Standing next to a newly refurbished bell tower, priest Aristakes Aivazyan says it needed divine intervention to save Armenia’s medieval Haghartsin monastery.
But it also took a lot of money from a very unlikely benefactor — the Muslim ruler of the resource-rich Arab emirate of Sharjah, Sheikh Sultan bin Mohammed al-Qasimi.
“I cannot recall anything similar to this happening in our history that some Arab sheikh, a Muslim, helped to restore and rescue an Armenian Christian church,” Aivazyan said.
“Without doubt it was God who brought the sheikh to Haghartsin,” the priest, dressed in long black robes, said.
Perched spectacularly amid thickly forested mountains about 100 kilometres northeast of Yerevan, Haghartsin monastery is a masterpiece of medieval Armenian ecclesiastical architecture.
Founded in the tenth century, the monastery — which includes three churches and once housed some 250 monks — survived attacks from Arab and Ottoman invaders and anti-religious campaigns under Soviet rule during its turbulent history.
But after weathering those storms, decades of neglect in recent years meant the complex looked headed for collapse as plants twisted through walls and cracks threatened to send buildings tumbling.
“The monastery was in need of serious reconstruction but the repairs were always delayed by the lack of finances,” father Aivazyan said.
That was until a fortuitous visit from al-Qasimi, who had been invited to Armenia by former president Robert Kocharian on a trip set up by the Armenian business community in the emirate.
“In 2005 his royal highness visited Armenia and generously offered to renovate the complex during a tour of various Armenian regions,” says Varouj Nerguizian, a Sharjah-based Armenian businessman who has advised the sheikh.
Nerguizian refused to say how much the sheikh had given for the refurbishment but local media reported that it could be around $1.7 million.
Now, after years of building work including a new road up to the monastery to help boost visitor numbers, the refurbished structure was finally opened last month.
“It falls within the natural context of his royal highness’ philanthrophy as well respect for other religions,” Nerguizian.
Perched on the Persian Gulf, after Abu Dhabi and Dubai, Sharjah is the third largest of the seven emirates that make up the UAE.
Al-Qasimi, 74, — who came to power in 1972 after his brother, then king, was killed in a failed coup — has sought to boost the emirate as a tourist and cultural hub in the region.
Despite a thriving community of Armenian businessmen that now boasts its own church in the emirate of some 900,000 inhabitants that now boasts its own church — there have been few links between Yerevan and Sharjah.
For those working at the monastery, the surprise of seeing an Arab leader visiting the holy Christian site remains a vivid memory.
“He came with his entourage of about 10 people and looked around for quite a while at all the churches and stone crosses before asking to go into the main Church of Our Lady,” recalled Artak Sahakyan, who sells candles to visiting worshippers.
“When he came out he said that he believed that the word of God was really heard here,” Sahakyan said.
Armenia is considered to be the oldest Christian country in the world and its Apostolic Church belongs to the ancient Oriental Orthodox branch.
The church is hugely influential in Armenia and two monasteries and its main cathedral are already listed on UNESCO’s list of world heritage site.
After a history of conflict between Armenia and its Muslim neighbours of Turkey and Azerbaijan, those working at the Harghartsin monastery say they hope the support they have received from a Muslim ruler shows that the two faiths can get along.
“The sheikh is a deeply religious man so seeing a monastery is such a bad state it is not surprising that he felt touched,” says father Aivazyan.
“It is as if the with this generous gesture the sheikh is saying that we need to be tolerant of other religions as in the end we all serve one God,” Aivazyan said.
Article source: http://www.middle-east-online.com/english/?id=62841
The agreement on Iran’s nuclear program provides President Obama with a rare potential achievement in a blunder-filled second term, but the move is also raising tensions with Israel, America’s most important ally in the Middle East.
The tentative pact announced Sunday is aimed at thwarting Iran’s ambitions to build a nuclear weapon — just the sort of foreign-policy development that analysts say Mr. Obama needs for any realistic hope of getting his administration back on track.
Since winning re-election a year ago, Mr. Obama’s presidency has been sidetracked by a series of scandals and missteps: the mishandling of the Benghazi terrorist attack, the IRS‘ targeting of conservative groups, the leaks about National Security Agency surveillance programs, worsening relations with the media over a lack of transparency, the government shutdown and multiple flaws in the rollout of Obamacare. Along the way, Mr. Obama’s job-approval rating has plummeted from around 58 percent last December to the upper 30s today.
