Facebook Zero: Connecting the World

[caption id="attachment_5030" align="alignright" width="219"] Mark Zuckerberg[/caption]

As Facebook is looking for growth it increasingly turns to Africa, India and the Middle East. These are about the only places left with vast markets and a pent-up demand for the services of the social network. Elsewhere on earth there is precious little room for growth left since most of those who had wanted to join the Facebook experience have already done so while the holdouts aren’t likely to ever be convinced to sign up.

Facebook sees the relatively low penetration of smartphones in the developing world (26% in 2012) as an opportunity rather than a hurdle. Earlier this year the company launched Facebook Zero. It did so in near total silence.

Facebook Zero is squarely aimed at users with less capable “feature phones” and slow Internet connections. The new service is optimized for speed while still offering most of Facebook’s features. Facebook Zero users can write on their friends’ walls, update their status, comment on posts, send messages and reply to them.

“It’s a classical win-win scenario that will see Facebook reach deeper in areas previously off-limits to the company.”

Through deals with over 50 mobile operators in 45 countries, Facebook has succeeded in doing away with data charges removing one of the biggest obstacles to its growth in the developing world. Program manager Sid Murlidhar says that Facebook Zero is so light weight that it will not burden mobile networks that may already be strained. “It’s a classical win-win scenario that will see Facebook reach deeper in areas previously off-limits to the company.”

The company has also teamed-up with phone maker Nokia to offer a $99 feature phone that includes free Facebook access. This device is being marketed through the Indian carrier Bharti Airtel which is a major player on the sub-continent and in much of Africa.

Facebook Zero fits in nicely with the company’s mantra of “Growth at All Cost”. In fact, the new service aims to contribute significantly to Facebook’s stated aim to become the world’s premier gateway to the Internet. Users of Facebook Zero will soon enough equate their experience with the social network to being on the Net.

In more developed markets this goal could be attained with Facebook Home; an app that integrates Facebook with most every aspect of the Android operating system that runs smartphones and tablets.

One out of eight mobile users accessing Facebook does so from a feature phone (as opposed to a smartphone). Among the 3,000 or so models available are Facebook capable phones that cost as little as $20. According to Javier Olivan, who heads Facebook’s Growth Team, the fastest growing market are today found in Brazil, Mexico, Vietnam and India: “In these countries not everyone is able to pay $600 or more for a smartphone plus an associated data plan costing $40 a month or more. We cannot connect the world socially if we leave out people who don’t possess smartphones or computers.”

For Mr Olivan the way forward is clear: “We now start running apps directly on our own servers thereby shrinking the amount of data the travels over the network. This way we bring in people who otherwise might have no way of sharing the Facebook experience.”

Facebook has already found that feature phone users are often more engaged with the service, despite slow and erratic data connections, than users with state-of-the-art smartphones. That level of commitment may be interesting to advertisers.

Facebook Zero pays other dividends as well. Feature phone technology is five to ten times faster than the smartphone apps and Facebook is incorporating some of this efficiency back into its regular software in order to make it more responsive yet.


Elusive Democracy: While Voters Fume, Brussels Fixes the Caravan

The European Union has weighed in on the grave issues concerning caravan safety. EU authorities are currently in the final stages of assembling a comprehensive set of regulations aimed at standardizing technical inspection procedures.

The European Parliament will debate this proposed legislation later in the year. It is widely expected that the new rules will come into force before the start of the 2014 holiday season.

In the UK, implementation of the European caravan rulebook will cost about €270 million according to the latest numbers released by the Ministry of Transport. This equates to about €500 per travel trailer.

A spokeswoman for the Caravan Club – an organization representing almost 400,000 caravan-pulling UK drivers – couldn’t have said it better when she noted that the proposed regulation “is not supported by clear evidence attesting to the existence of a problem and as such does not address a genuine concern.”

The EU is quite good at enacting silly legislation and supporting weird research such as that by German professors Andreas Hahn and Moritz Hagenmeyer. In 2011 these two recipients of a sizeable EU grant concluded that drinking water will not prevent dehydration. Hahn and Hagenmeyer even succeeded in presenting their findings with a perfectly straight face.

"The EU is quite good at enacting silly legislation and supporting weird research such as that by German professors Andreas Hahn and Moritz Hagenmeyer."

It took the professors no less than three years of arduous investigation to disprove a palpable fact. Even worse: On their recommendation, EU bureaucrats promptly ordered bottled water manufacturers to cease claiming that their product could help prevent dehydration. Those insisting to state the obvious, thereby ignoring the Brussels edict, would face up to two years in prison. After howls of laughter, the EU relented and backtracked, albeit reluctantly. Water has now received Brussels’ blessing as a possible “agent” to help avoid dehydration.

Earlier – and famously – the EU had banned bananas and cucumbers “free of abnormal curvatures” from being sold. Also, as per EU regulations, no European kid may inflate a balloon without adult supervision. And if you happen to own a horse, please resist the temptation to eat it. EU rules make eating your own pet quite illegal. This of course is nothing compared to what Americans are prohibited from doing, in case you were wondering (or laughing from across the pond). Alaska reportedly has a law on its books that makes it a felony to eject a moose out of a flying airplane. The EU is by no means unique in drawing up silly rules.

In times of plenty these legal antics could possibly be explained away as the product of the idle thoughts of bored bureaucrats confined to stuffy and mind-numbing cubicles somewhere in ever-exciting Brussels. However, these are not times of plenty and most Europeans are not amused.

At first, the utterly superfluous new legislation on caravan safety might seem rather innocuous. Who cares, right? Well, the ten million or so caravan owners in Europe probably do as they are to foot yet another bill. Also, Eurosceptic politicians such as Dutch MP Geert Wilders care. His Freedom Party (PVV) currently enjoys a comfortable lead in most surveys thanks to its unrelenting criticism of most all things European. Mr Wilders is not one to let a good example of EU meddling go unnoticed.

In Britain, the UK Independence Party is surging in the polls and indeed claimed over 26% of the vote in the east of England (Essex and Lincolnshire) during last May’s local elections.

Elsewhere in the union, Euroscepticism is on the rise as well: In Austria, Denmark and Italy political parties that propose untangling the EU to a greater or lesser extent now claim up to 30% of the popular vote.

Nik de Boer of the Amsterdam Centre for Law and Governance is not surprised by the increased mistrust between the EU and its citizens: “Member states have seldom involved their citizens in decisions regarding the union. The few times voters were asked to express an opinion on the EU, it was promptly ignored. This reinforces the impression that the EU is largely governed from behind closed doors.”

This perceived democratic deficit is the EU’s Achilles’ heel. Four layers of government separate European voters from the European Commission, the chief legislative and executive body of the union. The commission is the only one in Brussels with the power to initiate Europe-wide legislation and to enforce it.

Yet this body is not even remotely connected to the people: European voters elect their members of parliament who in turn appoint 28 heads of government. These get together in the European Council which then proceeds to nominate the members of the European Commission and its president.

To make matters worse, the EU is also run by a bewildering plethora of commissions and councils with often overlapping authority and rotating membership.

Even in Brussels few can explain the difference between the European Council, the Council of the European Union (aka Council of Ministers or simply “The Council”) and the Council of Europe. All have their own president as do the European Commission and European Parliament.

The 766 members of the European Parliament are supposed to offer some checks and balances. But this assembly is not a full-blown legislature. Its powers, though somewhat augmented with the Lisbon Treaty of 2009, are still rather limited. The parliament may not initiate legislation and must restrict itself to either approving, amending or rejecting bills handed down from the European Commission. As such the parliament – the only European body elected directly by the voters – is much the weaker partner in the EU’s balance of power.

Pro-Europe thinkers as the German philosopher Jürgen Habermas acknowledge the democratic deficit but see in its existence no reason to refrain from deepening and widening the union. In a speech at Leuven University in Belgium Mr Habermas pleaded for the rapid expansion of the “political union” in order to address the shortcomings and design flaws of the now rather dysfunctional monetary union.

Mr Habermas sees the EU – and in particular its workfare social security system – as a valuable bulwark against the “disruptive whirlwinds” of globalization. However, Herr Habermas was unusually vague on the practicalities of a more democratic and transparent Europe.

In Leuven, the German philosopher, who shaped most of the recent social and political thought on the European question, emphasized the need for the EU to embrace supranational democracy sooner rather than later. In order for the ill-conceived monetary union to survive – let alone succeed – Europe must make haste with the forging of a political union. Mr Habermas argues that such a broadening of the EU cannot be accomplished without changes to the union’s structure with a view of closing the gap between Brussels and the voters.

The problem is of course that Mr Habermas and other proponents of expanding the EU’s mandate and reach fail to paint even the faintest outlines of this EU 2.0 for fear of being booed off the stage. Any talk of boosting the EU’s power and authority is political dynamite: The countries currently struggling with high debt loads and fiscal deficits have no need for more lectures on frugality from Brussels while the few countries still financially afloat can ill afford a union that is organized around principles of solidarity, however beautiful these look on paper.

Also voters will not stand for it. There is a reason for the likes of Mr Wilders and Mr Nigel Farage doing well at the polls: Increasing numbers of voters all across the Europe want less EU meddling.

Even so, not all is lost. Mr Farage and his UKIP in Britain is one of the few truly Europhobes on the political scene. Most Eurosceptics would like to either see the EU reinvented with a somewhat less ambitious outlook or have the union full-heartedly embrace democratic principles before forging ahead with yet more integration.

This however does not rhyme with the self-evident need to save the monetary union through ever closer cooperation (read: transfer union) between member states. The conundrum so formed may perhaps best be approached from a more principled angle: The primacy of politics. In a contemporary democracy, voters have the last say and their choices are to guide their representatives either in national parliaments or in Brussels.

