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Macro Thoughts

Home Thoughts

Revelation 6:12-13: When he opened the sixth seal, I looked, and
behold, there was a great earth- quake, and the sun became black as
sackcloth, the full moon became like blood, and the stars of the sky
fell to the earth as the fig tree sheds its winter fruit when shaken
by a gale.

I learnt that in the last 44 years, we have achieved what we haven’t
in all this while: a mass annihilation of our fellow earthlings.
Between 1970 and 2014, Earth lost nearly 60% decline of its mammals,
birds, fish, reptiles and amphibians, almost all of it due to human
activity.

2 Vanity[a] of vanities, says the Preacher, vanity of vanities! All is
vanity. 11 There is no remembrance of former things,[c] nor will there
be any re- membrance of later things[d] yet to be among those who come
after.

Lao Tzu put it “Men are born soft and supple; dead they are stiff and
hard. Plants are born tender and pliant; dead, they are brittle and
dry. Thus whoever is stiff and inflexible is a disciple of death.
Whoever is soft and yielding is a disciple of life. The hard and stiff
will be broken. The soft and supple will prevail.”

“The problem,” writes the archaeologist Þóra Pétursdóttir, “is not
that things become buried far down in strata – but that they endure,
outlive us, and come back at us with a force we didn’t realise they
had, a dark force of ‘sleeping giants’,” roused from their deep-time
slumber.

Political Reflections

Donald Trump posing with Jerry Falwell Jr. and his family at
Mar-a-Lago. On Thursday, Falwell tweeted, “I told the crowd at the
Palm Beach GOP Christmas/Hanukkah party tonight that I predict the
2020 election will be Hiroshima and Nagasaki for the Dems!”

Beijing’s crackdown in Xinjiang is driving hundreds of thousands of
businesspeople and workers to abandon Korla, crippling the economy of
the region’s second-largest city.
In multiple interviews with the Financial Times, Korla businesspeople
estimated that the city’s population has halved from about 500,000
after the government implemented harsh security measures over the past
few years.
The residents most able to leave voluntarily are migrant
businesspeople from China’s dominant Han ethnic majority — the very
people the Communist party had attracted to Xinjiang in the hope that
they would “civilise” the region’s Turkic Uighur Muslim population and
build the local economy.
“It’s difficult to find labourers now and there’s no money to be
earned,” said a stall keeper at Korla’s agricultural market, who had a
“help wanted” sign on her stall. “The people have all left.”
None of those interviewed in Korla wished to be named for fear of
government reprisals.
Korla has historically been a frontier of the Han Chinese influx into
Xinjiang with PetroChina, the country’s largest petroleum company,
developing one of its biggest oilfields in the area.
The city became “a showpiece for tourists and prospective migrants of
how good life can be on the frontier”, said Tom Cliff, author of Oil
and Water: Being Han in Xinjiang.
“Han population decline shows that life is no longer good on the
frontier, even for the relatively privileged settlers,” said Mr Cliff.
In 2016, Chen Quanguo, Xinjiang’s new party secretary, introduced
security measures affecting all ethnicities in the region, from police
checkpoints and street surveillance cameras to identity checks and bag
scans at shopping malls and parks.
When you go into a shopping centre you have to scan your face, scan
your ID, scan your bag, store your bag in a locker. You have to hand
over ID just to buy something
At the same time, the government has detained about 1.8m Muslims,
turning many urban areas into ghost towns.
The economy has suffered as a result. Xinjiang’s official figures show
that fixed-asset investment dropped 36 per cent in the two years since
2016 in Bayingolin prefecture, which includes Korla, although it
picked up slightly in 2019.
Estimating the real population of cities in China is difficult because
official figures usually track people with local household
registrations or hukou. Such figures ignore the vast floating
population of workers and businesspeople.
Changing one’s hukou is a difficult process — the local government of
Urumqi, Xinjiang’s capital, has sometimes stopped processing
applications from people wishing to move out.
The Korla statistics bureau website shows the city’s hukou population
declined by 5 per cent from 2016 to a total of 472,600 in 2018.
But locals believe the decline in Korla’s total population has been
much higher. Six local Han Chinese businesspeople working in real
estate, agriculture, services and retail estimated that the city
population had halved from between 500,000-600,000 to about
200,000-300,000 over the past two years.
In the city centre, rows of shops were shuttered. Farther out, many
low-rise houses — usually rented by migrant workers — had been
demolished.
Staff at an employment bureau in Korla said the “crowds” of jobseekers
coming in before 2016 had shrunk to barely one or two per day.
“The campaign to ‘sweep out bad elements’ was part of the reason for
the halving in population,” said one Han Chinese worker at the city’s
agricultural market.
Another small business owner said people left Korla because of the
inconvenience of the security. “It’s not that living here isn’t
‘stable’,” he said, using the Chinese authorities’ term for their
mission in Xinjiang — to “stabilise” the region.
“It’s the pressure of daily life. When you go into a shopping centre
you have to scan your face, scan your ID, scan your bag, store your
bag in a locker. You have to hand over ID just to buy something,” he
said.
The experiences of Korla’s locals chime with what analysts suspect has
been a general economic slowdown in Xinjiang since the start of the
police crackdown.
Xinjiang’s economy is already highly reliant on government support.
This month, the central government announced it had been making annual
transfers of Rmb400bn to Xinjiang in recent years — or about one-third
of the region’s gross domestic product in 2018.
“Economic growth is an imperative for the government in Xinjiang,”
said Adrian Zenz, author of a book on China’s policies towards
minorities. “But the official figures hide the underlying reality that
the economy is tanking even more than they say and people are
leaving.”

Dissent is measured and snuffed out very quickly in China. China has
unveiled a Digital Panopticon in Xinjiang where a combination of data
from video surveillance, face and license plate recognition, mobile
device locations, and official records to identify targets for
detention. Xinjiang is surely a precursor for how the CCCP will manage
dissent. The actions in Xinjiang are part of the regional authorities’
ongoing “strike-hard” campaign, and
of Xi’s “stability maintenance” and “enduring peace” drive in the
region. Authorities say the campaign targets “terrorist elements,” but
it is in practice far broader, and encompasses anyone suspected of
political disloyalty.

Unless we are now going to Xinjiang the Whole World [A Million People
Are Jailed at China’s Gulags. I managed to escape. Here’s what really
goes on inside @haaretzcom “children are being taken from their
parents, who are confined in concentration camps, and being put in
Chinese orphana- ges,” he says. “Women in the camps are receiving
inoculations that make them infertile’’], the current modus operandi
is running on empty.

Be Water
(imperative) A martial arts philosophy popularised by actor Bruce Lee
in the early 1970s and adopted by pro-democracy demonstrators in Hong
Kong in 2019
Before the Hong Kong authorities know what is happening, the
protesters have already “gathered like dew” to block an important road
or surround a government building.
By the time the riot police have assembled to confront them they have
“scattered like mist”. As they escape through the city’s narrow
streets they are “fluid like water”, and if they are caught and have
to fight then they are “hard like ice”.
This is the “be water” philosophy of the protests that have rocked
Asia’s premier financial centre for more than six months and show no
sign of ending any time soon.
Confronted by the overwhelming might of the Beijing-backed Hong Kong
government and the threat of possible intervention by the Chinese
People’s Liberation Army, the mostly young protesters have chosen to
adopt the philosophy of the city’s most famous son.
Born in Hong Kong but made famous by Hollywood, Bruce Lee is an icon
the world over, but a god in his home town. Far more than just an
actor, Lee was a martial arts master and a warrior monk philosopher in
his own right. Explaining his meaning in an interview in the early
1970s he put it this way:
“Empty your mind. Be formless, shapeless like water. Now you put water
in to a cup, it becomes the cup. You put water into a bottle, it
becomes the bottle. You put water in a teapot, it becomes the teapot.
Now water can flow or it can crash. Be water my friend.”
It is not only his compatriots who have heeded his words. As 2019 wore
on, other protest movements across the world, from Spain to Chile to
Lebanon, appeared to be consciously adopting the “Be Water” tactics of
the Hong Kong protests.