The deal with Iran comes on the heels of the face-saving diplomatic solution the White House was able to find in Syria, where U.S. military intervention into that country’s bloody civil war once looked inevitable. Instead, Mr. Obama seized a last-minute offer from Russia to broker a deal to confiscate Syria’s chemical weapons.
Such agreements were exactly what American voters expected from Mr. Obama, said Dante Scala, a political science professor at the University of New Hampshire and a specialist on the U.S. presidency.
“What he ultimately did in Syria and Iran is in keeping with where a lot of Americans are in terms of foreign policy,” Mr. Scala said. “They certainly don’t want more American troops in the Middle East. Especially on Iran, if he’s able to turn the page … that would definitely be a big part of Obama’s legacy. It could go right up there with [the killing of] Osama bin Laden.”
But the agreement with Iran is also straining the U.S.-Israeli relationship, which has deteriorated sharply during Mr. Obama’s presidency. Israeli Prime Minister Benjamin Netanyahu called the pact a “historic mistake.”
“It’s not made the world a safer place,” Mr. Netanyahu said. He asserted that the agreement will allow Iran to take “only cosmetic steps which it could reverse easily within a few weeks; and in return, sanctions that took years to put in place are going to be eased.”
James Jay Carafano, a national security specialist at the conservative Heritage Foundation, said the Iran deal “accomplishes nothing” and is part of a troubling pattern with the Obama administration’s approach to the Middle East.
“This administration was desperate for something to make it look like they’re accomplishing things,” Mr. Carafano said. “They’ve been consistent on that from Iraq to Afghanistan to Libya and Syria. It doesn’t actually matter if you make things better, it just matters that you create the appearance that you’re making things better temporarily.”
With this agreement, Mr. Carafano said, U.S. relations with Israel have hit an all-time low.
“It makes it worse, but it’s really hard to imagine how it could get any worse,” he said.
The agreement with Iran also puts Mr. Obama on worse terms with traditional U.S. ally Saudi Arabia, said Aaron David Miller, a Middle East specialist at the Woodrow Wilson International Center in Washington.
“It has estranged the United States from its two closest allies in the region,” Mr. Miller said. “You can’t describe this as a good agreement. It has served to create real tensions in those two relationships, leaving both leaderships angry, aggrieved and willing to do everything they possibly can to undermine it.”
Mr. Miller said the pact will also make it more difficult for the Obama administration to pursue an accord between Israel and the Palestinian Authority.
Islam has left an indelible mark on Sicily’s culture, which has survived until the present day, an Italian academic said here Thursday.
Francesca Corrao, a professor of Arabic culture and language at the LUISS University in Rome, said the island played an important role in transmitting knowledge from east to west.
LUISS stands for the Libera Università Internazionale degli Studi Sociali Guido Carli, or the Guido Carli Free International University for Social Studies.
Corrao made the comments in a lecture on board the Italian aircraft carrier, Cavour. The ship is part of the 30th Italian Naval Fleet, which is visiting Saudi Arabia as part of the 80th anniversary of Saudi-Italian diplomatic relations.
“Discoveries show that this small island was important in the transmission of knowledge from east to west. We use many things of Islamic origin in our daily lives,” Corrao said.
She said it was important for people to learn about other cultures to promote understanding and cooperation. She said the influence of Muslims, including Arabs, can be seen in pottery and ceramics found at archeological sites. A bath owned by a Norman king shows that Islamic influence remained long after Muslims left the island.
Corrao said Arabs and Sicilians share many common fishing terms. In addition, the Arabs introduced a system of watering to the islanders. “Before they arrived, we didn’t have gardens, oranges, lemons, bananas, or dates.”
Sicilian and Tunisian brides use similar marriage boxes. “That is something beautiful and simple that we have in common. Even the churches were built in Islamic style. We learned a lot from the Arab world. The Mediterranean is like a mirror reflecting humanity,” she said.
Corrao said Italy has “important links with the Arab world” and that it was important to continue sharing knowledge. “It is through knowledge that we fight fear, war and misunderstanding, especially for our children and our future. We have a duty to solve problems and have the opportunity to find harmonious solutions. Listening and understanding is our mission,” she said.
The audience on the vessel included Simone Petroni, the Italian consul general, and Paolo Treu, the admiral and commander of the group.
Treu said: “It is part of our mission to strengthen, deepen and further promote political, economic, social and cultural cooperation.”
