The 15-berth port at Chancay, around 80 kilometers (about 50 miles) north of Lima on the Peruvian coast, was jointly inaugurated by Peru President Dina Boluarte and China’s President Xi Jinping as part of the Belt and Road Initiative (BRI).

The port, built by China’s state-owned Cosco and local miner Volcan, is poised to transform regional trade. Chancay is able to handle the largest “post-panamax” container ships that are too large for the Panama Canal. The port has an initial capacity of 1-1.5 million 20-foot equivalent units (TEUs), an industry standard for assessing container volumes. The port capacity is expected to rise to 3.5 million TEUs when fully operational.

With one eye on the resource-rich region, the largest container ships will now be able to sail to Shanghai in 23 days—reportedly 10 days faster than via the Panama Canal route.

Mexican and US port operators will likely see lower revenues. And US analysts worry that the port could double as an operating base for the Chinese Navy in America’s backyard, despite being located roughly 6,000 km from the US. China’s appetite for Latin American resources, and ability through the BRI to invest in developing countries, has led to accusations that the US has fallen behind in rolling out a similar initiative.

They point to the stark contrast of outgoing US Secretary of State Antony Blinken offering Peru a number of Caltrain diesel locomotives dating from the 1980s in a $6 million deal announced immediately following the Chancay port inauguration. They say the US has overlooked Latin America, allowing China to take advantage of local resources while simultaneously achieving a geopolitical advantage.

China’s investment in Chancay has not been without issues. In May, while embroiled in a dispute with Cosco, Peruvian lawmakers passed legislation granting Cosco exclusive rights to operate the port, a move previously considered unthinkable by analysts. China is Peru’s largest trade partner, with copper, iron and fishmeal making up the bulk of exports.

Lebanon’s Bank Audi is the largest Odeabank shareholder, with a 76.4% stake. Other shareholders include the International Finance Corporation (IFC), FIG Investment Company and the European Bank for Reconstruction and Development, which have agreed to sell their interests. The financial details of the transaction have not been disclosed. The law firm Dechert is representing Bank Audi in the negotiations.

“As part of ADQ, Odeabank will have access to fresh capital, which will allow the company to unlock synergies with our wider portfolio,” Mansour AlMulla, deputy group CEO at ADQ, said in a prepared statement.

According to Bank Audi CEO Khalil El Debs, the deal will allow the bank to regroup and expand in select markets. “This transaction aligns well with Bank Audi Group’s present strategic focus on its home market as well as its presence in Europe,” he added.

In a September note, Fitch Ratings said it expected Odeabank to incur an operating loss this year and expected profitability to remain weak next year.

State-owned ADQ is nevertheless charged with expanding Abu Dhabi’s investment footprint across various sectors and markets. In 2022, it launched a $300 million fund with the Türkey Wealth Fund, which invests in companies developing emerging technologies or improving existing technologies in key sectors. But ADQ’s banking foray may not be without issues. In May, Fitch Ratings cautioned banks in the six-member Gulf Cooperation Council (GCC) about unchecked growth plans.

“International expansion provides higher diversification but can be a source of additional risks. In particular, foreign-exchange and interest-rate risks may be significant when entering a lower-rated jurisdiction with a more volatile macroeconomic backdrop.”

As a poll of economists showed earlier this month, Turkey’s economy is set to grow 3% this year and in 2025, lower than the government’s recently updated forecasts.

First reported last month, the development comes amid a determined push by the UAE to establish itself as a global hub for advanced technologies and shrink the emirates’ dependence on hydrocarbon revenues. Mubadala, an Abu Dhabi sovereign fund, is reportedly playing a prominent role in the discussions with Samsung and TSMC, which are being pitched as a means to plug deficiencies in the global chip supply chain.

However, the UAE’s increasingly assertive efforts to become the pre-eminent regional economy could place it at the center of the standoff between Washington and Beijing over leadership in cutting-edge technology, primarily semiconductors. The Biden administration has previously been skeptical of the emirates’ tech ambitions, earlier slowing shipments to the region, analysts say.

