Mr Cameron Throws a Tantrum and Loses an Agenda

Politics must surely be one of the most fascinating of art forms. The levels of spin employed by artists to justify contradictory statements are at times mind-boggling. One of the current top-performers must be British Prime-Minister David Cameron. He has elevated spin to levels seldom achieved before.

For quite some time now, Mr Cameron has argued that the European Union needs more democracy and less backroom wheeling and dealing. The EU’s lack of transparency is one of the prime-minister’s pet peeves. He is, of course, quite right: The union could do with a bit more voter input.

One would have thought that Mr Cameron would welcome a strengthening of European Parliament’s so far rather limited powers. One would have been wrong. At first, Mr Cameron seemed rather pleased when it was decided last year to allow the EP a say in the appointment of the next president of the European Commission – the executive body of the union charged with running its day-to-day affairs.

It was decided that the blocs of political parties represented in the 751-strong parliament would each nominate a candidate for the post. At election time, this candidate would then be the leading face on the ticket. The bloc gathering the most votes was to be invited to present its candidate to the newly seated parliament for final approval.

“As it happens Mr Cameron severely dislikes Mr Juncker who he considers too manipulative, secretive and – in a word – way too continental, if not a puppet of the French and Germans.”

The politician so selected would become the EP’s official nominee for the presidency of the European Commission. Government leaders throughout the EU promised solemnly to attach great weight and value to the parliament’s recommendation on this matter. In fact, the EP was told that its nominee would carry the day.

The European Parliament is dominated by two caucuses: The European People’s Party (EPP, Christian democrat) and the Progressive Alliance of Socialists and Democrats (S&D, Labour). At last May’s European elections the EPP obtained 221 seats while S&D claimed 191 seats.

The EPP candidate for the presidency of the European Commission is the former prime-minister of Luxembourg Jean-Claude Juncker whose nomination has now been duly endorsed by the parliament in Strasbourg.

Back to Mr Cameron and his quest for increased democratic control over the EU. As it happens Mr Cameron severely dislikes Mr Juncker who he considers too manipulative, secretive and – in a word – way too continental, if not a puppet of the French and Germans. The British Prime-Minister will have none of it. In fact, he seems to have gone off his rocker and threatens everything short of outright war should the Council of Ministers have the gall to accept the EP’s nominee for the post.

Most other EU heads of state are quite flabbergasted by the Mr Cameron’s outbursts and are beginning to wonder what happened to his oft-repeated love of democracy. The British prime-minister now argues that his nemesis Mr Juncker is not a proponent of more transparency and represents the much-despised old school.

However, Mr Cameron fails to address the elephant in the room: Mr Juncker is the European Parliament’s choice for the post. As such, he represents the will of the voters and stands to become the most democratically appointed president of the European Commission ever. That in itself may not mean much, but is surely better than assigning the post to whoever comes out on top after much backroom wrestling between heads of government.

In fact, the British prime-minister is throwing but a tantrum following the example set by Mrs Thatcher. The sad part of it is that he may even wear his opponents down and get his way. Should Mr Cameron succeed in blocking Mr Juncker, the UK will have to keep quiet for a depressingly long time in Brussels. For that is how politics work: You’ve had your way, now please shut up for a while. Thus, an opportunity at pushing through a reform agenda for the EU will be lost. i


Professor Mary Beard: Every Inch a Fascinating Woman

 Mary Beard, professor of Classics at Newham College, Cambridge, is quite unusual. She is one of very few academics to be highly regarded by their peers despite having taken a stroll down media lane. Her latest publication is entitled Laughter in Ancient Rome. She also presents the TV series Meet the Romans. Mary Beard is the Classics Editor of the Times Educational Supplement.

It is nice to hear people speaking their mind when the diplomats remain quiet. Mrs Beard became infamous at the time of 9/11 by suggesting that, “however tactfully you dress it up, the United States had it coming. Bullies, even if their hearts are in the right place will, in the end, pay the price.”

Predictably enough, she was promptly accused of supporting terrorists. This, however, was not the case. Indeed, Mrs Beard was as appalled by these tragic events as any one of us. Her words reflected but the unspoken views of many. There are bound to be consequences when a nation’s foreign policy is rightly or wrongly thought to be offensive.

Professor Beard was born in Shropshire and was the first in her family to obtain a university degree. At school she was very good at Latin and made her first visit to Pompeii when she was 18 year old. As a student she was a devotee of black feminist Angela Davis. During her career Mrs Beard has repeatedly taken a stand against elitism and authoritarianism. She is passionate in the belief that the classics are for everyone – not just the privileged few.

Controversy visited Mrs Beard once again when she was invited on to the panel of BBC Question Time in January of 2013. She was pilloried for suggesting that the town of Boston in Lincolnshire would be able to cope with, and indeed benefit from, continuing European migration. She based her argument on a specific document from Boston Council that made this very point. Her clear understanding of the extraordinary contribution made by newcomers to the comfort, culture and vitality of Britain is most refreshing. She pointed out that, “European migrants make little use of benefits, the healthcare system or social housing.”

Some of Mary Beard’s Question Time critics – collectively known as The Trolls – saw it fit to ridicule her appearance and even went on to utter death threats. All this just because Mrs Beard refused to toe the populists’ line and insisted on saying once again what she believes to be true.

Professor Beard pointed out that although someone on Twitter had threatened to blow up her house, she had not been as severely abused as some other forthright women. She is absolutely comfortable with herself and has said, “I’m every inch the 57-year old wife, mum and academic, half proud of her wrinkles, her crow’s feet, even her hunched shoulders from all those misspent years poring over a library desk.”

Mrs Beard’s lack of pretence, her honesty and the boundless joy with which she makes the classics come alive are heart-warming and set her miles apart from the politically-correct, and thus utterly boring, crowd.


World Bank Reaffirms Commitment to the People of Egypt and the Country’s Development Priorities

[caption id="attachment_8014" align="alignright" width="255"] Cairo[/caption]

World Bank Regional Vice President for the Middle East and North Africa, Inger Andersen, affirmed support to the people of Egypt and the country's development priorities and underscored the Bank’s commitment to exploring new projects and scaling up existing ones.

“Egypt has the potential to become a powerful emerging economy,” said Andersen. “The World Bank Group is committed to supporting the country’s priorities to reduce poverty and achieve shared prosperity.”

Andersen’s three-day visit to Egypt included meetings in Cairo with Prime Minister Ibrahim Mahleb, Minister of International Cooperation Dr. Naglaa El-Ahwany and senior government officials including Minister of Planning Dr. Ashraf El-Araby; Minister of Investment Mr. Ashraf Salman; Minister of Social Solidarity Mrs. Ghada Wali; Minister of Finance Mr. Hani Qadri Demian; Minister of Industry, Trade and Small and Medium Enterprises Mr. Mounir Fakhry Abdul Nour; and, Minister of Petroleum and Mineral Resources Eng. Sherif Ismail.

“The World Bank Group is committed to supporting the country’s priorities to reduce poverty and achieve shared prosperity.”

In her meetings, Andersen highlighted the importance of rolling out a well-targeted, efficient and effective social safety net program to meet the urgent needs of the poor and protect them from short-term impact of fuel price increases.

In Upper Egypt, Andersen visited two projects focusing on employment creation and service delivery. Moreover, she met with civil society representatives and young leaders to discuss how the Bank can support job creation and improve service delivery especially in lagging regions.

“I had an opportunity to engage with a variety of stakeholders in Aswan, including women micro-entrepreneurs and young people, on their opinions about challenges facing Upper Egypt and the kind of interventions needed to create voice, participation and jobs,” said Andersen.

During Andersen’s visit, Egypt and the World Bank signed the US$500million Egypt Household Natural Gas Connection Project which was approved recently. The Project will expand access to a safe, more reliable and lower cost energy source for cooking by shifting 1.5 million households from the highly subsidized largely imported LPG cylinders to grid connected natural gas. It will also ensure access to areas where cooking gas is currently in short supply and where households have to pay high prices, including three governorates in Upper Egypt with poverty rates among the highest in the country.

“The World Bank is a steadfast and continuous partner of Egypt,” said Hartwig Schafer, World Bank Country Director for Egypt, Yemen and Djibouti. “I am pleased that this visit comes as we are preparing our new Country Partnership Framework and listening to the development priorities of Egyptians and how the Bank can best support Egypt.”

Last June, the World Bank Group launched nation-wide consultations for Country Partnership Framework (CPF) in Cairo, Alexandria and in Aswan and reached out to civil society, youth, academia, and the private sector.

The World Bank portfolio in Egypt includes 26 projects for a total commitment of US$5 billion. The World Bank finances projects for faster delivery of benefits to the people of Egypt in key sectors including energy, transport, water and sanitation, agriculture and irrigation as well as health and education.


Strategy&: Meeting the Big Data Challenge

Recent research on Big Data should sound an alarm bell for companies. On the one hand, there is a link between usage of Big Data and the quality of corporate performance. On the other hand, very few companies are actually making use of Big Data. Companies therefore need to grasp the commercial advantages that Big Data can bring and how they can develop their capabilities and culture to exploit its potential.

Writing in the Harvard Business Review in 2012, Andrew McAfee and Erik Brynjolfsson revealed the extent of Big Data’s impact. They interviewed executives in 330 publicly traded companies in the United States and found that those organizations which believed most in the power of Big Data gained a marked advantage over their rivals. According to McAfee and Brynjolfsson, the enterprises that were in the top third of their industry in terms of using data-driven decision making were more productive and more profitable than competitor companies by average margins of 5% and 6% respectively.