Diego Roma, project manager at Translize, said he found Corrao’s talk interesting. “Living in Saudi Arabia for nearly 30 years I know that Islam had some connection in the past with Italy, but I didn’t know what exactly. It enhanced my knowledge and understanding,” he said.
Mohammad Raffi, a businessman, said he was at the event because of his interest in the spread of Islam in the Mediterranean. He said he did not know much about Sicily, and the spread of Islam there. “I read about it in Malta and the south of Spain but this is the first time I had an opportunity to learn about Islam in Sicily. I’m thinking of traveling there so I came to attend to get more information as an intellectual pursuit,” he said.
Fatima Akram, a specialist at Nesma Training Center in Jeddah and an Italian of Indian origin, said she has read many books on the spread of Islam but did not know how it reached Sicily. She said the lecture would help change people’s perception and widen their knowledge.
Article source: http://www.arabnews.com/news/481886
ISTANBUL: Turkey and Greece were locked Wednesday in a war of words over the possible conversion of Hagia Sophia, one of Istanbul’s most stunning landmarks, into a mosque.
The feud over the 1,476-year-old World Heritage site is the latest to erupt between the two neighbours over religion.
Greece reacted furiously to remarks by Turkish Deputy Prime Minister Bulent Arinc that he hoped to change the status of Hagia Sophia, which is now a museum.
“We are looking at a sad Hagia Sophia, but hopefully we will see it smiling again soon,” Arinc said Monday, describing the complex in Istanbul’s historic quarter as the “Hagia Sophia Mosque”.
Hagia Sophia, which dates back to 537, was a church for centuries — and the seat of the Patriarchate of Constantinople — before being converted to a mosque under the Ottoman empire in 1453.
It opened as a museum in 1935 after the founding of modern Turkey.
“Recurrent statements made by high ranking Turkish officials about converting Byzantine Christian churches into mosques are offending the religious feeling of millions of Christians,” the Greek foreign ministry said in a statement.
But Turkey bluntly retorted Wednesday that it has “nothing to learn” from Greece about freedom of religion.
“Unfavourable treatment of Ottoman era cultural artifacts and places of worship by Greece is well-known by all,” the foreign ministry said in a statement.
Greece whose territory was once part of the Ottoman empire and Turkey share a history marred by bitter territorial disputes and Christian-Muslim feuds.
Mosques have been a thorny issue in Greece, where the population is predominantly Greek Orthodox. Athens is one of the few European capitals without an official mosque.
Arinc, a member of the ruling Islamist-rooted Justice and Development Party (AKP) had said on Monday that two other religious sites in Turkey, also named Hagia Sophia, would be turned into mosques.
The government is often accused by its secular opponents of forcing Islamic values on the predominantly Muslim but strictly secular country.
The Jeddah Municipality is planning to conduct case studies on the city’s work concerning Disaster Risk Management (DRM), according to Nader Ghazal, mayor of Tripoli and president of Al-Fayhaa Union of Municipalities in Lebanon.
Ghazal, who held bilateral discussions with Ali Khattani of the mayor’s office, said: “I am sure they are working hard, but what happened in Riyadh on Sunday indicates that we should be more prepared.”
Ghazal was speaking to Arab News on the sidelines of the concluding day of a regional consultation workshop on natural disasters in the Middle East and North Africa (MENA) region on Monday.
Asked what he saw in common between the problems faced by Tripoli and Saudi Arabia, he said that regardless of the reasons of the disasters, the results are the same.
“The reasons could be natural, or man-made, but the results are catastrophic that you need to handle,” he said.
“Whether it is an earthquake, flood or droughts, there are casualties on small or large scale that have to be taken care of. The numbers do not minimize the necessity of quick and efficient response,” he said, adding: “When you have a crisis you have to shelter people, feed them, and if it is a long-term sheltering or displacement such as the Syrian refugees, then you have to think about the education system as also the health system.”
When asked that as mayor of Tripoli, did he think there was a civil institution that has to be more cautious and prepared, he said: “Yes, indeed, when you have a crisis. Again it depends on the type of crisis. But generally speaking, the civil defense should be there, the Red Cross, or the Red Crescent. In Saudi Arabia, the Ministry of Interior is very much involved, so is the army.”
He stressed the importance of integration of all organizations related to such crises — the army, the internal forces, Civil Defense and the Red Cross.