Should voters express a wish for less union which in turn might damn the euro, then so be it: After all, elected politicians are supposed to manage the economy. Doing things the other way around violates all known democratic principles. It will also ensure the failure of not just the political and social union, but the monetary one as well.


Africa’s Changing Mediascape: Spreading the Word from China

A monumental shift is taking place in the world’s mediascape. As traditional news outlets such as CNN and the BBC see their operating budgets shrink and wither in response to lower revenues, new providers fill the vacuum and capture audiences.

China in particular is investing massive amounts of money in expanding the reach of its news outlets. Since opening its first international broadcast hub in Nairobi, Kenya three years ago, China Central Television (CCTV) has firmly established itself as a global purveyor of news. Its channels are now available in about 25 African countries.

Chinese wire service Xinhua is also gaining ground by offering its services free-of-charge to hundreds of newspapers all across Africa. Xinhua has recently also started its own CNC World television news channel.

Writing in the China Daily, Deng Yanting of the Chinese Academy of Social Sciences argues that his country needs to break the monopoly Western media have enjoyed in the developing world lest its intentions are misinterpreted.

“You’d have to be blind not to note the arrival of Chinese media in Africa.”

“To make the world aware of China’s true intentions in Africa, we need to be able to broadcast our point of view and our policy objectives.” According to Mr Yanting China has been silent for too long in the face of “unfounded suspicions” raised by Western-backed media: “Our policies in Africa and elsewhere in the developed world are benign and beneficial but you wouldn’t know it from the traditional media.”

Editor Eric Shimoli of the Kenya’s most-read newspaper The Daily Nation confirms China’s media offensive: “You’d have to be blind not to note the arrival of Chinese media in Africa.”

China is reportedly pouring some $7 billion in its worldwide charm offensive after the Communist Party leadership decided in 2010 to expand the country’s soft power. Two years later even then-US Secretary of State Hillary Clinton took note and – true to character – promptly declared a war: “We are engaged in an information war and are losing it.” Mrs Clinton told a congressional committee in Washington that state-backed news outlets as Russia Today and CCTV are moving in as US broadcasters are beating a retreat.

CCTV now claims to attract some 300 million regular viewers to its newscasts. The network broadcasts in six languages and has embraced the slick production techniques of its Western counterparts. Gone are the days when Chinese news anchors would shriek about “running dogs” when referring to the US and its “vassal” states. Still, Chinese media strenuously avoid using the term “democracy” when reporting on the unrest in the Middle East.

“The fundamental difference is that Western media sees itself as a watchdog while the Chinese model seeks to defend the state from questions about its authority,” says Douglas Farah of the Washington-based International Assessment and Strategy Center. This may explain why some news stories simply do not exist on CCTV or Xinhua.

When the blind pro-democracy activist Chen Guangcheng sought refuge in the US embassy in Beijing and was later granted political asylum, CCTV remained stubbornly silent on the subject.

Abebe Gellaw of exile-run Ethiopia Satellite Television (EST) doesn’t think China is too interested in promoting freedom of information and expression in Africa: “If they don’t have these freedoms at home, why would the Chinese provide them to Africa or Latin America?”

Zhou Xisheng, vice-president of Xinhua, begs to disagree and says his wire service is filing hundreds of stories each day: “These are not propaganda pieces but well-researched articles that provide valuable information. What matters most is the perspective you’re coming from.”

However Xinhua is seen to help some governments in Africa block broadcasts and publications of groups deemed dissident such as EST in Ethiopia. In fact, exile groups claim that the Ethiopian government obtained some $1.5 billion dollars of Chinese aid and loans to increase its capabilities of blocking free speech on the Internet and in print and broadcasting.

Even if this claim is somewhat outlandish – or at least vastly overstated – Chinese authorities should take note: In media, reputation and trust are capital assets. No matter how much money CCTV and other Chinese outlets spend on expansion, without the trust of the public the exercise will prove to be a vain one.


Revamping the Gezira Scheme: Sudan Seeks Food Security with Rice

A single grain of rice can tip the scale. It may also contribute to the realisation of food security in Sudan where, according to UN estimates, up to 12% of the population may need some form of nutritional assistance.

Rice is a latecomer to the Gezira farming region between the Blue and White Nile just south of Khartoum. Here the new crop is being hailed as a possible harbinger of much better times with excellent yields that allow farmers to almost triple their incomes.

Al Jazirah state minister for agriculture Abdullah Mohammed Osman doesn’t hesitate to describe rice as a potential wonder-crop: “Traditional cropping systems have failed in Gezira. They lack economic feasibility. However rice is doing much better than we had expected.”

A Japanese development project brought rice to the Gezira Scheme, a vast region irrigated through gravity by the waters of the Blue Line. The Scheme is one of the world’s largest irrigation projects, covering well over 8,000 square kilometres of exceptionally fertile clay soils. The area is crisscrossed by a maze of canals and ditches with a total length of about 4,300 km.

“Traditional cropping systems have failed in Gezira. They lack economic feasibility. However rice is doing much better than we had expected.”

Traditionally Gezira produced sorghum, groundnut, millet, wheat and cotton. However backlogged maintenance work on some canals has seen yields plummet and farmers move elsewhere. In 2010, the Japan International Cooperation Agency (JICA) stepped in to help local authorities stem this tide.

A first generation of 70 Sudanese agricultural engineers have been trained in the techniques of rice cultivation. They are now spreading the word to Gezira’s farmers who already report encouraging results. “Rice yields are now up to three tons per hectare. This is more than double the yield of wheat. Farmers can expect to cash up to 600 euros annually per hectare of rice compared to barely a third of that for the best of other crops,” says Agriculture Minister Osman.

The Sudanese government now aims to end the experimental phase of the development project and move into big-time rice production. The idea is to have Gezira farms first supply the domestic market with the 50,000 tons of rice needed annually and then turn the crop into export cash earner.

At his office in state capital Wad Medani, Mr Osman explains that Sudan currently spends about €11 million on rice imports each year: “We now realise that it is by no means impossible to grow this rice domestically.” JICA has already supplied planting and milling equipment and is in the process of helping Sudan set up the necessary infrastructure to secure a stable supply of seed and herbicides.

Japanese project manager Osamu Nakagaki emphasizes that the introduction of a new crop entails much more than merely sticking a few seeds in the ground: “We also need to put de-husking and packaging equipment in place and ensure proper and timely transportation in order to actually get the crop to the end-consumer as a finished product.”

The Gezira Scheme originated in colonial times when British administrators noted the banks of the Blue Nile gently sloping downward. It occurred to them that this particular topographic feature, in conjunction with the firm clay soils of the region, was ideal for the implementation of a gravity-fed irrigation scheme. The clay soil helps minimize water seepage. Initially the Gezira Scheme was to produce wheat but it was soon discovered that the area was especially well-suited for the cultivation of cotton, at the time a much more valuable crop.

With their emphasis on providing food security for a nation of 31 million, both the national government of Sudan and local authorities in Al Jazirah are confident that rice cultivation is an important – if not essential – part of the solution.

Minister Osman explains that the state will limit its role to providing solid guidance and technical assistance: “Initially we’ll also provide the seed and herbicides needed to get production off to a good start. However private farmers are the ones who will need to grab this opportunity to provide for their families and for the country as a whole.”


Assaulting Freedom to Protect Freedom: UK Government Gets Tough on Press

[caption id="attachment_5062" align="alignright" width="180"] Edward Snowden[/caption]

Legislation aimed at preventing acts of terrorism is now being misused to intimidate reporters and the media they work for. In the UK, police authorities invoked Schedule 7 of the Terrorism Act 2000 to question for nine hours David Miranda, the partner of the Guardian columnist who gave voice to US whistle blower Edward Snowden and thus revealed the massive worldwide spying operations of the National Security Agency and its European siblings. At the end of Mr Miranda’s ordeal, police confiscated his laptop computer, memory sticks and other electronic devices. However, they failed to charge him with any offense.

The Terrorism Act was also used to force The Guardian newspaper to destroy computers and hard drives that contained information leaked by Mr Snowden. Even though the UK government was fully aware that copies of the files exist outside the country, it coerced the newspaper to subject the offending hardware to an angle grinder. This ghastly scene unfolded in the basement of the paper’s London office on Saturday, July 20, under the watchful eye of agents from Government Communications Headquarters (GCHQ).

One cannot help but wonder what Home Secretary Theresa May thinks she is doing. It’s not the bidding of the US overlords. White House deputy press secretary John Earnest said he simply could not conceive of a situation that would see the American government force journalists to destroy computers and hard drives. Ever holier-than-thou, the White House spokesperson also said Mr Miranda’s detention at Heathrow Airport was not the product of US pressure.

"This ghastly scene unfolded in the basement of the paper’s London office on Saturday, July 20, under the watchful eye of agents from Government Communications Headquarters (GCHQ)."

Home Secretary May, who appears to never to have read George Orwell’s dystopian novel 1984, seems bent on repressing all sorts of freedoms and is now asserting the state’s control over its, mostly illegally obtained, secrets. Her misuse of the Terrorism Act beggars belief. By no stretch of the imagination can Mr Miranda be labelled a terrorist or be suspected of aiding and abetting terrorism.

Lord Falconer of Thoroton, the former Labour chancellor who helped write the Terrorism Act, said police had no right to detain Mr Miranda: “Schedule 7 allows for the questioning of somebody to determine whether he or she is preparing, instigating or commissioning terrorism. Clearly Mr Miranda is not such a person.”

Former Conservative Minister of Prisons Crispin Blunt warned that repeatedly misusing police powers brings the laws aimed at countering terrorism in disrepute. Home Secretary May was however not swayed and praised the police for their actions.