Despite such findings, companies have not broadly adopted Big Data practices. Indeed, a 2013 Gartner survey found that less than 8% of surveyed companies had actually deployed Big Data technology. Although this figure is set to rise substantially in coming years, companies will need to adapt considerably to thrive in a data-centric world. In 2012, the Aberdeen Group found that the proportion of executives that reported that their companies were unable to use unstructured data, and who complained that the volume of data was growing too rapidly, had increased by up to 25% during the previous year.

The Big Maturity Framework

So while better technology will help to store and analyse the avalanche of data now being produced, what will make the difference is building the right capabilities and culture. To do this, companies will need to know where they stand in terms of a Big Maturity Framework. The framework consists of three elements – environment readiness, organization-internal capabilities, and the ways in which Big Data can be used. It can help companies to see how far they have progressed, and identify what more needs to be done to get where they want to be.

“Over the next five years, Big Data will become the norm and will enable game-changing opportunities in many industries.”

The framework acknowledges that Big Data can be used in different, progressively more sophisticated, stages of maturity. It can have a limited scope, serving merely to improve the efficiency of existing operations. Or in its most developed phase, it can radically reshape the business landscape, transforming individual companies, and paving the way for disruptive, entrepreneurial start-ups and the creation of wholly new industries.

The first maturity stage, performance management, allows executives to view their own business more clearly through, for example, user-friendly management information dashboards. This would typically involve internally generated data.

The second maturity stage, functional area excellence, involves organizations using both internal and external data to improve selected areas of the business. This may lead to the enhancement of sales and marketing techniques, or to advancements in operational efficiency. For example, one German car manufacturer used real-time performance monitoring of production machinery to achieve a 20% increase in productivity. Each machine was closely monitored to pinpoint downtime, enabling the company to optimize the effective usage of the overall plant.

The third maturity stage, value proposition enhancement, allows organizations to start to extract a new source of competitive advantage that goes beyond the incremental improvement of existing operations and services. This may entail real-time recommendations, or the personalization of services, to raise the quality of the customer experience.

Stronger Bottom Line

For example, a global mass merchant was able to increase its profit per customer by 37% by applying advanced customer analytics to identify its best customers and then present them with personalised offers. The frequency of those target customers’ purchases rose by approximately a quarter, and the average basket size grew by around 10%.

Another example of this third maturity stage comes from a leading European bank. This financial institution managed to increase sales by 12% through diversifying its website content. When customers logged in, they were shown one of several alternative websites based on their individual transaction history and segment, and the company’s overall product portfolio. The content was adjusted according to the predicted needs of the customer in order to maximize potential sales.

The fourth and final stage, business model transformation, is when Big Data leads to fundamental change. Big Data practices become deeply entrenched within the organisation, shaping the nature of the business as well as the mode of executive decision-making.

Both product and services organizations are capable of reaching this stage. General Electric (GE) is a product organization that has made clear that it believes in the power of Big Data. The company anticipates that machinery and equipment will soon be loaded with sensors which will display detailed service data in real time and across longer time periods. GE is therefore spending more than $1 billion on building up its data science capabilities to provide data and analytics services across business functions and regions.

The recent merger of the two advertising companies, Omnicom and Publicis, could lead to a data-driven transformation among service providers. The advertising industry is moving toward a more science-based, data-driven business that aims to deliver personalised advertising messages. This new world will be dominated by those major players that possess the most comprehensive data about individuals. Omnicom and Publicis believe that their combined size will produce the desired volume of data.

Pitfalls

Yet despite widespread interest in Big Data, companies face many pitfalls. Many of these relate to their own internal systems and culture.

One prominent obstacle is the shortage of available data scientists with an advanced education in mathematics or statistics who can also translate raw material into actionable, commercial insights. Although many educational institutions have started to introduce relevant courses, the market demand for such people is already considerable.

Companies must also refashion their current decision-making culture. Senior executives should be making more judgements based on clear data insights, rather than simply resorting to their intuition as in the past.

Changing corporate culture in this way could well impinge on concerns relating to status, with executive instinct increasingly challenged by the facts of hard data. However, while data can be of great assistance in solving an actual problem, it nonetheless holds true that senior management has first of all to ask the questions that the data at their disposal could usefully answer, rather than process it with no clear strategic goal in mind. What this means is that the value of an insightful executive will not be diminished in this new era, but rather can be enhanced thanks to Big Data.

Over the next five years, Big Data will become the norm and will enable game-changing opportunities in many industries. Organizations must react in a timely manner to determine how they can deploy Big Data in the most effective way possible, and then lay the appropriate groundwork. Without the necessary senior-level enthusiasm and sponsorship to realize the huge potential of Big Data, savvier competitors are likely to gain a potentially decisive advantage.

About Strategy&

Strategy& is a global team of practical strategists committed to helping you seize essential advantage. We do that by working alongside you to solve your toughest problems and helping you capture your greatest opportunities. These are complex and high-stakes undertakings—often game-changing transformations. We bring 100 years of strategy consulting experience and the unrivaled industry and functional capabilities of the PwC network to the task. Whether you’re charting your corporate strategy, transforming a function or business unit, or building critical capabilities, we’ll help you create the value you’re looking for with speed, confidence, and impact.

We are a member of the PwC network of firms in 157 countries with more than 184,000 people committed to delivering quality in assurance, tax, and advisory services. Tell us what matters to you and find out more by visiting us at strategyand.pwc.com/me.

About the Authors

Bahjat El-Darwiche is a Partner with Strategy& and the leader of the firm’s Communications, Media, and Technology practice in the Middle East. He has around 20 years of experience in the telecommunications industry, acquired through various engagements in the Middle East, Europe, North America, and Asia.

Dr. Walid Tohme is a Beirut-based Partner with Strategy& and a member of the firm’s Health and Digital Business and Technology practices.

He works with major healthcare providers, payors, and ministries of health across the GCC. He specializes in strategic transformations, post-merger integrations, and joint ventures. Additionally, he is one of Strategy&’s experts on digitization and Big Data, and leads the firm’s efforts in this area in the Middle East.


The IT Scene in China: Alibaba’s New ‘Open Sesame’ Financing

[caption id="attachment_8030" align="alignright" width="217"] Jack Ma[/caption]

Alibaba is China’s largest e-commerce company. It is a privately owned Hangzhou-based group of Internet-based e-commerce businesses which, amazingly enough, began in 1999 with only a website.

Today, Alibaba is one of the twenty most-visited websites globally, featuring nearly a billion products. It alone accounts for over 60% of the parcels delivered in China. Bigger than eBay and Amazon.com combined, Alibaba in 2012 controlled 1.1 trillion yuan ($170 billion) in sales.

Alibaba has interests in a number of ventures. Its latest, launched in March this year, is Yu Le Bao – an investment vehicle similar to the crowd funding style of Kickstarter. It allows thousands of ordinary Chinese to become micro financiers for movies and games using smartphone apps via Alibaba’s mobile Taobao platform.

Yu Le Bao, or Entertainment Treasure in English, gives anyone with a smartphone the opportunity to pledge anywhere from a minimum of a hundred yuan (about $16) up to a thousand yuan. The pledges are made to support the development and production of a bewildering range of high-profile games, movies, and TV shows. Investors are enticed by “expected annualized returns” of 7% - investments in gaming projects can go as low as 50 yuan. Each user may only make two investments in any given project.

“Today, Alibaba is one of the twenty most-visited websites globally, featuring nearly a billion products. It alone accounts for over 60% of the parcels delivered in China.”

“Yu Le Bao aims to provide a grassroots investment platform to bring the public closer to the cultural industry,” said Liu Chunning, president of Alibaba’s digital entertainment business group. The funds raised are invested in films, mobile games, television programmes and online game projects through the insurance and wealth management services offered by Guohua Life, a Shanghai-based life insurance company.

Customers who invest in Yu Le Bao may also get to meet the actors of the films and TV shows they supported and may even be granted a say in who is to direct their chosen project and which actors will land the lead roles.

The Yu Le Bao funding drive opened at 10 a.m. on March 31 and closed at 5 p.m. on April 4. During that time, 223,800 investors snapped up 785,500 shares in hot upcoming Chinese television and movie projects and social-networking games. Alibaba met its 73 million yuan (US$11.77 million) target in less than a week and could have raised tens of millions more if it hadn’t closed the funding early.

The first fully funded project was a social-networking game featuring China’s leading actress Fan Bingbing. The most popular projects, with over 100,000 investors, were the next two instalments of the Tiny Times franchise – movies following on from the smash 2010 romance drama film based on the best-selling novel of the same name.

Alibaba is now also exploring incursions into existing television and sports programmes in addition to film and games. The company recently struck a deal with state-run Shanghai Media Group’s Dragon TV station to produce hit shows – including the talent shows “China’s Got Talent” and “Chinese Idol”. In June, the company purchased a 50% stake in Guangzhou Evergrande Football Club for a reported 1.2 billion yuan (US$192m).

Alibaba, founded by Internet tycoon Jack Ma, is currently valued at between US$150 billion and US$200 billion. The company is widely expected to go for an IPO (Initial Public Offering) on a New York stock exchange and has the potential to eclipse Facebook in size.


How Much Does Pollution Cost?

As it becomes increasingly necessary to reduce emissions, organizations and governments are looking for ways to compensate for the harmful effects of carbon dioxide in the atmosphere.

How much do the emissions coming from your car’s exhaust pipe cost in terms of damage to the environment? What about the gases that factories emit? Smog can be seen – and felt—in places like Beijing and Mexico City, in other words, it is tangible. But it is difficult to measure and calculate in monetary terms the damage done to the planet, nature and people by greenhouse gases.

Nevertheless, scientists, governments, international institutions and non-governmental organizations are analyzing formulas (some of which already exist) to “charge for polluting,” or “put a price on carbon.” In other words, those who pollute the most must provide monetary compensation for the harm they do to the environment. The idea is to limit and reduce greenhouse gas emissions, which are responsible for global warming and climate change.

