this opportunity was a godsend. If farmers earn from one crop, they will invest more in the next crop. We just need to work on training our farmers to learn better, modern agricultural practices to increase their yield and revenue.”

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India’s Modi urged to set ‘ambitious’ economic agenda after poll humbling | Business and Economy News

Indian Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) campaigned on India’s sizeable economic expansion in the lead-up to the country’s recent national elections.

Since Modi came to power in 2014, GDP per capita has risen from about $5,000 to more than $7,500.

India’s GDP growth hit 8.4 percent in the financial year ending March, making it by far the fastest-growing major economy.

At the same time, the economy is producing much far less impressive data, including a high unemployment rate, which rose to 8.1 percent in April from 7.4 percent in March.

It is this statistic, along with high inflation, that has been touted as a key reason for the weaker-than-expected performance of the BJP, which won 240 seats, well below its previous tally of 303 and fewer than the 273 needed to form a government on its own.

While Modi has formed a government with the help of his National Democratic Alliance partners, his reliance on smaller parties changes the equation for a leader who commanded outright majorities during his previous two stints as prime minister.

“This is going to be really unusual for Prime Minister Modi,” Vina Nadjibulla, vice president of research and strategy at the Asia Pacific Foundation of Canada, told Al Jazeera.

“It was partly why the markets reacted the way they did,” Nadjibulla added, referring to the sharp drop in Indian stocks following the election result.

Nadjibulla said investors are concerned Modi may be unable to push through reforms needed to tackle issues such as high unemployment.

Despite strong headline economic growth, nearly half of India’s population is still employed in the relatively unproductive agricultural sector – a share that rose during Modi’s second term, from 42.5 percent in 2018-19 to 45.8 percent in 2022-23, according to an Oxford Economics report.

Young people, in particular, suffer from a lack of employment – in 2022-23, the youth unemployment rate was about 10 times higher than the adult rate, according to the report.

It is “ironic” that India’s robust growth under the Modi government “has come at the cost of economic stability for the lower classes”, Michael Kugelman, director of the South Asia Institute at the Wilson Center, told Al Jazeera.

In its third term, the Modi government will have to find a way to help poorer Indians in a way that goes beyond building infrastructure, Kugelman said.

“Across the board, it’s going to be a very ambitious economic agenda,” he said.

Manufacturing vs services job

Much has been made of India’s push to boost manufacturing, create jobs and lure global brands looking to set up alternative supply chains in the face of trade tensions between the United States and China.

India’s “Make in India” drive, however, has done little to create jobs for the large segment of the population that is still employed in agriculture.

India wants to create a manufacturing powerhouse to create jobs [File: Amit Dave/Reuters]

One reason for this is that the government’s focus has largely been on promoting higher value-added yet less labour-intensive sectors such as electronics, Alexandra Hermann, Oxford Economics lead economist, told Al Jazeera, adding that this would probably not change.

Another oft-touted reason is the lack of “big bang” reforms to land and labour rules, experts say, which are needed to bring in the type of major investment needed to really expand manufacturing.

While the Modi government has failed to make serious headway in this area – despite large majorities in parliament – experts say its coalition partners may now help it pave the way for some of those measures as jobs will benefit all voters.

Coalition partners could also help the Modi government make some progress in its so far failed efforts for land and labour reform, which have been highlighted as a necessary step to attract more investment in manufacturing.

“There will have to be some coordination with state governments… and coalition partners are regional parties that will have a lot of sway in some parts of the country and that is where a coalition government will be very helpful for Modi and the BJP,” Kugelman said.

For now, rather than relying on manufacturing, India’s growth story has largely been driven by services, which experts say will only be able to continue over the longer term and create sustainable and inclusive growth if human capital levels increase.

“Raising human capital levels on a broad basis will be crucial to create inclusive and sustainable growth over the medium-to-long-term,” Hermann said.

“Although India is home to some top technology and management universities nurturing global business leaders, it is the quality of primary and secondary education that still leave the Indian population, on average, relatively low-skilled. [But in its manifesto] the BJP fell short of committing to the higher spending goal,” Kugelman said.