Those reservations appear to have been tamped down by Microsoft’s $1.5 billion investment in G42, Abu Dhabi’s principal artificial intelligence (AI) firm in April, which has been interpreted as a move by the US to ensure that the UAE does not become a conduit for the transfer of proprietary technology to China. Nvidia, the US chipmaker at the forefront of AI development, has reportedly received the regulatory green light to sell chips, including its critical Hopper H100 AI GPUs, to the UAE as the petrostate invests in data centers. The emirates are also partnering with the chipmaker to develop a climate tech lab in Abu Dhabi using AI-powered climate and weather modeling across the globe. Last month, UAE President Sheikh Mohamed bin Zayed Al Nahyan made an official visit to the US that in addition to discussions on Middle East tensions, included talks with the leaders of BlackRock, Microsoft and Nvidia.    

According to a September statement, the Central Bank of Egypt (CBE) sought the necessary approvals, including consent from Egypt’s Financial Regulatory Authority and the Egyptian Stock Exchange.

United Bank’s assets increased to 106 billion Egyptian pounds (EGP)—roughly $2.2 billion—at the end of June, up from EGP72 billion in 2021. Additionally, profits reached EGP1.74 billion at the end of 2023 from EGP1.15 billion in 2021, the CBE said. United Bank operates a network of 68 branches, maintains 225 ATMs and employs 1,800 staff. It also provides Islamic banking services to its customer base.

The CBE did not disclose the value of the intended IPO, and cautioned that the sale is subject to market conditions and relevant regulatory approvals. The IPO is an integral part of a new economic strategy, says Ahmed Negm, head of Market Research for MENA at broker XS.com. Negm said, “The sale is part of a broader asset sale program to address foreign currency shortages and boost the economy.”

Still, the Middle East is on a precipice amid fears that Israel’s incursion into Lebanon could morph into a wider regional conflict and affect investor confidence.

Egypt hopes to generate $1 billion from sales of state-owned companies this year, and $1.5 billion in 2025, Hala el Saeed, Egypt’s then minister of planning and economic development, said in April. This year’s forecast is lower than the earlier headline figure of $6.5 billion that Egypt’s finance minister indicated in February. The International Monetary Fund  also appears to have moderated its outlook for proceeds from privatization as a result of the war in Gaza. In March, the International Monetary Fund  increased a current loan agreement with Egypt by $5 billion to $8 billion. It previously negotiated a $3 billion, 46-month Extended Fund Facility with Egypt in 2022.        

The proposed union, however, faces challenges. Chief among those is political gridlock, impeding reforms that could benefit the majority of Kuwaiti lenders. Kuwait Emir Mishal al-Ahmad al-Sabah shut down the National Assembly and suspended parts of the constitution in May.

These hurdles may put a brake on the deal’s progress, says Mazen Salhab, chief market strategist for the MENA region at brokerage BDSwiss. “Political instability may delay regulatory approvals, [and] this instability can also create an uncertain economic environment,” he says. Nonetheless, if consummated, the merger would create an Islamic banking major. The growth of Islamic banking is currently outpacing that of conventional banking in Kuwait, he adds.

Banks in Kuwait could profit from the ratification of the proposed Public Debt Law, which would permit government borrowing, and a mortgage law enabling banks to provide residential mortgages. However, these legislative reforms now look to be in jeopardy, and as a consequence, credit growth, at around 3%-4% this year, is likely to remain muted, according to Fitch.

As is common throughout the six-member Gulf Cooperation Council (GCC), which includes the region’s oil exporters, Kuwait is overbanked. GCC banks increasingly turn to mergers and acquisitions to cut costs and improve profits amid limited organic growth opportunities in domestic banking markets.

Kuwait’s banking sector has already witnessed a spate of M&A activity. In June, Burgan Bank acquired a 100% stake in Bahrain’s United Gulf Bank. This followed the sale of 52.2% of its 99.7% stake in Burgan Bank Turkiye to Al Rawabi United Holding. Meanwhile, a 51.8% stake in the Bank of Baghdad was sold to Jordan Kuwait Bank in 2023. Together, these banks are part of Kuwait Projects Company, a local holding company. Earlier this year, S&P Global Ratings noted that GCC bank profits could be squeezed when the US Federal Reserve begins cutting interest rates.