So much then for the oft-repeated mantras that the innocent have nothing to fear from the surveillance state or that one can never be too safe. Loyalty is all. Critics of policy merely comfort the enemy. The UK government is quite resourceful when it comes to finding excuses for its heavy-handed attitude.

For the GCHQ officials present at the ceremonial destruction of the laptops and hard drives in Guardian’s basement, things looked rather simple: “You’ve had your fun and now there is no need to write any more on the subject.” Judge, jury and executioner all rolled into two burly agents who are “just doing their job”.

This then is the new reality of contemporary Britain: Any respect for the freedom of expression has gone out the window. Journalists and their newspapers may be intimidated at will. Police powers are broad and go largely unchecked. Of course, all this is to protect society from those that try to undermine its hard-fought freedoms. The irony seems utterly lost on Mrs May and the government she is part of.


Use of Chemical Weapons in Damascus: UN Voices Deep Shock and Concern

[caption id="attachment_5068" align="alignright" width="253"] Damascus[/caption]

Secretary-General Ban Ki-moon expressed his shock at reports of alleged use of chemical weapons in Syria’s Damascus suburbs yesterday, as a United Nations team continues to investigate the matter in other parts of the war-torn country.

Following a late-day closed-door briefing to the Security Council on the latest developments, Deputy Secretary-General Jan Eliasson reiterated Mr. Ban’s deep shock at reports of chemical weapons use in Syria.

“We see the need to investigate this as soon as possible; no matter what the conclusions, this represents a serious escalation with grave humanitarian and human consequences,” Mr. Eliasson told reporters outside the Council chamber.

He added that the UN investigation team is “in place” and that he and Mr. Ban hope the Syrian Government will give its consent so that the probe can be carried out.

“This should also be seen in the larger and broader perspective, namely the great need for cessation of hostilities,” he said of the dramatic situation, underscoring that: “What this incident has shown is that we must contain this conflict,” especially given its regional implications, and now, the possibility of the use of chemical weapons, which is to be investigated.

“What this incident has shown is that we must contain this conflict”

Stressing that there has been no confirmation of chemical weapons use, the Deputy-Secretary-General said senor UN officials are in contact with the Syrian Government.

Also at the microphone, Ambassador Maria Cristina Perceval of Argentina, President of the Security Council during the month of August, said there is “strong concern among the Council members” about the allegations, and a general sense that there must be clarity on what happened and that the situation has to be followed carefully.

A UN team is currently in Syria spending up to 14 days, with a possible extension, probing the alleged use of chemical weapons by the Government at Khan al-Asal, as well as two other allegations reported by Member States.

The team “is following the current situation in Syria carefully, and remains fully engaged in the investigation process that is mandated by the Secretary General,” Mr. Ban’s spokesperson told journalists in New York.

According to the agreement reached in Damascus in July, the two parties are discussing, in parallel, other allegations and their related sites.

“Professor Åke Sellström is in discussions with the Syrian Government on all issues pertaining to the alleged use of chemical weapons, including this most recent reported incident,” the spokesperson noted.

He added that Mr. Ban is aware that a number of Member States, the Arab League and the European Union have expressed grave concern about the most recent reports of the possible use of chemical weapons.

Mr. Ban and the Security Council reiterated that the use of chemical weapons by any side under any circumstances would violate international law, and reaffirmed the need for a “thorough investigation” of the alleged incidents, according to the spokesperson, as well as a need to cease hostilities.

Also today, the UN Children’s Fund (UNICEF) said the reported attacks on civilians, which “presumably” included children on the outskirts of Damascus are “deeply disturbing.”

“Such horrific acts should be a reminder to all the parties and all who have influence on them that this terrible conflict has gone on far too long and children have suffered more than enough,” the UN agency said in a statement.

Meanwhile, in Cairo, Under-Secretary-General for Political Affairs Jeffrey Feltman met with Arab League Secretary-General Nabil Elaraby today to discuss a range of issues, including efforts towards a political solution to the conflict in Syria.

The Joint Special Representative for Syria, Lakhdar Brahimi, who reports to both organizations, has been supporting efforts on a political solution including a second international conference on Syria to be held in Geneva.


Indian Rupee Looking for a Line in the Sand

[caption id="attachment_5098" align="alignright" width="235"] Palaniappan Chidambaram[/caption]

Earlier this week, Indian Finance Minister Palaniappan Chidambaram unveiled a comprehensive – and long-awaited – plan to improve the country’s crumbling infrastructure by reviving no less than 36 stalled projects.

The government has earmarked over $28bn (€21.2bn, £17.7bn) to finance major undertakings in the energy, communications and transport sectors. Mr Chidambaram hopes that the plan will also give the economy a significant boost while improving its underpinnings: “The message we are sending is that the investment cycle has restarted and we are pushing it.”

In February, the International Monetary Fund (IMF) chastised the Indian government for failing to ensure investments in infrastructure kept pace with the economic expansion registered over the first decade of the century. In its report, the IMF expects the creaky infrastructure to be the main cause of the sharply lower growth rates predicted for the coming years.

The plan presented by Finance Minister Chidambaram comes on top of a bilateral deal with Abu Dhabi that will see the emirate invest up to $50bn in infrastructure projects on the subcontinent. Though still short on specifics, the agreement was made possible by New Delhi relenting in its opposition to Abu Dhabi-based Etihad Airways buying a 24% stake in Jet Airways, India’s second largest carrier. The Indian government is also keen to sign an Investment Protection Pact with the UAE. This is seen as a way to unlock further investments.

“The message we are sending is that the investment cycle has restarted and we are pushing it.”

However, Mr Chidambaram’s announcement on Tuesday did not succeed in rallying the markets. The already battered Indian rupee again approached last week’s record low against the dollar on concerns that deficit targets will not be met. Since last June, the rupee has slid from 56 against the dollar to 66.

The finance minister assured the markets that the controversial – and at $20bn annually, rather expensive – Food Security Bill approved by parliament on Monday will not lead to increased deficit spending. The new law aims to eliminate malnutrition by providing subsidized food to about two-thirds of the population. “After paying for the Food Security Bill we will still be on target for the fiscal limits set earlier by this government.” Mr Chidambaram also said that the rupee is now trading below its “true level” and will shortly bounce back.

Meanwhile, the Reserve Bank of India (RBI) – sitting on a hoard of about $300bn in foreign reserves – refuses to expand its currently timid interventions to something more substantial in order to prop up the currency. “After a volatile and hectic day, the RBI will step into the market at around 4:30 pm to buy up some rupees. That’s like cosmetic surgery and leaves the market opening with a gap the next day,” says Partha Bhattacharya of Mecklai Financial in Mumbai.

These mini-interventions have cost RBI some $14bn in foreign exchange since March. “We now need the bank to draw a line in the sand and stick to it by putting its full weight on that line.” However, Mr Bhattacharya expects the markets to remain jittery: “The rating agencies will not take Mr Chidambaram on his say-so and will want to determine the real impact of the Food Security Bill on the budget.”

According to Chief Investment Officer G. Chokkalingam of Centrum Wealth Management in Mumbai, India is plagued by an “unholy trinity” of issues: “There are clear pressures on the fiscal deficit; the economy suffers a greater than expected slowdown in its growth; and we now have to deal with an unstable currency as well.”

Mr Chokkalingam doesn’t expect much from the ambitious investment plan that has now been rolled out: “These projects have long gestation periods, measured in years rather than months. Their impact on the economy will not be felt anytime soon. As such we do not expect these investments, however necessary they are, to contribute in any meaningful way to increased economic growth.”

Finance Minister Chidambaram, however, remains quite unfazed and appeals to that quintessential of Indian character traits: Patience. “We just have to remain patient and be firm. With that, the rupee will regain its true level.”


The Equator Principles: Banking on Sustainability

Financial institutions worldwide are increasingly benchmarking their larger investment projects to the Equator Principles of social and environmental risk assessment. A third and more comprehensive edition of these guiding principles has now been drawn up and is being used by 79 financial institutions in 35 countries to gauge the impact of investments.

Banks adhering to the Equator Principles together account for nearly 70% of project debt financing in emerging countries. The latest bank to sign up is the Infrastructure Development Finance Company (IDFC) based in Mumbai, India.

In its third edition the Equator Principles now include human rights. This mostly applies to labour conditions and the relocation of people displaced by large-scale projects such as mines and dams. According to Managing Director of Environmental and Social Risk Management at Citibank, Shawn Miller, “projects need to engage and protect the people affected. These may be indigenous people, ethnic societies or other vulnerable groups. Financiers need to make sure that the rights of these groups are respected and appropriate protections are in place. That in turn requires robust engagement and consultation processes.”

The Equator Principles also address labour conditions at both the project and its associated supply chain. “We aim to do this through audits that ascertain compliance with standards on working conditions and labour conventions,” says Mr Miller who emphasizes that the Equator Principles go beyond merely observing local laws and customs.

"Financiers need to make sure that the rights of these groups are respected and appropriate protections are in place."

By embracing human rights as one of its core values the Equator Principles move onto more shaky ground: “Contrary to, say, environmental standards that can be objectively measured and gauged, human rights issues are more often than not emotive and as such a lot harder to explain, quantify and address. The Principles do, however, provide banks with a framework and a language that enables them to speak about human rights.”

Mr Miller furthermore has found that any major project stands much to gain from obtaining a social license to operate: “If any of our clients’ projects do not apply strict standards, they will inevitably suffer from opposition and delays. These are costly and may significantly increase the risk. The cost of these avoidable setbacks can easily run into the billions of dollars.”

