Following on the ever-increasing ease of accessibility of all renewables-hardware, the costs of technologies reshaping energy-related investment per The International Energy Agency’s World Energy Investment 2019 report have mainly affected and/or facilitated the surging demand for even more power. In effect, it is in the developing world, including, the MENA region where the market seems to be the highest, that this is happening before our very eyes. Hence this article of the World Economic Forum.
The world invested $1.8 trillion in energy last year, with spending on renewables stalling, while oil, gas and coal projects increased.
The International Energy Agency’s World Energy Investment 2019 report shows overall global investment in energy stabilised in 2018 after a recent decline, with the power sector continuing to make up the biggest proportion of this spending. Much of that investment has been fueled by the world’s rapidly increasing demand for electricity.
Investment in coal increased for the first time since 2012, despite reduced Chinese spending to focus on power generation.
When it comes to cleaner fuels, there was little movement in the overall investment in renewables and no net addition to capacity, driven in part by the falling costs of some technologies. But production of biofuels, which has fallen behind the IEA’s sustainable development targets, saw a rise in investment last year.
The agency’s report also showed minimal increases in energy efficiency investments, with spending on transport efficiency remaining constant even though sales of electric vehicles are motoring upwards.
Indeed, the IEA warns there is a “growing mismatch between current trends and the paths to meeting” the world’s climate goals laid out in the 2016 Paris Agreement and “other sustainable development goals.”
The changing landscape
The costs of technologies are reshaping energy-related investment, as the chart below demonstrates.
Some of the most marked changes have been seen in the power sector, where there have been dramatic falls in the costs of solar, onshore wind and battery storage.
Prices for some efficient goods such as light-emitting diodes (LED) and electric vehicles have continued to fall, too. But investment in efficiency innovations is still being held back by governmental policy and financing challenges.
On the other hand, there has been little change in the costs of nuclear power projects and carbon capture and storage – a technology that aims to trap greenhouse gases before they enter the atmosphere.
Who invests the most?
China remained the biggest market for energy investment last year, even as the US is rapidly catching up, the IEA report said.
Increases in oil and gas — particularly in the shale sector — have driven the bulk US investment. By contrast, China is putting much of its money into low-carbon projects, with big investments in nuclear power and renewables.
India is the most rapidly growing market for investment. Elsewhere, investment in energy generally has fallen in recent years in Europe, the Middle East, Southeast Asia and sub-Saharan Africa, according to the agency.
10 Scenarios for the MENA region in the year 2050 as elaborated and written by @Eubulletin | Thursday, May 9th, 2019
Scenarios are imagined futures that can demonstrate how current actions may lead to dramatically different outcomes, but also serve as useful tools to help guide strategy and shape the future. This analysis lays out long term scenarios (2050) for the Middle East and North Africa (MENA). These conclusions point towards greater conflict and contentious state-society dynamics, regional fragmentation and shifting centres of gravity, the region’s embeddedness in global rivalries and disruptive socio-economic and environmental international trends.
Unstoppable Climate Change
By 2050 climate change will be a decisive global reality, but its impact will differ from one region to the other. The countries of the Middle East and North Africa (MENA) will be among the most affected: the effects will be felt across the region in the form of extreme weather phenomena, heat waves and droughts, desertification, severe water shortages and a rise in sea level. One of the most vulnerable areas will be the Nile Delta, where a sea-level rise of about 50 cm could force 4 million Egyptians to resettle to other areas. The region’s governments and societies will have to deal with scarcity of natural resources, including food, price volatility and the risks associated with new pandemics.
By 2050, a post-oil world order will be in place due to profound changes in the global energy market. Such a new order will not be triggered by a lack of supply: on the contrary, fossil fuel production may even increase for a time, thanks to the exploitation of new reserves, innovative investments in oil and tar sands, the popularization of LNG and fracking development projects beyond the United States. Prices may remain relatively low for some time despite the high demand from emerging economies. But in the longer term, the main driver of decarbonisation will be the gigantic steps forward in technological innovation for renewable energy production and storage capacities, which will be more popular due to global awareness of the climate change.
An Urbanized Region
The MENA region is characterized by high urbanization. Some 60 percent of the population was already urban by 2018 and this trend will not be reversed by 2050. While we are already familiar with “Mega Cities” such as Cairo and Istanbul, new ones will surpass the 10 million people benchmark. Baghdad and Khartoum, each with 15 million inhabitants, will be two of the fastest-growing cities in the region. The capacities of urban spaces to accommodate this new reality will depend on the pace of growth but even more on the resources deployed by local and national authorities to upgrade basic infrastructures such as public transport, sanitation and housing.