If emissions continue at the current pace, the average global temperatures will rise and seriously impact the environment, with more severe and frequent climate events affecting agriculture, among others.

"On September 23rd the Secretary-General of the United Nations will host a Climate Summit in New York to build political momentum and ambition needed to reach a global climate change agreement in 2015."

To calculate the cost of the damage caused by these emissions, it helps if they are quantified. It is common to calculate CO2-equivalent emissions of all gases that cause the greenhouse effect, including CO2 and methane, which warms even more quickly.

The “buying” and “selling” of emissions that cause the greenhouse effect and climate change is known as the “carbon market.”

A Question of Pricing

Although the price assigned to CO2 (or its equivalent) is not equal to the real cost of emissions, it does serve to discourage emissions, according to Neeraj Prasad, Climate Change Knowledge & Partnerships Manager. “With carbon prices we can say, for example, that the energy produced with carbon is more expensive than that produced by a solar panel,” says Prasad.

“If we cannot estimate (in monetary terms) the damages that climate change causes, there are other mechanisms we can implement to determine the prices we should use as indicators,” says Alvaro Umaña, Costa Rica’s former Minister of the Environment and Energy at the recent Latin American Carbon Forum in Bogota.

While not the most polluting region, Latin America is extremely vulnerable to changes in the climate, such as more frequent and severe droughts, flooding and storms. In response, some governments of the region have established a variety of mechanisms and policies to discourage emissions.

One example is a carbon tax, which is applied to carbon dioxide emissions and which varies by country. In Mexico, for example, a new tax on fossil fuels is linked to the carbon content of the product: for example, it is higher for diesel fuel (12.40 cents per liter) than for Magna gasoline (10.38 cents per liter).

In Costa Rica, the revenue from a 3.5 percent fuel tax has been used to preserve forests.

There are also national and regional emissions trading markets, such as that of the European Union, and even a global carbon market. There are mechanisms that allow carbon credits from projects in developing countries to be sold into emissions trading markets around the world, such as the Clean Development Mechanism. If a company gets certification that its greenhouse gas emissions fell thanks to its implementation of renewable energy, methane capture or energy efficiency measures, for example, it can earn carbon credits issued by the United Nations and sell them on a carbon market (trade them). The funds generated by selling carbon credits can be used to finance “green” investments.

Visible Impact

Right now, nearly 40 countries and more than 20 cities, states, and provinces use carbon pricing though carbon taxes or emissions trading schemes, or plan to do so. Together, those jurisdictions are responsible for about 22 percent of global emissions.

Another formula to protect the environment and reduce greenhouse gas emissions is to pay farmers, indigenous communities or companies for the environmental services they provide. Governments can pay them for protecting nature, conserving biodiversity or reducing greenhouse gas emissions.

Costa Rica, Mexico, Colombia and Brazil use different variations of this mechanism. In Costa Rica, for example, land owners receive payment for every tree they plant or conserve. The results are evident: forest coverage increased from 21 percent in the 1980s to 52 percent in 2012. “With the support of the World Bank and others, we havefixed more than 90 million tons of forest carbon in the past decade,” says Alvaro Umaña.

A Look Towards the Future

On September 23rd the Secretary-General of the United Nations will host a Climate Summit in New York to build political momentum and ambition needed to reach a global climate change agreement in 2015.

The issue of carbon pricing is high on the agenda.

The World Bank Group is encouraging corporate and government leaders to register their support for the Put a Price on Carbon statement that will be launched at the Summit. In the statement, governments pledge to work together and companies pledge to work with governments towards the long-term objective of carbon pricing used throughout the global economy.

 After the Summit next week, the focus will then shift to the global legal climate negotiations on climate that will take place in Lima this December and will continue in Paris in 2015.

Countries can reduce greenhouse gas emissions by putting a price on carbon through an emissions trading scheme or a carbon tax. The environment can be protected in other ways, as well, such as through payments for environmental services. Regardless of how it is achieved, it is crucial for countries to act on climate change and transform high-carbon economies into a low-carbon, livable future. Source


Chollywood: Chinese Film Industry Set to Expand Rapidly

The French Lumière Brothers are credited with enabling the birth of modern cinema but since the 1920s this is indisputably an American art form, primarily the domain of Hollywood which soon became the dominant force in an emerging industry.

Since taking the lead, the American film industry has grossed more money year-on-year than that of any other country in the world: At least three times the dollar volume than generated by its nearest competition.

The international film market has grown a staggering 33% over the past five years with the global box office for all films released around the world totalling $35.9 billion in 2013, up 4% over the 2012 revenue.

Estimates vary from four to ten years, but things are destined to change in the film business as a new heavyweight player has walked onto the set. Asian superpower-in-waiting China is soon expected to boast the world’s largest box office. Much like Godzilla, the country is set to leave Hollywood in its path of destruction as China marches to global dominance in yet another market.

A report by Ernst & Young speculated that, at the current rate of expansion, the Chinese box office is set to pass the US seven years from now and double it by the middle of the next decade.

Mega Studios

The Chinese are also fostering their home-grown version of Hollywood – Chollywood – on a massive scale. China already boasts the largest outdoor film production company in the world - the Hengdian World Studios at nearly 500,000 square metres - which is set to be superseded by Qingdao Oriental Movie Metropolis - a 20-studio complex with the world’s largest recording pavilion measuring 10,000 square metres and a unique permanent underwater stage. It is the brainchild of property entrepreneur and leisure tycoon Wang Jianlin who plans to pump 50 billion yuan ($8.2 billion) of his own money into the venture.

“Asian superpower-in-waiting China is soon expected to boast the world’s largest box office.”

The increased demand for entertainment in Asia has led China to break the international box office receipts of US$3billion for the first time - more than a billion dollars more than its closest rival Japan. The 36% jump to a total revenue of $3.6 billion last year propelled China to the second slot of worldwide ticket sales behind the United States.

This year, forecasts by the research group Entgroup place the Chinese box office well on track to reach a staggering $4.6 billion which puts revenues at 42% of those generated by the US film industry. The growth rates attained are impressive: Chinese box office takings hit $520 million in February 2014 which equals to the full year of revenue the country’s film industry generated in 2007.

The rise in the Chinese box office – already far bigger than Britain (3rd globally with $1.7bn) and India (5th globally with $1.5bn) combined - now makes it a vital market the US film industry cannot ignore any longer. Hollywood stands to make vast gains by tailoring its products to the Chinese market.

Still Lagging

Although China currently still lags behind India and the US in total film productions - with India producing over 1,000 feature films and 1,500 shorts and the US some 750 to China’s average of 432 - it is only a matter of time before the Chinese state-of-the-art studios now gearing up for production begin to churn out both domestic and international hits.

There have already been some notable Chinese international successes. The controversial 2010 disaster movie Aftershock - not to be confused with Eli Roth’s 2012 horror flick of the same name - and the Fish out of Water and Lost in Thailand movies are just three examples of Chinese mega hits. However, it was Crouching Tiger, Hidden Dragon which kicked it all off back in 2000, taking US$128 million in total ticket sales over a 31-week theatrical run in North America alone. The movie eventually generated of US$213 million, ranking it 19th in that year’s worldwide box office successes.

Aftershock - original title Tang Shan da di Zhen - became the highest-grossing film in Chinese history and paved the way for up to fifteen foreign titles - as part of an exclusive deal between AMC Entertainment and China Lion Film Distribution - to have national releases on the same day in both China and the US at multiplex cinemas where normally subtitled movies are not appreciated.

Little known outside Asia, the sleeper hit Lost in Thailand became the first Chinese film to cross the domestic 1 billion yuan ($160 million) mark since its release. To date, this movie has grossed some $208 million in China alone - not bad for a production with a $2 million budget. Only James Cameron’s Avatar managed to beat it with $223 million.

The success and growth of its domestic movie industry has led many to question whether China needs go through the trouble of distributing internationally at all, if only a marginal extra income is generated.

A Multiplex a Day

The domestic market is set to skyrocket as more multiplexes are built in China - each one housing at least half a dozen cinema screens. Digital cinema is the biggest growth sector. After a slight blip, it grew by 25% last year. Asian multiplexes now have almost 2,000 more digital screens than North American ones.

Back in 2007, there were just slightly over 3,000 movie screens in operation in China. Today there are almost 18,200 screens. That translates into one screen for every 72,000 or so people. In the US that ratio is one screen to every 8,000 inhabitants. To reach the US level of screen density, China would have to build an additional 150,000 screens.

It is getting there: According to the MPAA (Motion Picture Association of America) on average thirteen new multiplexes are built in China every single day. The Dalian Wanda Group, owner of the world’s largest cinema chain, is now building what it claims will be the world’s biggest film and television centre – the Qingdao Oriental Movie Metropolis, combining film and television production and a theme park covering 376 hectares. The massive studio is set to open in June 2017.

“Once China reaches the threshold of, say, 20,000 screens, there will be films that are specifically targeted to certain cinemas,” says Le Vision Pictures CEO Zhang Zhao who was a co-investor in, and Chinese distributor of, The Expendables 2 which grossed $53.1 million in the country during its September-October 2013 run.

Mr Zhao added that soon Hollywood productions will have to confront the challenge of local productions released in select cinemas with shorter runs and which cater to local tastes, “China has its own domestic productions, and they must now find a way to be competitive. A Hollywood blockbuster will be like an elephant attacked by fifty monkeys.

Market Restrictions

Chinese state regulators, determined to foster the growth of domestic industry, maintain a quota of only 34 international films a year (up from twenty last year). US studios aim to get round the quota by co-producing films with China. This system requires that at least one-third of a film’s funding must come from Chinese sources and one-third of its main cast must be Chinese. Such a production must also have scenes shot in China.