“Water is fluid, soft, and yielding. But water will wear away rock,
which is rigid and cannot yield. As a rule, whatever is fluid, soft,
and yielding will overcome whatever is rigid and hard. This is another
paradox: What is soft is strong,” Lao Tzu

A stable world order is a rare thing. When one does arise, it tends to
come after a great convulsion that creates both the conditions and the
desire for something new. It requires a stable distribution of power
and broad acceptance of the rules that govern the conduct of
international relations. It also needs skillful statecraft, since an
order is made, not born. And no matter how ripe the starting
conditions or strong the initial desire, maintaining it demands
creative diplomacy, functioning institutions, and effective action to
adjust it when circumstances change and buttress it when challenges
come.Eventually, inevitably, even the best-managed order comes to an
end. The balance of power underpinning it becomes imbalanced. The
institutions supporting it fail to adapt to new conditions. Some
countries fall, and others rise, the result of changing capacities,
faltering wills, and growing ambitions. Those responsible for
upholding the order make mistakes both in what they choose to do and
in what they choose not to do. But if the end of every order is
inevitable, the timing and the manner of its ending are not. Nor is
what comes in its wake. Orders tend to expire in a prolonged
deterioration rather than a sudden collapse. And just as maintaining
the order depends on effective statecraft and effective action, good
policy and proactive diplomacy can help determine how that
deterioration unfolds and what it brings. Yet for that to happen,
something else must come first: recognition that the old order is
never coming back and that efforts to resurrect it will be in vain. As
with any ending, acceptance must come before one can move on. In the
search for parallels to today’s world, scholars and practitioners have
looked as far afield as ancient Greece, where the rise of a new power
resulted in war between Athens and Sparta, and the period after World
War I, when an isolationist United States and much of Europe sat on
their hands as Germany and Japan ignored agreements and invaded their
neighbors. But the more illuminating parallel to the present is the
Concert of Europe in the nineteenth century, the most important and
successful effort to build and sustain world order until our own time.
From 1815 until the outbreak of World War I a century later, the order
established at the Congress of Vienna defined many international
relationships and set (even if it often failed to enforce) basic rules
for international conduct. It provides a model of how to collectively
manage security in a multipolar world. That order’s demise and what
followed offer instructive lessons for today—and an urgent warning.
Just because an order is in irreversible decline does not mean that
chaos or calamity is inevitable. But if the deterioration is managed
poorly, catastrophe could well follow.

OUT OF THE ASHES

The global order of the second half of the twentieth century and the
first part of the twenty-first grew out of the wreckage of two world
wars. The nineteenth-century order followed an earlier international
convulsion: the Napoleonic Wars, which, after the French Revolution
and the rise of Napoleon Bonaparte, ravaged Europe for more than a
decade. After defeating Napoleon and his armies, the victorious
allies—Austria, Prussia, Russia, and the United Kingdom, the great
powers of their day—came together in Vienna in 1814 and 1815. At the
Congress of Vienna, they set out to ensure that France’s military
never again threatened their states and that revolutionary movements
never again threatened their monarchies. The victorious powers also
made the wise choice to integrate a defeated France, a course very
different from the one taken with Germany following World War I and
somewhat different from the one chosen with Russia in the wake of the
Cold War. The congress yielded a system known as the Concert of
Europe. Although centered in Europe, it constituted the international
order of its day given the dominant position of Europe and Europeans
in the world. There was a set of shared understandings about relations
between states, above all an agreement to rule out invasion of another
country or involvement in the internal affairs of another without its
permission. A rough military balance dissuaded any state tempted to
overthrow the order from trying in the first place (and prevented any
state that did try from succeeding). Foreign ministers met (at what
came to be called “congresses”) whenever a major issue arose. The
concert was conservative in every sense of the word. The Treaty of
Vienna had made numerous territorial adjustments and then locked
Europe’s borders into place, allowing changes only if all signatories
agreed. It also did what it could to back monarchies and encourage
others to come to their aid (as France did in Spain in 1823) when they
were threatened by popular revolt.  The concert worked not because
there was complete agreement among the great powers on every point but
because each state had its own reasons for supporting the overall
system. Austria was most concerned with resisting the forces of
liberalism, which threatened the ruling monarchy. The United Kingdom
was focused on staving off a renewed challenge from France while also
guarding against a potential threat from Russia (which meant not
weakening France so much that it couldn’t help offset the threat from
Russia). But there was enough overlap in interests and consensus on
first-order questions that the concert prevented war between the major
powers of the day.
The concert technically lasted a century, until the eve of World War
I. But it had ceased to play a meaningful role long before then. The
revolutionary waves that swept Europe in 1830 and 1848 revealed the
limits of what members would do to maintain the existing order within
states in the face of public pressure. Then, more consequentially,
came the Crimean War. Ostensibly fought over the fate of Christians
living within the Ottoman Empire, in actuality it was much more about
who would control territory as that empire decayed. The conflict
pitted France, the United Kingdom, and the Ottoman Empire against
Russia. It lasted two and a half years, from 1853 to 1856. It was a
costly war that highlighted the limits of the concert’s ability to
prevent great-power war; the great-power comity that had made the
concert possible no longer existed. Subsequent wars between Austria
and Prussia and Prussia and France demonstrated that major-power
conflict had returned to the heart of Europe after a long hiatus.
Matters seemed to stabilize for a time after that, but this was an
illusion. Beneath the surface, German power was rising and empires
were rotting. The combination set the stage for World War I and the
end of what had been the concert.

WHAT AILS THE ORDER?

What lessons can be drawn from this history? As much as anything else,
the rise and fall of major powers determines the viability of the
prevailing order, since changes in economic strength, political
cohesion, and military power shape what states can and are willing to
do beyond their borders. Over the second half of the nineteenth
century and the start of the twentieth, a powerful, unified Germany
and a modern Japan rose, the Ottoman Empire and tsarist Russia
declined, and France and the United Kingdom grew stronger but not
strong enough. Those changes upended the balance of power that had
been the concert’s foundation; Germany, in particular, came to view
the status quo as inconsistent with its interests. Changes in the
technological and political context also affected that underlying
balance. Under the concert, popular demands for democratic
participation and surges of nationalism threatened the status quo
within countries, while new forms of transportation, communication,
and armaments transformed politics, economics, and warfare. The
conditions that helped give rise to the concert were gradually undone.

Because orders tend to end with a whimper rather than a bang, the
process of deterioration is often not evident to decision-makers until
it has advanced considerably.
Yet it would be overly deterministic to attribute history to
underlying conditions alone. Statecraft still matters. That the
concert came into existence and lasted as long as it did underscores
that people make a difference. The diplomats who crafted it—Metternich
of Austria, Talleyrand of France, Castlereagh of the United
Kingdom—were exceptional. The fact that the concert preserved peace
despite the gap between two relatively liberal countries, France and
the United Kingdom, and their more conservative partners shows that
countries with different political systems and preferences can work
together to maintain international order. Little that turns out to be
good or bad in history is inevitable. The Crimean War might well have
been avoided if more capable and careful leaders had been on the
scene. It is far from clear that Russian actions warranted a military
response by France and the United Kingdom of the nature and on the
scale that took place. That the countries did what they did also
underscores the power and dangers of nationalism. World War I broke
out in no small part because the successors to German Chancellor Otto
von Bismarck were unable to discipline the power of the modern German
state he did so much to bring about.