Digitalization and Automation
Technologization will be a global megatrend by 2050. Automation and Artificial Intelligence will radically transform job markets in most countries. The MENA region will be particularly affected by those trends due to the already high (and seemingly persistent) unemployment and underemployment rates, particularly among young people. While the Gulf region and Israel may adapt more easily to these changes, other countries, with large working populations, strained job markets and insufficient governance could face major social problems. Infrastructural investment, business culture, education and regulation will also determine the ability to adapt to these megatrends.
Religiosity, Individualization and Citizenship
Societal trends in the MENA in 2050 will result from the complex interplay between endogenous and exogenous variables. Fragmentation and centrifugal dynamics are likely to shape both the religious and the secular camps as well as societies as a whole. Individualization processes, among which the fact that religious or non-religious choices will be the result of each person’s preferences, and the contestation of intermediate authorities (such as religious bodies) will further fragment each camp. In any case, attitudes towards religion will continue to be a major driver of societal and political dynamics and remain a highly contentious issue.
Strong or Fierce States
Attempts to erode or complement the role of states in the region will continue. This is likely to happen by efforts to curtail their size and prerogatives. Next to this, challenges to the authority of states will prompt analysts and pundits to speculate on the weakening or outright collapse of the state system and the redrawing of the regional order. Yet, MENA states could prove more resilient than some expected. By 2050, controlling the state will remain the main and often only guarantee for elite survival. State agents (state elites, the public sector, security apparatuses) and the dynamics revolving around them (clientelism, state capitalism) will remain predominant in the region compared with other parts of the world.
Managing the Effects of Today’s Conflicts
It is impossible to determine which of the conflicts current today will be solved by 2050 and which will still be in place – let alone to predict new ones that may emerge. Nevertheless, we can take it for granted that the effects of today’s conflicts will continue to be felt in the MENA countries in 2050. Even in those cases where effective solutions have been put forward, the post-conflict trauma will mark one or more generations. In addition, new drivers of conflict are very likely to come to the forth, but all these phenomena can turn into either sources for risks or opportunities depending on how they are managed by regional and international actors.
China: Primus Inter Pares
By 2050, China is likely to be the world’s largest economy. Its annual growth rate will have remained considerably steady, keeping in check internal tensions associated with inequality and governance deficits. After almost four decades since its inception, the Belt and Road Initiative has the potential to drastically transform the socio-economic landscape of the Asian continent and of the MENA region. On the basis of the positive returns of China’s initial investments in the 2020s, the MENA authorities’ willingness to engage with China will further increase.
By 2050, the African continent could be home to 2.5 billion people. This is twice as many as in 2019. Nigeria’s population will have reached 400 million and may rank 14th among the world’s largest economies. The number of African workers will have already surpassed that of China. African mobility will be a major issue, both in terms of rural exodus and international migration. Africa’s weight in global affairs will be one of the game-changers of the following decades. The MENA region will naturally look southwards, both in terms of opportunities and risks. Not only will the MENA care more about African affairs, African leaders will also have a say in the evolution of the Middle East and the Maghreb.
Europe and the MENA Region: A Family Issue
Geographic proximity will remain a key factor in the relations between Europe and the MENA region. What is likely to change is the intensity of the societal bonds between these two spaces and what governments and the people make of it. By 2050, the proportion of Europeans with some sort of MENA background will be much higher than it is today. Such people will no longer be perceived as second- or third generation migrants but as Euro-Arabs, Euro-Turks, Euro-Kurds and Euro-Amazighs. This diversity will not only be present at the level of the general population but also among the two generations of new political and economic elites. The intensity of the connections between the EU and the region could further grow if some countries of the MENA region become members or reinforce their association with the EU.
The economic performance of lower-income developing countries will be crucial to reducing poverty further. Although these economies face significant headwinds, they could also seize important new growth opportunities – especially with the help of digital platforms.
MILAN – The global economy is undergoing very large structural shifts, driven by three megatrends. One is the digital transformation of the foundations on which economies are built and run. Another is the growing purchasing power and economic strength of emerging economies, and China in particular. Lastly, there are broad-based political-economy trends, which include rising nationalism, various forms of populism, political and social polarization, and a possible breakdown of the multilateral framework within which the global economy has functioned since World War II.