The Equator Principles, which apply globally, were first adopted by a group of 12 financial institutions – including Citigroup, ABN-AMRO and Barclays – in 2003 at the urging of the International Finance Corporation, part of the World Bank Group. The framework has since undergone two major revisions: The latest version was drafted earlier this year at the June gathering of participating banks in Amsterdam, The Netherlands, and concludes a strategic review initiated in 2010.

The principles now apply to project-related corporate loans and bridge financing as well. Previously, the framework was only used for direct project financing. The threshold at which the Equator Principles come into play was also lowered from $50 million to $10 million.

Although most NGOs (Non-Governmental Organizations) welcome the Equator Principles, some critics argue that the framework lacks teeth as well as independent oversight and enforcement. An oft cited example of how the framework may apparently be ignored at will concerns the ABN-AMRO and its involvement in countless projects deemed damaging to the environment.

For example, projects financed by ABN-AMRO in 2005 – prior to the splitting-up of the Dutch financial behemoth in 2010 – contributed to CO2 emissions of about 250 million tonnes, or fully one per cent of the world’s total carbon dioxide production for that year. Since then ABN-AMRO, a founding bank of the Equator Principles, has tried to clean up its act.

The Equator Principles are supplementary to the IFC’s own Performance Standards on Environmental and Social Sustainability and to the World Bank’s Environmental, Health and Safety Guidelines. Projects taking place outside a group of 31 countries designated as having robust national standards and legislation must not only comply with the Equator Principles but also have to meet the often more stringent IFC and World Bank criteria.


Connecting a Country: Iraq Gears Up for a Telecoms Leap

In Iraq the budding telecom sector is to spearhead the country’s drive to full economic recovery. The Baghdad government has adopted a series of policies to encourage the sector’s growth through innovation and the early adoption of new technologies. The aim is not just to provide better telecom services to the oil and gas industry, but also to create a more competitive environment for both the fixed line and broadband sectors where growth of late has been rather muted.

In early October, stakeholders in the Iraqi telecom industry will gather in Istanbul, Turkey, for the 8th Annual Iraq Telecoms Conference. The event is supported by the Iraqi and Kurdistan Ministries of Communication and by the Iraq Communications Commission, the industry’s regulator.

"But, once these issues are addressed there is no reason for the country not becoming a major local telecom player."

One of the challenges facing the sector is its current inability to cash in on the rising demand for mobile data services. Though some 4G services were introduced over the summer, the wait is on for the auction of the more ubiquitous 3G licenses scheduled for the end of 2013. Over the first quarter, the mobile segment of the telecom market recorded a 12.5% year-on-year growth, up from 7.1% in 2012.

However, the country’s two top mobile providers – Zain Iraq and Asiacell – registered slightly lower average revenue per user (ARPU) and blame this on the saturation of their data networks which currently use older GSM (2G) technology. Kurdish mobile operator Mobitel, the only one with a functioning 3G network, still struggles with interconnection problems that often deny its users access to the wider telecom grid.

[caption id="attachment_5086" align="alignleft" width="160"] Jose Salame[/caption]

The limited availability of broadband services offers an opportunity to satellite operators such as Telenor. The company is scheduled to launch its Thor 7 satellite next year. “At the Iraq Telecoms conference, we will be showcasing our newest Ka-band satellite which offers high bandwidth accessed through a small antenna and affordable hardware,” says Telenor sales manager Jose Salame.

Telenor expects its HTS (High Throughput Satellite) Thor 7 bird to be particularly well-suited for markets in the Middle East and North Africa: “Though our focus is on serving offshore oil and gas sites, Thor 7 also offers plenty of scope for land-based customers such as ISPs and government agencies that need speed and bandwidth.”

Mr Salame sees some challenges ahead as the Iraqi government attempts to transform the country into a data hub for the Middle East: “For this to happen, a reliable telecom infrastructure needs to be put in place. Also, all parts of Iraq need to enjoy a minimum level of security. But, once these issues are addressed there is no reason for the country not becoming a major local telecom player.”

Meanwhile Asiacell, part of Qatar Telecom Qtel, is riding high on the tail of its successful IPO at the Iraq Stock Exchange last February. Asiacell’s fully subscribed IPO raised some $1.2 billion for the company which made it the biggest initial share sale in the Middle East since Saudi Arabian Mining Company went public in 2008. With its war chest filled to the brim, the company is now exceedingly well-poised to claim a significant chunk of the 3G spectrum when the bidding starts later this year.

The Iraqi mobile market is a particularly promising one when 3G comes into play. At barely 6%, fixed line broadband penetration is the lowest in the region. With no significant improvement expected before 2017, mobile network operators have an excellent opportunity to cash in on the pent-up local demand for Internet access and services.

Telenor sees its Thor 7 satellite as part of the solution and hopes that the bird’s launch next year coincides perfectly with Iraq’s first 3G networks becoming operational. Mr Salame emphasizes that his company has been active in Iraq for the past eight years: “Iraq is a great country to invest with plenty of opportunities across a range of telecom sectors. Also, the government is not sparing any effort to attract and accommodate both local and foreign investors who may help it develop the telecom industry.”

The upcoming Iraq Telecoms Conference in Istanbul – unfolding between October 7 and 9 – is an essential element of the Baghdad government’s drive toward the modernization and further expansion of one of the most promising sectors of the Iraqi economy.

For more information please contact:
Jerome Golding
Marketing Administrator
CWC Group Ltd, Regent House, 16-18 Lombard Road, London, SW11 3RB, United Kingdom
Tel: +44 20 7978 0020
Email: jgolding@thecwcgroup.com
Website: www.Iraqtelecoms.com


Looking for a Fig Leaf: US & UK Mull Punitive Action against Syria

[caption id="attachment_5092" align="alignright" width="148"] Bashar al-Assad[/caption]

Here we go again. The US and Britain are whipping themselves once more into a frenzy over the actions of an evil strongman in the Middle East. This time around the recipient of American and British ire is Syrian president Bashar al-Assad. He is suspected of having ordered a series of attacks with chemical weapons on rebel strongholds in the Damascus suburb of Ghouta, a mostly agricultural area to the east of the capital.

Depending on the source, anywhere between 322 (Syrian Observatory for Human Rights) and 1729 (Free Syrian Army) people were killed on the early morning of Wednesday, August 21. The Syrian government initially denied the use of chemical weapons and later claimed the rebels were to blame for the attacks. Doctors Without Borders (Médecins Sans Frontières) reported some 3,600 cases of people admitted to local hospitals on the morning of the 21st with neurotoxic symptoms of whom 355 died later that day.

A team of United Nations observers is now trying to ascertain facts on the ground. Their work is hampered by continued fighting in the affected area and less-than-helpful authorities. Also, as time goes by, traces of the possible chemical attack become harder to document.

"The Syrian government initially denied the use of chemical weapons and later claimed the rebels were to blame for the attacks."

However, we may be reasonably certain that before long both Washington and London will conclude that a chemical attack has indeed taken place and that Mr al-Assad – admittedly no choirboy – is to blame. Intelligence agencies such as the CIA and MI6 will obligingly furnish the proof needed in order to justify retaliatory air strikes and possibly even a full-blown intervention.

True to the script he inherited from his predecessor, US president Barack Obama, on Monday already mentioned that his government was looking to assemble a “coalition” to “make this work.” In the likely event that the US, Britain and their lesser allies feel the need to intervene before a UN sanctioned mandate is obtained, a legally sound precedent is required.

According to the New York Times, the Obama Administration is looking at the 1999 conflict in Kosovo when then-president Bill Clinton went ahead with air strikes against Serbia in order to protect endangered civilians. Partially as a result of this unilateral US military operation, the UN formally adopted the Responsibility to Protect (R2P) norm in 2005.

The R2P norm may now be conveniently employed as a legal fig leaf for punitive military action against the Syrian regime. The writing is very much on the wall: Even before UN observers on the ground in Syria have had a chance to report their findings, US Secretary of State John Kerry accused the government in Damascus of perpetrating a “moral obscenity.” Whitehouse spokesperson Jay Carney said that the US government has “very little doubt” that the Syrian government is culpable and promised to release an intelligence report shortly to back up his assessment.

One cannot help drawing parallels with the lead-up to the invasion of Iraq. Then too intelligence agencies duly produced detailed reports on that country’s vast stockpiles of Weapons of Mass Destruction (WMDs) among which mobile plants for producing chemicals weapons right on the battlefield. The fact that these reports were the product of wild speculation – and had merely sprung from the minds of desk-bound spies suffering both from an excess of zeal and lack of competence – now seems lost on President Obama and his team.

It may be a cliché to state that history does indeed repeat itself, but we now are watching this process take shape. The outcome is also depressingly predictable: Rather than contributing to an end of hostilities in Syria, the indignant powers of the west will in all likelihood make matters worse by entering a civil war they don’t quite understand and moreover lacks any “good guys” to support.


Ernst & Young, Argentina: Trusts, Tax Evasion and Money Laundering

By Horacio López

Tax division partner at Ernst & Young Argentina

[caption id="attachment_5104" align="alignright" width="220"] Buenos Aires: Puerto Madero[/caption]

On June 30, 2013, it will be a year since General Resolution No. 3312 became effective, and in July it will expire once again, this time for 2012. This resolution introduced an annual reporting system to be implemented by parties acting as trustees of trusts set up in Argentina, as well as by trustees, grantors and/or beneficiaries of trusts set up abroad.

That is, as regards personal assets tax, in some cases the “reporting agent” is also the taxpayer, e.g. the trustor or beneficiary, while in other cases it is not, which would be the case of the trustee.

Trusts have been set up abroad for the past few years as a tax planning measure with regard to personal assets tax, particularly in cases where a person intends to separate a portion of his equity and reserve it for one of his heirs.