Two other lessons stand out. First, it is not just core issues that
can cause an order to deteriorate. The concert’s great-power comity
ended not because of disagreements over the social and political order
within Europe but because of competition on the periphery. And second,
because orders tend to end with a whimper rather than a bang, the
process of deterioration is often not evident to decision-makers until
it has advanced considerably. By the outbreak of World War I, when it
became obvious that the Concert of Europe no longer held, it was far
too late to save it—or even to manage its dissolution.

A TALE OF TWO ORDERS

The global order built in the aftermath of World War II consisted of
two parallel orders for most of its history. One grew out of the Cold
War between the United States and the Soviet Union. At its core was a
rough balance of military strength in Europe and Asia, backed up by
nuclear deterrence. The two sides showed a degree of restraint in
their rivalry. “Rollback”—Cold War parlance for what today is called
“regime change”—was rejected as both infeasible and reckless. Both
sides followed informal rules of the road that included a healthy
respect for each other’s backyards and allies. Ultimately, they
reached an understanding over the political order within Europe, the
principal arena of Cold War competition, and in 1975 codified that
mutual understanding in the Helsinki Accords. Even in a divided world,
the two power centers agreed on how the competition would be waged;
theirs was an order based on means rather than ends. That there were
only two power centers made reaching such an agreement easier.  The
other post–World War II order was the liberal order that operated
alongside the Cold War order. Democracies were the main participants
in this effort, which used aid and trade to strengthen ties and
fostered respect for the rule of law both within and between
countries. The economic dimension of this order was designed to bring
about a world (or, more accurately, the non-communist half of it)
defined by trade, development, and well-functioning monetary
operations. Free trade would be an engine of economic growth and bind
countries together so that war would be deemed too costly to wage; the
dollar was accepted as the de facto global currency. The diplomatic
dimension of the order gave prominence to the UN. The idea was that a
standing global forum could prevent or resolve international disputes.
The UN Security Council, with five great-power permanent members and
additional seats for a rotating membership, would orchestrate
international relations. Yet the order depended just as much on the
willingness of the noncommunist world (and U.S. allies in particular)
to accept American primacy. As it turns out, they were prepared to do
this, as the United States was more often than not viewed as a
relatively benign hegemon, one admired as much for what it was at home
as for what it did abroad.  Both of these orders served the interests
of the United States. The core peace was maintained in both Europe and
Asia at a price that a growing U.S. economy could easily afford.
Increased international trade and opportunities for investment
contributed to U.S. economic growth. Over time, more countries joined
the ranks of the democracies. Neither order reflected a perfect
consensus; rather, each offered enough agreement so that it was not
directly challenged. Where U.S. foreign policy got into trouble—such
as in Vietnam and Iraq—it was not because of alliance commitments or
considerations of order but because of ill-advised decisions to
prosecute costly wars of choice.

Today, both orders have deteriorated. Although the Cold War itself
ended long ago, the order it created came apart in a more piecemeal
fashion—in part because Western efforts to integrate Russia into the
liberal world order achieved little. One sign of the Cold War order’s
deterioration was Saddam Hussein’s 1990 invasion of Kuwait, something
Moscow likely would have prevented in previous years on the grounds
that it was too risky. Although nuclear deterrence still holds, some
of the arms control agreements buttressing it have been broken, and
others are fraying.  Although Russia has avoided any direct military
challenge to NATO, it has nonetheless shown a growing willingness to
disrupt the status quo: through its use of force in Georgia in 2008
and Ukraine since 2014, its often indiscriminate military intervention
in Syria, and its aggressive use of cyberwarfare to attempt to affect
political outcomes in the United States and Europe. All of these
represent a rejection of the principal constraints associated with the
old order. From a Russian perspective, the same might be said of NATO
enlargement, an initiative clearly at odds with Winston Churchill’s
dictum “In victory, magnanimity.” Russia also judged the 2003 Iraq war
and the 2011 NATO military intervention in Libya, which was undertaken
in the name of humanitarianism but quickly evolved into regime change,
as acts of bad faith and illegality inconsistent with notions of world
order as it understood them.  The liberal order is exhibiting its own
signs of deterioration. Authoritarianism is on the rise not just in
the obvious places, such as China and Russia, but also in the
Philippines, Turkey, and eastern Europe. Global trade has grown, but
recent rounds of trade talks have ended without agreement, and the
World Trade Organization (WTO) has proved unable to deal with today’s
most pressing challenges, including nontariff barriers and the theft
of intellectual property. Resentment over the United States’
exploitation of the dollar to impose sanctions is growing, as is
concern over the country’s accumulation of debt.  The UN Security
Council is of little relevance to most of the world’s conflicts, and
international arrangements have failed more broadly to contend with
the challenges associated with globalization. The composition of the
Security Council bears less and less resemblance to the real
distribution of power. The world has put itself on the record as
against genocide and has asserted a right to intervene when
governments fail to live up to the “responsibility to protect” their
citizens, but the talk has not translated into action. The Nuclear
Nonproliferation Treaty allows only five states to have nuclear
weapons, but there are now nine that do (and many others that could
follow suit if they chose to). The EU, by far the most significant
regional arrangement, is struggling with Brexit and disputes over
migration and sovereignty. And around the world, countries are
increasingly resisting U.S. primacy.

Why is all this happening? It is instructive to look back to the
gradual demise of the Concert of Europe. Today’s world order has
struggled to cope with power shifts: China’s rise, the appearance of
several medium powers (Iran and North Korea, in particular) that
reject important aspects of the order, and the emergence of nonstate
actors (from drug cartels to terrorist networks) that can pose a
serious threat to order within and between states.
The technological and political context has changed in important ways,
too. Globalization has had destabilizing effects, ranging from climate
change to the spread of technology into far more hands than ever
before, including a range of groups and people intent on disrupting
the order. Nationalism and populism have surged—the result of greater
inequality within countries, the dislocation associated with the 2008
financial crisis, job losses caused by trade and technology, increased
flows of migrants and refugees, and the power of social media to
spread hate.  Meanwhile, effective statecraft is conspicuously
lacking. Institutions have failed to adapt. No one today would design
a UN Security Council that looked like the current one; yet real
reform is impossible, since those who would lose influence block any
changes. Efforts to build effective frameworks to deal with the
challenges of globalization, including climate change and
cyberattacks, have come up short. Mistakes within the EU—namely, the
decisions to establish a common currency without creating a common
fiscal policy or a banking union and to permit nearly unlimited
immigration to Germany—have created a powerful backlash against
existing governments, open borders, and the EU itself.

The United States, for its part, has committed costly overreach in
trying to remake Afghanistan, invading Iraq, and pursuing regime
change in Libya. But it has also taken a step back from maintaining
global order and in certain cases has been guilty of costly
underreach. In most instances, U.S. reluctance to act has come not
over core issues but over peripheral ones that leaders wrote off as
not worth the costs involved, such as the strife in Syria, where the
United States failed to respond meaningfully when Syria first used
chemical weapons or to do more to help anti-regime groups. This
reluctance has increased others’ propensity to disregard U.S. concerns
and act independently. The Saudi-led military intervention in Yemen is
a case in point. Russian actions in Syria and Ukraine should also be
seen in this light; it is interesting that Crimea marked the effective
end of the Concert of Europe and signaled a dramatic setback in the
current order. Doubts about U.S. reliability have multiplied under the
Trump administration, thanks to its withdrawal from numerous
international pacts and its conditional approach to once inviolable
U.S. alliance commitments in Europe and Asia.  Given these changes,
resurrecting the old order will be impossible. It would also be
insufficient, thanks to the emergence of new challenges. Once this is
acknowledged, the long deterioration of the Concert of Europe should
serve as a lesson and a warning.

