2020. vol. 15. No. 3

This report focuses on the many ways digital transformation challenges existing policies. Overwhelmingly, current policies are predicated on tangible products and assets, on fixed geographic boundaries and locations, on transaction costs that limit the scale and scope of interactions and offerings, and on supply and demand conditions that reflect scarcity. The digital transformation is dramatically affecting all of these factors and the efficacy of policies based upon them. Exposing the underlying nature of the changes induced by digital transformation rather than focusing on the technologies themselves, the report seeks to offer an overarching perspective of the changes at play to understand policy tensions at a more fundamental level. The intent is to outline policy implications across a range of domains to support a holistic and cross-sectoral approach with consistent, mutually supportive policies. The objective is to provide a start towards a checklist against which existing and new policies can be reviewed to see if they are appropriate and fit-for-purpose in the digital era. The report explores three key areas where digital transformation is affecting the way the economy and society is operating, i.e.: i) scale, scope and speed; ii) ownership, assets and economic value; and iii) relationships, markets and ecosystems. These break down into seven “vectors” of digital transformation that cut through nearly all policy domains. Changes in scale, scope and speed result from the conversion of information into digital bits that can be processed and analysed by computers. The digitisation of information has become exponentially cheaper and faster over the last 50 years and affects the nature of assets that generate value, how ownership is imparted and where value is generated. In turn, these changes affect the structure and operation of markets, supported by digital platforms and thereby create new ecosystems of supply, demand and exchange. These shifts affect how relationships – both economic and social – are developed, maintained and located. For each of the seven vectors the report explores examples of policy implications, and in some cases possible approaches to policy adaptation. While illustrative, the policy examples provide an additional perspective on the vectors. This report benefits from comments from the OECD Committee on Digital Economy Policy, the Going Digital Steering Group, the Going Digital Expert Advisory Group, a series of Going Digital national roundtables, and responses to a questionnaire gathered from the 14 core OECD Committees participating in the Going Digital project. It also reflects important contributions made by colleagues from across the OECD, as well as outside experts.

In the wake of the 2008 financial crisis, international financial institutions have changed their views on the benefits of capital account liberalization and the management of capital flows. The International Monetary Fund (IMF) began to publicly express support for what have traditionally been referred to as “capital controls.” The impacts of restrictions on capital flows have, unfortunately, still not been established, and capital controls create distortions if they remain in place indefinitely. The present study uses quarterly data on capital controls in 25 emerging economies over the period between 2000 and 2016. Through an examination of a panel vector autoregressive (PVAR) with variance decomposition and impulse-response functions analysis, the study provides further evidence of some domestic effects of restrictions on capital flows. The results show that restrictions were more effective following the 2008 financial crisis and allowed for more monetary policy autonomy and exchange rate stability. Unexpectedly, the findings do not show any significant impact on international reserves accumulation. The study highlights the necessity of following the international financial organizations’ guidelines to well manage external capital flows and to better coordinate macroeconomic policies in the hope of finding an optimal policy mix.

In recent years there has been a steady growth of “multi-bilateral aid,” or voluntary earmarked contributions transferred by international donors through multilateral organizations. The World Bank Group’s financial intermediary funds (FIFs) and trust funds have gained an especially wide recognition and have been particularly instrumental in channelling aid to fragile states — a priority group of partners for achieving the United Nations’ sustainable development goals. But researchers have paid much less attention to FIFs than to trust funds.This article identifies characteristic features of World Bank IFIs as a multilateral mechanism to channel aid to politically unstable regions, focusing on the Middle East and North Africa Transition Fund (MENA TF) established in 2012 to support Arab countries undergoing political transitions as a result of the Arab Awakening. The introductory section examines the particularities, benefits and risks of establishing FIFs as multilateral mechanisms to transfer development assistance. These parameters are illustrated in subsequent sections which discuss the MENA TF’s establishment procedures, governance structure, and mobilization and allocation of funds.The article concludes that for each of the parties involved, hypothetically, World Bank FIFs are a quite convenient mechanism for supporting fragile states. However, the example of the MENA TF conclusively shows that everything depends on the concrete political context of their establishment and operation. In terms of some key parameters (establishment procedure, governance structure) the MENA TF mechanism is very similar to other funds of the same type, but its operation is strongly affected by challenges uncommon to the majority of FIFs, which are focused on more politically neutral sectors. These challenges stem from several factors, including the predominance of political decisions within the Deauville Partnership, a unique list of contributors, and a severity of discord among them given the drastic deterioration of the political climate in the Arab world and beyond in 2014. This not only disrupted plans to engage more donors and mobilize the planned amount of funds, but it also stipulated a visible politicization of aid allocation. Political risks which materialized in the MENA TF operations might occur in other FIFs focused on fragile states and situations. The establishment of additional multilateral mechanisms, thus, requires learning from experience and prioritizing risk assessment and mitigation.