The last two instalments of Michael Bay’s mega-hit franchise Transformers were partially filmed in China. A third film, Dark of the Moon (2011), earned $165 million in China. Paramount Studios has partnered with China Movie Channel and Jiaflix Enterprises in a production agreement that would create a major presence for Transformers 4 in the booming nation.

According to a press release, the partnership has the two Chinese companies helping director Michael Bay with the “selection of filming sites within China, theatrical promotion and possible postproduction activities in China as well as casting of Chinese actors and actresses.”

Another Hollywood movie which has seen tailoring for the Chinese market is the mega-hit franchise Iron Man. The third edition of this franchise was partially shot in Beijing. It was also financed in part by Beijing-based DMG Entertainment. Iron Man 3 released a special cut for the country which included “significant Chinese elements” and “specially prepared bonus footage” as well as an appearance by one of the country’s biggest acting stars, Fan Bingbing.

Other movies have received the same treatment: World War Z removed a discussion over whether the zombie apocalypse originated in China; James Bond film Skyfall deleted a scene where a Chinese security guard was shot; Men in Black 3 removed all scenes set in Chinatown while 40 minutes were cut from Cloud Atlas.

When Django Unchained was released in China, as one of a select few foreign films, it was immediately pulled from cinemas by censors, reportedly due to background images of nudity.

Brad Pitt has only this year entered the Chinese mainland again – with his partner Angelina Jolie and family to promote her new film Maleficent - since reportedly being banned for life after starring in the 1997 movie Seven Years in Tibet, which includes a sympathetic portrait of the Dalai Lama.

Another 1997 movie, the Disney-backed and Martin Scorsese directed Kundun about the early life of the Dalai Lama and the brutal Chinese invasion of Tibet in 1950, was hotly objected to by the Chinese government resulting in a ban for life for the director. Harrison Ford, Richard Gere and Bjork are all also banned from China for their support of Tibet.

Sharon Stone is also on the black list for her ill-advised comments regarding the 2008 earthquake. The actress said the quake might have been caused by bad karma resulting from the mistreatment meted out to Tibetans by the Chinese. Asked for her thoughts on the earthquake, the actress said, “You know, it was very interesting because at first I am not happy about the way the Chinese are treating the Tibetans, because I don’t think anyone should be unkind to anyone else, and so I have been very concerned about how to think and what to do about that because I don’t like that.”

Popcorn Rising

Finally, a price hike will surely hit the cinema staple snack popcorn in the coming years as the Chinese cinema goers develop a taste for it. Although North Americans devour popcorn by the bucket-load while enjoying a movie, the Chinese are yet to properly discover an appreciation for the tasty offerings of concession stands.

Concessions (popcorn, sweets, drinks) account for just 20% of a cinema’s revenue, but generate 40% of the profits. Fully 85% of the price of a bucket of popcorn represents profit to the cinema.

North American cinema chains are often estimated to make as much as 70% to 85% of their profits from concessions sales. In China’s budding cinema sector, income is usually and mainly generated from the shared returns of ticket sales.

The importance of popcorn to the growing Chinese cinema sector is underlined by the Dalian Wanda Group showing nationwide popcorn sales totalled 390 million yuan ($62.8 million) last year alone. This amounted to 72% of total concession sales and 9.5% of total earnings of 4.1 billion yuan ($6.5million). By way of comparison Wanda’s American chain AMC in 2013 earned $1.8 billion from ticket sales and $787 million from food and beverage. Concessions thus represent over 28% of total revenue.

Zhao Minran, manager of a Wanda cinema in the eastern Chinese city of Zhenjiang, said his business had sold 150% more popcorn than it expected to last February. Even so, just an estimated 30% of movie goers bought the snack. Mrs Minran added that his cinema is now considering adding new flavours of popcorn other than plain and caramel.

Overall, the Chinese movie industry is geared for growth and seems to have dodged the financial crisis, the VHS/DVD craze and illegal downloading. Producing quality entertainment to an eager worldwide public remains key to lasting success. That’s really all there is to show business. i

About the Author

Ivan Chapman is the producer/screenwriter of the found footage horror movie ‘The Last Diary of Nikita Rose’ and upcoming psychological thriller ‘Container’. He is based in the UK.


Otaviano Canuto, World Bank Group: Liquidity Glut, Infrastructure Finance Drought and Development Banks

[caption id="attachment_8065" align="alignright" width="164"] Canary Wharf, London[/caption]

The world economy faces huge infrastructure financing needs that are not being matched on the supply side. Emerging market economies, in particular, have had to deal with international long-term private debt financing options that are less supportive of infrastructure finance. While unconventional monetary policies in advanced countries in the aftermath of the global financial crisis have led to a global liquidity glut, some traditional sources of long-term finance have been strained and alternatives have not been able to adequately compensate. The threat of an eventual reversal of the global liquidity abundance makes even more urgent that emerging market and developing countries find new sources to tap for long-term funding, if they are to fill their infrastructure gap and keep growing. Domestic institutional investors and strengthened local long-term debt markets will be key in that regard. Official development banks can be of help to the extent that they focus on their potential “additionality.”

The world economy faces huge needs of infrastructure finance…

Last year, a report by McKinsey Global Institute (2013) estimated that, in order to realize its potential global growth from then to 2030, the world would have to invest in infrastructure (roads, bridges, ports, power plants, water facilities, and other forms) in the range of US$57–67 trillion, depending on three different methodologies (Chart 1). To give an idea of what a tall order such a challenge will be, the report notes that the lower bound of the range corresponds to nearly 60 percent above the amount spent in the last 18 years and it is larger than the estimated value of today’s infrastructure.

[caption id="attachment_8053" align="aligncenter" width="616"] Chart 1: Estimates of needed infrastructure investments, 2013-30 ($ trillion, constant 2010 dollars). Source: McKinsey (2013).[/caption]

The share of infrastructure finance requirements in emerging market economies (EMEs) in those figures corresponds to 37 percent. As those estimates do not embed “development goals” beyond where emerging market and developing economies are nowadays, as well as additional expenditures associated with adaptation to climate change and sustainability needs, they may be considered a lower bound (Swiss Re and IIF, 2014). The World Bank estimates that these countries need to invest in infrastructure at a rate of an additional US$1 trillion per annum through 2020, just to keep pace with the demands of urbanization, growth, climate change, and global integration.

… but the financing gap is yawning

Several factors have been leading to a shortfall of infrastructure finance supply, including in advanced economies. Public sector funding has faced stringent conditions. With a few exceptions – like China - most advanced and emerging market economies have become more fiscally constrained in the last few years, as counter-cyclical fiscal policies have reached their limit, either for political and/or debt sustainability reasons. On the private sector financing side, there is an ongoing transition toward a new configuration of infrastructure finance that has left a void: while banks have been retrenching, their replacement by non-bank institutions, wherever feasible, has been inadequate.

Some combination of bond issuance and bank lending is what usually works best in debt finance of greenfield investments in new projects and the creation of new productive assets. Banks are better equipped to address issues of information asymmetries, particularly at the early stages of project design in cases of complex financing needs -- like infrastructure -- whereas the arms-length relationship typical of long-term bond issues and institutional investors is more appropriate for extending and consolidating investment financing. Infrastructure assets are appropriate investments for pension funds, insurance companies, and other long-term financial institutions (mutual funds, sovereign wealth funds etc.) because they tend to match their long-term liabilities, provide inflation-protected yields, and have a lower correlation to other financial assets. A significant presence of mature long-term debt markets and institutional investors as ultimate asset holders enhances the risk-transfer and risk-transformation functions of financial intermediation as a whole and can make the system more stable.

The problem is that the financial crisis has been followed by a bank retrenchment from the field, without non-bank institutions filling the finance gap. The weight of banking can be gauged by its share in global project finance (Chart 2). In that context, infrastructure financing by banks has been curtailed as part of a deleveraging process which is still in course.

This is particularly the case for European banks, which had traditionally played a significant international role in infrastructure financing prior to the global financial crisis. Their balance-sheet repair and capital-ratio adjustment, since the euro-zone crisis - as depicted in Chart 3 - has been obtained mainly by retrenchment on the asset side of their balance sheets, by unwinding existing positions and shunning new commitments.

[caption id="attachment_8057" align="aligncenter" width="612"] Chart 2: Global Project Finance Market - by source of funding, 2005-2013.[/caption]

[caption id="attachment_8058" align="aligncenter" width="612"] Chart 3: Euro-area banking system reported tier 1 ratios. Source: IIF, 2014.[/caption]

Such propensity to retrench has been widespread among banks in crisis-afflicted countries, given the higher levels of balance-sheet risk aversion. Remaining uncertainties about the crisis recovery, coupled with prospective regulatory changes (e.g. Basel III) penalizing liquidity and maturity mismatches in deposit-taking institutions, have led banks in general to reduce leverage, shorten finance terms, and raise counterparty requirements across the board.

On the other side of the finance spectrum, had the financing previously supplied by banks been replaced by pension funds, insurers and mutual funds, their portfolio allocation to infrastructure debt would currently correspond to 12.5%; in reality, the actual current allocation is less than 1% of global pension fund assets (Swiss Re and IIF, 2014). To be sure, as noted above, bank and non-bank infrastructure finance are not perfect substitutes, given their distinctive abilities and willingness to deal with different risks along an investment cycle – as illustrated in the revealed preference of non-banks toward “brownfield” relative to “greenfield” investment projects. However, given prevailing trends in banking, it is no wonder that so much attention has been dedicated to what it will take to raise “infrastructure as an asset class” – see the 10-point agenda outlined by IIF (2014) – and raise the profile of non-bank institutions as a necessity in order to fill the infrastructure finance gap.