Kugelman agreed. 

“Some of the fastest growing sectors are in services but the labour force is not equipped for those jobs and there’s a complete mismatch,” he said.

India’s labour force is not equipped with skills for the services sector [File: Bhumika Saraswati/AP Photo]

‘Conditions for private investment’

Ultimately, though, GDP growth and job creation are driven primarily by private investment, said Ajay Shah, an economist in Mumbai.

Private investment has not fared well in India since 2009 or 2011, depending on which measure you use, so “the organising principle for economic policy should be to create conditions for private investment”, Shah told Al Jazeera.

Part of the reason for the lack of success in this area has been excessive central planning in economic policy, Shah said.

“This,” he said, “creates policy risk. Arms of the government behave in unpredictable and personalised ways. This creates risk for private persons.”

Shah expressed hope that the incoming coalition will be better positioned to address such problems.

“There are more checks and balances,” he said.

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Samsung workers in South Korea take industrial action for first time | Business and Economy News

National Samsung Electronics Union, which represents tens of thousands of people, is pushing for better wages.

Staff at Samsung Electronics, one of the world’s largest smartphone manufacturers and also one of the only companies producing high-end semiconductors, have taken industrial action for the first time as part of a six-month campaign for better pay.

Son Woo-mok, head of the National Samsung Electronics Union (NSEU), which represents tens of thousands of people, said that employees were taking their paid leave entitlements simultaneously on Friday.

“It’s difficult to provide an exact number, but from what I’ve seen of the workplace attendance in the morning, there is a significant difference from the usual,” he said.

Samsung has been locked in negotiations with the unions over pay since January. The company has offered a 5.1 percent pay rise this year, while the union has said that it wants an additional day of annual leave as well as transparent performance-based bonuses.

On Friday, Samsung said it had been “diligently engaging in negotiations and will continue to do so”, and that there had been no impact on production. The company’s chips are used for generative AI, including AI hardware from industry leaders including Nvidia.

“The paid leave usage rate on June 7 is lower than that of June 5 last year,” which, like Friday, was sandwiched between a public holiday and a weekend, the company said in a statement.

About 10 workers held a protest in front of Samsung’s major office in Seoul on Friday, chanting: “Respect labour! We are not wanting a 6.5 percent raise or a 200 percent bonus!”

The NSEU has been negotiating over pay since January, and some workers took to the streets last month [Kim Soo-hyeon/Reuters]

Samsung Electronics is the flagship subsidiary of South Korean giant Samsung Group, by far the largest of the family-controlled conglomerates that dominate business in Asia’s fourth-largest economy.

At the end of April, it reported a nearly 10-fold jump in first-quarter operating profit to 6.61 trillion won ($4.85bn) thanks to strong sales of its flagship Galaxy S24 smartphone and higher prices for its semiconductors.

Taiwan-based market research firm TrendForce said that while the firm accounts for a significant chunk of the global output of high-end chips, the strike would not affect production because it involves headquarters employees rather than those on the production lines.

Even so, the strike has historical importance, “since Samsung resisted unionisation and engaged in union-busting for so long”, Vladimir Tikhonov, professor of Korean studies at the University of Oslo, told the AFP news agency.

He said the collective action showed that “there is a gradual tendency towards empowerment of labour in South Korea”.

Samsung Electronics prevented the unionisation of its employees for almost 50 years, sometimes adopting ferocious tactics, according to critics, as it turned itself into a global electronics giant.

But in the late 2010s, organisers seized the opportunity presented by the left-leaning government of former President Moon Jae-in, a former rights lawyer who represented trade unions, and controversy around the bribery trial of the company’s then-vice-chairman Lee Jae-yong, the founder’s grandson, to set up a union.

The NSEU now has about 28,000 members, or more than a fifth of Samsung’s total workforce, and is the biggest of the five unions at the company.

Lee Hyun-kook, the union’s vice president, said the strike would not create disruption in production and nor was that the intention.

“We just want Samsung to hear our voice,” he told AFP.

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