Monday’s successful conclusion of the A-3 Energy Auction in which Brazil sold wind development rights worth $1.5bn serves as reminder that Brazil is as a model for sustainable development. Even some failures in the Brazilian renewable energy sector can be seen more as projects whose time have not yet come. For example, the solar energy projects that were up for auction on Monday went unsold due to prices that did not provide an adequate return on investment. Though this might appear as a failure the fact that these projects were included in the auction for the first time indicates that Brazil feels that there is a market for them. It is not unreasonable to think that these projects will sell in the foreseeable future. The emergence of the Sustainability Network (an opposition party that has recently partnered with the Socialist Party and will likely have increased political clout even if they do not win the election in 2014) also indicates that increased support for renewable projects is likely.
The success of Monday's auction is a positive sign when compared to set backs in oil projects. The Pre-Salt (deep-water oilfields) auction on October 21st was a disappointment. Only 11 firms participated compared to 71 firms in the previous auction. In the end the Libra deep-water field was auctioned off to a consortium dominated by state run Petrobras but also representing, Royal Dutch/Shell, Total, China National Petroleum Corp., and China National Offshore Oil Corp. No American energy companies bid. In fact the consortium's bid was the only offer and it only provided Brazil with minimum profits (41.65%). The auction was also met with protest from unions and other stakeholders who resented natural resources being sold to "foreign capital" at "fire sale" prices.
The focus on sustainable development that will come as the Sustainability Network gains political power combined with the foreign investment which Brazil's energy auctions bring in could result in projects that might serve as templates which could be exported. It is important to note that Brazil's diverse ecosystems allow for many different types of projects to be developed and fine tuned. For this reason the country can be viewed as a testing ground where developments in Cleantech should be monitored closely.
Friday, November 22, 2013
Friday, November 15, 2013
Can The Silicon Valley Model Be Replicated in Kenya?
Kenya’s Kenya Vision 2030 Plan (a scheme to transform Kenya into an industrialized, middle income country by 2030) is being made more realistic due to several factors including:
Kenya is ambitious. For example, when discussing the proposed Konza Techno City the Financial Times noted that,
"Rather than echo a smattering of tech parks and business centres starting up on the continent…Kenya envisions a broader city-from-scratch to bring research universities, industry and government together..."
This is the model that has allowed Silicon Valley to thrive (though Silicon Valley was not built from scratch). Clearly, Konza seeks to achieve the same. In addition to providing a home for tech companies the plan also calls for the construction of a university to accommodate 1,500. The idea is that the university and the Central Business District can feed off one another in a manner similar to Stanford and Silicon Valley.
Kenya has a thriving tech community to build upon. Nairobi's Innovation Hub (iHub) provides a meeting place for innovators and investors while organizations, such as Nailab, offer technical and business support services to new tech companies. In addition to this there are a variety of organizations, such as 88 mph, who provide seed money to startups. Clearly, there are mechanisms for the exchange of ideas and the funding to help transform these ideas in viable businesses.
The existence of a burgeoning tech industry and increased investment in East Africa bode well for Kenya’s "Silicon Savannah." Though numerous challenges, such as attracting capital, remain we must note that success often breeds more success. If Konza, or any of the other ambitious plans in East Africa, show promise more funding is probable. It is also important to note that in the short term money invested in one place will not be invested elsewhere but in the long term success in one venture could attract capital to a similar opportunity. Such scenarios tend to improve political stability further aiding the attraction of capital. For this reason a delay in funding today does not necessarily deter Kenya's long-term ambitions. Kenya has already attracted 3.5 Billion dollars from the Chinese for railway expansion. It is not unreasonable to think that Nairobi will be able to attract more funding.
- The development of the Konza Techno City
- Investment in East African Infrastructure
- The plans to expand Kenya’s economic base into manufacturing and IT
- The arrival of undersea internet cables which dramatically lowered the cost of the internet
Kenya is ambitious. For example, when discussing the proposed Konza Techno City the Financial Times noted that,
"Rather than echo a smattering of tech parks and business centres starting up on the continent…Kenya envisions a broader city-from-scratch to bring research universities, industry and government together..."
This is the model that has allowed Silicon Valley to thrive (though Silicon Valley was not built from scratch). Clearly, Konza seeks to achieve the same. In addition to providing a home for tech companies the plan also calls for the construction of a university to accommodate 1,500. The idea is that the university and the Central Business District can feed off one another in a manner similar to Stanford and Silicon Valley.
Kenya has a thriving tech community to build upon. Nairobi's Innovation Hub (iHub) provides a meeting place for innovators and investors while organizations, such as Nailab, offer technical and business support services to new tech companies. In addition to this there are a variety of organizations, such as 88 mph, who provide seed money to startups. Clearly, there are mechanisms for the exchange of ideas and the funding to help transform these ideas in viable businesses.