Setting up an irrevocable trust prevents risks associated with business issues that the trustor may experience and also avoids payment of personal assets tax, as the trustor gives up control of the assets, which are no longer available to him.

What may happen with trusts whose beneficiaries live in Argentina is that they have not been duly reported by the trustor or the trustee. This could be due to different circumstances: they are not Argentine residents or they are Argentine residents but fail to comply with the regulation, perhaps as a self-defense mechanism because the funds had not been reported or simply because they are not aware of the new regulation.

"However, new regulations regarding money laundering which have been introduced in some places around the world consider that these situations are not too different and that tax evasion also suggests money laundering."

In addition, what could also happen is that the trusts were not reported by the beneficiary. The reasons could be:

That the events allowing the beneficiary to be informed about his status as such have not taken place. (E.g. due to his age, marital status or even profession).

That these events have occurred but he is still unaware of his status.

That the beneficiary decided to assume the risks of not reporting his new equity to avoid paying the tax levied on these assets.

Therefore, for different reasons, equity used to set up a trust abroad could remain unreported to Tax Authorities, thus failing to pay the related taxes. This suggests that the taxpayer involved believes that saving the related tax amount is more feasible (and alluring) than being identified and penalized by tax authorities.

On the other hand, we understand that regulations preventing money laundering are aimed at identifying the equity that some parties manage to accumulate through illegal activities. And, in general, we believe such regulations to be very different from those regulations aimed at penalizing parties who obtain income or hold equity from legal activities but have failed to pay the related taxes as required by the regulations in place.

However, new regulations regarding money laundering which have been introduced in some places around the world consider that these situations are not too different and that tax evasion also suggests money laundering. This could cause an Argentine taxpayer (albeit an irregular one in his payments) to be included in a report prepared by a foreign entity that identifies suspected money laundering.

As a consequence of this new interpretation, in the core countries’ financial systems the regulation preventing financial entities from keeping unreported funds in their customers’ country of residence is becoming more applicable. Although applicable regulations are not yet entirely clear, it is well established that a written affidavit signed by the customer is not sufficient when there is evidence of tax evasion.

One indication suggesting that the customer failed to report the funds is the use of a complex structure to make the related investment or deposit without reasonable grounds.

It is probably arguable whether a trust is considered to be a “complex structure”. It may depend on the culture of each country and the knowledge of the person making the assessment.

However, if we analyze the lack of “reasonable grounds”, it is clear that the trustor who is not also the beneficiary in his country of origin gained an advantage in terms of tax (and equity) from using such a structure and, therefore, the structure was used with reasonable grounds.

But if the trust fund was not reported in Argentina and, consequently, nobody paid over the personal assets tax associated with the trust’s corpus assets value, there would seem to be no “legitimate” tax and/or equity advantage gained by those trustors who are also beneficiaries or for the beneficiaries who are aware of their status as such.

About the Author

[caption id="attachment_5110" align="alignright" width="102"] Horacio Lopez[/caption]

Professional History

Certified Public Accountant, University of Buenos Aires (1991).

Post-Graduate studies in Management Development, Argentine Catholic University (UCA) in 2004.

Experience providing tax advisory services, public and private clients belonging to several industries, including manufacturing, services, retail and communications.

Has participated as an E & Y internal training instructor and has lectured at outside training seminars about different tax matters.

Professional Qualifications

Professor of the Tax Theory and Technique I course at University of Buenos Aires, School of Economics. (1998- present),

Has published several articles.

Active member of the AAEF (Argentine Association of Tax Studies). Permanent lecturer at the “Introductory course to tax specialization”.

Member of IFA (International Fiscal Association)


Bangladesh: Steadily Moving Up without Beating the Drum

[caption id="attachment_5120" align="alignright" width="196"] Finance Minister Abul Maal Abdul Muhith[/caption]

Skipping the usual ado and almost silently, Bangladesh is moving up the ladder and surpassing its local peers in a number of key areas such as health and education. During the past decade, the country has managed to greatly improve maternal health, literacy rates and access to basic sanitary services. As a result of this, life expectancy has shot up as well.

Perhaps in recognition of its good governance practices, Bangladesh has also benefited from increased donor largess. Earlier this month, Finance Minister Abul Maal Abdul Muhith reported income of $2.78bn in grants and (soft) loans over the 2012-13 fiscal year; a full 37% over the previous year’s receipts.

Over the same period, the country disbursed almost $900m in interest payments on development loans granted previously, resulting in a net inflow of close to $1.9bn. Minister Muhiht said aid levels are “satisfactory”.

In fact, they are slightly more than that: With some donor countries and agencies still suffering financial uncertainties, and most Western governments cutting their development aid budgets, the result obtained by Bangladesh may perhaps be called rather extraordinary.7

"In a nod to progress already made, the World Bank last week lauded Bangladesh for the enduring success of the Public Procurement Reform Project II."

Mr Muhiht acknowledged as much when he concluded that a recent spat with the World Bank over the Padma Bridge Project had not in the least soured relations with that lender: “The numbers prove that, contrary to what many expected, our dealings with the World Bank have not declined. In fact, the bank has increased its disbursements and now participates in three other new projects.”

Former government advisor Akbar Ali Khan sees welcome signs of maturity on both sides: “Both the Bangladeshi government and the World Bank at all times kept very alert to the complexities surrounding the Padma Bridge Project financing. And though the government in the end declined World Bank loans for this particular endeavour, relations have remained excellent and, by looking at the numbers, may even have improved.”

In a nod to progress already made, the World Bank last week lauded Bangladesh for the enduring success of the Public Procurement Reform Project II, initiated in 2007 and slated to run until the end of 2016. By encouraging enhanced transparency and competitiveness, the project has streamlined procurement procedures, reduced delays and cut costs.

Now, up to 65% a small value contracts are awarded within the initial bid timeframe, up from just 10% in 2007. The average number of bids received increased from four to six, while about 60% of the contracts are currently tendered online, a fourfold increase over 2007. The Central Procurement Technical Unit has posted all relevant rules and regulations on its comprehensive website offering interested parties a clear set of guidelines.

Digitalisation ranks high on the government’s list of priorities. Its latest drive – supported by a €10m ($13.3m) grant from the European Union – aims to create a vast computer database containing all of the country’s land records. “A secondary goal of this ambitious project is to enable women to claim their rightful inheritance which currently is not always easy to do,” says Khushi Kabir of Nijera Kori (“We Do It Ourselves”), a NGO that assists landless people.

Women’s rights are particularly significant in Bangladesh; the world’s only country that has been ruled by women longer than by men. Women are also at the heart of the garment industry which is the biggest cash earner of the economy, bringing in well over $20bn annually in foreign exchange.


IFC - International Finance Corporation: Eliminating Poverty, One Loan at a Time

[caption id="attachment_5127" align="alignright" width="184"] Lima, Peru[/caption]

The famed Peruvian economist Hernando de Soto has said it all along: The world’s destitute are oftentimes somewhat less poor than they think. It’s just that untold millions are toiling away in the informal economy and as such remain under the radar of both governments and banks. Likewise, their property is mostly unregulated and thus unprotected; it cannot serve as collateral for credit.

In the late 1980s and 1990s, Mr De Soto and his Institute for Liberty and Democracy have succeeded in getting a number of laws adopted in Peru that aim to empower the poor by giving them full and easy access to regular economic life.

Red tape was cut, prohibitive taxes were lowered and restrictive regulations scrapped. Land and property registration was modernized while licensing requirements were relaxed. As a result of these changes, well over 350,000 small businesses came in from the cold: They now operate in the formal economy. Almost 1.5 million households gained deeds to their homes, however ramshackle, tiny or improvised.

A fully licensed business and a properly deeded dwelling can be monetized. Now people are able to access credit and invest in their own future. Mr De Soto speaks of a revolution, albeit a capitalist one.

“It is an important tool to improve livelihoods, especially in underserved households in rural areas.”

- Thomas Lubeck,  IFC Regional Manager

Perhaps taking a cue from the Peruvian economist’s work, the International Finance Corporation (IFC) – part of the World Bank Group – is heavily engaged in projects aimed at empowering small businesses in emerging markets. The issues Mr De Soto identified in Peru as inhibitors of growth and wealth creation, also limit development in Sub-Saharan Africa.

In Ghana, the IFC is helping financial and civil authorities modernize and streamline their systems and operations with a view to allowing small business access to credit. A regulatory framework geared to the needs of budding entrepreneurs can make all the difference. Take Ms Constance Swaniker of Accents & Arts Ghana, a design firm that produces furniture and household items. Ms Swaniker suffered not from a lack of demand for her products, but from an inability to finance the expansion of her company.

Come into play the Ghana Borrowers and Lenders Act. This legislation, which the IFC helped draft, created an online collateral registry and introduced a secured lending regime. Previously, banks only accepted real estate as collateral, something Ms Swaniker and many other business people like her do not have. Now, the owner of Accents & Arts Ghana was able to put up some of her machinery in order to secure a loan. Her business flourishes and she was able to create 30 full-time jobs that went to people of her community.

As a result of the IFC’s assistance to Ghana, some 36,000 loans – totalling almost $3bn – have been granted to about 22,000 small businesses and 5,000 SMEs (Small and Medium Enterprises) since March 2010.

The IFC is now replicating this successful approach elsewhere. In Armenia, the corporation is actively supporting the local Inecobank in the development of microfinance products and services. This work takes place under the umbrella of IFC’s Performance-Based Grant Initiative. This program seeks to fund innovative banking models that expand access to financial services. Funds are made available to lenders such as Inecobank that implement strategies to reach market segments not previously served by banks.