For the United States to heed that warning would mean strengthening
certain aspects of the old order and supplementing them with measures
that account for changing power dynamics and new global problems. The
United States would have to shore up arms control and nonproliferation
agreements; strengthen its alliances in Europe and Asia; bolster weak
states that cannot contend with terrorists, cartels, and gangs; and
counter authoritarian powers’ interference in the democratic process.
Yet it should not give up trying to integrate China and Russia into
regional and global aspects of the order. Such efforts will
necessarily involve a mix of compromise, incentives, and pushback. The
judgment that attempts to integrate China and Russia have mostly
failed should not be grounds for rejecting future efforts, as the
course of the twenty-first century will in no small part reflect how
those efforts fare.
The United States also needs to reach out to others to address
problems of globalization, especially climate change, trade, and
cyber-operations. These will require not resurrecting the old order
but building a new one. Efforts to limit, and adapt to, climate change
need to be more ambitious. The WTO must be amended to address the
sorts of issues raised by China’s appropriation of technology,
provision of subsidies to domestic firms, and use of nontariff
barriers to trade. Rules of the road are needed to regulate
cyberspace. Together, this is tantamount to a call for a modern-day
concert. Such a call is ambitious but necessary. The United States
must show restraint and recapture a degree of respect in order to
regain its reputation as a benign actor. This will require some sharp
departures from the way U.S. foreign policy has been practiced in
recent years: to start, no longer carelessly invading other countries
and no longer weaponizing U.S. economic policy through the overuse of
sanctions and tariffs. But more than anything else, the current
reflexive opposition to multilateralism needs to be rethought. It is
one thing for a world order to unravel slowly; it is quite another for
the country that had a large hand in building it to take the lead in
dismantling it.  All of this also requires that the United States get
its own house in order—reducing government debt, rebuilding
infrastructure, improving public education, investing more in the
social safety net, adopting a smart immigration system that allows
talented foreigners to come and stay, tackling political dysfunction
by making it less difficult to vote, and undoing gerrymandering. The
United States cannot effectively promote order abroad if it is divided
at home, distracted by domestic problems, and lacking in resources.
The major alternatives to a modernized world order supported by the
United States appear unlikely, unappealing, or both. A Chinese-led
order, for example, would be an illiberal one, characterized by
authoritarian domestic political systems and statist economies that
place a premium on maintaining domestic stability. There would be a
return to spheres of influence, with China attempting to dominate its
region, likely resulting in clashes with other regional powers, such
as India, Japan, and Vietnam, which would probably build up their
conventional or even nuclear forces. A new democratic, rules-based
order fashioned and led by medium powers in Europe and Asia, as well
as Canada, however attractive a concept, would simply lack the
military capacity and domestic political will to get very far. A more
likely alternative is a world with little order—a world of deeper
disarray. Protectionism, nationalism, and populism would gain, and
democracy would lose. Conflict within and across borders would become
more common, and rivalry between great powers would increase.
Cooperation on global challenges would be all but precluded. If this
picture sounds familiar, that is because it increasingly corresponds
to the world of today.

The deterioration of a world order can set in motion trends that spell
catastrophe. World War I broke out some 60 years after the Concert of
Europe had for all intents and purposes broken down in Crimea. What we
are seeing today resembles the mid-nineteenth century in important
ways: the post–World War II, post–Cold War order cannot be restored,
but the world is not yet on the edge of a systemic crisis. Now is the
time to make sure one never materializes, be it from a breakdown in
U.S.-Chinese relations, a clash with Russia, a conflagration in the
Middle East, or the cumulative effects of climate change. The good
news is that it is far from inevitable that the world will eventually
arrive at a catastrophe; the bad news is that it is far from certain
that it will not.

A top US development finance official has warned that China's $1.3tn
global spending spree on infrastructure is destined to collapse,
shattering some emerging market economies.
Adam Boehler, the chief executive of the US International Development
Finance Corporation, told the Financial Times that China’s
international investments were “100 per cent” like a house of cards
because of “debt overload, poor infrastructure, bribes [and] lack of
transparency”.
“Everything comes around, it’s only a matter of time. It was only a
matter of time before WeWork came around, right?,” Mr Boehler said,
referring to the distressed office rental start-up that unravelled
this year.
“We have to be there as an alternative because I could see China take
down a whole bunch of emerging countries . . . there will be more and
more cracks and then the glass will break,” he added.
Mr Boehler, a former US healthcare official and executive, became head
of the DFC late this year after the agency received a big funding
boost from Congress that doubled its war chest to up to $60bn and
allowed it to make equity investments.
As well as ensuring that US businesses pump more money into developing
countries, the DFC is also much more explicitly tying its deals —
including loans, loan guarantees and risk insurance — to the Trump
administration’s national security priorities, including challenging
China’s growing economic and strategic influence around the world.
“My job isn't to go out and make up American foreign policy,” Mr
Boehler said. “[But] we co-ordinate very heavily with [the] NSC, with
State, USAID, USTR, to get a US government view when we approach
things. We're cognisant of what China is doing, but it's not a
reaction to China . . . playing offence not defence here,” he added.
Although the DFC — which was previously known as the Overseas Private
Investment Corporation — is not ruling out investments in traditional
infrastructure such as ports, motorways and bridges, it is
increasingly looking to compete with China in funding advanced
technologies, including 5G, both in terms of building out the networks
and participating in spectrum auctions.
“It doesn't have to be the United States, it doesn't have to be a
US-based company. But we do care quite a bit about that data being
secure,” Mr Boehler said.
The DFC is also part of the US government’s broader effort to stop
countries from using technology run by Huawei, the Chinese
telecommunications company that is accused by Washington of espionage
and being a threat to national security.
“The answer to Huawei is not ‘don’t buy Huawei and that’s it. You need
an effective and credible alternative,” he said.
While many in Washington fear that the US is struggling to persuade
countries to reject Huawei as they build out their 5G networks, Mr
Boehler was more upbeat, saying he detected “changing winds” as
governments were “getting smart” on these issues. “More and more
you’re seeing people say no”.
He called Chinese investment a “drug” but said more countries were
becoming sceptical of it in terms of the sustainability of the debt.
“I think people are pretty circumspect about it,” Mr Boehler added.
“There is a lot of concern where there's over-leverage toward China in
the market right now, a lot.”
The agency’s disbursements remain well below its caps, but it has
already started to ramp up spending this year, from $3.3bn in 2018 to
$5.3bn this year, its highest level in more than 20 years.
Adam Boehler, chief executive of the US International Development
Finance CorporationAt a time when the Trump administration’s relations
with US allies is rocky and the White House has struggled to mount a
united front to confront Beijing on trade, Mr Boehler said he would
like to do more business alongside similar agencies in Japan, Europe
and beyond.
“I would rather write a smaller cheque and do it with JBIC,[ the
Japanese development finance agency] or our friends at African
Development Bank or others,” he said.
With the Japanese in particular, he added that there was a live
“conversation about how do we drive our goals in Indo-Pac together
because they are shared goals”.
“We should be holding hands on that. That's a strong message, not just
against China but against anybody that wants outsized influence in a
sovereign nation and that's going to push a closed system instead of
an open one,” he added.
Mr Boehler was sceptical that the DFC could ever work with the
Beijing-backed Asian Investment Infrastructure Bank, unless there was
a big change in China’s approach.
“To the extent we have concerns about transparency, rule of law and
outsized influence, it would be difficult to work together,” he said.
Criticism of Beijing’s global investments, including through its Belt
& Road Initiative, have increased sharply in Washington in recent
years, forming an important dimension of Sino-American rivalry.
Many developing countries in Asia, Africa and even Latin America have
benefited from an inflow of Chinese money to help them fund projects
more cheaply and with fewer restrictions.
But Mr Boehler said that even though US funding may not be quite as
swift, it came with higher standards and better outcomes.
“It's a sovereign country’s decision which way they want to go and how
they want to go. But I'll let the results speak for themselves,” he
said.
“China's biggest investment in the western hemisphere at 60 per cent
of their dollars is Venezuela. There's a direction that looks like
that.
“And there's a direction that looks like some of the countries that
you've seen develop over the last bunch of years in a very positive
light,” Mr Boehler added, citing Colombia.