The media devote most of their attention to the economic, social, and regulatory challenges arising from these megatrends, and to the trade, investment, and technology tensions between China and the United States. Yet a significant share of the world’s population lives in poor countries, or in poorer parts of developing countries. Furthermore, the rapid reduction in global poverty over the past three decades is primarily the result of sustained growth in developing economies.
The future growth prospects of today’s early-stage (that is, lower income – some growing and others not) developing countries will be of huge importance in reducing poverty further. Although these countries face significant headwinds, they could also seize important new growth opportunities – especially with the help of digital platforms.
The headwinds are certainly considerable. For starters, advances in digital technologies – robotics, machine learning, sensors, and vision – directly threaten the labor-intensive manufacturing and assembly upon which lower-income, non-resource-rich economies have traditionally relied.
Moreover, climate change has had its greatest economic impact in the tropical and subtropical regions where most lower-income countries are located. The effects of global warming are highly disruptive in fragile economies, and, taken together, constitute a major new obstacle to growth.1
Fertility rates, meanwhile, remain astonishingly high in some countries, especially in Sub-Saharan Africa. In a few of the poorest – Niger, Mali, and the Democratic Republic of Congo – the rate is 6-7 children per female. The resulting flood of new entrants to the labor market is far outstripping the number of jobs available.
No known growth model can accommodate or keep up with this kind of demographic surge. Even sustained economic growth of around 7% per year won’t be enough. And although fertility tends to decline as incomes rise, that does not happen immediately. Empowering women, therefore, may be the most effective way of starting to address the challenge.
Conflict also disrupts growth. Although many conflicts appear to have a religious or ethnic basis, some scholars believe that their root cause may be economic, with ethnic divisions serving as a way to exclude other groups from access to scarce resources and opportunities. Whatever its source, inequality of opportunity has a highly disruptive effect on governance and hence growth.
But these obstacles are not insurmountable. For one thing, developing countries now have huge potential export markets in middle-income countries, and no longer depend entirely on advanced economies for access to global markets.
There is also a renewed awareness of the importance of infrastructure in enabling growth. In addition to roads, railways, and ports, electricity and digital connectivity are crucial. In this regard, the rapid expansion of cellular wireless technology, combined with the installation of high-capacity undersea broadband pipes around Africa, represents major progress. Meanwhile, China’s “Belt and Road Initiative” – though criticized by much of the West, and the United States in particular – could bring dramatic improvements in physical and digital connectivity to Central Asia and parts of Africa.
Further advances in critical infrastructure will create important growth opportunities for developing countries via e-commerce, mobile payments, and related financial services. The experience of China strongly suggests that these digital platforms, and the ecosystems that develop around them, are powerful engines for incremental, highly inclusive growth.
China, of course, is a very large, homogenous market. If smaller, lower-income developing countries are to benefit from equally rapid inclusive growth, the digital platforms will have to be regional and international in scope.
Some are starting to emerge. Jumia, a Nigeria-based e-commerce platform covering 14 African countries, recently went public on the New York Stock Exchange, amid considerable excitement. True, the company faces similar obstacles to those that Asian and Latin American platforms previously had to overcome, including a lack of reliable payment systems, low trust between buyers and sellers, and logistics and delivery bottlenecks. But the experience of other regions shows that these shortcomings can be addressed over time.
The bigger risk to these platforms stems from the inevitable and necessary increase in regulation of the Internet around the world. In particular, diverse national regulatory regimes may inadvertently or deliberately disrupt or block the international development of e-commerce ecosystems, hurting lower-income countries in the process. Avoiding the creation of such unintended obstacles should therefore be a high priority for the international community.
Today’s lower-income countries already face a tough task in trying to emulate the impressive growth of developing economies before them. An underperforming global economy, and rising national and international tensions, will make that task even harder. If the world is serious about reducing poverty further, it must pay far more attention to their progress.
Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Advisory Board Co-Chair of the Asia Global Institute in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He was the chairman of the independent Commission on Growth and Development, an international body that from 2006-2010 analyzed opportunities for global economic growth, and is the author of The Next Convergence – The Future of Economic Growth in a Multispeed World.
Recent setbacks in financing for development should therefore focus policymakers’ attention on the need for decisive national strategies so these best intentions might be realized. Harnessing the necessary resources could be achieved through a combination of revenue mobilization, attracting private finance, and supporting financial sector development. Policy makers will need to engage in collective action and practice a new multilateralism in support of global goals.