While artificial intelligence was already promising profound changes in the traditional banking business model, the latest innovation in the technology—generative AI—portends a multisensory revolution in banking services. Indeed, GenAI, with its ability to collect and interpret financial data on a vast scale, could force some of the Arabian Gulf region’s biggest banks to rethink their already costly digital banking strategies.

GenAI’s insatiable appetite for data offers banks in the Gulf Cooperation Council states the prospect of not only a more intimate relationship with customers, but also improved management processes, such as fraud detection and other important back-office functions. Unsurprisingly, banks that are best able to quickly deploy GenAI are looking forward to a return on their bottom line, despite concerns over the human impact of the new tech.

Banks that integrate and scale GenAI could see a 22% to 30% improvement in productivity over the next three years, Accenture estimated in a February report on AI in banking, and up to 600 basis points in revenue growth, and 300 basis points in return on equity. In the US, the giant management consultant found, 73% of time spent by bank employees has a high potential to be impacted by generative AI, some 39% by automation, and 34% by augmentation.

Whether those figures would apply to GCC financial institutions is unknown; what is clear is that the Gulf’s petrodollar revenue and its governments’ ability to lavish significant sums to gain a position in GenAI, makes GCC banks financially well positioned to adopt the latest innovations and capitalize on market demand.

Boosting that scenario are highly positive consumer attitudes in the region toward innovative technology such as mobile commerce and the rapid take-up of digital banking by GCC institutions’ customers that sped the rollout of AI chatbots in customer service.

Major Gulf banks, including Al Rajhi Bank of Saudi Arabia, Qatar National Bank, and National Bank of Kuwait are already using AI to varying degrees. In the United Arab Emirates, Emirates NBD has partnered with management consultants McKinsey and QuantumBlack—the firm’s AI arm—with the latter reportedly involved in the design and early-stage deployment of generative AI use cases.

But with GenAI chatbots now available based on OpenAI’s ChatGPT and Alphabet’s Bard, workers can engage and use the latest AI iterations as digital assistants, transforming the way in which banks do business. New opportunities to drive customer engagement, such as gamification, also promise to increase customer retention.

Whether through automation or augmentation, Accenture expects dramatic results in the back, middle, and front offices,  predicting 25% of all staff will be impacted by both. The UAE is backing AI at the government level, with the minister for AI—a position created in 2017—noting in February that nine banks and nine other financial institutions are using blockchain solutions.

The UAE, which has its own AI university, has taken another technological leap, launching its own open-source, open-access large language model. The latest version, Falcon 2, offers itself as the Gulf’s answer to Google’s and Meta’s GenAI innovations. Falcon 2’s array of applications, and its developer’s claim that it is the only AI model with vision-to-language capabilities, makes it probable GCC banks will want to evaluate a homegrown variant.

Generative AI’s potential to rescript the business of banking implies almost limitless applications. However, having poured millions if not billions into digital banking, GCC banks may hesitate over another round of technology investment expenditure. And there is also the question whether they are nimble enough.

“Banks have been traditionally product-centric,” says Rajesh Saxena, CEO of Retail and Central Banking at Intellect Design Arena, a fintech designer for financial services. “This approach has made large-scale transformations within banks time-consuming, expensive, and risky, not least because the back-end systems and products are all embedded into a monolithic architecture.”

But if the cost base for GCC banks is similar to their international counterparts’—staff compensation at global banks makes up half the cost-base on average, Moody’s Investors Service estimates—they may wish to accelerate GenAI integration. Regardless of the potential upheaval, Saxena thinks the latest innovations could quickly up banks’ compliance programs, where generative AI’s speed and accuracy could contain reputational exposure to issues such as money laundering, etc.