Ghazal said he always likes to focus on the role that can be played by the civil society. “Following the bombing of the two mosques in Tripoli and in the case of the displaced Syrians, we were happy and surprised by the reaction from the civil society. They did a wonderful job. In some areas, they took on the role of the government,” he said.
Ghazal said that at the union and the municipality, they have a unit that takes care of crisis management. He said that because of the large number of Syrian refugees, they are facing problems. “As a municipality, we are not in a position anymore to be able to manage this influx of refugees from outside the city,” he said, adding that the problems included solid waste management, sewer system, education system and public health issues.
He urged the World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR) to support the municipality in the crisis.
“This is not the first time that the World Bank has helped us in Tripoli. We have several projects, such as a project on DRM, the preservation of cultural heritage, and also to develop our own strategy,” he said.
adding: “We had very good support from the World Bank earlier and are looking forward to further this support.”
He said that besides government agencies and ministries, there should be focus on the role of the civil society. It has to be trained, so that they are ready, and are able to give the proper support. “Having the will is good but having the means is also important, and having the skills is much more important. What the civil society needs is not just the will but the means and the skills as well. So I think these should also be focused on,” he added.
Article source: http://www.arabnews.com/news/479756
The perception of beauty is like looking into a kaleidoscope – it is reflected in the sum of many parts.
With the region’s rich history in cross-cultural integration, the Arabic look encompasses a broad spectrum of skin tones and diverse heritage.
But in the advertising world, casting the right models to embody the essence of Arab beauty while representing the masses, can be a tricky one.
Some say it stems from having a limited number of Arab models to choose from in the talent pool.
But does the responsibility lie with advertising agencies, production companies and magazines, all of which have been accused of misrepresenting Arab beauty, or is it part of a much wider issue? You’d be forgiven for thinking that to be an Arab woman was to be extremely pale with European features, with often only the palest models making the grade, both in advertising campaigns and magazine fashion shoots.
It is widely known that most brands take an axiomatic approach in featuring aesthetically pleasing faces to their beauty campaigns, rather than taking risks to help widen the perception of what is deemed beautiful. While Dove is considered an exception to the rule, with its ‘Real Beauty Sketches’ campaign featuring women of all backgrounds, shapes and sizes, why does this broader concept of beauty fail to resonate in the Arab world?
Evan Kearney, strategic planning director at Memac Ogilvy Mather, says: “Beauty in the Arab world is still a very superficial topic. Whereas the West is adopting a more holistic approach to beauty, concentrating on elements like confidence and self-assurance and their importance to overall inner beauty, here it’s still judged solely on outward appearances. We see brands like Dove championing the ideal of real beauty, continuing on from their global positioning and trying to remove the standard of beauty from unrealistic and unobtainable images portrayed by the media, but they seem to be alone in that regard.
“Everyone else seems happy to further the established stereotypes. As a result, and despite the fact that most women have to cover up in public, the
demand for plastic surgery shows considerable growth, and has done for years. And it’s consequently become increasingly more accessible, affordable and accepted. These ideals are what consumers here relate to and it’s just easier for brands to ride that wave.
“And the superficial nature of beauty doesn’t end there. There is a growing trend for ‘slim’ to be the new evaluation of health – women are even basing such life essentials on these superficial measures, which just fuels the demand for cosmetic procedures like liposuction and plastic surgery.”
Not surprising then, that beauty ideals portrayed in the media are often considered the inspiration for women in the Arab world, and that good looks are high on the agenda as an important source of pride. So, what is the cultural motivation for maintaining physical beauty standards for Arab women?
Evan adds: “The desire to keep one’s husband interested when he’s allowed to marry more than once and divorce is so easy, the inability to attract a man’s interest through anything other than outward (and very limited) appearance when you’re not allowed to talk to them, the lack of other self-fulfillment channels open to women (like education or a career), the example set by the older generation – all of this only serves to fuel this perception.
“Is it only a matter of time before their perception of beauty evolves too? Will self-confidence start to be seen as an attractive quality, on par with slimness and hair? Hard to tell, but it also raises the other, important philosophical question – should advertising reflect society, or shape it? As many advertising professionals in the region are from the West, should we be imparting our ideals on this region, or should we be playing back the current perceptions of beauty even though it can be a source of stress to many? And this can be a real challenge.
“If the current perception of beauty is a problem to many, we need to find ways to address it. If attaining that standard is a problem, we need to find solutions to it. But we should always be looking to address the issues, not add to them.”