Ecclesiastes 1:2-11 2 Vanity[a] of vanities, says the Preacher 2
Vanity[a] of vanities, says the Preacher, vanity of vanities! All is
vanity. 11 There is no remembrance of former things,[c] nor will there
be any remembrance of later things[d] yet to be among those who come
after.

International Markets

Euro 1.1088
Dollar Index 97.688
Japan Yen 109.40
Swiss Franc 0.9823
Pound 1.2942
Aussie 0.6920
India Rupee 71.2015
South Korea Won 1163.39
Brazil Real 4.0835
Egypt Pound 16.0256
South Africa Rand 14.2130

Commodities

Emerging Markets

Frontier Markets

Sub Saharan Africa

Global bond traders who ventured into Africa this year have reaped rich rewards.
The continent’s sovereign dollar debt has generated total returns of
20% since the start of 2019, more than any other region in emerging
markets.
Local bonds have also performed strongly. Egyptian pound and Nigerian
naira bonds each returned more than 30% in dollar terms.
If the world’s major central banks remain dovish in 2020, that should
sustain a dash for higher yields in emerging markets and mean that
African bonds remain in hot demand.
The extra yield investors get when buying sovereign dollar bonds in
Africa rather than U.S. Treasuries has narrowed almost 100 basis
points this year, according to J.P. Morgan Chase & Co.’s indexes.
Still, at 461 basis points, that spread remains the highest of any
emerging-market region and double that of Eastern Europe.
Africa is a “land of opportunity” and could be one of the main
beneficiaries if the U.S. and China make more progress on trade talks,
said Bank of America strategists including London-based David Hauner.
But investors face plenty of potential risks in 2020. South Africa
could lose its last investment-grade rating, Ghana’s government might
ramp up spending ahead of elections, Zambia’s debt crisis could spiral
out of control and Nigeria may be forced to devalue its currency.
Here’s what to watch for in 10 key markets.
Angola
Africa’s second-biggest oil producer is still reeling from a crash in
crude prices five years ago. The economy will contract for a fourth
straight year in 2019, the International Monetary Fund said this week.
Still, investors have been impressed by the central bank’s reforms,
including the devaluation of the kwanza. Its fall of 32% this year
against the dollar -- only Argentina’s peso has weakened more -- has
increased inflationary pressure.
But it’s also eased a shortage of foreign exchange that was crippling
businesses.
Egypt
Egypt remains a favorite among portfolio investors. Carry traders,
attracted by yields of around 14% on pound bonds, have flocked to the
Arab nation.
The currency has rallied 12% this year, its best performance in at
least 25 years -- and Societe Generale SA forecasts it will gain
another 4.5% to 15.35 per dollar in 2020.
But the reforms of President Abdel-Fattah El-Sisi are yet to translate
into the foreign direct investment and jobs that Egypt badly needs.
Aware of that, investors will watch to see if there’s any repeat of
the anti-government protests in September that briefly rocked local
markets.

Ethiopia
The Horn-of-Africa nation remains one of the fastest-growing economies
in the world. But that masks deep problems: inflation has accelerated
to more than 20% and shortages of foreign exchange are acute.
Prime Minister Abiy Ahmed, this year’s Nobel Peace Prize winner,
recently turned to the IMF for a $2.9 billion, three-year loan.
Investors welcomed the move, which should speed up plans to open up
and modernize the state-controlled economy.
The central bank has already started to weaken the overvalued birr,
which had been largely pegged to the dollar.
“This IMF deal is one of the biggest ideological shifts I’ve seen in
Africa this decade,” said Charlie Robertson, Renaissance Capital’s
London-based chief economist.
Ghana
West Africa’s second-biggest economy holds general elections in late
2020, with President Nana Akufo-Addo probably seeking a second term.
The country has a history of fiscal profligacy in the run-up to polls
and investors will watch whether the government is more cautious this
time.
The cedi has been under pressure and fell to a record low this month.
But Renaissance Capital, which recommends that clients buy Ghana’s
Eurobonds, says it is now one of Africa’s most undervalued currencies.
Ivory Coast
The Francophone country is set to hold a general election in October.
Many analysts hoped it would mark a transition to a younger generation
of leaders. But there’s a chance it will be a contest between
President Alassane Ouattara, who came to power in 2011, and his
long-time rivals Henri Konan Bedie and Laurent Gbagbo.
If so, “the country risks slipping back into the political turmoil it
seemed to have escaped barely 10 years ago,” said Teneo Intelligence
analysts Anne Fruhauf and Malte Liewerscheidt.
Kenya
Kenya’s economy is forecast to grow 5.8% next year, making it one of
Africa’s most buoyant nations. Bank of America says the removal of a
cap on interest rates in November is a further reason for optimism and
should help the government obtain a standby loan from the IMF.
Key to the East African country’s longer-term prospects will be
whether it can rein in the budget deficit. Forecast to be 6.6% of
gross domestic product this year, it’s one of the widest in
sub-Saharan Africa.
Mozambique
Mozambique completed a debt restructuring in October that had dragged
on since it defaulted on $727 million of Eurobonds in early 2017.
That should pave the way for the government to raise the funding it
needs for its portion of multi-billion-dollar gas projects. O
nce they’re finished, the impoverished southern African country is set
to become a major exporter of liquefied natural gas.
Nigeria
Nigeria’s status as one of the world’s best carry trades will probably
last as long as central bank Governor Godwin Emefiele keeps the naira
stable. That’s becoming harder, with Nigerian foreign reserves having
dropped 14% to $39 billion since July.
Emefiele’s signaled he’ll let them fall a lot further before loosening
his grip on the currency, which barely budges. Fiscal authorities,
meanwhile, will try to boost an economy that’s been growing more
slowly than the population for the past five years.
South Africa
Portfolio investors have exited South Africa en masse this year,
pulling a net $10 billion from its stock and local-bond markets,
according to data from the Johannesburg Stock Exchange.
They’ve been concerned by the deepening crisis at state-owned power
company Eskom Holdings SOC Ltd., which can’t service its $30 billion
of debts without government support, and the increasing chance that
Moody’s Investors Service will cut South Africa’s final
investment-grade rating to junk.
But if President Cyril Ramaphosa makes headway in reforming Eskom,
investors will probably be quick to come back. Bank of America and
Goldman Sachs Group Inc. both say its inflation-adjusted bond yields
are attractive and the central bank has room to cut interest rates.
Zambia
Zambia’s economy has worsened this year, the latest problems being
severe drought and electricity outages. The copper producer’s
dollar-bond yields trade at almost 20%, suggesting investors see a
high risk of default.
The government still has some time on its hands -- its next Eurobonds
don’t mature until September 2022. But many analysts believe it will
struggle to avoid a restructuring unless it quickly gets debt relief
on loans from China and a bailout from the IMF.
President Edgar Lungu has so far seemed reluctant to accept the
conditions that would come with a loan from the Washington-based
lender.

This follows the Zambian government's complaints and issuance of a
demache to the American Gvt that they should recall Ambassador Foote
as his views on homosexuality were against the laws of the country

As this goes out, Beyoncé and 500 other mainly African-American
celebrities are expected to head to Ghana for the culmination of the
Year of Return.
Part marketing ploy, part genuine initiative to forge closer
understanding between Ghana and the African diaspora, the event marks
the 400th anniversary of the start of the transatlantic slave trade.
It is impossible to get a booking in any of Accra’s top hotels.
The A-listers are arriving at a time when, for the second year
running, an African has taken home the Nobel Peace Prize. In 2019, it
was the turn of Abiy Ahmed, Ethiopia’s prime minister, who pressed on
with a daring economic and political reform agenda — now endorsed by a
$2.9bn IMF loan — in the teeth of a growing ethno-nationalist
backlash.
Elections scheduled for May 2020 will be critical. For all its
problems, its fast-growing economy carries the hopes of the continent.