“AI algorithms analyze vast amounts of data to assess credit risk, detect anomalies, and prevent AML fraud,” Saxena notes. That might be particularly relevant to financial institutions in the UAE. Earlier this year, the Paris-based Financial Action Task Force removed the UAE from its “grey list” for deficiencies in money laundering controls, a move that drew criticism from some anti-money laundering analysts.

Many traditional banks’ initial indecisiveness in rolling out AI prompted many analysts to predict that more dynamism of challenger or neobanks could end their dominance. And challenger banks have doubtless upped the stakes, especially in customer service and with product innovations such as Buy Now, Pay Later (BNPL). But the premise that they are displacing traditional banks in the US and Europe is unproven.

So, what about the GCC?

With fintech valuations still high, the likelihood of traditional banks acquiring their upstart rivals is questionable. And venture capital, the main source of funding for many fintechs, is also under pressure. Data from PitchBook shows a downward shift in investor sentiment that might slow further funding rounds. Global deal activity fell to $350 billion last year, from $530 billion in 2022.

In the GCC, a digitally savvy population’s strong focus on user experience has helped neobanks disrupt the status quo for their traditional rivals. Fintechs in the region have benefited not only from innovative technology but from targeting a specific market segment, says Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

That leadership could prove temporary, however, and may be just as likely to benefit traditional banks.

“GenAI can quickly make traditional banks more efficient and effective,” says Schulman. “It may threaten challenger banks by eroding competitive advantage more than it helps them; neobanks have been known for innovation for more than a decade, but the digital gap has narrowed and their frontrunner status may slip faster with generative AI.”

So, is that goodbye to further growth for neobanks? Not quite.

Some analysts, including Schulman, speculate the rivals could find a compromise that results in more collaboration. “An uptick in mergers and exploratory partnerships seems inevitable,” he predicts.

In the US and Europe, challenger banks have lost some of their luster with the realization that banking is built on relationships and that retaining customer loyalty necessitates a presence across multiple—often unexciting—business clusters.

Setting the GCC apart is its importance as a center for Islamic finance, a market with assets of $4.5 trillion in 2022, according to November’s ICD-LSEG Islamic Finance Development report, the latest date for which figures are available. Bahrain and Dubai are positioning themselves as Islamic finance hubs, and applying generative AI would seem a natural progression that could have global implications for the two tech-centered economies.

One advantage: Falling costs of training could also move Islamic finance toward a wider adoption of GenAI. And while the interpretative characteristics of sharia law make adapting AI to Islamic finance a complex task, AI-driven applications and processes that offer opinions on financial products’ and transactions’ validity and adherence to Islamic finance law could further the GCC’s ambitions as a go-to hub.

That said, the need to address cultural and legal issues could hamper development of a dedicated AI tool, warns Yiannis Antoniou, practice head of Data, Analytics, and AI at consultant Lab49.

“The lack of a cohesive and widely accepted cross-border Islamic finance framework leads to complexity and inefficiencies that make multinational financial institutions’ compliance [obligations] especially difficult,” he says.

Automating work and deriving cost savings are just the beginning of what could be an extraordinary chapter in GCC banking. Yet, the real opportunity lies in harnessing generative AI to fuel growth—assuming the latest innovations do not overwhelm banks and result in a loss of control.

“Banks won’t be able to cordon off generative AI’s impact on their organization in the early days of change,” Accenture’s AI in banking report states. “It touches almost every job in banking.”

Still, with substantial financial resources and a falling cost of training personnel in AI, banks in the GCC have an opportunity to overtake the successes of their maverick fintech rivals.

Another year, another bumper crop of profits. Banks in the six-member Gulf Cooperation Council (GCC) are set to reap further gains as higher oil prices, increased public-sector spending, and red-hot real estate markets combine to generate a heady lending environment. In the first quarter of this year, the combined profits of 57 listed banks jumped 10.5% to $14.4 billion compared to the same period in 2023, Kuwait-headquartered Kamco Invest said in a May report.

Quarterly performance was similarly robust, with an 11.8% surge in quarter-on-quarter profits.