EMEs have faced a cross-border infrastructure finance drought amidst a liquidity glut…

Has the relative abundance of capital flows to EMEs since 2008 meant that they have been spared from the challenges associated with the yawning infrastructure finance gap? Despite massive foreign capital inflows to EMEs in recent years (Chart 4), it is doubtful that these will constitute a sufficient solution to the EMEs’ infrastructure finance gap. While foreign direct investments have maintained an exuberant pace and can play a significant role in funding infrastructure investments, long-term debt finance – fundamental to many projects – has not performed up to the needed levels.

There is a relevant underlying change of composition in the debt component of those heavy capital inflows. International long-term debt flows to developing countries -- bonds and syndicated bank lending with maturities at or beyond five years -- fared well indeed from 2000 to 2012, reaching a fourfold increase in nominal terms at the end of the period, despite a blip in 2008-09 (Canuto, 2013a). However, this rise comes with an important caveat: lending from foreign banks has declined in absolute terms since 2007, a trend hardly reversible in the foreseeable future. Bond issuance has been primarily used to refinance existing debt at lower costs, or simply to replace syndicated lending that was not being rolled over.

Bond purchases surged after the crisis, reflecting a combination of unconventional monetary policies in large advanced economies, as well as hype about growth prospects in developing countries (Canuto, 2013b; 2013c). However, not only are bond flows experiencing the effects of the current unwinding of those two factors, but they have been imperfect substitutes to bank’s infrastructure financing via long-term lending (Canuto et al, 2014). The mere abundance of international liquidity of latter years has not been conducive to an equivalent creation of new productive assets in developing countries.

As for cross-border asset acquisition by institutional investors and other long-term financial institutions, assuming that the above-mentioned agenda of tasks for the full development of infrastructure as an asset class is accomplished, one should keep in mind the competition for infrastructure investments in home (advanced) economies, in a context of perceived risks unfavorable to EMEs.

On the other hand, if hypotheses of secular stagnation in some advanced economies are right - Canuto, O., 2014 - long interest rates will remain too low to comply with retirement pension needs for a long time. In this scenario, it is worth recalling that today:

“Two particularly pernicious and inter-related challenges confront the global financial system. On the one hand, pools of trillions of dollars of savings, particularly in OECD economies, are trapped in sub-optimal investments earning poor returns. On the other, many developing countries face a serious shortage of capital, even for investments that can generate high financial and economic return. The world’s financial system fails to intermediate between the two at any scale. ”

- Kapoor, 2014

[caption id="attachment_8060" align="aligncenter" width="612"] Chart 4: Capital Inflows to EMEs. Source: IIF.
Country sample: BRICS, Turkey, Mexico, Chile, Poland and Indonesia. Note: f = IIF forecast, e = IIF estimate. Inward - Other: Other Inward Investment (mainly bank loans, but also trade credit and official lending, plus some more obscure items like financial derivatives, financial leases, etc.)[/caption]

… and EMEs need to tap new sources for long-term funding

EMEs have been gradually building their own pool of sizeable long-term assets managed by institutional investors, mainly pension funds and insurance companies, totaling around US$5.5 trillion as of end 2012 (Charts 5-6). Besides the increasing role these institutions are expected to play in funding infrastructure, an additional benefit is that a large base of domestic institutional investors could make infrastructure investments more attractive to foreign investors, because they will be perceived as a potential liquidity buffer in times of capital outflows.

As discussed by Canuto et al (2014), the task ahead is to develop financial vehicles that can channel EMEs long-term institutional savings into financially viable infrastructure projects. The growing share of public-private partnerships (PPP) for infrastructure projects is facilitating the development of innovative financial structures to fund these projects.

[caption id="attachment_8061" align="aligncenter" width="612"] Chart 5: EME Pension assets at US$ 2.1tn at the end of 2012. Source: Official sources and J.P. Morgan.[/caption]

[caption id="attachment_8062" align="aligncenter" width="613"] Chart 6: EME Insurance company assets reaching $3.4tn. Source: Official sources and J.P. Morgan.[/caption]

Local fixed-income markets, complemented by more traditional unlisted products, could fill in a large share of the remaining funding gap through infrastructure project bonds,, as long as policy makers develop the appropriate framework for issuers, investors, and intermediaries. Infrastructure project bonds are an innovation in advanced economies, but are showing growing relevance in wider markets, with several types of bonds and credit enhancement schemes being tested, depending on the variety of project (for example, greenfield, brownfield ).

The challenge for EMEs in developing these bonds is threefold. The first is building or strengthening the fixed-income market regulatory and institutional framework so that structuring, issuance, and placement of infrastructure project bonds becomes cost-efficient. Most large EMEs already have that framework in place and are in a position to support such bonds. The second challenge is to develop the appropriate credit risk enhancement instruments so that project bonds have credit ratings that are acceptable to institutional investors, generally at domestic investment grade or above (BBB-). Governments, multilateral organizations, development banks, and commercial banks should play a key role in either supporting or providing these risk-mitigating instruments. The third challenge is to implement solutions for liquidity support, such as more effective market-making arrangements, so as to attract a broad group of investors and mitigate the “drying effects” of buy-and-hold by institutional investors. The availability of markets and instruments that allow hedging from exchange-rate risks will also help.

Public policies and the direct engagement of government and development agencies in making long-term vehicles financially viable are critical for their success. Furthermore, the development of an active infrastructure project bond market could have a number of positive externalities in reinforcing a long-term fixed-income market for a broader range of issuers. This could compensate for the higher volatility in foreign capital flows and support local fixed-income markets in EMEs that are less dependent on foreign investors.

What Development Banks Can Bring to the Table

In such a context, it is no surprise that the creation/expansion of national and multilateral development banks has been getting so much attention. For instance, most G20 countries now have some type of national development bank and the aggregated sum of their assets amounted to more than US$3.5 tn, according to a recent survey made by UN DESA. By the same token, several existing multilateral development banks have made efforts to raise their financial capacity, while new institutions have been created (e.g. the NDB from the BRICS countries) or are about to be.

In principle, even with a domestic base of banks and other financial intermediation vehicles willing and able to fill the gap left by shrinking international syndicated lending, there would be a unique additional role to be played by such development banks. The key word here is "additionality", i.e. to provide some value added relative to what markets and institutions are already able and willing to do.

First, there is a core financial additionality offered by development banks, when they play a key role as a catalyst, drawing private capital into long-term projects in countries and sectors where significant development results can be expected, but the market perceives high risks. Those institutions contribute their own funding (loans, equity) and/or guarantees, providing partners with an improved creditor status. Bringing partners into specific deals through syndications also generates additional financing.

It is relevant to stress that "more becomes less" after a certain point. The size and composition of development bank portfolios must aim to maximize the "crowd in" of private engagement, rather than taking their place ("crowding out"). This is particularly the case when the supply of development bank finance embeds substantial public subsidies. Counterparty finance and complementarity with private investors at the project level can also mitigate “moral hazard” risks.

Furthermore, those portfolios should be moving frontiers: When success is obtained, perceived risks tend to fall and finance starts to acquire "plain vanilla" attributes. Typically, a development bank helps with infrastructure project finance; then, the investment starts to operate with funding from loans; building and operational risks fall over time (greenfield becomes brownfield); the originator development bank securitizes and makes public offers to institutional and other long-term investors; and the originator is able to initiate a new project cycle.

Development banks can also provide "design additionality," when they help improve the "bankability" -- or "financeability" -- of project designs. There is also a "policy additionality" when their expertise and policy advice contribute to improvement and stability of policy and regulatory environments. While both are obviously the case with multilateral development banks, very often national development banks are also local repositories of technical knowledge. Finally, as a corollary to these contributions, development banks may offer "selection additionality," often improving the process of project selection by governments (Chelsky et al, 2013).

Ultimately the cost-benefit balance of development banks’ operation depends not only on the additionality provided, but also on its funding, particularly as it embeds some level of subsidies. Given that long-term financing needs in general, and developing country infrastructure project financing needs in particular tend towards unequivocal upward growth, the potential retrenchment and inappropriate composition of existing international debt flows, as well as the need to make the way for deeper non-banking financial intermediation, highlights the potential catalytic role of development banks. Nevertheless, as exemplified in the imperfect substitutability -- and indeed the complementarity -- among types of private finance, development banks should make sure they maximize the development bang for their little -- and often costly -- buck by ensuring additionality in what they do.

* This article delves substantially on Canuto, 2013a and Canuto et al (2014)

About the Author

Otaviano Canuto is Senior Advisor on BRICS Economies in the Development Economics Department, World Bank, a new position established by President Kim to bring a fresh research focus to this increasingly critical area. He previously served as the Bank’s Vice President and Head of the Poverty Reduction Network (PREM), a division of more than 700 economists and other professionals working on economic policy, poverty reduction, gender equality and analytic work for client countries. He also served as an Executive Director of the Board of the World Bank from 2004-2007. Outside of the Bank he has held leadership positions at the Inter-American Development Bank where he was Vice President for Countries, and for the Government of Brazil where he was Secretary for International Affairs at the Ministry of Finance. He also has an extensive academic background, serving as Professor of Economics at the University of São Paulo and University of Campinas (UNICAMP) in Brazil.

References

Canuto, O., 2013a. Development Banks and Post-Crisis Blues in Investment Finance, Huffington Post, September 19.

Canuto, O., 2013b. Currency War and Peace, Project Syndicate, March 12.

Canuto, O., 2013c. Lost in Transition, Project Syndicate, December 2

Canuto, O., 2014. Macroeconomics and Stagnation – Keynesian-Schumpeterian Wars Capital Finance International, spring.

Canuto, O.; Silva, A.C.; and Garcia-Kilroy, C., 2014. Long-Term Finance in EMEs: Navigating between Risks and Policy Choices, Economic Premise n.152, June.