If beauty is commonly perceived as predominantly physical, what are brands doing to ensure their insecurities and desire to be attractive are not being fuelled by ad campaigns?
Madhusudhan Rao, marketing vice president for Unilever MENA, says: “Globally there are nine out of 10 women who are likely to say they are not beautiful. In this part of the world, when we’re talking about Arab women, it’s clear they believe that taking care of themselves and keeping up with their looks by continuing to look attractive is important to them. The lack of self-esteem when it comes to women is a global problem. I see it as an opportunity and responsibility of brands to restore their low self-esteem.
“Dove is at the forefront of bringing back self-esteem making it not just about looks but also personality. Brands must have a point of view when it comes to beauty and they don’t always do that.
“If we look at beauty in the Arab market it is very sophisticated – brands must appeal to that. Consumers are looking for products that fulfill their wants and desires to help reinforce their character and personality. There needs to be a holistic approach in how brands approach beauty.”
Alex Malouf, corporate communications manager, at Procter Gamble (PG), Arabian Peninsula, adds: “We have always believed that true beauty stems from within. We have never alluded to beauty as a superficial, frivolous concept or a purely physical manifestation. For us, beauty is synonymous with health and wellbeing; essentially, it is a projection of a woman’s inner radiance. We want our customers in the region to feel good about themselves on the inside, so that it can be reflected on the outside. It is not strictly about appearance. There is definitely a profound emphasis on beauty in Arab culture and this derives from the region’s longstanding heritage and traditions.
“There is no denying that make-up is an incredibly important and creative tool for women in this region – it serves as an important mode of self-expression and allows them to forge a personal style.
“Beauty is already extremely subjective; it is absolutely in the eye of the beholder. There are myriad beauty trends that reign supreme in this region – such as thick eyebrows, dark eyes or long hair – that probably don’t work elsewhere in the world.
“In reality, every single culture today mandates specific standards of beauty. There is no universal ideal; it is a question of ever-evolving taste, shifting times and changing cultural values.
“Physical beauty should never be clearly defined. We prefer to focus on the importance of genuine, inner beauty and how that can cause a ripple effect that seeps into every area of a woman’s life. We want to empower women with the knowledge that true beauty comes from within; and, in doing so, we aim to provide them with the right tools to enhance their self-esteem and build their self-confidence.”
In the GCC in particular, the perception of beauty can be skewed even more by the added problem of modelling being deemed an unsuitable profession, which leads to predominantly European models playing the role of Arab women.
One such model is Romanian Andreea Zoia, who has been cast in ad campaigns for Emirates, Emirates NBD, Emaar and Coca-Cola. She believes that the limited number of Arab models can also struggle to tell a convincing story in ad campaigns. “After so many years in the industry, I’ve been on site with many people and have noticed many nationalities, but also Arab models – some of them have a certain ego about being photographed because they have not been in an environment where they have been briefed or taught about delivering a service to make a car or drink look good,” she says. “It doesn’t make for a convincing story.
“When I came here I was modeling a lot and there was a big demand for Arab models and I felt I had the look because I’m a Mediterranean woman and have similar features to Arab women. I wondered how I would feel in an abaya and so I bought one and wore it for a photo shoot.
“I saw it as an opportunity and felt very good about myself wearing it. Designers started to book me for fashion shows.”
The Arab world has never been a popular place to search for models for regional and global campaigns, due to conservative factors, but will it change and enhance the way beauty is perceived in the future? Zoia says: “If model scouts are in the mall and offer their business card to an Arab woman, they will not take it. Unfortunately, there are too many advertising agencies and clients that don’t have a wide choice over who they book.
“Sometimes they select Arab models who don’t do justice to what they are marketing. They are still young and still have a lot to learn about the industry.
“I think that there is a sensitive culture and that’s the reason why parents of young women want them to spend their time earning their living differently. Arabs are generally more conservative and private, which is understandable and to be respected.
“People need to be patient and allow the industry to grow. In terms of development, we are there economically but the technicalities and attention to detail have to be present in order to learn further, but rest assured the industry will.”
On Jan. 1, 2014, Latvia will adopt the euro, and its lats currency will be no more. Farewell to the fulsomely bearded Krišjānis Barons, the collector of folk songs who graces the 100-latu note. Goodbye to images of sailing ships and maidens, oak trees and the Daugava River. The little Baltic nation is shucking a piece of its national heritage because its leaders think that joining Europe’s somewhat troubled common currency zone will lead to more trade, investment, and prosperity. “We are looking to growth,” Finance Minister Andris Vilks told reporters in June.