But there are headwinds, including an expected change in monetary policy by the US Federal Reserve, mounting competition, and geopolitical uncertainty.

Meanwhile, banks in Saudi Arabia and the United Arab Emirates may face liquidity challenges as they scramble to meet strong lending demand driven by governments jockeying to liberalize their economies. That scenario could trigger renewed consolidation, some analysts predict, as GCC banks, with limited regional options, look to other jurisdictions to achieve operating efficiencies and cost savings.

GCC banks have been riffing off the Fed’s last monetary tightening cycle to support earnings; higher interest rates typically boost loan yields and fee income. At the end of 2023, the average return on assets of the region’s top 45 banks reached 1.7%, up from 1.2% at year-end 2021, according to ratings agency S&P Global.

With the exception of Kuwait, where the dinar is pegged to a basket of currencies, GCC governments peg theirs to the US dollar, and so they typically follow US interest rate changes to preserve their pegs.

Yet, a Fed move to lower may pressure some GCC banks. S&P estimates that every 100-basis-point rate drop corresponds to around a 9% reduction in bottom-line profits. The most vulnerable bank S&P rates may see as much as a 30% drop in the bottom line for every 100 basis point cut.

Despite the chances of an erosion in earnings, however, merger and acquisition activity among GCC banks has gone quiet since it reached a pre-pandemic peak in 2019 when 11 deals worth $118 billion were consummated, according to data from PitchBook. Last year saw few blockbuster deals, adding to speculation that a fresh burst of activity might be overdue.

While it is unclear when the Fed will begin reducing interest rates and by how much, when it happens, the shift could alter GCC banks’ risk profile. The good news is that rate cuts would reduce the number of unrealized losses that institutions in the region have built up amid frenetic lending. These might be as much as some $2.8 billion for rated GCC banks, or 1.9% on average of their total equity at year-end 2023, S&P estimates.

Still, lower profits are not the only consideration for banks when they weigh M&A to achieve cost efficiencies. In recent years, deals among the larger banks have been a shortcut to building market share. But it is widely acknowledged there are too many banks in local banking markets at a time of mounting competition from smaller, more agile rivals.

“Consolidation makes sense for overbanked systems in the region,” says Mohamed Damak, managing director, sector lead financial institutions, Middle East and Africa at S&P Global Ratings. “It can be even more appealing in an environment where interest rates and profitability are reducing.”

Regional banks’ appetite for international acquisitions that diversify them away from their home markets will drive M&A activity. “By deploying capital into high-growth markets, they may be able to compensate for weaker growth opportunities in their home markets,” Fitch Ratings said in May. 

Increasing competition from swashbuckling fintechs could also spur M&A. Challenger banks and neobanks have gnawed away at conventional banks’ market share and are a preoccupation of C-suite executives. Their continuing impact on profits may also spark consolidation, analysts suggest.

Fintech valuations, by contrast, are high, and that may limit outright acquisitions by conventional banks looking to take their rivals’ innovations in-house. Not all banks will be able to compete in the new environment, and governments will be mindful of any threat to systemic stability, says Hiba Chamas, business development director, Americas and MENA, at RTGS.global, a London-based cross-border settlements fintech.

“Regulatory pressures may play a significant role, with authorities mandating mergers to reduce the number of smaller, weaker banks and enhance financial stability in the region,” says Chamas. Smaller banks that lack capital to invest in fintech or build their own products may be compelled to merge with larger institutions, she suggests.

Some of the GCC’s larger banks have already bought into corporate marriages as a way to diffuse geopolitical risk and an overweight dependency on oil-related revenue. The UAE triggered an earlier flurry of M&A activity in 2016 when First Abu Dhabi Bank emerged from the union of National Bank of Abu Dhabi and First Gulf Bank, spurred by a desire to leverage scale and deliver cost synergies.

That deal was followed in 2019 by the tripartite merger of Abu Dhabi Commercial Bank, Union National Bank, and Al-Hilal Bank. Other notable GCC deals have included the creation of Saudi National Bank in 2021 through the merger of National Commercial Bank and Samba Financial Group, creating Saudi Arabia’s largest bank. Smaller deals have taken place in Bahrain, Kuwait, Oman and Qatar.