Chelsky, J.; Morel, C.; and Kabir, M., 2013. Investment Financing in the Wake of the Crisis: The Role of Multilateral Development Banks, Economic Premise n.121, June.

IIF - Institute of International Finance, 2014. Top 10 Impediments to Long-Term Infrastructure Financing and Investment, July.

McKinsey Global Institute, 2013. Infrastructure productivity: How to save $1 trillion a year, January.

Swiss Re and IIF, 2014. Infrastructure Investing. It Matters.


What Does Carbon Pricing Success Look Like? Ask These Leaders

British Columbia, Sweden, California and China have been pioneering carbon pricing systems to lower emissions and help shift their economies onto cleaner, greener trajectories.

Currently, nearly 40 countries and more than 20 cities, states, and provinces use a form of carbon pricing or are planning to implement it.

That number is growing as more governments explore the benefits of carbon pricing for climate and economy.

[caption id="attachment_8073" align="alignright" width="246"] Canada: Vancouver[/caption]

Vancouver is thriving. Across the coastal Canadian city, jobs are being created, fueled by a cleaner, greener economy. Low-carbon development projects are underway, and there is a shift toward neighborhood energy strategies that cut greenhouse gas emissions and make the energy supply more resilient to storms and overloads.

This didn’t happen by accident. Six year ago, the province of British Columbia took a bold step by establishing one of the continent’s first carbon taxes. Vancouver was already ahead on environmental standards, but the tax flipped a switch, clearly incentivizing resource efficiency and spurring greater innovation in energy, industry, and policy.

“Renewable energy and clean tech companies are choosing to invest in Vancouver precisely because we are ahead of the curve with a carbon tax,” said Mayor Gregor Robertson. The carbon tax is bolstering Vancouver’s pursuit of a clean, green future.

Markets and Taxes

Carbon pricing, whether through emissions trading systems or carbon taxes like British Columbia’s, is an effective way to shift economies toward low-carbon growth and lower the emissions leading to climate change.

With emissions trading systems, governments cap greenhouse gas emissions. They restrict the total amount of emissions by issuing a limited number of emissions permits and create a trading system that allows large emitters to purchase permits from lower-emitting industries that don’t use them, efficiently encouraging low-carbon choices at the least cost to the economy as a whole.

“Renewable energy and clean tech companies are choosing to invest in Vancouver precisely because we are ahead of the curve with a carbon tax.”

- Gregor Robertson

Currently, nearly 40 countries and more than 20 cities, states, and provinces use a form of carbon pricing or have plans to implement one. How each carries it out – the price, the method, how the proceeds are used, and where, from extraction to use, the tax or cap is applied – varies based on the economy, emissions sources, and opportunities for lower-carbon growth. Many more are expressing support and interest in putting a price on carbon.

Shifting the Tax Burden

British Columbia made a fundamental change when it introduced the carbon tax: It reallocated its tax burden, shifting taxes away from labor and toward environmentally harmful activities, particularly greenhouse gas emissions.

The carbon tax on fossil fuel purchases started at C$10 per ton and rose to C$30 per ton of CO2-equivalent today, equivalent to about 7 cents per liter of gas or about US 25 cents per gallon. The tax is revenue neutral – the money is returned to the tax payers through lowered personal and business income taxes and targeted support for low-income families.

Today, British Columbia and Vancouver have among the lowest income tax rates in Canada, their economies are growing, and their greenhouse-gas-per-capita rates are among the lowest in North America. They are also contributing to a safer, healthier world by lowering greenhouse gas emissions that are driving climate change, particularly for the poor, who are most at risk from the effects of climate change and least able to adapt.

Sweden, one of the first countries with a carbon tax, is demonstrating the potential of a combined carbon tax and emissions trading system. Since implementing the carbon tax in 1991, Sweden has been able to decouple greenhouse gas emissions from economic growth. From 2000 to 2012, the country’s total greenhouse gas emissions fell 16 percent while its overall GDP grew by about 30 percent. Its carbon taxes, meanwhile, are among the highest in the world, although industry pays lower rates than consumers to mitigate competitiveness effect. The revenues go to the general government budget, allowing the reduction of other taxes.

Improving Carbon Trading

California studied early emissions trading systems, including the successful U.S. program to combat acid rain by reducing sulfur dioxide emissions, and launched a carbon cap-and-trade system in 2013 designed to shift investment to clean energy and low-carbon development.

It set a statewide cap on emissions from electric power plants and large industrial facilities that it lowers each year toward a goal of reducing emissions to 1990 levels by 2020, about 28 percent below business as usual. To give emitters flexibility, it created an emissions trading system.

California has avoided some of the challenges that Europe’s emissions trading system has faced, in part by avoiding over allocation of emissions allowances. By the end of the decade, it expects to collect US$5 billion a year or more from auctioning off allowances – money it will reinvest in clean energy, energy efficiency, and sustainable communities.

A recent entry into carbon markets is one to watch: China launched seven local emissions trading pilots over the last year to test different structures as it prepares to develop a nationwide carbon market. Together, these markets make up the second largest carbon market in the world after Europe. A national China market would dwarf existing systems.

China has reasons for taking action to price carbon. Its cities have struggled with high levels of pollution in recent years that led the city of Beijing to begin to phase down coal, and it has concerns about energy security. China also has ambitious national targets for emissions reductions, including reducing its carbon intensity 40-45 percent below 2005 levels by 2020.  An emissions trading system delivers air pollution and carbon benefits at lowest cost.

Increasing Interest in Carbon Pricing

Governments, increasingly aware of the risks climate change poses to their populations and their economies and the economic and health benefits of taking action, are exploring carbon pricing options.

They are learning from their predecessors and from one another through groups such as the Partnership for Market Readiness as they design the carbon pricing systems of the future.

At the UN Secretary-General's Climate Leadership Summit on Sept. 23, 2014, dozens of governments and hundreds of businesses will express their support for carbon pricing to help deal with climate change and shift economies worldwide toward low-carbon development.  Source


World Bank Group, FAO Aim to Boost Women's Land Ownership in Central Europe

Women's land ownership in the Western Balkans often involves a complex web of statutory, customary, and religious laws.

World Bank and FAO teams worked with national partners to devise 11-month pilot work plans for their countries to boost female land ownership.

In FYR Macedonia, where female land ownership was found to hover around 16 percent, the Aerodrom community launched outreach efforts highlighting the positive impact of property ownership.

Land ownership has a number of crucial benefits for women and their families, both economic and social. Increased security allows women to access credit to buy key agricultural inputs, or make other investments to increase food production. Access to land can also lift a woman's status and enhance her bargaining power in families and communities, boosting well-being at the household level. Some research even shows that women who own land are less likely to suffer from domestic violence.

Although women’s land rights are enshrined in national law and a growing number of international agreements, women's land ownership often involves a complex web of statutory, customary, and religious laws—along with social norms that prioritize men and boys.

Thirty-seven of 143 countries surveyed in the World Bank Group's Women, Business, and the Law 2014, still have discriminatory land laws in place, while even in countries with gender-equal laws on the books, powerful norms and customs can dictate that men alone hold title to land and other assets.

"Although women’s land rights are enshrined in national law and a growing number of international agreements, women’s land ownership often involves a complex web of statutory, customary, and religious laws—along with social norms that prioritize men and boys."

Data analyzed by the World Bank (WB) and UN Food and Agriculture Organization (FAO), under a new initiative funded by the World Bank Group’s Umbrella Facility for Gender Equality (UFGE), suggests that men in many regions fail to register their wives on property deeds. This means widows can lose rights to the land they farm after a husband dies, and sons often take priority in inheriting the land.

In the Western Balkans, Senior Land Administration Specialist Kathrine Kelm found that data on women’s land ownership was a key step to ensure that government’s fully understood the size of the problem.

A 2013 initiative offered technical assistance to mine existing databases to measure women’s land ownership in the region and establish benchmarks. The initiative gathered existing relevant data from Albania, the Federation of Bosnia and Herzegovina and Republika Srpska, Kosovo, FYR Macedonia, Montenegro, and Serbia—at the national, provincial, and local levels.

"We began collecting and analyzing it by studying property titles,” Kelm said. “When we presented the data, the government was surprised to find that female property ownership can be as low as 3 percent in the region, particularly in rural areas.” This helped galvanize follow-up work with government partners to improve women’s property rights.

WB and FAO teams worked with national partners to devise 11-month pilot work plans for their countries to boost female land ownership—alongside senior officials, land agency staff, and notaries.

In Kosovo, with national levels of female ownership at around 15 percent, efforts have targeted associations of notaries, to request that they always inform clients who register land and property about the importance of co-registering wives or female heirs.

In one town, Shtime, registering property in one name cost 20 Euros, while registering property jointly cost 40 Euros. In early 2014, the mayor temporarily waived the registration fee as an incentive for couples to register jointly, prompting a 20 percent jump in property registrations for women. The town now has a flat registration fee.

The Kosovo team hopes to continue its work on the gender action plan, and deploy mobile gender units during their next round of property registration, and use a randomized control trial to demonstrate the cost benefits of such teams.

In FYR Macedonia, where female land ownership was found to hover around 16 percent, one community, Aerodrom, launched outreach efforts highlighting the positive impact of property ownership and connecting residents with notaries.

Ongoing negotiations on targets to succeed the anti-poverty Millennium Development Goals after 2015 have identified as a priority the need for women and girls to have equal access to financial services, as well as equal rights to own land and other assets. Most people living in extreme poverty worldwide are female.

About the UFGE

The UFGE is a multi-donor trust fund dedicated to strengthening awareness, knowledge, and capacity for policy-making that advance gender equality.

It invests in priority areas critical to closing gaps between what we know and what we do to advance gender equality. The UFGE currently supports over 70 activities in 54 countries.