Another big hope for Africa, the African Continental Free Trade Area,
a $3tn trade area of 54 countries, made progress this year with the
accession of reluctant heavyweight Nigeria. But xenophobic riots in
South Africa and Nigeria’s closure of its land borders to stop
smugglers hint at some of the obstacles ahead.
As in 2018, the continent’s economy grew by less than 3 per cent,
wretchedly slow, thanks mainly to laggards South Africa and Nigeria.
But Ghana, Ethiopia, Rwanda, Ivory Coast, Senegal and Djibouti all
managed growth rates of 6-8 per cent, some of the world’s fastest.

Here are five things that helped shape the continent in 2019.

Sudan: The Sudanese revolution deserved more global attention.
Millions of people, many women, many young, faced down bullets in the
name of peaceful change.
They met savage repression, but eventually prevailed. After 30 years
as president, Omar al-Bashir fell. A fragile military-civilian council
is charged with overseeing a transition to democracy.
The economy is still on its knees. The soldiers still have guns. What
happens next will be important for a continent with out-of-touch
leaders and a median age of 19.

Climate change: This year the impact of changing weather became
obvious in a continent that has hardly contributed to global warming,
yet will be among the first to suffer.
Cyclone Idai, the second deadliest on record in the southern
hemisphere, ripped through Mozambique, Zimbabwe and Malawi, killing
1,300 people and displacing 2m.
Idai brought flooding, but drought is a bigger problem still,
including in Zimbabwe where crop and government failure combined to
put nearly 8m people on the brink of severe hunger.
In the Sahel, desertification is helping to stoke conflict between
nomadic herdsman and settled farmers. In Mali, which saw an upsurge in
terrorist attacks, those conflicts are intertwined with rising
Islamism.
In Ethiopia, coffee farmers are moving to higher altitudes as
temperatures rise. Expect some African governments to soften their
opposition to genetically modified crops.

Felix Tshisekedi: He became president of the Democratic Republic of
Congo after elections that Financial Times reporting suggests were
fixed.
Joseph Kabila remains the power behind the cobalt throne. How long
that continues will help determine the fate of the vast, resource-rich
country.

Jumia: This company, perhaps unfortunately dubbed Africa’s Amazon,
provided the most spectacular initial public offering. Others included
Helios Towers, Bharti Airtel Africa and Network International.
Jumia listed in New York, became the continent’s first $1bn start-up.
After initially soaring, shares fell back with a bump as the company’s
on-the-ground logistical difficulties mounted. Losses neared €55m in
the third quarter. Some expect it to be sold next year.

Fintech: There are signs that Africa’s homegrown fintech industry is
at last mustering critical mass. In December alone, $400m flowed into
Nigerian start-ups, adding to the $1.2bn already invested in Africa in
2019.
That is still low, but it marks a jump and is roughly where south-east
Asia, now attracting around $8bn in annual investments, was five years
ago.

Jack Ma, co-founder of the Chinese technology group Alibaba, is full
of optimism about Africa. In November, he was in Ghana to award an
inaugural $1m prize in what will be an annual “Netpreneur” contest.
Another internet star, Twitter’s chief executive Jack Dorsey said he
would be spending quality time on the continent next year. “Africa
will define the future (especially the bitcoin one!)” he tweeted
cryptically. “Not sure where yet, but I’ll be living here for 3-6
months mid 2020.”

Of course, the Continent is absolutely non-linear something which we
are seeking to address with the AfCTA and what is key in that is the
free circulation of our most valuable capital of all our Human
Capital.
[As a result, population explosion in Africa has been supercharged
compared with earlier adopters of modernity in Europe. If large
numbers of people are a good thing, then this is a case of last-mover
advantage FT]
However, the AfCTA whilst surely a Silver Bullet is some ways off and
we have to deal with the NOW.

The ‘’zeitgeist’’ of the Revolution in Khartoum was intoxicating. As I
watched events unfold it felt like Sudan was a portal into a whole new
normal.

Fish symbolise rebirth, transformation, health, abundance, serenity,
intelligence, happiness, strength, and endurance, they represent the
deeper awareness of the unconsciousness. President @edmnangagwa feeds
fish at his water reservoir as he commemorates National Unity Day

It’s low tide as Hassan, the boatman, manoeuvres our taxi dhow up onto
the shallows. The Portuguese fort that I had been photographing as we
approached the island dominates the small beach in an otherwise
unassuming harbour.
I wade through the ankle-deep water and up some steps to the outskirts
of a village. A plaque painted with a Tanzanian flag indicates there
is a foundational school some hundred metres to our left.
We wander over to the fort and stand underneath what looks like a
giant version of an intricately carved Lamu door. The mid morning
glare stings my eyes as I squint up from underneath the brim of my
straw hat to study the fine floral lattice work which frames the
looming entrance.
Jamila, our guide, is explaining that the Gereza Fort was erected
after the Portuguese seized control of the Swahili coastal trade
routes and is one of the last in a series of great forts and palaces
built on the island of Kilwa Kisiwani, at one point the most powerful
city-state in the whole of East Africa.
Located directly opposite the town of Kilwa Masoko, 300km to the south
of Dar es Salaam, Kilwa Kisiwani is one of two islands that were the
epicentre of a once bustling cosmopolitan trading hub.
Kilwa Kisiwani and its neighbouring Songo Mnara, are today quiet
places, inhabited by small communities, which survive on fishing and
subsistence farming.
During the Middle Ages, however, this vibrant Swahili city-state came
to dominate commerce up and down the East African coast, due to a
favourable geographical positioning at the intersection of trade
routes of gold and ivory from Zimbabwe, beads and textiles from India,
ceramics from China and Persia and slaves captured as far as Lake
Malawi.
Jamila narrates how the fort is the symbol of two successive
colonisations of the Swahili coast, once an interconnecting network of
urban trading centres which were inhabited as early as the first
century CE.
The first colonisers were the Portuguese around 1500 and then the
Omanis, who in the late 1600s liberated the sultans and their cities
from the European invaders, only to then take on the mantle of
occupying rulers themselves.
A few hundred metres from the fort we see ruins peppered to either
side of us. Jamila points out a small cemetery, some merchant houses
and the “Malindi mosque”.
I later learn that the city state of Malindi was one of Kilwa’s great
rivals during the 1400s. With every step, we feel ourselves going back
in time.
“Here you can see the Great Mosque that was built with coral blocks by
the Shirazi sultans one thousand years ago,” Jamila tells us.
The mosque, with its sixteen domes, seems like something out of an
Indiana Jones movie.
Jamila waits patiently as I clamber around to try to get a good shot
of a towering ficus which has long outgrown its host, its gnarl of
roots threaten to tear the walls of the ancient building apart.
Inside the mosque, the morning light pours sideways through the
colonnades, the bulbous domes and tear drop arches stand sensuously in
the saturated light.
Close by the Omani palace, relatively new in the grand scheme of the
island, is an ode to space and luxurious living.
I stand in the middle of what would have been the palace’s huge
garden, bird song fills the air. We press on, there’s one more site to
visit.
Built in the early 1300s the Husuni Kubwa was once a sprawling palace
replete with spacious courtyards for merchants to ply their wares, a
public hearing hall for audiences with the sultan and in the private
quarters, a hexagonal swimming pool that looked out onto the sea.
I walk around in the unforgiving midday heat with just enough energy
to marvel at the thick coral walls, at the remains of large domes and
sunken rooms where I can imagine angry men shaking their fists at each
other has they discuss the matters of the day.
Exhausted, after covering almost three kilometres walking around
ruins, we make our way down a long flight of stairs to the mangroves
and then through to the expecting boat.
Situated in one of Tanzania’s less frequented areas, Kilwa and Songo
Mnara aren’t exactly the cheapest holiday destinations, unless you are
keen to take the Mashallah bus or are self-driving.
The trip takes about five hours depending on how bad traffic leaving
Dar es Salaam is.
We stayed at the delightful Kilwa Dreams Beach Resort where the owner
Gladys and her staff made us feel instantly at home and treated us to
some excellent seafood.
The bandas were painted red and decorated with images of sea life,
while on the inside they were simple, clean, lit with lights powered
by solar panels on the roof, with nice seating areas, well maintained
mosquito nets and hot water coming from a solar heater outside.
For those used to Kenyan prices it felt a bit on the expensive side
but this is probably due to the low levels of tourism in the area
which means it is costly to keep hospitality facilities running all
year round.
Our friends in Dar es Salaam also recommended checking out the Slow
Leopard, a recently opened lodge on the Jimbiza beach which seems
popular with the backpacking crowd.
Visits to Songo Mnara and Kilwa Kisiwani should ideally take place
over two days. Songo Mnara is 12 kilometres from the mainland so
remember to bring a book as the internet reception dies a few
kilometres out.
Kilwa Kisiwani is just a fifteen minute boat ride from the harbour at
Kilwa Masoko and should definitely be the second of the two places you
visit.