There aren’t many other events in 2014 that we can forecast with as much confidence as Latvia’s scheduled adoption of the euro. For decision-makers in global business, some big unknowns await. Things you’d like to know: Will the U.S. economy add jobs or asset bubbles with Janet Yellen as the next chairman of the Federal Reserve? Will German Chancellor Angela Merkel become more generous toward Southern Europe if she forms a coalition with the Social Democrats? Can Chinese President Xi Jinping and Premier Li Keqiang defeat the forces of reaction and repair the slowing engines of the world’s second-largest economy? And how about Shinzō Abe, the iconoclastic Japanese prime minister: Can he shrink budget deficits without pushing the economy back into deflation?
This article sets the economic and geopolitical stage for our special issue, The Year Ahead: 2014. In the pages to follow, we’ll provide a preview of 2014 for 55 global industries, from tech to banking and energy to retail. We don’t claim to be prescient, but we do believe that by wrestling with the hardest questions of the day we can help executives make decisions about where and when to deploy people and capital.
Worldwide, 2014 should be better than 2013 but not great. Inflation and interest rates are low in most of the world, oil prices are expected to fall, companies are sitting on cash, and there’s plenty of pent-up consumer demand. A Barclays (BCS) measure of global business confidence reached a 31-month high in October. But the world is having trouble accelerating after the 2009 global downturn. The International Monetary Fund projects global growth in gross domestic product of 3.6 percent in 2014. That’s up from 2.9 percent this year, although not back to the 5 percent growth rates of 2005 to 2007. The IMF’s theme for 2014 is “transitions and tensions,” which sounds anxious. “Global growth is in low gear, the drivers of activity are changing, and downside risks persist,” the organization reports.
The best place to start our tour d’horizon is Washington. That’s partly because the U.S. is the world’s largest economy and partly because two of the most important uncertainties on the global scene involve the Fed and Congress. Business executives from Shanghai to São Paulo are praying that Congress and the White House will reach deals with a minimum of additional fuss in January and February to fund the federal government for the rest of the fiscal year and raise the debt ceiling. And they’re hoping that Yellen can taper stimulus measures as adroitly as Ben Bernanke layered them on.
Success in both missions could lift 2014 growth in the U.S. above the middling 2.6 percent rate foreseen by economists surveyed by Bloomberg News. Failure threatens not only the U.S. but also the entire world. In 2014 “the biggest risk for us would be homemade troubles” coming out of Washington, says Jan Siegmund, chief financial officer of Automatic Data Processing (ADP), the payroll giant.
“Right now we’re living in this uncertainty. The thing that business hates the most, maybe after taxes, is uncertainty,” says Harold Sirkin, a senior partner at Boston Consulting Group. The U.S. is emerging as one of the world’s low-cost manufacturing centers, but politicians could still screw things up by keeping executives on pins and needles, Sirkin says. “Companies aren’t making the same level of investment,” he says. “They don’t want to hire people. If you tell them what the rules of the game are, they’re more likely to respond.”
One reasonable scenario goes like this: Fiscal policy becomes less of a drag on the U.S. economy in 2014. Republicans approve a debt-ceiling increase in February in exchange for some hard-to-predict concession from the White House. By spring, President Obama wins continuing resolutions that replace some of the scheduled budget caps and sequestration with smaller cuts in other areas. In the November 2014 congressional elections, the GOP loses some seats but retains control of the House. Divided government means less contraction because the Republicans can’t win big spending cuts and the Democrats can’t get tax increases. There’s little progress, though, on restraining the long-term growth in entitlement spending.
Over at the Fed on Constitution Avenue, Yellen will face anguishing decisions as soon as she replaces Bernanke as Fed chairman on Feb. 1, assuming she wins confirmation. Years of near-zero interest rates and aggressive Fed bond-buying have failed to engender strong economic growth. Monetary hawks say easy money will create bubbles in assets ranging from housing (again) to farmland to junk bonds. The Fed is near a tipping point at which stimulus becomes “an agent of financial recklessness,” and “none of us really know where that tipping point is,” Richard Fisher, the president of the Federal Reserve Bank of Dallas, said in October. In 2014, Fisher becomes a voting member of the Federal Open Market Committee—and a thorn in Yellen’s side.
