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What the World can learn from Clean Energy Transitions

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What the world can learn from clean energy transitions in India, China and Brazil by Radhika Khosla, University of Oxford; Ajinkya Shrish Kamat, Massachusetts Institute of Technology, and Venkatesh Narayanamurti, Harvard University could be considered as a message to the rest of the world. In effect, at a time when more and more institutions are voicing their concern, some of them even committing to divest from any fossil fuels, the countries named above are moving into ‘practical’.

Jenson / shutterstock

If the world is to transition to a climate-compatible future, much will turn on new innovations in clean energy and whether they can be deployed at a large scale. This is especially critical for emerging economies, which are developing their infrastructure and undergoing economic growth and urbanisation at an unprecedented scale and pace, yet still often lack the support for technological innovation found in wealthier countries.

Six of these emerging economies – Brazil, China, India, Indonesia, Mexico and South Africa – contributed more than 40% of the global CO₂ emissions in 2019. That’s 1.5 times the combined emissions from the US and Europe. Yet at the same time China, India, and Brazil were the first, fourth and sixth largest producers of renewable electricity. These three countries – the largest emerging economies – are now at a crucial juncture, faced with immense potential to become major innovators in the development of clean energy technology.

In a new paper we explored how fast-growing countries can not only develop their own sustainable systems but provide a source of learning and knowledge to influence global trends. We did this by investigating specific clean energy success stories in the three countries.

India’s remarkable transition to LEDs

First is India’s 130-fold expansion of its market for light emitting diode (LED) bulbs in just five years. LED bulbs are more energy efficient and last much longer than incandescent bulbs, tube lights, and compact fluorescent bulbs. In India they are primarily being used for residential lighting and street lamps.

India’s LED transition is estimated to save more than 40 terawatt hours (TWh) of electricity each year – roughly enough to power 37 million average Indian households or the whole of Denmark for one year. In three years, the country grew from a negligible share of the global LED market to about 10%.

Lamp sales for different lighting technologies in India. The LED lighting market grew from annual sales of 5 million bulbs to 669 million. Khosla et al (Data: ELCOMA), Author provided

Solar energy soars in China

An equally remarkable transition occurred in China, which has become the top manufacturer and largest market of solar photovoltaic (PV) cells and modules, accounting for 69% of global production. In the past 40 years, solar panel costs have declined by more than 99%, driven recently by low-cost manufacturing in China.

Between 2014 and 2018, China added about 158 gigawatts of solar PV – about the same as the total power generation capacity of Brazil.

China’s manufacturing capacity increased more than 25 times during 2008-2017. Khosla et al (Data: IEA-PVPS annual Trends Reports and National Survey Reports for China, Japan, Malaysia, South Korea and the US), Author provided

Biofuels in Brazil

A third success story is that of Brazil’s long-term growth to become the largest producer, exporter and market for ethanol biofuel made from sugarcane.

Ethanol-run vehicles increased their share of Brazil’s new car sales from 30% in 1980 to 90% in 1985. After ethanol stagnated in the 1990s, biofuels were revived by the introduction of flex-fuel vehicles which use any mix of gasoline and ethanol. Their share increased from negligible in 2003 to 85% of new cars sold just five years later – and has remained constant since.

There are some environmental and socioeconomic impacts. These include deforestation for sugarcane plantations, soil erosion, air and water pollution, and the consolidation of land ownership among large ethanol producers. But when you look at the full lifecycle of sugarcane ethanol fuel, from crop to car, its greenhouse gas emissions are lower than those from gasoline or corn ethanol.

Ethanol production by country between 2000-2018. Note that US ethanol is almost entirely from corn, whereas Brazil’s is from sugarcane which has lower life-cycle carbon emissions. Khosla et al (Data: OECD), Author provided

Three lessons for the rest of the world

Based on these unexpected clean-energy transitions, we have identified three insights relevant across emerging economies.

1. Public sector enterprises are crucial

In all three cases businesses with significant equity owned by governments played a crucial role. In India, a joint venture of four public-sector utilities called EESL bought energy-efficient LED bulbs in bulk, reduced prices using competitive bidding, ran national marketing campaigns, and sold the bulbs to customers through new distribution channels.

In China, public sector enterprises provided venture capital investments and loans that enabled rapid expansion of private sector solar startups. In Brazil, the leading public oil company bridged the gap between ethanol production and consumer point-of-purchase by buying ethanol from mills, providing storage and transport, and distributing fuel through the country’s largest network of fuel pumps.