A new UN study, prepared with significant contributions by the IMF, the World Bank Group, the World Trade Organization, the United Nations Development Program and other UN agencies, takes a deep dive into how countries and the international community are faring in mobilizing the needed financing.
The financing needs are not small change—an IMF study earlier this year estimated additional annual spending needs by 2030 would be $2.6 trillion in low-income and emerging markets for the big-ticket SDGs delivering education, health, power, roads, water and sanitation to growing populations. The financing challenge is particularly large in low-income and fragile states given their low starting point, rapid population growth, and often weak growth trajectory accounting for one-fifth of the total financing needs.
While the financing challenges are large, they are not overwhelming for most countries.
The UN report also notes that some recent developments may make mobilizing financing more difficult. Global growth has likely peaked, trade restrictions are intensifying, some emerging markets are experiencing capital flow reversals, and debt risks are rising with about thirty low-income countries at a high risk of debt distress or in debt distress. We are indeed at a delicate moment for the global economy as the IMF Managing Director remarked earlier this month.
Meeting the financing challenge
The Financing for Sustainable Development Report makes over 40 specific recommendations to UN member states to better align financing with investments in the sustainable development goals. Four proposals merit particular attention:
Develop a financing framework. Financing is often the weakest part of national SDG plans: a recent study showed that over three-quarters of 107 national plans do not contain costings or financing details. The report makes concrete recommendations on how to operationalize a financing framework and illustrates how some countries developed plans identifying both public and private flows.
Medium-term revenue strategies. The report recommends building a national consensus for medium-term revenue strategies that can support reforms through the political cycle by highlighting the link between additional revenues and effective and equitable public services. Indonesia provides a good example of an ambitious revenue strategy that aims to raise revenue from 10 to 15 percent of GDP over the medium term (explained in this IMF book ). Revenue strategies may be bolstered by global coordination on international corporate tax reform.
Actions to support debt sustainability. An in-depth discussion of debt risks provides a rich menu of actions to help countries spot vulnerabilities early on, and better manage their debt. The report highlights that all debt crisis situations are different and discusses ongoing efforts and challenges for debt-restructuring in the Gambia, Republic of Congo, and Mozambique.
Prepare for future crises. Even the best laid plans, strategies, and tools may not prepare developing countries adequately for future financial crises and spillovers from advanced economies. The report reiterates the importance of ensuring the adequacy and comprehensiveness of the global financial safety net, including through the ongoing review of IMF financing arrangements.
While the financing challenges are large, they are not overwhelming for most countries. Particularly strong efforts will be needed to move the needle in Africa and parts of the Middle East, with national policies to support SDG investments, and international cooperation to find solutions to new and emerging challenges. The Financing for Sustainable Development Report makes an important contribution to identifying necessary actions.
As per the World Bank in its latest announcement, “Growth has picked up across the region and is projected to strengthen over the next few years. And almost all MENA countries have moved to reduce or eliminate energy subsidies, identify new sources of non-oil revenues, and expand social safety nets to shield the poor from adverse effects of change.”
Meanwhile the World Economic Forum informs that the MENA region hosts the world’s elite today and tomorrow by the Dead Sea shore, to try and debate some of the region’s current issues. Jordan has already held the WEF’S gathering in the recent past; refer to MENA-Forum.
ByMirek Dusek, Deputy Head of the Centre for Geopolitical and Regional Affairs, Member of the Executive Committee, World Economic Forum
For thousands of years, the Dead Sea has attracted visitors from far and wide, drawn by legends of its power to heal and rejuvenate. On 6-7 April, 1,000 key leaders from government, business and civil society will gather on its shores for the World Economic Forum on the Middle East and North Africa (MENA). Over two days they will confront the issues facing more than 400 million people.
A region of two opposing systems
The Arab world is a region of two contrasting systems. One system features a dynamic private sector, digitally native youth and open economies. The other has a bloated public sector and closed, controlled economies.
Most people in the Middle East and North Africa (MENA) interact with both systems, facing a mixed reality. Wealth sits side-by-side with poverty; an exciting entrepreneurial culture struggles with leaden bureaucracy; and an insatiable appetite for the new is balanced with a reverence for tradition.
How these two systems interact – and whether the dynamic, forward-looking system can thrive while respecting the traditions of the Arab world – is among the most important issues the region is facing today.
Five key questions
The following five areas will determine whether the Arab world can successfully move towards the system of innovation and competitiveness.