The reported study was funded by the Russian Foundation for Basic Research according to the research project No 17-37-01018-OGN.

The advent of the new coronavirus hinders the fragile welfare of migrant workers. Those economic sectors with a large migrant workforce appear to be those hit hardest during the lockdown, resulting in surge in migrant unemployment and a plunge in the volume of remittances. This has become yet another factor putting pressure on the gross domestic product (GDP) growth, balance of payments, and budgets of countries that are net remittance recipients, while also triggering rising poverty levels. This paper evaluates the impact of the current pandemic (and respective economic downturn) on remittance inflows to recipient countries and tackles the potential contribution that international financial institutions could make to alleviate the adverse economic aftermath. In Central Asia and Southern Caucuses (except Azerbaijan) emergency financing granted by the International Monetary Fund (IMF) and the World Bank covers 9–20% of the overall size of the annual remittances received. This financial support could be rendered insufficient due to the sharp decrease in the volume of remittances, decline in tourism revenue, and weakening economic activity, while the poor quality of state institutions may hinder the efficient distribution of accumulated resources. In Europe, the IMF and the World Bank provided approximately $7.7 billion in financing to low- and middle-income countries for such purposes as economic stabilization, support for population welfare, and financing of internal/external deficit, of which $5 billion is represented by the new Ukraine-IMF Stand-By Agreement. With the exception of Ukraine, Macedonia, and Bulgaria (the latter having received no loans/grants so far), the cover index for European remittance-recipients stands within a range of 2–18% over 2019 remittance inflows.Therefore, it is most feasible that the current 2020 GDP growth forecasts made by the IMF, the World Bank, and local governments are inaccurate in the light of the insufficient financial support provided by international financial organizations. Additional pressure on the GDP figures might stem from further extension and/or toughening of the lockdown period, as well as from uncertainty regarding the revival of regular business activity and the timeline for resuming migrant remittances.

This article offers a comprehensive analysis of various aspects of the financial integration of the Eurasian Economic Union (EAEU) at its present stage of development. Opportunities and prospects, risks, and limitations were analyzed from the point of view of Russia’s national interests, taking into account the country’s EAEU presidency in 2018. Financial integration should be deepened; it could have a powerful systemic effect and help accomplish several interrelated goals, such as giving a new impetus to Eurasian integration and overcoming the relative stagnation caused by the exhaustion of the natural integrational effects of the EAEU’s “start-up stage.” At the same time, the authors assume that (in the absolute majority of cases) EAEU countries have common interests in the financial aspect of integration. A successful Eurasian project could lead to the adoption of a multilateral approach with an emphasis on concerted actions, which would make financial integration beneficial to all members of the EAEU, individually and collectively alike. The article presents an in-depth analysis of the Eurasian Economic Commission’s (EEC) regulatory documents and compares the EAEU’s financial integration with that of other integration associations (such as the European Union and the Association of Southeast Asian Nations). The analysis identifies the most promising areas of financial integration in the medium term, taking into account members’ obligations. The list of priority measures to step up integrational cooperation aimed at creating a single financial market is presented at the supranational (for the EAEU) and national (for Russia) levels.

This article explores the issue of data localization by capturing all relevant debates and discussion around it. It investigates issues related to data management, storage, and ownership, followed by the data safety and security concerns of developing countries in a rapidly changing digital world. Storing data locally can be an effective way to tackle these concerns. Data localization can bring the data storing market price down. It can inject sufficient incentive to spur technological innovation in the system. If workable templates of data safety and privacy frameworks can be built locally, consumers’ rights will also be protected. Data localization also has the potential to positively contribute to effective redressal of damages in developing countries related to data leakage. The COVID-19 pandemic has considerably sharpened existing conflicts in the e-commerce ecosystem. Treating this crisis as an opportunity and pushing for digital data safety and security by means of data localization is the ideal strategy for developing and emerging economies to adopt.

The election of Donald Trump caused a change in the direction of U.S. foreign policy for Latin America with the imposition of new sanctions on the Cuban government (starting a new cold war with the island) and the attempted regime changes in Venezuela and Nicaragua, whose governments are seen as a threat by Washington’s elite. In September 2018, during a speech at the opening session of the United Nations General Assembly in New York, Donald Trump took up the principles of the Monroe Doctrine as formal a U.S. policy and rejected the alleged interference of foreign states in the western hemisphere and in the internal affairs of the United States — a direct allusion to China and Russia. This change in U.S. policy toward Latin America has had a great impact on Sino-Latin American relations in the context of political pressures and aggressive rhetoric seeking to curb the Chinese presence there. This article explores the motivation behind the new attitude of the United States in its relations with Latin America and how it impacts Sino-Latin American relations.