[caption id="attachment_5132" align="alignleft" width="184"] Thomas Lubeck, IFC[/caption]

Thomas Lubeck, the IFC Regional Manager for the South Caucasus, emphasizes that microfinance has a direct impact on people’s lives: “It is an important tool to improve livelihoods, especially in underserved households in rural areas.”

It doesn’t take cartloads of money to finance success. In the village of Eghegnut – with a population of slightly over 2,000 – in Armenia’s Armavir Province, a thousand dollars was all it took to enable Mr Razmik Margaryan to build a greenhouse on his land to grow vegetables and other greens. He now employs three locals to help with the upkeep and the harvest.

In the town of Mrgashat – population 5,400 – also in the Armavir Province, the two Petrosyan sisters Karine and Narine were able to open a shop with a loan from the IFC-backed Inecobank. In three years, the sisters went from running a shop-on-a-single-shelf to a full-sized supermarket complete with its own bakery. They now employ three people to stock a great many shelves.

Since Inecobank acceded to the IFC’s Performance-Based Grant Initiative, the bank was able to originate well over a 100,000 microloans, 84% of which went to borrowers in rural areas whose entrepreneurial skills help reduce poverty and boost employment.


Uttar Pradesh, India: Water Management Key to Reducing Poverty

For good governance to fully contribute to and enable sustainable development, it needs an institutional framework through which sensible policies may be applied. This may be one of the areas in which India’s most populous state, Uttar Pradesh, faces some challenges: While fully 60% of the state’s population of over 200 million is dependent on agriculture for its livelihood, the sector suffers from anaemic growth rates. Since the start of the century, growth of the farming and animal husbandry sectors has averaged just about 1.3% annually.

The World Bank has now released a $360 million (€272m) line of credit to the Uttar Pradesh government to finance an ambitious program to help build and expand the institutional capacity needed to increase agricultural productivity across the state. The bank’s Board of Executive Directors approved the loan with an eye to alleviating poverty as well.

World Bank Country Director Onno Ruhl says investments in agriculture will likely help reduce poverty levels in Uttar Pradesh which lags the rest of India in a number of human development indicators: “We will pay particular attention to improving water use efficiency. This not only benefits agriculture, but also addresses the wider issue of a growing mismatch between water demand and usage patterns.”

"We will pay particular attention to improving water use efficiency."

Earlier, the World Bank assisted Uttar Pradesh with the restructuring of the state’s water sector. Over 340,000 hectares of irrigation and drainage systems were rehabilitated. The World Bank also helped set up resource management institutions in Uttar Pradesh and was instrumental in the formation of over 800 Water Users Associations. Moreover, the Uttar Pradesh Irrigation Department now has an up-to-date information management system in place to help guide its policies.

While between 2001 and 2007 the Indian economy registered average growth rates of well over 7% annually, Uttar Pradesh lagged behind only managing to expand its economy by 4.4% per year. However, the state is now rapidly catching up and even exceeding its government’s already ambitious targets. Over the 2010-2011 fiscal year, the Uttar Pradesh economy grew by no less than 8.1%.

The potential of the state is impressive, in particular its agriculture sector: Thanks to the fertile flatlands of the North Indian River Plain and irrigation schemes such as Ganges Canal, Uttar Pradesh already is a major contributor to the national grain and horticultural outputs.

The latest World Bank project aims to benefit over a million families by expanding on the accomplishments of earlier development schemes. The Uttar Pradesh government has identified 16 districts as priority areas and it is here that over 2,000 Water Users Associations (WUAs) will receive additional support with the operation and maintenance of local systems. These associations play an essential role in the allocation of water resources, the resolution of conflicts between competing users and the assessment of water charges.

According to Winston Yu, task team leader of the project and a senior water resources specialist, the modernization of irrigation and drainage systems in the selected districts will significantly contribute toward agricultural efficiency and, hence, increased yields. “At the same time we can improve a more efficient use of water resources.”

The World Bank project now also includes flood control. Significant parts of Uttar Pradesh are prone to flooding. Modern technologies – Geographic Information Systems (GIS), satellite remote sensing and mobile-based applications – are to be employed to help reduce and manage risks to agriculture. This continuous monitoring will be conducted by the newly-established Uttar Pradesh Remote Sensing Applications Centre.

In order to improve farming practices, Water Schools will be set up where both trainers and farmers may receive instruction on water-saving techniques such as furrow irrigation, crop-water budgeting, laser levelling and the usage of raised beds. Farmers trained at these Water Schools are expected to share their knowledge with others in local communities so as to increase both the reach and the scope of the project.

The new project in Uttar Pradesh will be financed by a credit from the International Development Association (IDA), part of the World Bank Group, which provides interest-free loans with a five year grace period and 25 years to maturity.


The Limitless Power of Latin America: Renewables to Light Up a Continent

In Latin America, renewable energy can supply up to 22 times the region’s power needs, even taking into consideration future growth. Wind, solar, geothermal, biomass and ocean energy sources can generate up to 80 pWh (petaWatt-hour*) of electricity while by 2050, the projected demand of the region is estimated to run anywhere between 2.5 and 3.5 pWh.

In its report “Rethinking Our Energy Future”, the Inter-American Development Bank (IDB) concludes that renewables are a viable option as costs decrease and new technologies become available. The IDB report shows that several alternative energy sources can already compete on price and availability with more conventional power generating technologies.

The bank’s ground-breaking study also aims to dispel some of the myths surrounding renewable energy, arguing that the emerging sector offers a great many solid investment opportunities to business and interesting policy options to governments that strive to diversify their countries’ energy matrices.

“Renewables are becoming a viable and attractive option that needs be explored,” says IDB President Luis Alberto Moreno: “Though Latin America uses more renewable energy than any other region in the world, the continent faces difficult choices as it seeks to generate the electricity it needs to grow without harming the environment.”

“Renewables are becoming a viable and attractive option that needs be explored.”

- IDB President Luis Alberto Moreno

The bank presented its study earlier this year at the first-ever meeting of the Global Green Growth Forum (3GF) in Latin America. The event – attended by leaders from government, business, finance, civil society and multilateral organizations – took place in Bogotá, Colombia and was hosted by that country’s president Juan Manuel Santos.

3GF is an initiative of Danish Prime-Minister Helle Thorning-Schmidt in partnership with the governments of South Korea and Mexico. Mrs Thorning-Schmidt explains that the Global Green Growth Forum seeks to open up a space for debate on new and green avenues for growth: “We need to challenge conventional economic thinking in order to come up with sustainable development models that can get us out of the economic crisis. We all share the responsibility of fostering the green revolution that will deliver tomorrow’s prosperity.”

According to Walter Vergara, lead-author of the study and head of the IDB’s Climate Change Division, concrete policy initiatives and public-private partnerships are now needed to exploit Latin America’s vast renewable energy potential: “Our study puts the magnitude of this undertaking in perspective, outlining the broad benefits and illustrating policy options.”

Mr Vergara notes that throughout the continent a number of projects are already taking shape. Mexico has recently become the world’s fifth largest producer of geothermal energy. Meanwhile, Brazil now is a leading biomass energy producer. The country converts bagasse – the fibrous matter that remains after sugar cane has been crushed – into electricity.

Biomass now fuels fully 27% of Brazil’s electricity generating capacity. The sector employs well over a million people. Including hydroelectric power, Brazil currently obtains over 85% of its power from renewable sources.

Elsewhere in Latin America a, number of projects are underway to exploit wind, solar and wave power. Finland has recently pledged support to help the Chilean Ministry of Energy set up a WaveRoller power plant to showcase wave power as a promising way to bring energy to remote regions.

During a visit to Chile earlier this year, Finnish Prime-Minister Jyrki Katainen commented that Chile possesses “a near-limitless supply of wave power which is just begging to be harnessed.” The huge tidal swings recorded along the country’s southern shoreline – among the largest in the world – also offer possibilities for large-scale power generation.

Last year, worldwide investments in alternative renewable energy technologies totalled $244bn. However, Latin America represented only 5.4% of this sum. IDB president Luis Alberto Moreno said in Bogotá at the 3GF meeting that his institution will encourage additional investments in renewable energy projects and called upon regional governments to consider enacting legal frameworks that facilitate public-private partnerships to foment development in this sector.

The IDB is currently financing wind farms, solar power system and biofuel plants in the region with an emphasis on projects in rural areas. The bank is also engaged in various schemes that aim to increase the efficiency of hydroelectric power plants by retrofitting dams with state-of-the-art turbines.

* A petaWatt-hour is equal to one trillion kilowatt-hours (1012 kWh). This is approximately three times the amount energy consumed by Mexico annually. Currently, Latin America generates 1.3 pWh.


Christopher Colford, World Bank: Competitive Cities Can Meet the Challenge of Job Creation

[caption id="attachment_5465" align="alignright" width="248"] Philadelphia[/caption]

Focusing policies on competitive industries can provide jobs for the impoverished, hungry, restive urban millions

As magnets for talent and crucibles of creativity, dynamic cities are the pacesetters for innovation in this era of relentless global competition. Vibrant metropolitan regions play another vital role, too: Competitive cities are the world’s indispensable engines of job creation. Ensuring that cities enhance their competitiveness and spur vigorous job growth – especially in the leading-edge industries that will shape the future – is now all the more urgent, as economies large and small struggle to overcome this decade’s slow-growth stall.

Job creation is the top priority for policymakers worldwide in the wake of the Great Recession, and the world’s most competitive cities will play a make-or-break role in generating the higher-skill, higher-wage jobs that every economy craves. If the world’s cities fail to live up to their full job-creation potential, then hundreds of millions of people – especially in the developing world – will remain vulnerable to chronically high unemployment and persistent poverty.