Since its launch in 2012, the UFGE has received contributions from Australia, Canada, Denmark, Finland, Germany, Iceland, Norway, Spain, Sweden, Switzerland, United Kingdom, and the United States. Source


New UN Report Calls for Major Changes in Global Economic Governance, Management

[caption id="attachment_8086" align="alignright" width="213"] Fishing is one of the main contributors to the Namibian economy and Walvis Bay on the Atlantic Ocean is the main port in the country. Photo: World Bank/John Hogg[/caption]

Six years after the start of the global economic and financial crisis, the world economy has still not found a sustainable growth path, argues a new United Nations Conference on Trade and Development (UNCTAD) report released on September 10, 2014.

The study, subtitled Global governance and policy space for development, suggests that “getting back to business as usual has failed to address the root causes of the crisis.” The “new normal” has some worrying parallels with the conditions that initially led to the global financial crisis in 2008, namely rising inequalities and asset bubbles, said an UNCTAD statement to the press.

With expected growth of 2.5 to 3 per cent in 2014 keeping the global recovery weak, policies supporting it are not only inadequate but often inconsistent, the report argues. This means that simply relying on buoyant asset prices, trade competitiveness and declining wage shares to maintain growth cannot bring the world economy back to robust health.

Indeed, developing countries have managed to recover from the “great recession” after 2009 faster than developed countries, in part by supporting domestic demand with countercyclical policies. However, there have been limitations and the idea that emerging economies have decoupled from events in the advanced economies is no longer tenable.

"With expected growth of 2.5 to 3 per cent in 2014 keeping the global recovery weak, policies supporting it are not only inadequate but often inconsistent, the report argues."

The report also points out that growth in Japan and the United States is not expected to improve in 2014. Growth will exceed 5.5 per cent in Asian and sub-Saharan countries, but will remain subdued at around 1 per cent in North Africa and Latin America and the Caribbean. Meanwhile, transition economies are expected to further dip to around 1 per cent, from an already weak performance in 2013.

Developing countries will continue to face the challenges of a persistent instability of the international financial system. Tackling this requires macroeconomic and regulatory policies. And mirroring economic activity, international trade remains lacklustre due to weak global demands.

Breaking from this protracted period of low economic growth requires strengthening aggregate demand through real wage growth and more equal income distribution rather than new “financial bubbles.”

Sluggish growth, weak employment conditions, high household indebtedness and persistently high levels of inequality are “neither new nor normal”. Rather, the main problems in the post-crisis ear are insufficient aggregate demand and continuing financial instability, and that both of these issues reflect policy choice.

To offer a policy alternative, UNCTAD economists proposed a global model to consider the potential impact of a coordinated package of fiscal, monetary, industrial and trade policies described in this year’s report. The model divides up the world economy into 25 countries and groups and evaluates growth patterns, trade, employment and financial performance in the public and private sectors and also allows a role for international financial flows.

The alternative scenario entails growth-enhancing fiscal policies, including public investment, income policies to support demand growth on a sustainable basis and industrial policies to promote investment. It also includes development-oriented trade agreements that would support these policies in developing countries, as well as regulation of finance and capital controls.

Making the alternative scenario a reality requires careful consideration of the policy space available to developed and developing countries alike. There will always be a “give and take” on policy space in an interdependent world economy made up of sovereign States of unequal economic and political strength, the report recognized.

At the same time, it is worth acknowledging that governance arrangements that have evolved under finance-led globalization have given too much leeway to private corporations and taken too much from the space for government action.

The global financial crisis was meant to give political motivation to correct the inequalities, but reforms have been foiled. In light of big policy challenges facing advanced and emerging economies, there is an increasing need for policy consistency and macroeconomic coherence. Source


New Report Identifies Major Clean-Tech Market Opportunity for Small Businesses in Developing Countries

Small and medium-sized enterprises (SMEs) in developing countries can generate significant growth and create jobs by seizing a potential $1.6 trillion market opportunity in clean technology.

Latin America and Africa are among the largest markets for SMEs in clean technology with potential market sizes of $349 billion and $235 billion respectively.

SMEs are key drivers of job creation. Clean technology jobs compare favorably to jobs in other sectors, being on average more skilled, safer, and better paid. Countries must take key policy actions to fully realize this growth potential.

A new World Bank Group report quantifies significant opportunities for small and medium-sized enterprises (SMEs) in developing countries to generate profits and create jobs by providing solutions to local climate challenges.

Much of the emphasis on climate change has been on urging countries to act to avoid environmental catastrophe. This new report, “Building Competitive Green Industries: the Climate and Clean Technology Opportunity for Developing Countries,” frames responding to climate change as an extraordinary economic opportunity, particularly in developing countries. The report, published by infoDev, a global innovation and entrepreneurship program in the Bank Group’s Trade and Competitiveness Global Practice, recommends actions by the public and private sectors to foster the growing market for SMEs in the clean technology sector.

“Fostering home-grown clean-tech industries in developing countries can create a sustainable and wealth-producing sector of the economy,” said Anabel Gonzalez, senior director for the World Bank’s Global Practice on Trade and Competitiveness,“while simultaneously addressing such urgent development priorities as access to clean and affordable energy, clean water and climate-resilient agriculture.”

In just the last decade, clean technology has emerged as a major global market. Over the next 10 years, an estimated $6.4 trillion will be invested in developing countries. Of the total market in developing countries, some $1.6 trillion will be accessible to SMEs,according to the report. China, Latin America and Sub-Saharan Africa are the top three markets in the developing world for SMEs in clean technology, with expected markets of $415 billion, $349 billion and $235 billion, respectively for sectors such as wastewater treatment, onshore wind, solar panels, electric vehicles, bioenergy, and small hydro.

"Fostering home-grown clean-tech industries in developing countries can create a sustainable and wealth-producing sector of the economy while simultaneously addressing such urgent development priorities as access to clean and affordable energy, clean water and climate-resilient agriculture."

- Anabel Gonzalez, Senior Director, World Bank Group Trade and Competitiveness Global Practice

To unlock this environmental and economic potential, more can be done to support green entrepreneurship. Clean technology SMEs face daunting challenges, particularly in accessing early and growth stage financing. Countries can help by creating targeted policy incentives to encourage their own clean technology sectors. The report provides policymakers with a range of practical instruments that help support SMEs in clean technology sectors such as innovative finance, entrepreneurship and business acceleration, market development, technology development, and the legal and regulatory framework. These policy considerations are illustrated through case studies of national programs in South Korea, India, Thailand, and Ethiopia.

The report highlights clean technology market opportunities that can have great social impact. In Kenya, for instance, the roughly 80% of the population not served by the electricity grid represents a vast market for new climate solutions. Local entrepreneurs and SMEs are deriving innovative solutions in solar and biogas technologies. This not only creates jobs and improves the environment but also provides new offerings for sustainable, off-grid electricity to the poorest 40% of the population. (Video example)

Clean technology jobs compare favorably to jobs in other sectors, requiring more skill and delivering better pay and on-the-job safety. The move towards a lower carbon and more resource-efficient economy is expected to yield a double-dividend in terms of employment and environmental improvement.

infoDev’s Climate Technology Program supports local climate and clean technology SMEs and startups through its targeted Climate  Innovation Centers (CICs). To date, the Kenya CIC has helped 83 small firms whose services have provided over 8,200 people access to safer water, have given almost 49,000 people access to low carbon energy sources, and 59,675 tons of CO2 — the equivalent of the exhaust of almost 13,000 cars annually — have been mitigated. Source


World Bank Supports Increased Financing for Medium & Small Businesses in Nigeria

[caption id="attachment_8101" align="alignright" width="283"] Central Bank of Nigeria[/caption]

The World Bank’s Board of Executive Directors today approved a US$500 million International Bank for Reconstruction and Development (IBRD) credit to increase access to finance for medium and small scale enterprises (MSME) in agriculture, trade, light-manufacturing, and services. These will stimulate economic growth and create jobs.

The Development Finance Project will provide stable funding to support the growth of Nigeria’s MSMEs through the establishment of a Development Finance Institution (DFI). The DFI will provide funding to eligible financial intermediaries to lend to MSMEs. The DFI would also provide partial risk guarantees to participating Commercial banks and other financial institutions.

Limited access to private finance is a key obstacle to enterprise growth and entrepreneurship, particularly for young people, and it is a major obstacle faced by SMEs. Only 9.5% of Nigerian SMEs had a loan in the books or line of credit in 2011 and SME lending made up only 5% of total commercial bank lending.

”Women entrepreneurs in Nigeria are held back by knowledge gaps, limited access to markets, and challenges in some regions of Nigeria in regards to land ownership rights,” said Marie Francoise Marie-Nelly, World Bank Country Director for Nigeria.  “Specific attention will also be paid to cater to supporting the needs of these business women in order to address this problem.”

”Women entrepreneurs in Nigeria are held back by knowledge gaps, limited access to markets, and challenges in some regions of Nigeria in regards to land ownership rights.”

- Marie Francoise Marie-Nelly, World Bank Country Director for Nigeria

The project is a joint effort between the World Bank, AfDB, KFW, AFD, and the United Kingdom’s Department for International Development (DFID). All financing will be provided by the respective donors in parallel through their own individual projects, which while complementary and coordinated will not require co-mingling of funds.

The project will be implemented by the Federal Ministry of Finance (FMOF) and would be for seven years.

“The DFI will be operationally and financially sustainable and would be subject to regulation and supervision by the CBN, which will enforce requirements similar to those applied to commercial banks, including strong prudential transparency and accountability standards”said Arnaud D. Dornel, Lead Financial Sector Specialist and Task Team Leader of the Project. Source


Noam Chomsky: Unravelling Established Truths

It is hard, if not downright impossible, to gain the upper hand in a debate with a logician who is a walking, and talking, encyclopaedia to boot. Noam Chomsky, a self-styled anarcho-syndicalist and a linguist of great distinction, is not easily swayed and will vigorously defend whatever outlandish position he has adopted.