M. G. Vassanji: I would describe it as a love story that in its
development and description tells other stories. It is set in Kilwa,
the ancient town on the east coast of Africa, which is associated
historically with slavery, international (Indian Ocean) trade, and
twentieth-century colonialism, as well as Swahili culture and poetry.
This history is manifest in various forms in the lives of the people.
The story of Kilwa is therefore also the story of the two childhood
sweethearts in the book. Thus, the boy Kamal is mesmerized by the
history narrated by the old poet of the town.
Vassanji: Sometimes, it's hard to remember. I think I had the town of
Kilwa in mind, having read about it. It has a certain romance to it,
being ancient. It's one of the oldest urban settlements in sub-Saharan
Africa. The Arab traveler Ibn Batuta mentions it in the fourteenth
century; the English poet John Milton mentions it. It's older than
Delhi. Its descriptions in old Portuguese texts are fantastic. Then
there was the mystique of magic--which is very strong in Tanzania. I
got fascinated by Swahili culture.

Vassanji deftly develops a rich portrait of village life, with its
close bonds and closer conflicts. It's a world steeped not only in
faith, but in magic. Saida's grandfather, for example, is reportedly
in control of a djinn, which contributes to his poems; when the djinn
is spurned, it seems to take revenge on the old poet, and is blamed
when the man is found hanged.
The world of the past, of Kamal's boyhood in Kilwa, and his forced
relocation to Dar es Salaam, where he lives with his father's family
to reclaim his Indian heritage, blurs together with Kamal's
present-day exodus to Tanzania to try to locate Saida, whom he last
saw as he was about to leave for university in Uganda. The narrative
is framed and recounted by Martin Kigoma, a Tanzanian publisher, who
encounters Kamal in a hospital in Dar es Salaam where he is recovering
from what he believes to be poisoning.
It's an interesting narrative approach, and allows for fluid,
non-linear storytelling that brings the past and the present, the
recounted and the shown, the pedestrian and the magical, into a
crystalline narrative immediacy. It's a bravura performance, but
subtle and understated.

The Nairobi to Moshi bus left early in the morning, made its lonely
way south through the plains. I had been instructed by my hosts to
decline in case a fellow-passenger offered me a candy, because it was
likely to be drugged, in which case I would be robbed and lose my
luggage.
It was the early 1990s and such was the fear for personal safety then.
But my neighbour, a young Masai or Meru who was headed with goods for
his father’s shop in Arusha, seemed nice as he pressed sweets upon me,
and I could hardly refuse.
Eating sweets seemed to be a common practice in the buses. Our journey
was irritating and anxious initially, with frequent police checkpoints
on the Kenya side. A grim-faced copper or two would step up and peer
inside the silenced bus.
If they felt like it these sullen guardians of the law could search
all the passengers, or even have the luggage brought down from the
roof, a bag at a time. At each checkpoint, however, they received
their baksheesh.
Once I heard the driver instruct the conductor, “Give him a pair of
pants”; this was done, and we went speeding on our way.
It was only when we had crossed the border into Tanzania, Kilimanjaro
rising ahead of us in the distance, that the mood inside relaxed, the
passengers became chatty. We arrived in Moshi in the middle of the
afternoon.
One of my fellow passengers was a young man called Pinto from Nairobi,
a tour operator who had come from India only two years before.
We found a hotel together and afterwards as we walked around were
approached and befriended by a young Asian taxi driver called Dilip
who took us to his home.
The family was very modest, consisting of our friend, his young
brother, and their parents. The father’s leg had been amputated after
a car accident, and the older boy was the bread earner.
I wondered why they took us in—did they expect something from us? Taxi
fares? Perhaps they were lonely. Driving a taxi was not an Indian
trade.
Only later I realized that they must be from a so-called low caste.
When the old man lost his “company” job following his accident, he had
to give up the flat that went with it, and the family had to spend six
months in the temple.
After dinner and listening to incessant complaints from the old man
about the state of the country (the refrigeration at the morgue was
broken, for one thing, and there was a stench in the town) and the
cost of living, Pinto and I went back to our hotel, which was above a
noisy bar.
It was the Hindu Navratri season, and during the night as the bar
became quiet downstairs, I could hear strains from the singing at the
temple.
Moshi and its sister town Arusha, an hour away, always had an English
village feel to them, at least to those of us visiting from chaotic
Dar.
They were compact and neat, with tree-lined avenues and bungalows for
houses; the weather was cool and the surrounding countryside lush and
hilly. Moshi was the smaller town, with a set of streets named First
Street, Second Street, etc., giving it added distinction.
But the wonderful thing about Moshi was Kilimanjaro, seen from the
main street looming majestically over the town, the smooth, round,
snowy peak clear in the pristine morning air, then gradually donning a
veil of cloud as the day wore on.
To me the great war does not evoke Flanders or Gallipoli, all vividly
brought to life in novels and films, in the same way it does the
windblown thorny semi-desert from Voi to Moshi under the mighty
Kilimanjaro, and the road to Tanga.
And there is the over-riding irony of it: the graves at Moshi, the
anonymous monuments to the Africans and the Indians.
Elsewhere they talk incessantly about the weather; in Moshi they asked
if there was a cloud cover yet on the mlima. This mighty mountain with
its gentle contour remains the most awesome and yet heartwarming
sight—even though I am not from the area—casting its benign gaze over
the entire country.
The story goes that originally—in the early days of colonization—it
was part of British Kenya, but Queen Victoria presented it to her
German cousin and the border was adjusted with a bend in order to
accommodate the change.
At the nation’s independence Brigadier Sarakikya of the Tanganyika
Rifles planted the national flag on its peak, a momentous occasion
symbolizing freedom, hope, ambition—an event that was commemorated on
the highest-denomination postage stamp.
Our friend from the previous day, Dilip, took us around. There
appeared to be a subculture of drifters and expats in Moshi—consisting
of hotel managers, tour operators, and others—that he took pleasure in
showing off.
The Asian section of town consisted of rather pleasant-looking,
flat-roofed bungalows and townhouses built in the early sixties. There
was an older area that was eerily quiet, perhaps because there were no
vendors or children in sight; the trees were ancient, and the
bungalows staid, with high tiled or iron roofs.
This would have been the old European area. Here we came upon a
monument to “Hindu, Sikh, and Mohamedan” soldiers of WWI. Close by, in
a tidy compound enclosed by a white picket fence, was a rather
extensive war cemetery for the “British” soldiers, where I walked
around while the others waited.
The dead young men buried here wholesale in the neat rows of graves
were all fully identified; many had been killed during the period
March-May 1916. The cemetery was cared for by a British veterans’
organization.
Few people I met knew or cared that a protracted campaign of World War
I—which changed so much of the world—had been fought in this region,
that their town in Africa reposing at the foot of Kilimanjaro had a
modern history that was fascinatingly connected to the larger events
of the world; that that European war had also dramatically changed the
course of this African nation.
In November 1915, worried by reports of military setbacks from British
East Africa (Kenya), the Committee of Imperial Defence in London
recommended that the conquest of German East Africa (Tanganyika) take
place as soon as possible.
This turned out to mean immediately, and the man picked to lead the
invasion across the Kenya-Tanganyika border was Lieut-General Jan
Smuts of South Africa. Smuts, a diminutive man, was of Afrikaaner
background, therefore arguably an African.
In the Boer War (1899-1902) he had commanded guerrilla raids against
the British. He had tussled with Gandhi. He was as tough as
Lettow-Vorbeck, the German commander in Tanganyika.
Suddenly, in early 1916, the quiet and arid border region between
Kenya and Tanganyika, sparsely dotted with small villages, was overrun
by thousands of soldiers speaking a dozen languages and from as many
cultures: settlers wearing wide-rimmed sun hats, the British, South
Africans, and Rhodesians in baggy khakis and helmets, Indians in a
variety of turbans, smart African askaris in puttees and caps with a
neck-flap; armoured cars raced urgently on grass trails and new roads,
vast tent villages sprang up, wildlife stayed away and horses and pack
animals raised the dust. Even today this spectacle from the past makes
you wonder. What would the natives in their rudimentary settlements—a
few mud huts around a yard of packed red earth—someone at Mbuyuni, for
instance, or Maktau—have made of this upheaval of their universe, this
alien invasion? There are no accounts from their side of course.