"Job creation is the top priority for policymakers worldwide in the wake of the Great Recession, and the world’s most competitive cities will play a make-or-break role in generating the higher-skill, higher-wage jobs that every economy craves."

Today’s jobs crisis is inflicting a painful toll on recession-wracked Athens, Madrid and Lisbon – where the slump has now lasted longer than did the Great Depression of the 1930s. Yet the impact of mass poverty is even more desperate among the poorest neighborhoods of such swelling cities as Kolkata, Kinshasa, Lagos and Lahore. The continuing upheavals in Cairo – and this summer’s riots in Istanbul and São Paulo – show how urban anxieties can explode when a chronically excluded underclass, and a frustrated middle class, have their expectations dashed.

[caption id="attachment_5174" align="aligncenter" width="596"] Three distinct layers of policies are needed. The role of government is to ensure that the conditions are in place for strong private-sector-led growth, to understand why there are not enough good jobs for development, and to remove or mitigate the constraints that prevent the creation of more of those jobs. Government can fulfill this role through a three-layered policy approach. Source: World Development Report 2013 team.[/caption]

Simultaneous surges in joblessness, population growth and urbanization are now making it more critical than ever to get urban policy right. Success requires, above all, a rigorous focus on sharpening every city's competitive edge.

Mass-scale unemployment seems destined to intensify in the world’s most impoverished nations, according to this year’s flagship World Bank publication, the “World Development Report” (WDR 2013). More than 200 million people worldwide are now officially counted as unemployed – but another 1.5 billion people are only marginally employed, earning only subsistence-level incomes. An additional 2 billion working-age adults are neither working nor seeking a job.

Worse, an imminent demographic surge is poised to bring millions of young entrants into the labor force. The global economy will need to create about 600 million new jobs within the next 15 years to employ the new working-age population. About 90 percent of that future job creation must occur in private-sector firms: WDR 2013, and a companion jobs study by the International Finance Corporation, note that governments will be able to productively employ only about 10 percent of the new job-seekers. So job creation in the private sector will be crucial.

Combine the jobs crisis and the population surge with the global urbanization trend, and the challenge is even more acute – especially in Africa and South Asia, where the urban populations will double within the next 20 years. Worldwide, nearly two billion people will stream into ever-more-stressed cities by 2030 – most of them, in middle-income and low-income countries. The number and size of megacities is projected to soar, according to analyses by the McKinsey Global Institute, with an additional 310 million working-age people soon streaming into just 600 of the world’s most densely crowded cities. That will compound the complexities of urban management.

"Combine the jobs crisis and the population surge with the global urbanization trend, and the challenge is even more acute – especially in Africa and South Asia, where the urban populations will double within the next 20 years."

Providing jobs for the impoverished, hungry, crowded urban millions will be the challenge of the century. To create anywhere close to enough jobs, competitive cities will need to shape policies that inspire startup firms and promote entrepreneurship; that create innovation-minded development clusters that can maximize the “spillover effects” among adjacent industries; and that channel investment toward economic sectors with the most promising growth potential.

In a relentlessly competitive global economy, cities must develop policies and deploy solutions that will help them stay at their competitive best. Each city must strive to establish an enduring comparative advantage for itself – seizing or creating a specific niche within global value chains.

A comprehensive approach to building urban competitiveness can promote investment where it will be most valuable: in innovative ecosystems that bring together networks of inventors, investors and industries – so that all those creative elements, in close proximity, can catalyze growth. Laissez-faire fatalism will clearly not be enough: Activist economic strategies and supportive public policies must rigorously focus on building competitiveness.

The overall elements of such an activist, urban-focused strategy are clear: The hard part is in implementing them, case by case, in the context of each metropolitan region. Governments and the private sector must work closely together to ensure that a strong and agile infrastructure is continuously renewed; that a well-educated workforce is equipped with flexible job skills that match up well with the local economy's needs; that advanced industries are incubated in concentrated clusters; and that disciplined investments in innovative sectors help each metropolitan area take maximum advantage of the region's economic strengths.

[caption id="attachment_5195" align="aligncenter" width="615"] Among youth, unemployment is not always the issue. 621 million young people are “idle”—not in school or training, not employed, and not looking for work. Rates of idleness vary across countries, ranging between 10 and 50 percent among 15- to 24-year-olds. Source: World Development Report 2013 team.[/caption]

Private-sector companies will be the engine of job creation, but the public sector has a critical role to play, too – and governments must play that role energetically, not just half-heartedly. Sound policies must provide the enabling legal framework, regulatory regime and infrastructure that help industries compete. Industry-specific growth strategies should help focus local attributes and advantages on the industrial sectors that have the strongest potential for success. And a continuous civic dialogue must keep policymakers attuned to business' evolving needs.

Competitiveness strategies do not require heavy-handed attempts to “pick winners and losers” – an approach that some economies tried, with only limited success, a half-century ago. Instead, crafting market-attuned strategies for competitiveness will require both business and governments to reach deeper into their policy toolkit. Analytical tools, including the use of Big Data, can help promising growth industries stay flexible enough to meet ever-changing market demand. Most of all, such strategies will require a constructive dialogue among business leaders and policymakers, who together can channel supportive investments – in infrastructure, R&D, education and job skills – toward sectors that seem poised to gain a competitive edge.

Mobilizing a metropolitan region’s innovation capacity and productive agility is certainly not easy – yet there are some cities and regions that have shown how they can focus their policies to “punch above their weight.” One of the most dramatic examples is Singapore, which has pioneered public-private coordination. Anticipating future market demand – a deft technique that Singapore’s leaders call “market sensing” – has helped Singapore stay ahead of market trends, rather than merely react to them. Seoul, Taipei, the Guangzhou-Shenzhen region of the Pearl River Delta, and other “Asian Tiger” cities have also shown how bold strategic bets can pay off.

"Instead, crafting market-attuned strategies for competitiveness will require both business and governments to reach deeper into their policy toolkit."

Focusing a region’s ambitions on specific sectors has certainly paid dividends for some world-leading competitors. Silicon Valley has famously thrived on government funding for high-tech innovation, often channeled through the Defense Department budget. The Research Triangle in North Carolina and Silicon Glen near Cambridge, England have catalyzed growth through close alliances among universities, government-funded research laboratories and local manufacturers. The same pattern holds true for the biotech industries in Maryland near the National Institutes of Health; the robotics cluster around Pittsburgh’s university medical centers; the ambitious nanotech corridor around R&D centers in New York; and the polymer-and-plastics enclave that has enlivened growth in the old tire-and-rubber city of Akron.

There are cautionary tales, as well. Regions that fail to keep up with the tempo of change – such as the rusting old shipbuilding cities of northern England and Northern Ireland, the moribund steelmaking neighborhoods of Youngstown and Cleveland, and even the once-robust Route 128 technology corridor around Boston show how companies that lose track of market trends can squander their advantages. And the decades-long decay of now-bankrupt Detroit is a fearsome example of how regions overly concentrated on an underperforming niche can wither.

Helping the developing world’s metropolitan regions make the most of their specific, local economic strengths is the aim of the Competitive Cities initiative, a part of the World Bank’s practice group on Competitive Industries. Helping cities succeed, by tailoring solutions to meet each metropolis' particular needs, is crucial to achieving the World Bank’s mission: eliminating extreme poverty by 2030 and building societies that enjoy shared prosperity.

[caption id="attachment_5165" align="alignright" width="180"] Christopher Colford[/caption]

The battle against poverty will be won or lost in the world’s cities – and those who hope to build a world free of poverty must help every city and region hone its competitive edge. Delivering transformational solutions will call for all the ingenuity that mankind can muster. Activist, urban-focused strategies that focus on competitiveness – maximizing the value of the private sector's dynamism – can unleash the concentrated creative potential of competitive cities.

About the Author

Christopher Colford is a consultant at the World Bank, in its network on Financial and Private Sector Development. That network's Competitive Industries Practice helps the world’s developing countries strengthen their international economic competitiveness.


Small Egypt Farmers Catch the Eye of Agribusiness: IFAD Finds Key to Success

Twenty-odd years ago, groups of dispossessed farmers and unemployed youth were resettled on smallholdings in Upper Egypt. Authorities told the new arrivals to go till the desert soil. Plots – sandboxes really – of one to two hectares were duly meted out, the project was declared a resounding success and everybody left the scene, including most of the newly settled families.

At the time, Upper Egypt was neither a welcoming nor a promising place. Historically the least developed region of the country, Upper Egypt used to be a place from which people left. Not any longer: Labourers from elsewhere in Egypt are now flocking to the area between Entelak and Tiba to work the fields carved out from the desert. A migratory trickle is on its way to becoming a modest flood.

Today, West Noubaria produces significant crops of grains, nuts, fruits and vegetables destined not just for the domestic market but for export as well. Farmers report reaping well over four tonnes of peanuts per harvest from a single hectare of what used to be desert sand. In four years’ time, yields of high-value produce such as oranges, pomegranates and garlic have increased fivefold.

"Over the course of a decade, the project lifted over 27,000 families out of poverty."

Former subsistence farmers are making real money, and spending it: A large new town – replete with markets, shops and restaurants – is being erected next to the Al Yashaa village. The district now boasts good roads, a dependable power grid, clean piped water and a much-improved network of roads that allow cash crops to reach packing plants and markets within hours of being harvested.

Among development projects, West Noubaria is a pearl. Budgeted at about $55 million and slated to be completed this year, it is run by the United Nations’ International Fund for Agricultural Development (IFAD). Major financing came by the way of an Italian-backed debt-swap valued at $32 million. IFAD contributed with $18.5 million. Over the course of a decade, the project lifted over 27,000 families out of poverty.