Bubbles are only one risk. The expansion could lose what little momentum it has next year if Yellen, to prove her inflation-fighting bona fides, goes along with premature withdrawal of stimulus. The decline of the unemployment rate since 2009, to 7.3 percent in October, is misleading because it’s largely the result of people giving up and not being counted among the unemployed, says Scott Clemons, chief investment strategist at Brown Brothers Harriman Wealth Management.
The last recession ended in 2009, so by next summer this run of growth, modest as it is, will have lasted longer than the average post-World War II expansion. To keep it alive, says one investor, it’s almost as likely that the Fed will increase stimulus as that it will finally begin its long-anticipated taper. “Low demand for credit, low inflation, and other indicators are signaling that deflation remains a serious threat,” Daniel Arbess, a partner in the investment and advisory firm Perella Weinberg Partners, wrote in an e-mail.
The Fed’s next move matters to everyone because it remains the world’s de facto central bank. Other nations complained when low U.S. rates sent hot money flooding their way in 2008, and they complained again this year when hints of higher U.S. rates reversed the tide. Yellen won’t focus too much on that turmoil, though. Serving the U.S. economy is complicated enough. The latest expectation of many market watchers is that the central bank will start tapering bond purchases around March. But the Fed’s own rate setters don’t foresee nudging up the federal funds rate until 2015. That’s because the U.S. economy remains too weak to withstand it.
All of which argues for caution. At the sprawling Port of Long Beach, Calif., work is proceeding on a $4 billion expansion that by 2019 will increase capacity by one-third. Port officials aren’t so bullish about the coming year, though. They’re projecting only 3 percent volume growth for Long Beach and the neighboring Port of Los Angeles combined, the same as this year. Says Noel Hacegaba, the chief operating officer: “We see no clear sign that the recovery is picking up steam in the immediate future.”
China, the world’s No. 2 economy, won’t grow at its customary pace in 2014, either. Western drugmakers, whose Chinese sales rose 40 percent a year as recently as 2011, might have to settle for 14 percent to 15 percent growth next year, estimates London-based GlobalData. Economists surveyed by Bloomberg are looking for China’s deceleration to continue in the year ahead, with growth of 7.4 percent, vs. 7.6 percent in 2013. That may look boringly steady, but the seeming ability of China’s leadership to hit its targets masks economic and political volatility. “Nothing in China is as it appears,” says Gary Burnison, chief executive officer of recruiting company Korn/Ferry International (KFY). He lived in Shanghai this past summer.
To judge whether President Xi and Premier Li are gaining the upper hand, keep an eye on a few key events in 2014, advises David Hoffman, who lives in Beijing as managing director of the Conference Board’s China Center for Economics and Business. One is the 12th National People’s Congress’s plenary meeting in March. The other is a plenary session of the 18th Central Committee of the Communist Party of China, probably in September or October. Li wants to move China from investment to consumption as a source of growth, but the pop in growth this fall was achieved the old-fashioned way, by heavy lending that fueled investment in plants, equipment, and infrastructure. The municipality of Beijing is planning a financial district with 80 skyscrapers, even though its existing Financial Street is only about 15 years old. “We’re seeing tremendous inertia on the reform front, and the factional divides are very pronounced,” Hoffman says.
Xi and Li have declared war on corruption. The South China Morning Post says Xi has taken a personal interest in allegations of graft against Zhou Yongkang, who was the head of internal security until he retired last year. The trouble is that the leadership isn’t just cracking down on crime; it’s suppressing legitimate dissent by arresting professors and executives who defy it, says Regina Abrami, co-author of a new book Can China Lead? “The whole economy is built on a foundation of moral hazard,” says Abrami, director of the Lauder Global Program at the University of Pennsylvania’s Lauder Institute.
China looks considerably healthier to Michael Silverstein, who, like Sirkin, is a Boston Consulting Group senior partner. “There are 300 bureaucrats that basically run China as a meritocracy,” he says. They’re already starting work on the next Five-Year Plan, which will cover 2016 to 2020. “It’ll just blow you away,” Silverstein says. “I think they’re going to get highly specific about the technologies they really want to try to own.” Corruption? “The current government is very intent on knocking that out,” he says.