Today, several GCC banks are reportedly looking to acquire financial institutions outside of their domestic markets. But snapping up banks in lower rated jurisdictions could be problematic, warns Fitch Ratings. GCC banks already have substantial exposures in countries such as Turkey and Egypt, and further international expansion would come with uncertainties regarding foreign exchange and interest rate risk, according to Fitch.

Burgan Bank (Kuwait), Emirates NBD (UAE), Qatar National Bank and The Commercial Bank (Qatar) have all seen changes to their rating profiles as a result of exposure to Turkey. Qatar National Bank’s additional exposure in Egypt’s weak economy also makes it vulnerable to changes in the local macroeconomic environment. And Kuwait Finance House has a higher exposure to Turkey and Bahrain, Fitch notes.

Cross-border M&A within the GCC is complicated, too, given large government shareholders in some of the region’s major banks. Strong balance sheets and solid project pipelines reduce the likelihood of consolidation in the GCC, says Junaid Ansari, director of investment strategy and research at Kamco Invest, which could make deals outside the region more attractive. “Consolidation within the region would only be limited to the ongoing deals, but we expect to see an increase in overseas M&A deals by GCC banks.”

Tight liquidity, meanwhile, is resulting in prolific levels of US dollar debt issuance by GCC banks to fund soaring credit demand. Fitch calculates that annual issuance in 2024 and 2025 could exceed the 2020 record of $25.2 billion. With government initiatives including Saudi Arabia’s Vision 2030 and Dubai’s D33, which entail mind-numbing levels of spending, banks’ loose change for M&A might be constrained.

The GCC is also no stranger to Black Swan situations, and a sudden shock event might be enough to force or scupper M&A deals, dealing a blow to business confidence. Of primary concern would be a widening of the Israel-Hamas war or an escalation of attacks by Yemen’s Houthi rebels in the Red Sea. Especially if Iran is drawn into the conflict, the economic impact would be dramatic and possibly lead to a spike in non-performing loans.

“Were the scope of the Israel-Hamas war to widen significantly,” Fitch said in January, “Middle Eastern countries could be affected by further disruption to oil trade routes, or, potentially, production capabilities, and could also experience a marked negative impact on non-oil activity.” That would likely set back their plans for longer-term economic diversification, although higher oil prices could provide an offset.

As the GCC’s second-largest economy, the UAE looks particularly exposed. In 2020, it was a signatory to the Abraham Accords, normalizing relations with Israel. The emirates are now reportedly Israel’s second-largest trading partner in the Middle East, yet it is unclear what level of exposure UAE banks have to nascent bilateral trade.

These concerns are another reason some observers argue that the best bet for GCC banks, bolstered by their healthy balance sheets, is to diversify into markets outside the region, lowering risk and lessening their dependency on hydrocarbon-related income in a region known for springing surprises. 

The Omani government is planning a levy ranging from 5% to 9%, but its application to citizens and expatriates will be different. Omani citizens will be taxed at a flat rate of 5% on their net global income above $1 million. Expatriates pay a tax on incomes exceeding $100,000, a move that is likely to be closely scrutinized by other Gulf states.

While Oman’s initiative could nudge other GCC countries toward similar reforms, immediate adoption seems unlikely, says Mazen Salhab, chief market strategist—MENA at BDSwiss. Saudi Arabia and the United Arab Emirates have indicated they have no plans to introduce income taxes. And Oman, for its part, “may face challenges in competing with its tax-free neighbors for skilled expatriates and international businesses.”

The logic behind the sultanate’s move is clear, however. Along with Bahrain, Oman’s economy has strained under the weight of a heavy debt burden that saw the ratio of public debt to GDP reach almost 70% at its peak in 2020. Austerity implemented under Sultan Haitham bin Tariq Al Said, Oman’s head of state, has since pushed it back to around 35%, according to London-based Capital Economics.