Based on the premise that each country has a particular way of interpreting and reacting to international events, the study of strategic culture provides an important analytical tool for understanding and explaining how countries see the world and what drives their foreign policy practices and preferences. Considering that the rise of emerging powers has the potential to affect the balance of power in the international system, this article examines and compares the strategic culture of two of the most important emerging countries in the world, Brazil and India. While apparently exhibiting completely different patterns of strategic thinking, which have led them to pursue different approaches to reach their objectives, these two states share a belief that they are predestined to “greatness,” to play a more significant role in their regional contexts, and to become major stakeholders in global affairs. As the largest countries in their respective regions, Brazil and India can help to shape the future of Latin America and South Asia. Their international behaviour can not only condition the foreign, security and domestic policies and strategies of their neighbours but also impact the ambitions of extra-regional powers with a stake in those regions. Analyzing the strategic culture of these two countries can therefore help policymakers and scholars to understand the rationale for their perceptions and ambitions, what influences and drives their foreign and security policies, how they see the world and why they behave the way they do.

With the rise of China, reforming the global governance institutions has become an important part of China’s diplomacy. Based on whether to build new international rules or reinterpret or redeploy the existing ones, we can divide the rising power’s paths in global governance reform into four types: displacement, layering, conversion and avoidance. Why does China adopt different paths toward reforming the existing international institutions which are dominated by the U.S.? Building on the theory of “gradual institutional change” in historical institutionalism, this article argues that the veto capability of the established power and the flexibility of the existing international institution are two determinants of the rising power’s path selection in global governance reform. It applies this theoretical framework to explain China’s behaviour in four issue areas: sovereign credit rating, the international monetary system, free trade agreements and multilateral development banks. In sovereign credit rating, the strong veto capability of the U.S. and the low flexibility of the existing international credit rating institution make China adopt the path of avoidance. In the international monetary system, the strong veto capability of the U.S. and the high flexibility of the International Monetary Fund’s special drawing rights make China adopt the path of layering. In free trade agreements, the weak veto capability of the U.S. and low flexibility of the Trans-Pacific Partnership make China adopt the path of displacement. In multilateral development banks, the weak veto capability of the U.S. and high flexibility of World Bank rules make China adopt the path of conversion.

Oil export revenues still constitute a considerable part of the national budget, and influence the business cycle, in Russia as well as other oil-exporting countries. Therefore, the identification of the main factors influencing oil prices, an adequate assessment of their significance, as well as a forecast of market developments and possible actions in the international arena are necessary for competent public policy planning and realistic evidence-based budgeting. The activities of the Organization of the Petroleum Exporting Countries (OPEC) are traditionally considered among the main geopolitical factors that significantly influence oil price dynamics.Although at present it is too early to make a full-fledged impact assessment for all factors that influenced oil prices during the current crisis, the first attempts are already being made through situation analyses and academic articles in peer-reviewed journals. However, an analysis of the available studies carried out since the end of the 1960s for all cases of significant oil price fluctuations helps systematize existing findings and answer the following research question: under what circumstances do geopolitical factors play a defining role, and when is their influence extremely limited or completely absent? The goal of this analysis is to identify and generalize the main trends in the oil market and relevant academic research, as well as to clarify OPEC’s role in the current stage of the oil market’s development.Based on this analysis several conclusions are drawn. First, geopolitical factors had varying significance in oil price dynamics depending on the historic period: in the 1960s and 1970s, the influence was determinative; it then started to weaken and became less important compared to economic variables (especially on the demand side). Second, a key feature of the influence of geopolitical factors on the oil market is indirectness: expectations about future events that theoretically could lead to changes in market conditions, primarily oil supply, have a greater impact on prices than the events themselves. Third, OPEC (+) activities and the political processes taking place among its members are still the most significant geopolitical factors affecting the oil market. Moreover, OPEC’s influence as a cartel has been steadily declining since the 1980s. It has lost price-setting power, and now its major function is the adjustment of market-defined prices. Finally, OPEC’s influence has decreased due to several major factors: oil market transformation from the sale of commodities to the sale of financial products, the shale revolution, the development of production in non-OPEC countries that, in case of the United States, are also the largest consumers, and the  development of alternative energy and renewable sources.

The article was written on the basis of the RANEPA state assignment research programme

The article discusses modern Eurasian integration - regional processes of unification in the post-Soviet space, in which Russia plays a guiding role. Despite the declaration by the American establishment of the importance of the Eurasian macro region and the deep involvement of the United States in the region’s affairs, the American foreign policy discourse clearly shows a lack of interest on the part of the expert community in integration in the post-Soviet space against the backdrop of Washington’s assistance in integration processes in other regions of the world. In this regard, the purpose of the article is to analyze the current practice of coverage in the American scientific and academic discourse of Eurasian integration processes with the active role of Russia. Based on the opinion of American experts from centrist, liberal and conservative think tanks, it is planned to determine the place of Eurasian integration issues in the American foreign policy discourse, to determine the dynamics of changes in the process of coverage of Eurasian integration by the American expert community, and to outline the nature of the assessments of American experts on Eurasian integration projects.