1. Can the Arab world develop a new, sustainable economic and social framework?
The social contract in much of the Arab world has relied on state-provided employment. This is unsustainable. Nearly half the population is under 25, and a quarter of those are unemployed. Add the biggest gender gap in the world, and it’s clear a new framework is needed.
2. Can a mechanism for conflict resolution be developed?
Ongoing humanitarian disasters in Syria, Yemen and Iraq require immediate attention, as do the longer-term projects of rebuilding fully functioning states. The region has been home to long-standing tensions, and unless these are mitigated, a thriving, competitive region will be hard to realise.
3. Can an ecosystem of entrepreneurship and innovation be developed?
The stories of individual success in the region are too often ones of thriving despite the economic framework. An ecosystem that nurtures innovation and encourages firms to flourish and grow is needed.
4. Are countries prepared for the Fourth Industrial Revolution?
Changes in the way we work are happening more quickly than most societies are prepared for. There is a short window for establishing the right regulatory environment, and reskilling people to make sure they – and the larger economies – can capture the opportunities of technology.
5. Will addressing corruption and transparency be a priority?
Governance reform is a “must do” issue in the region and disillusionment caused by perceptions of corruption is particularly strong among young Arabs.
Global questions, Arab answers
While other regions have grappled with similar questions, the Arab world needs Arab solutions, that capitalize on the unique strengths of the area while accounting for its important sensibilities. There are good examples of this starting to happen.
The UAE is playing a leading role in integrating the region into the global economy. The new Emirates Centre for the Fourth Industrial Revolution, run by the Dubai Future Foundation in partnership with the World Economic Forum, is working to shape governance and capacity issues in the MENA, and it could shape data protocols across the world as a whole. Europe is enforcing strict data protections and regulations, while the United States is taking a more liberal approach. The Arab solution being developed may not just be a better fit for the region, but for elsewhere as well.
Saudi Arabia already has an influential voice as part of the G20, and it’s a voice that can grow. In 2020, it will host the Riyadh Summit, presenting an opportunity for greater impact on the regional and global agenda. A forward-looking programme that strengthens the MENA economies and the global economy as a whole will be an important step toward long-term success for the area.
Actions not words
There is a dire need for a new collaborative platform that brings governments together with businesses and other stakeholders in private-public cooperation. This is the aim of the World Economic Forum’s summit in Jordan. By convening members of the public and private sectors, and bringing new voices into the arena, such as the 100 Arab Start-ups, we hope to facilitate forward-leaning dialogue that understands and respects the values and culture of the region.
With no details reported on the final electricity price agreed for a 500 MW solar project to be built in Oman, speculation will center on whether the victorious Saudi power company and its Kuwaiti partners have again trumped lower offers from overseas rivals. The winning ACWA says:
With big players from France, Korea, China, Spain, India, Turkey and the U.K. all having expressed an interest in developing a 500 MW solar park in Oman, the organizing body will have surprised hardly anybody by eventually settling on a winning consortium led by Saudi Arabia’s ACWA Power and two Kuwaiti partners.
The winner was reportedly announced late on Sunday night by Kuwait’s state-owned news agency KUNA. pv magazine has been unable to verify that decision, which was reported by news wire Reuters yesterday.
According to the Reuters report, ACWA and partners the Gulf Investment Corporation and the Alternative Energy Projects Co have landed the contract to develop the project at Ibri, 300 km west of Muscat.
Originally announced as a $500 million project, the Ibri scheme is now being reported as a $400 million plant but the commissioning date of early 2021 is unchanged.
The decision of commissioning body the Oman Power and Water Procurement Company (OPWP) will come as a fresh snub to French energy giant EDF, which last year submitted the lowest bid for a 300 MW scheme in Saudi Arabia – SAR0.06697/kWh ($0.018) for the energy generated – only to lose out to ACWA despite the Saudi company offering a higher tariff of SAR0.08872. The Reuters report did not carry any details of final negotiated power tariffs in the Omani procurement exercise.
EDF was one of 12 bidders shortlisted by the OPWP after an initial request for expressions of interest attracted 28 enquiries from around the world. Indian state-owned utility NTPC Ltd was filtered out at the first stage but that left big solar companies including Engie, X-ELIO, Hanwha Q Cells, BP, Chint, GCL New Energy and Abengoa in the running.
The OPWP announced in November there were three consortia left standing, with ACWA and its partners joined by a group made up of Chinese manufacturing giant Jinko Solar, French oil major Total and state-owned Abu Dhabi concern Masdar; and a third bid, from Japan’s Marubeni Corp and the Oman Gas Company.