No one knows for sure who’s right. In China and elsewhere, predictability is a thing of the past. For a few good years, roughly 2000 to 2007, life was easy for global investors, according to a recent presentation in New York by David Bloom, global head of foreign exchange strategy at HSBC (HBC). Practicing the time-honored carry trade, they would borrow in countries with low interest rates, such as Japan, and invest in those offering higher returns, such as New Zealand. After the global financial crisis hit in 2008, the game became “risk on/risk off.” In months when “risk on” was in fashion, money flowed into risky, high-yielding securities; other months investors would flee for the safety of U.S. Treasuries.
The latest trend, which will continue in 2014, says Bloom, is for some investment money to travel the carry-trade route, some to seek geopolitical safety in the likes of the euro and the British pound (but not the suddenly scary U.S. dollar), and some to go toward places such as Hong Kong, Taiwan, and South Korea whose currencies look promising because they have fat trade surpluses. “The FX world has gone from the simple to the complicated,” Bloom wrote in an e-mail.
One piece of good news on the currency front is that imbalances in global trade have been shrinking. American deficits and Chinese surpluses have fallen dramatically since 2007. But even that positive development will cause unnerving reverberations in 2014, predicts Stephen King, HSBC’s global head of economics and asset allocation.
The recently dubbed Fragile Five—Brazil, India, Indonesia, South Africa, and Turkey—became addicted to inflows of hot money caused in part by the Fed’s easy monetary policy. They ran up trade deficits. Now those deficits are getting smaller, which is healthy in the long run. But they’re dwindling too rapidly and in a sickly way, i.e., through currency depreciation that makes imports unaffordable and through high interest rates that chill demand, says King.
Mathematically, if the Fragile Five are reducing their deficits, some other countries must run bigger deficits or smaller surpluses. If they don’t want to, the risk is a beggar-thy-neighbor currency war.
A big question for 2014: Which country will break out of a mercantilist mindset and accept smaller surpluses? China is moving slowly toward an overall balance in trade despite its huge surplus vs. the U.S. Then come Japan and Germany. Japan’s Abe is in a pickle. He needs to boost growth but can’t afford a big stimulus and is promising a sales tax hike in April. So Abe is counting on igniting growth through higher inflation. That weakens the yen, which suppresses imports. “It is hard to see any solution to Japan’s problems that does not involve a significantly weaker yen,” Julian Jessop, chief international economist for Capital Economics, wrote in a note to investors.
That leaves Germany, which has run large trade surpluses throughout the European crisis. Merkel won election to a third four-year term as chancellor in September, but her Christian Democratic Union party failed to garner enough votes to form a government by itself. Her most likely partner is the more Eurocentric Social Democratic Party. European growth could accelerate in 2014 if a new German coalition government provides more financial aid to the rest of Europe and agrees to contribute more to recapitalizing weak banks in Spain and Italy. “This is not far-fetched,” says Andre Sapir, an economist and senior fellow at Bruegel, a Brussels-based think tank. “Germany doesn’t want to go for the major clash and the end of the euro.”
On the other hand, ordinary Germans aren’t feeling a lot of gemütlichkeit—warm fuzzies—toward the people of Southern Europe, whom some describe as freeloaders. Conservative Germans say that if they make life too easy for Greece, Portugal, Italy, and Spain, the pressure on them to reform will be removed. If Germany gets too hard-nosed, though, its policies could intensify a populist backlash in debtor nations. A key event to watch is the elections to the European Parliament in May, where anti-European parties threaten a strong showing. A surprise rate cut by the European Central Bank on Nov. 7 should boost growth. On balance, Sapir is mildly optimistic: “I would see 2014 as a year of transition. But hopefully not a wasted year of transition.”
Once you get past the world’s top four economies, you’re down to countries that are not fully masters of their own fates. The rest of Europe takes its cue from Germany, although Britain, France, and Italy are players, too. The economies of Russia and the Middle East depend on energy prices. Africa, primarily a commodity producer, lives and dies by the swings in prices of raw materials. Ditto for most of South America, although Brazil is a major manufacturer as well. Southeast Asia and Australia are in China’s orbit, while Canada and Mexico depend on the U.S. India is big but insular. Then there are the trouble spots that could blow up in 2014—or not: the South China Sea, Kashmir, Yemen, and so on.
The U.S. matters the most of all. If it grows, the world will, too. In the eastern U.S., railroad CSX (CSX) is running more trains laden with housing construction materials, cars, and even crude oil from North Dakota. “We are feeling more optimistic,” says CEO Mike Ward. “If you look at some of the broad indicators in the economy … we’re really seeing some positive signs.” If more CEOs climb on board Ward’s optimism train, 2014 could be a strong year after all.