The existence of a burgeoning tech industry and increased investment in East Africa bode well for Kenya’s "Silicon Savannah." Though numerous challenges, such as attracting capital, remain we must note that success often breeds more success. If Konza, or any of the other ambitious plans in East Africa, show promise more funding is probable. It is also important to note that in the short term money invested in one place will not be invested elsewhere but in the long term success in one venture could attract capital to a similar opportunity. Such scenarios tend to improve political stability further aiding the attraction of capital. For this reason a delay in funding today does not necessarily deter Kenya's long-term ambitions. Kenya has already attracted 3.5 Billion dollars from the Chinese for railway expansion. It is not unreasonable to think that Nairobi will be able to attract more funding.
Friday, November 8, 2013
The Shift of the Balance of Power in Northeastern Africa and Its Impact on Hydropolitical Cooperation in the Blue Nile States
On Monday November 4th, 2013 representatives from The Republic of Sudan, Egypt and Ethiopia met in Khartoum to discuss the findings of a report by an International Panel of Experts concerning the development of the Grand Ethiopian Renaissance Dam. Though an agreement to form a supervisory committee for the dam failed it is important to note that this meeting would have been inconceivable three years ago, however, the Arab Spring and the secession of South Sudan have significantly changed the balance of power in Northeastern Africa. Cairo's consent to the meeting and Khartoum's support of the dam testifies to this shift. Though an agreement has not been reached, Egypt’s weakness and Sudan’s support of the dam indicates that a deal could become a reality provided that Cairo’s concerns are mollified. A more thorough examination of the dam's impact could go a long way to addressing these concerns paving the way for an agreement which would increase energy production and agricultural output while reducing political instability between the countries (Egypt’s domestic situation is an entirely different story).
Due to domestic instability Egypt has neither the strength to enforce its will on the Nile nor the resources to go to war, especially as most of its co-riparian countries have common hydropolitical grievances which could unite them. The Republic of Sudan is the only other country whose water rights Cairo formally recognizes. This has historically meant that Egypt and Sudan's interests usually aligned, however, in a recent about-face Khartoum is now in support of the dam. This change in policy is not surprising as the independence of South Sudan has reduced oil revenues for the Republic of Sudan making the revitalization of its agricultural sector an economic imperative. The dam will facilitate this shift. An increase in arable land is essential as Khartoum and Beijing have recently reached an Agricultural Cooperation Agreement.
The Grand Ethiopian Renaissance Dam is scheduled to be completed by 2017. When operational it will facilitate the irrigation of about 500,000ha of new agricultural lands in Sudan. The dam will be based on the Benishangul-Gumuz region of North Eastern Ethiopia, which is about 25 miles from the Sudanese border. This proximity will provide cheap energy to Sudan further helping the country develop. The fact that Ethiopia is paying the dam's projected cost of 4.7 billion USD is also a benefit for Sudan. Naturally, the dam will help Ethiopia meet its own developmental needs. Certainly, the country will benefit from the hydropower and increased agricultural yield. Recent deals with Djibouti, such as the Djibouti-Ethiopia railway line, are also reducing the land locked status that the independence of Eritrea has imposed on Ethiopia. This will help reduce the cost of Ethiopian exports.
Cairo now finds itself in a position where negotiating is preferable to aggression. Khartoum has an affordable way to reorient its economy. And Addis Ababa is in a position to attract investment and build up its economy. All of these changes reflect the regional power shift. Ideally, an increase in agricultural yields will allow the region to feed its growing population while exporting the surplus. That said, the terms and conditions of such deals should be monitored closely as the ideal and the actual do not always overlap. Overly exploitative deals could reduce the stability that an agreement on the dam could bring.
Due to domestic instability Egypt has neither the strength to enforce its will on the Nile nor the resources to go to war, especially as most of its co-riparian countries have common hydropolitical grievances which could unite them. The Republic of Sudan is the only other country whose water rights Cairo formally recognizes. This has historically meant that Egypt and Sudan's interests usually aligned, however, in a recent about-face Khartoum is now in support of the dam. This change in policy is not surprising as the independence of South Sudan has reduced oil revenues for the Republic of Sudan making the revitalization of its agricultural sector an economic imperative. The dam will facilitate this shift. An increase in arable land is essential as Khartoum and Beijing have recently reached an Agricultural Cooperation Agreement.