More than a drop on the plate, the West Noubaria Rural Development Project showed a way forward: Its comprehensive and inclusive approach did not just teach farmers how to work the barren land, but also featured a complete economic and social infrastructure package. Schools, training institutes, health clinics, civic centres and public housing projects were built, transforming West Noubaria from a region with a mostly transient population into a true community with a clear sense of purpose.

Abdul Rahman, an accountant-by-trade from Lower Egypt, first came to West Noubaria in the early 1990s, the proud owner of a smallholding he had acquired through a government-sponsored loan. He and his wife did try to work the desert floor but failed miserably and quickly moved back north. After word of the IFAD project reached him, Mr Rahman decided to try again. This time, his efforts met with more success: “I was provided with training and technical support. Things went a lot smoother the second time around and now my land is fertile and we are happy.”

A unique aspect of the West Nourabia project is its successful attempt to link small farmers, such as Mr Rahman, to big business. In the past, processing plants and trading companies shied away from small farmers and conducted their business almost exclusively with commercial farms.

By organizing and uniting smallholders into marketing associations, the IFAD project managed to entice larger companies into dealing with the West Nourabia producers. The marketing associations’ members receive extensive training in best agricultural practices, organic farming, food technology and basic crop processing. Members also learn about the importance of quality control; essential for gaining access to the coveted long-term supply contracts available from food processors and exporters.

"By organizing producers into marketing associations and training them in market requirements, we have enabled small farmers to establish successful business linkages with more than 50 private companies involved either in processing or trading and exporting," says Abdelhamid Abdouli, IFAD Country Programme Manager for Egypt.

Mr Abdouli remembers that early on, few in West Nourabia thought it possible to farm the desert: “People just did not understand that it would be possible to grown anything on this fragile, sandy soil. It took a lot of convincing, but now our settlement rate is 98%, up from 25% at the start of the project.”

IFAD has recently announced the start of a new development project in Upper Egypt, the Promotion of Rural Incomes through Market Enhancement (PRIME) programme. Notwithstanding its rather awkward name, this project aims to disseminate the approach taken in West Nourabia to a much wider segment of the population. By helping smallholders forge enduring links with agribusiness, IFAD hopes to offer some measure of succour to the vast numbers of Egyptian subsistence farmers who mostly toil against the odds.


Barking Up the Wrong Tree in St. Petersburg: G20 Hijacked by Syria Conflict

[caption id="attachment_5218" align="alignright" width="203"] St. Petersburg[/caption]

The world leaders gathered today in St. Petersburg for the G20 summit were supposed to discuss the slowdown of global economic growth and ways to combat tax evasion. This agenda has now been largely supplanted by developments in Syria and in particular the gung-ho attitude of the US administration that seems set on punishing the regime in Damascus for its alleged use of chemical weapons.

On the summit’s eve, President Vladimir Putin of Russia – never one to mince words – said he would consider sending the Syrians a missile shield to help protect the country from a US attack. Putin warned that Russia will not remain passive if international law is breached: “We would surely have to rethink our current position and perhaps offer to equip certain countries with sensitive technologies that afford them better protection against unwarranted attacks.”

Those “certain countries” Mr Putin referred to are widely understood to include Iran which earlier had shown interest in acquiring the Russian-made S300 air defence system. Under heavy pressure from the US and Israel, the deal was scrapped.

Meanwhile, US President Barack Obama remains confident that both houses of congress will eventually authorize some form of punishment to be meted out to Syrian President Bashar al-Assad. A draft resolution approved on Wednesday by the Senate Foreign Relations Committee allows strikes against Syria to take place within a 60 day window, extendable to 90 days. The draft also includes the tough words of hawkish US senator John McCain to the effect that US policy is to seek “a change of momentum on the battlefield of Syria.” Regime change just got another name.

“We would surely have to rethink our current position and perhaps offer to equip certain countries with sensitive technologies that afford them better protection against unwarranted attacks.”

- Vladimir Putin

Isolated internationally – but for the French who remain uncharacteristically belligerent on Syria – President Obama now hopes to find domestic support for his strike plan. In St. Petersburg, the Russian president tries to fill the gap. This unlikely champion of freedom and restraint – who just a few weeks ago welcomed US whistle blower Edward Snowden to Russia – appeals for military action to be put off until the United Nations have spoken on the matter. This may take a while. The analysis of soil samples taken last week by UN observers in Syria, may take up to three weeks.

Mr Putin reiterates on a daily basis his doubts about the Syrian government’s use of chemical weapons: “It is just ridiculous and defies logic. Why would the Syrian Army use chemical weapons on opponents they had surrounded and beat knowing full well the international outrage this would provoke? Nobody has been able to answer this question, nor has anyone offered solid proof that government forces have actually employed chemical weapons.”

Intelligence agencies ranging from Israel’s Mossad to Germany’s Bundesnachrichtendienst and Britain’s MI6 claim to possess the irrefutable proof Mr Putin is looking for. However, these spying agencies remain – as usual – woefully short on specifics and hence fail to convince anyone.

President Obama’s stubborn refusal to cool down and let the UN do its job seriously undermines the G20 summit in St. Petersburg. The centrepiece of the event is a bold plan, drawn up by the OECD (Organization for Economic Cooperation and Development), to combat tax evasion by forcing banks to disclose their customers’ assets at the request of governments.

The initiative was inspired by the US Foreign Account Tax Compliance Act which came into force earlier this year. Even though this legislation has been heavily criticised for the invasive powers it grants authorities, the G20 leaders were all expected to sign up for the plan.

However, in St. Petersburg the agenda for economic growth and the ambitious tax plan are both securely buried under the cacophony of sound bites, accusations and threats over the Syrian Issue. While the US Administrations vents its indignity and rolls around in self-righteousness, the wider world just tries to deal with more mundane questions regarding lacklustre economic growth, the continued degradation of the environment and the need for social ascendency of the poor masses; issues that when not addressed might actually cause real troubles that would pale whatever may have transpired in Syria with chemical weapons.


A Flash in the Pan Fizzles Out: The Downfall of a Brazilian Tycoon

[caption id="attachment_5233" align="alignright" width="248"] Eike Batista[/caption]

Playing the markets and getting at the mega-bucks with financial wizardry does not a businessman make: Brazil’s flamboyant Eike Batista – erstwhile owner of the world’s seventh largest fortune – has fallen off his perch in the most spectacular of fashions. Mr Batista’s six commodities and logistics companies have lost a combined $9.7bn so far this year. A drop in the bucket, for sure, when set against the $203bn in losses suffered by the 300 or so publically traded companies in the country.

The downfall of Eike Batista is perhaps best illustrated by the plight of OGX, the former billionaire’s flagship oil company which has lost close to 90% of its value over the past year. OGX was but a bubble, inflated by no less than 55 regulatory filings attesting to largely fictitious oil reserves. The truth had to come out eventually, but before it did Mr Batista took out a dazzling number of put options: 56 million OGX shares to be precise in early June.

He did need a windfall even if was to it arrive on the coattails of his own company’s demise. That impending demise had left Eike Batista with a $1.5bn debt to the Abu Dhabi sovereign wealth fund, the Mubadala Development Corporation. The failing tycoon also owes Brazilian banks a pretty penny: Investment bank BTG would like to see $282m from Batista while the Itau and Bradesco banks are each owed a billion dollars or more.

Mr Batista now rather desperately tries to sell his assets to meet these – and a host of other – obligations. However, his crumbling empire – beset by the twin evils of debt and operational losses – finds few takers. Also, a lawsuit by disgruntled investors has further reduced Mr Batista’s entrepreneurial freedom: An injunction now severely limits his ability to sell assets. The lawsuit, led by Rio de Janeiro lawyer Marcio Lobo accuses Mr Batista of insider trading and “acting in bad faith”.

"Investment bank BTG would like to see $282m from Batista while the Itau and Bradesco banks are each owed a billion dollars or more."

More befitting an eccentric than a businessman, Mr Batista is a firm believer in the powers of the beyond. Now that Lady Luck stopped smiling, he reportedly has become an assiduous visitor to Rio’s House of Magic, a well-known temple of mysticism. One solace mystics may offer duped investors and creditors is their prediction that Mr Batista will live to be 108. There is some time left to recoup losses.

Meanwhile, Mr Batista’s sorry plight perhaps symbolizes to some extent the broader malaise that has choked Brazil’s economic ascendency and mires the country firmly in the league of the mid-income mediocre. Pundits seldom tire in praising Mr Batista’s purported entrepreneurial genius while, in the same breathe, ascribing his troubles to excessive government meddling and regulation.

The state is to blame. While it is certainly true that Brazilian bureaucracy does not have the best interest of business at heart, it is equally true that plenty companies are able to adapt, manage and even prosper under the circumstances. Much as Mr Batista’s business prowess was grossly overstated (and banked upon), Brazil’s promise as an economic powerhouse is mostly hype.

For now, the country at best may aspire to remain a regional superpower, owing more to its impressive geographical dimension than to any actual progress. The potential is there, and in vast quantities. It is underused and at times being squandered. What Brazil historically lacks is a clear vision on how to develop its potential into lasting prosperity. It should look to Chile for lessons on how to do that.

Mr Batista was merely a flash in the pan. Brazil boasts a great many excellent, world-class entrepreneurs who honed their impressive skills in an adverse regulatory climate and are biting at the bit to get going and build real business empires: Not ones based on flights of fancy and the manipulation, cynical or otherwise, of stock markets. Mr Batista’s downfall may, as such, be a blessing in disguise, drawing attention away from the antics of a joker to perhaps allow more deserving businessmen and –women to come into focus.