Kenya

The End of the Year is upon us, and it is that time to Ring out, wild bells

The year is dying in the night;
Ring out, wild bells, and let him die.
Ring out the old, ring in the new,
Ring, happy bells, across the snow:
The year is going, let him go;

In Memoriam, [Ring out, wild bells] Alfred Lord Tennyson -

Against a global backdrop which was hardly conducive, what with the
crossfire of a Trade War [now ebbing well for a few months because
Trump has an election to win and Xi has an economy to rescue] and a
Global Revolution which Bloomberg Opinion's Pankaj Mishra headlined
thus; ''A Global Anarchy Revival Could Outdo the 1960s''  and added
''That acknowledgement of the state’s authority as ultimate arbiter is
now rapidly disappearing, in not only Hong Kong, but also India and
many other countries. It is being replaced by the conviction that the
state has lost its legitimacy through cruel and malign actions''  As
Pierre-Joseph Proudhon, the pioneering thinker of anarchism put it,

“To be GOVERNED is to be kept in sight, inspected, spied upon,
directed, law-driven, numbered, enrolled, indoctrinated, preached at,
controlled, estimated, valued, censured, commanded, by creatures who
have neither the right, nor the wisdom, nor the virtue to do so.”

In such a complex, nonlinear and interdependent World where feedback
loops can start spinning at dizzying speed, it is in fact easier to
look backwards and into the proverbial rear view mirror.

Internationally, Dirk Thiels of KBC Asset Management pronounced  “We
call it a grand cru, which in wine terms means a very good vintage,.”

The scorecard tells the story: America’s equity benchmark has climbed
28%. A global stocks gauge is up 23%. A worldwide credit index rose
10%. Emerging-market sovereign dollar bonds added 12%. Even Treasuries
and gold, those classic safe havens, advanced about 7% and 15%,
respectively. Staying on the sidelines was about the only way to lose.

Turning our gaze closer to home. We must start first with a Currency
overlay because as I am sure you are aware Venezuela and the likes of
Zimbabwe often times top the League in percentage terms but when You
convert its worth its ''tuppence'' in hard currency. Whilst Kenya's
Shilling which is +1.00% in 2019 did not match the Egypt Pound's
+12.00% gain, The Shilling's performance is more than respectable
especially when you consider it against the SSA scorecard. I don't
need to repeat that the Zambia Kwacha is the 3rd worse performing
currency in the World, The Ghana Cedi has fallen 25 Years in a row and
so forth. The Central Bank of Kenya have to be commended for their FX
Operations. Of course, The IMF have previously cited the Shilling as
overvalued and if we do go to that Institution for support [which is
as sure a Thing as the Aga Khan's Shergar was] we will need to be
alert to any Shilling Quid pro Quo scenario. So The Shilling has been
a Performer and has surfed on a rising tide of Remittances $2.4b on a
12 month running basis at the last count. The Governor Dr. Patrick
Njoroge also bounced the Government into touch You will recall

''CBK has warned the National Treasury CBK is of the opinion that
aiding by printing funds to pay debt will be a zero-sum game'' [NTV] -
I don't need to tell you that such an outcome would kneecap the
Shilling.

Our Eurobonds have performed well, in large part because of a benign
international backdrop of extreme low interest rates globally which
lifted EM and Frontier bond prices as an Asset Class unless You are
Zambia where Eurobonds are yielding 20% because No One believes they
will pay you back. The GOK Eurobonds with are all denominated in US$
are as follows; 10 Year Issue [now 9] is at 6.1%, the 30 Year [now 29
Year] is at 7.8% and the 12 Year Issue is at 7.1%. GOK Shilling
denominated bonds were very well supported during the Interest Rate
Cap regime by the Banks. However, Moodys Investor Services [The
Ratings Agency] recently pronounced the following

Kenyan lenders are the second most exposed to the government with
almost 300 per cent of their equity lent out to the State. However,
Egyptian banks are even more exposed on lending Cairo 603 per cent of
their equity.

What this tells me is that an important Source of Buy Side Demand for
GOK Shilling Paper is now ''limit Long'' If You are sitting on the
Credit Committee of a Kenyan Bank and exercising some degree of
oversight I would argue that then you would be demanding a Hard Cap.
Therefore, given the fact that GOK issuance is not going to slow down
but will probably accelerate, I would be keeping a close eye on the
Curve.Staying ahead of the Curve was a remarkable book by the renowned
Investor George Soros. Its worth reading.

The Nairobi All Share Index served up a +15.80% return in 2019 and
that's quite a decent outcome when you consider the volume of Profits
Warnings but essentially the All Share performance speaks to the
increasing bifurcation between the Big Cap Stocks [outperforming] and
the ''zombie'' or ''Penny'' stocks [underperforming woefully] Dr.
Mwangi's Equity Bank led the charge with a +53.52% gain in 2019 and
has further to go. Dr. Mwangi has spread his Wings, diversified the
Banks risk across SSA and his Model is working a treat. I reckon there
is a lot further to go. KCB Group has rallied +41.52%, NCBA Bank
+23.02%, Barclays +19.18%. The Banks were repriced higher on the
removal of the Interest Rate Cap Regime. Safaricom rallied +39.19% and
this rally was driven by another sterling performance of M-PESA, whose
value remains in my opinion undervalued by more than 50% on the
balance sheet. International Investors [I am reliably informed] were
not excited by the proposed Ethiopia JV and clearly the Company has to
do some work around persuading Investors that they have the bandwidth
and an attractively structured vehicle for that. The bottom line is if
Safaricom does well so does the Nairobi Securities Exchange at a
headline level.

I wish you all a very Merry Christmas.