To his many critics, Mr Chomsky is but an extremist of the militant left spouting crackpot ideas inapplicable to, and at odds with, contemporary life. However, most of Chomsky’s opponents fail to see the depth and breadth of his reasoning. They also often lack the openness of mind required to see the sound reasoning behind Mr Chomsky’s ideas.

According to his biographer Robert F Barsky, “he was clearly struck by the obvious contradictions between his own readings and mainstream press reports. The measurement of the distance between these realities, and the evaluation of why such a gap exists, remain a passion for Chomsky.”

An unremitting defence of the right to both free speech and free press lies at the centre of Mr Chomsky’s political philosophy. Without it, all debate ceases and any exchange of opinion becomes a dialogue of the deaf. Highly critical of the press in his own country, the United States, Mr Chomsky habitually decries the reshaping of fact to fit the commercial or political mould du jour.

In a by now infamous critique of the media, he compared the coverage awarded the genocidal Pol Pot regime in Cambodia, a US enemy state, to the press reports on the occupation by Indonesia, a US ally, of East Timor. Mr Chomsky found that atrocities committed by Indonesian forces received but scant coverage while those perpetrated by Pol Pot and his henchmen in Cambodia were splashed all over the news drawing wide condemnation.

Though stating the obvious – and reaching conclusions not devoid of logic – Mr Chomsky received much criticism and was even called an apologist for the regime that instituted the Killing Fields. In reality, he merely concluded that international news coverage is largely inspired and driven by systemic biases and propaganda.

Though a polemicist by nature, Mr Chomsky has gained wide acclaim as a linguist and became, for a time in the 1980s and 1990s, the most-cited living scholar in the field of Arts and Humanities. In 1956, he helped create the Chomsky Hierarchy which describes the basic structure of formal languages and, as such, still helps computer scientists build linguistic bridges between machine code – processed by chips and processors but incomprehensible to humans – and programming language that can be easily written and read by software developers.

Mr Chomsky has authored over a hundred books – including some exceptionally heavy tomes – on both linguistics and politics. One of his latest works – On Western Terrorism: From Hiroshima to Drone Warfare, published in 2013 – proves that Noam Chomsky continues to be the dissident intellectual of old, questioning the West’s role in the world and inviting readers to question established truths and thus undermine prevailing notions of morality.


Dr Rachid Yazami: A Battery-Powered Future

Dr Rachid Yazami almost single-handedly invented a global business now worth some $15bn annually. But, he’s not in it for the money. Rather, this Morocco-born scientist is motivated by the thrill of discovery.

Dr Yazami has some seventy patents to his name, most relating to battery technology. It is largely thanks to his genius that mobile phones and other gadgets today charge much faster and hold power considerably longer than before. He recently came up with nano-Si and nano-Ge based anodes that allow lithium batteries to be fully recharged at ultra-high rates.

According to Dr Yazami, the future holds great promise. Scientists are on the cusp of finding their holy grail: The almost instantly rechargeable, long-life battery. Dr Yazami is currently leading a team of researchers at the California Institute of Technology (Caltech) working on the development of lithium-carbon fluoride battery technology. Next-generation batteries will enable more powerful portable electronic devices to perform longer with little downtime for recharging.

Just one year after graduating from the Grenoble Institute of Technology in 1978, Dr Yazami discovered a polymer electrolyte for use in an electrochemical cell that led to the development lithium-graphite anode now found in almost all lithium batteries. After obtaining his Ph.D. degree in 1985, Dr Yazami joined the prestigious French Centre for National Research which awarded him a professorship in 1998.

Author of more than 200 scientific papers, Dr Yazami is widely considered the world’s leading expert on battery technology. While the study of graphite intercalation compounds or phase transitions in metal oxides may not fascinate the general public, these esoteric endeavours made it possible to develop a vast range of gadgets now deemed essential to contemporary life.

Without Dr Yazami’s discoveries, the iPhone would not be so smart; notebook and tablet computers would be but dumb and short-lived cousins to the AC-powered desktop; watches would still need to be wound up; pacemakers would need external battery packs; and NASA would have to shoot heavy and cumbersome battery cells into space. The humble lithium-ion battery, now ubiquitous, owes its very existence to the scientific work of Dr Yazami.

Earlier this year, Dr Yazami and three of his fellow researchers were awarded the coveted Draper Prize by the US National Academy of Engineering (NAE) for their pioneering work on battery technology. The $500,000 prize, granted annually and considered one of the three “Nobel Prizes of Engineering” (with the NAE’s Russ and Gordon Prizes), seeks to honour and recognize those who contribute to the advancement of engineering.

Battery technology constitutes one of today’s most dynamic fields of scientific investigation. The development of ever smaller cells that hold vast amounts of power and may be recharged quickly and efficiently is essential for the coming-of-age of nearly everything from electrical vehicles and miniature drones to portable computing and long-lasting implanted medical devices.


Europe’s Original Sin and the Dangers of Doing Good

Carlos Rangel, the Venezuelan diplomat and essayist, once pointedly remarked that western nations often send their failed politicians – the dreamers, utopians, and other ineffectual romantics – to far-off places where they can do no harm other than to their host countries. Mr Rangel (1929-1988) deplored the lack of pragmatism and structure in development aid and considered the untold billions of dollars spent on haphazard attempts at eradicating poverty in Africa, Latin America, and elsewhere largely a waste of resources. He argued that as long as policies are set and implemented out of pity, a heavy conscience, or an irrepressible urge to “do good,” they are doomed for failure.

Mr Rangel, a close friend of French philosopher Jean-François Revel, was ahead of his time. In his widely-praised book From Noble Savage to Good Revolutionary (1976), he posited rather convincingly that many of the damaging social experiments carried out in the post-colonial developing world had mostly originated in the fertile minds of those European politicians whose impractical ideas had failed to gain traction on the home front. These, then, were let go to peddle their designs at international organisations and in struggling countries of little consequence. Former Dutch Minister for Development Cooperation Jan Pronk comes to mind. Never more than an inconvenient footnote on the domestic scene, he was soon dispatched overseas to become an icon of the guilt-ridden left and the personification of the embarrassment of riches. Though Mr Pronk did not accomplish much, he did make the right noises at the right times and was duly rewarded with a long career – far from Dutch shores.

Today, ideology and its attendant lusting after the perfect society have all but disappeared from political discourse. Even pressing issues such as climate change are now generally considered economic opportunities that can and must produce revenue streams for agile businesses that can see and decipher the writing on the wall.

“Africa is at long last finding its groove not because of, but in spite of development aid.”

Whenever someone suggests we should do “the right thing” for no other reason than to “do good” regardless of profit, people take note and may even be overcome by nostalgia. Such was the case when in September the German magazine Der Spiegel – not normally a redoubt of wishful thinking – published an essay by Jürgen Dahlkamp on the murderous harshness of Europe’s asylum policy.

The fearless Mr Dahlkamp actually suggests Europeans refrain from consuming wine and strawberry cakes, and stop buying Volkswagen Golfs as well, in order to send the monies thus saved to poor people in Africa. He argues that nobody actually needs these things in order to survive. “It is our wine, cakes, and Golfs against their lives,” writes Mr Dahlkamp referring to the hundreds of desperately poor people who drown in the Mediterranean while trying to reach the safety of Europe.

Mr Dahlkamp goes on to call Europe’s penchant for luxury living its “original sin” and declares innocence lost as the first drop of wine passes the lips of a yet unsuspecting young European. This marks the point at which, in Mr Dahlkamp’s view, prosperity replaces survival as life’s leitmotif.

The fact that the writer of this angst-ridden drivel is dead-serious causes some worry. So too does the fact that an otherwise stoically serious publication like Der Spiegel decided to print it.

Though few would dispute the graveness of the human tragedy taking place in the Mediterranean, suggesting Europe is to blame for the deaths of hundreds or even thousands of asylum seekers at the hands of ruthless human traffickers, borders on the insane.

The suggestion, reminiscent of Mr Pronk’s most noteworthy speeches, that Europeans should moderate their consumption of non-essential goods and services in order to help those in dire need, is a classic recipe for disaster of unmitigated proportions. Once Europeans move back to the caves from whence they emerged a few millennia ago, the balance will be restored and all will be well.

There are a great many reasons that explain the tidal wave of humanity that sweeps the Mediterranean. However, Europe’s “original sin” is not one of them. If European countries must share the blame, it could as well be for paying lip service to cruel, criminal, ineffectual, and/or corrupt leaders who ruled their countries as personal fiefdoms and ruined them in the process.

Coincidence or not, but as development aid budgets were slashed, many African nations started to bloom. China is not big on aid, but does deliver trading and investment opportunities to Africans as no other country ever has. Most European nations now bestow their largess exclusively on countries that adhere to principles of good governance. Mishaps do still occur such as the EUR500m of Dutch development aid dumped on South Sudan where it promptly disappeared without much of a trace.

Africa is at long last finding its groove not because of, but in spite of development aid. Instead of consuming less and thus adding to their already formidable economic woes, Europeans may want to consider embarking on a spending spree: The additional demand for goods and services couldn’t fail to bolster trade with Africa.

For all their “progressive” talk, the Pronks and Dahlkamps of this world have never quite given up on Europe’s colonial legacy. They cannot help but see Africans as needy people unable to fend for themselves, thus requiring a guiding hand. This is not only offensive to an entire continent; it is pure nonsense.

As this issue of CFI.co has shown, Africa now stands at the threshold of a renaissance. Though far from perfect yet and still suffering a great many ills, the continent is definitely on the move and heading in the right direction. The pace is picking up as well and as it does migratory pressures will subside.