Earlier reforms aimed at tightening fiscal policy included the introduction of a 5% value-added tax in 2021, but the optics surrounding an income tax are likely to ripple through the GCC expatriate workforce. And its expected impact on Oman’s budget—adding just 0.2% to GDP by 2026, according to Fitch Ratings’ forecasts—is minimal. Still, an income tax would provide the government with an additional tool to diversify future revenue sources. The good news is that earlier cuts in government spending, combined with a determination to stabilize public debt, have had a dramatic effect on Oman’s budget position. From a deficit of nearly 20% of GDP in early 2021, it swung into a surplus of 2.5% last year, according to Capital Economics. 

In July, BYD—an acronym for “Build Your Dreams”— unveiled its new EV plant in Thailand, having reportedly investing $486 million to gain a foothold in what was until recently Southeast Asia’s second largest auto market. The plant, BYD’s first in Southeast Asia, has the capacity to produce 150,000 vehicles a year. BYD’s push into Southeast Asia was followed by a $1 billion investment in Turkey in a plant that can also produce 150,000 per year.

By choosing Turkey, BYD sidesteps punitive tariffs Brussels is about to levy on Chinese automakers. While not a member of the EU, Turkey enjoys a customs union with the bloc, which means BYD will be able to reexport vehicles to the EU without incurring a 27.4% tariff currently under discussion.

Tariffs and restrictive regulations are forcing Chinese automakers to reconsider their game plan, says Richard Lawton, head of marketing and communications at DriveElectric, an EV leasing and carbon management company.

“It’s likely that these tariff increases might influence the future decision-making processes of BYD as well as other Chinese manufacturers, especially when it comes to making strategic investments,” he notes.

BYD, in which Warren Buffett’s Berkshire Hathaway holds a 6.9% stake, also has Elon Musk in its crosshairs; it is set to surpass the Tesla in battery EV sales this year, research firm Counterpoint said in a July report. Chinese automakers are turning their attention as well to emerging markets in the Middle East and Africa, Latin America, Southeast Asia, Australia, and New Zealand, Counterpoint notes.

With US and European automakers struggling to compete, much will hinge on high-level trade talks. “The outcome of EU-China talks, especially with Germany’s opposition, will shape future EV market dynamics, with Europe [and] the US driving growth from 2025 onwards,” Counterpoint said in a statement. Elsewhere, BYD has its sights set on Indonesia, Southeast Asia’s largest auto market, having forged an alliance with domestically based Neta Auto to build a $1 billion factory set to become operational by 2026.      

Government debt has mushroomed in recent years, hitting 15.3 trillion pesos—around $264 billion in May—according to Bureau of the Treasury estimates. Manila reportedly plans to borrow a further $3 billion this year as part of a $5 billion bond program that began in May. The country’s debt-to-GDP ratio is currently in excess of 60%, the Treasury says.

The DoF recently held talks in Japan with Sumitomo Mitsui Banking Corporation and Nomura Securities as part of a roadshow to gauge interest from investors there. The final timing for the new bond issue is likely to be linked to the US Federal Reserve’s decision later this year on lowering interest rates.

The government has tapped Japanese bond markets before.

In 2018, the publicly held Japan Bank for International Cooperation acquired part of a multi-tranche ¥154.2 billion (roughly $1.39 billion) samurai bond offering by the Philippine government, data from the Treasury shows. The following year, it raised ¥92 billion (approximately $860 million) of samurai bonds in a three-tranche offering. And in 2021, it raised ¥55 billion in three-year, zero-coupon samurai bonds: its first-ever zero-coupon Japanese offering, which saw strong interest from investors.

But Manila’s latest return to the well has a larger political context. In early July, the Philippines inked a defense pact with Japan amid tensions with China over disputed territory in the South China Sea: further evidence that trade and finance have become intertwined with regional geopolitics.  President Ferdinand Marcos Jr.’s government is also courting investors to sustainably develop its nickel reserves to meet demand for the metal’s use in electric vehicle batteries. After Indonesia, the Philippines is world’s second largest producer of the metal, according to Statista.