The Grand Ethiopian Renaissance Dam is scheduled to be completed by 2017. When operational it will facilitate the irrigation of about 500,000ha of new agricultural lands in Sudan. The dam will be based on the Benishangul-Gumuz region of North Eastern Ethiopia, which is about 25 miles from the Sudanese border. This proximity will provide cheap energy to Sudan further helping the country develop. The fact that Ethiopia is paying the dam's projected cost of 4.7 billion USD is also a benefit for Sudan. Naturally, the dam will help Ethiopia meet its own developmental needs. Certainly, the country will benefit from the hydropower and increased agricultural yield. Recent deals with Djibouti, such as the Djibouti-Ethiopia railway line, are also reducing the land locked status that the independence of Eritrea has imposed on Ethiopia. This will help reduce the cost of Ethiopian exports.
Cairo now finds itself in a position where negotiating is preferable to aggression. Khartoum has an affordable way to reorient its economy. And Addis Ababa is in a position to attract investment and build up its economy. All of these changes reflect the regional power shift. Ideally, an increase in agricultural yields will allow the region to feed its growing population while exporting the surplus. That said, the terms and conditions of such deals should be monitored closely as the ideal and the actual do not always overlap. Overly exploitative deals could reduce the stability that an agreement on the dam could bring.
Friday, November 1, 2013
Will November Be a Transformational Month for Myanmar?
November could be an interesting month for Myanmar. This week, representatives from 18 armed, ethnic groups met at the Kachin Independence Organization’s headquarters in the northern town of Laiza to discuss entering into ceasefire negotiations with the government. If peace talks with the government commence, companies that have been wary of investing in the country might reconsider their positions. Signs that an agreement can be reached would be well timed, as they would come during a month when the country is hosting the Myanmar Port Development Forum and the Myanmar Mining Forum. Forums on agribusiness and investing in the country were held in October. Clearly, Naypyidaw is actively courting investors. Though Myanmar has a great deal of mineral wealth, it lacks the infrastructure to exploit it in an efficient manner. A ceasefire agreement combined with the proposed overhaul to the country’s 1994 mining law has the potential to attract investors who are willing to make the long-term commitments necessary to recoup investments in infrastructure.
Under Myanmar’s current mining law the Ministry of Mines serves as a non-equity partner yet it demands approximately 30% of minerals extracted as well as income tax and royalties. In addition to these terms, mining companies are currently responsible for compensating the occupiers of land despite the reality that there is no guide as to what the compensation should be. If reforms to the mining laws are passed and a guideline for compensation is established then the incentive to invest will increase, especially if political instability in the country decreases due to a ceasefire agreement. It is important to note that compensation for land is a difficult subject and it is likely that many people will not receive the compensation that they feel they are owed. This is unfortunate on a humanitarian level and it could contribute to instability in the country on a political and economic level. That said, disturbances from unarmed or poorly armed groups are not nearly as disruptive as the potential for violence posed by heavily armed ethnic militias.
Myanmar is not poor due to a lack of resources or geographic reasons such as being landlocked. The country is underdeveloped due to the decades of political oppression that is now beginning to dissipate. Myanmar has the resources to attract investors and an advantageous, geographic location that can help it to develop quickly. Reforms in the country will see it attain the level of development that its geographic location and resource base affords it. The question is how long this process will take. Trust needs to be built between a variety of factions. This takes time. That said, the process has begun. If a credible ceasefire agreement is reached and if the 1994 mining law is overhauled we could see a great deal of activity in Myanmar which would have a significant effect on trade in the Indian Ocean and economic development in the Asia Pacific region. November has the potential to be the start of this shift.
Under Myanmar’s current mining law the Ministry of Mines serves as a non-equity partner yet it demands approximately 30% of minerals extracted as well as income tax and royalties. In addition to these terms, mining companies are currently responsible for compensating the occupiers of land despite the reality that there is no guide as to what the compensation should be. If reforms to the mining laws are passed and a guideline for compensation is established then the incentive to invest will increase, especially if political instability in the country decreases due to a ceasefire agreement. It is important to note that compensation for land is a difficult subject and it is likely that many people will not receive the compensation that they feel they are owed. This is unfortunate on a humanitarian level and it could contribute to instability in the country on a political and economic level. That said, disturbances from unarmed or poorly armed groups are not nearly as disruptive as the potential for violence posed by heavily armed ethnic militias.
Myanmar is not poor due to a lack of resources or geographic reasons such as being landlocked. The country is underdeveloped due to the decades of political oppression that is now beginning to dissipate. Myanmar has the resources to attract investors and an advantageous, geographic location that can help it to develop quickly. Reforms in the country will see it attain the level of development that its geographic location and resource base affords it. The question is how long this process will take. Trust needs to be built between a variety of factions. This takes time. That said, the process has begun. If a credible ceasefire agreement is reached and if the 1994 mining law is overhauled we could see a great deal of activity in Myanmar which would have a significant effect on trade in the Indian Ocean and economic development in the Asia Pacific region. November has the potential to be the start of this shift.
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