Ones to Watch, 5 August 2019

Americas: President Macri expected to come second in Argentina’s 11 August primary elections

Sectors: all
Key Risks: policy continuity; political stability; economic reforms

In Argentina, the 11 August ‘PASO’ primary elections will provide the first major temperature check ahead of the upcoming October general election, expected to be highly contested between centre-right President Mauricio Macri and moderate Peronist opposition candidate Alberto Fernandez. Recent opinion polls suggest Macri, whose popularity ratings have recently suffered, is expected to trail Fernandez whose running mate is former president Cristina Fernandez de Kirchner (CFK) in the ‘PASO’ vote. Presidential candidates will need 1.5 per cent of the vote share to contest the 27 October election. Investors consider the mandatory PASO vote as an official poll demonstrating Macri’s competitiveness against Fernandez, whose possible victory could signal a return to the protectionist policies of CFK. Both Macri and Fernandez will likely intensify efforts to attract centrist voters and a November runoff vote remains increasingly likely. Uncertainty over policy continuity will persist.

 

Asia-Pacific: Hong Kong SAR sees more violent unrest amid mass strike action

Sectors: all
Key Risks: business disruption; civil unrest

Protests escalated in Hong Kong SAR over the weekend and on Monday 5 August, as hundreds of thousands took part in the non-cooperation movement against the government. On 3-4 August, protesters occupied streets from Causeway Bay to Tseung Kwan O in the New Territories. Many of the protests targeted police stations. The movement appeared highly organised, with protesters using cat-and-mouse tactics against security forces by causing chaos in one area before suddenly shifting focus to other target locations. A citywide industrial strike action targeting business and transport services including the MTR, airport and major roads was held on 5 August. Eighty-two people were arrested after protesters rallied in seven locations. Clashes broke out in multiple areas, including occupied Harcourt road and Nathan road, with police using police tear gas to disperse crowds. There remains a high risk of violent unrest.

 

Eurasia: Tajikistan runs out of Rogun Dam funds, Turkmen president returns but questions remain

Sectors: all
Key Risks: project cancellation; financial crisis; political stability 

On 2 August Tajikistan’s Finance Minister Faizidding Kahhorzoda announced a new special commission to seek funds for the completion of the Rogun hydropower dam. The government will shortly have spent all the US$500m raised in a 2017 Eurobond sale. The announcement means more delays are likely for the project. It is doubtful that international financial institutions will provide major grants. Any major new funding is only likely to come from China, which has already extracted major concessions from Dushanbe. Tajikistan faces a major risk of debt distress and has twice defrauded the IMF, raising the risk of being barred a bailout. Meanwhile on 4 August, Turkmenistan’s state television broadcast new photos of President Gurbanguly Berdymukhamedov for the first time in a month in an attempt to finally squash rumours he had died though questions remain about machinations behind the scenes. 

 

Europe: EU agrees IMF director nominee but Britain’s role puts process into question

Sectors: all
Key Risks: political stability; trade disruption; project cancellation

On 2 November, EU governments agreed to nominate World Bank CEO Kristalina Georgieva as head of the IMF. However, British Prime Minister Boris Johnson boycotted the process, risking Britain’s future say in naming IMF chiefs. Since foundation, Europe has traditionally put forward the IMF head. Georgieva is seen as more dovish than the other leading candidates, Finland’s Central Bank governor Olli Rehn and ex-Dutch Finance Minister Jeroen Djisselbloem, both known as major supporters of austerity. There is a risk that Johnson will belatedly realize he has lost Britain’s vote in the process in the midst of Brexit turmoil and lobby Washington to oppose Georgieva, which would risk politicising the process. However, Johnson faces a high risk of being voted out of office in September as opponents of a no-deal Brexit consider how to block this from occurring on 31 October.

 

MENA: Turkey announces new campaign against Kurdish positions in north-eastern Syria

Sectors: all
Key Risks: war on land

On 4 August Turkish President Recep Tayyip Erdogan renewed a pledge to carry out a cross-border military operation into Syria to oust Kurdish fighters from its southern border, which would also look to curtail de facto control of Kurdish forces in Syria’s north-east. While such declarations are not new, the announcement looks to pressure Washington to force a deal for a safe zone effectively limiting the remit of US-backed majority Kurdish Syrian Democratic forces which comprises the Kurdish People’s Protection Units (YPG) whom Ankara conflates with the Kurdistan Workers’ Party (PKK), deemed a terror organisation. Ankara is already waging a campaign against PKK positions in northern Iraq and has occupied areas of Syria’s north-west. Another military campaign may prompt further destabilisation in Syria at a time when the regime is attempting to recover territory from rebel groups in the north-west.

 

Sub-Saharan Africa: ‘Constitutional declaration’ paves way for power-sharing government in Sudan

Sectors: all
Key Risks: civil unrest; internal conflict; political instability

On 4 August Sudan’s ruling Transitional Military Council (TMC) and the pro-civilian rule Forces for Freedom and Change (FFC) opposition coalition issued a constitutional declaration that paves the way for a transitional government. The declaration follows the 17 July power-sharing agreement, in which the broad outlines of a unity government were laid out. A final deal is expected to be signed on 17 August, following which a governing council composed of representatives of the security forces and civilian politicians and an FFC-appointed prime minister are expected to be named. It is unclear why the agreement was not finalised on 4 August. There remain concerns that the TMC’s piecemeal approach to the appointment of a new governing council is a tactic to delay the transition to civilian rule and further entrench its power.