2. Domestic choices in a global economy

Second is the need to reinforce complementary links between the global economy and domestic technology choices. For example, India was able to accelerate its LED market because its bulk procurement and bulb distribution policies complemented access to China’s large scale low-cost LED manufacturing. Equally, China’s early domestic support for export-oriented hi-tech manufacturing complemented the growing demand for solar cells in Germany.

3. R&D that unites academia and industry

Finally, engagement between industry and universities and public sector research institutions is essential. For example, Brazil could develop the technology to make ethanol compete on cost with gasoline only because of strong links between public sector research institutes and industry, including the government-funded “Sugarcane Genome Project”.

Our analysis shows that it is possible for emerging economies to begin from a technologically and economically disadvantaged position and yet successfully accelerate the transition to clean energy technologies. These lessons provide good news, since success or failure in this endeavour will have long-term energy and climate consequences for all.

Radhika Khosla, Senior Researcher at the Smith School of Enterprise and the Environment, University of Oxford, University of Oxford; Ajinkya Shrish Kamat, Postdoctoral Associate, Institute for Data, Systems, and Society, Massachusetts Institute of Technology, and Venkatesh Narayanamurti, Benjamin Peirce Professor of Technology and Public Policy, Harvard University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Geostrategic Gas Tensions in the Mediterranean

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At a time, when important issues are being raised and out of the ordinary tensions are taking place concerning gas fields, Algeria faces geostrategic gas tensions in the Mediterranean.  It is, in particular, the tensions between Greece and Turkey, challenging it where its primary gas market is, in Europe, and whose hydrocarbons with derivatives provide 98% of foreign exchange revenues in 2019, where the price of gas disposal has fallen by more than 75% in 10 years and providing 33% of its SONATRACH’s revenues. Here is an analysis of options for this unprecedented east Mediterranean situation as seen from Algeria.

Between 2018/2019, according to the IEA we have the following distribution 33.1% of oil, 27.0% coal, 24.2% natural gas, 4.3% nuclear and 11.5% renewable energy (hydropower 6.5%, wind 2.2%, biomass and geothermal 1.0%, solar 1.1%, agrofuels 0.7%). 

Natural gas pockets lie beneath the Earth’s surface and consist mainly of methane and other hydrocarbons. It is mainly used for electricity generation, heating and as cooking. Gas can also be used for air conditioning, lighting and as an alternative fuel for vehicles. It is considered one of the cleanest fossil fuels because it emits less carbon (about 50% less than coal) and other pollutants such as sulphur oxides and nitrogen. We have two types of natural gas on the market: natural gas and liquefied natural gas. 

Natural gas is derived from fossil fuels and is made up of decomposing organic matter that has been released into the soil for millions of years and is routed through pipes. We have liquefied natural gas as far as it is a natural gas that has been changed to a liquid state so that it can be transported and stored more easily. Because natural gas deposits are often far removed from many consumers of this energy, transporting it in a gaseous state is risky and expensive.

Also and by cooling it, it is possible to transform it into liquid natural gas, There are two main markets on which the world’s natural gas is traded. The most important is the NYMEX or New York Mercantile Exchange located in the United States, and the second, the NBP or National Balancing Point of the International Petroleum Exchange located in London. There are other smaller markets such as the FTT in the Netherlands or The Zeebrugge in Belgium. Between 2018/2019, before the coronavirus outbreak, according to Cedigaz, demand increased, strengthening its place in the energy mix. In 2018, international LNG represented a provisionally estimated volume of 311 Mt, according to Cedigaz, up 8.5% from 2017. LNG now accounts for more than a third of gas trade, with growth in LNG imports concentrated in Northeast Asia (China and South Korea), where gas plays an increased role in electricity generation and heating. China contributes the most to the growth in global LNG demand, with more than 60% of the total increase in trade.

Proven world reserves on a total of 197.394 billion cubic meters of gas (data from 2018/2019) we have in descending order: Russia 47,800 billion cubic meters, Iran 33,500, Qatar 24,300, USA 8,714, Saudi Arabia 8,602, Turkmenistan 6061, Venezuela 5702, Nigeria 5,284, and China 5,194 and for Algeria between 2500 and 3000 according to the statement of the current Minister of Energy before his appointment and the communiqué of the Council of Ministers of 2014, the data of 4500 being those of BP of the years 2000. The top 10 countries producing natural gas in descending order are. Russia alone accounts for 20% of world natural gas production. It is also the largest exporter, second with the shale gas revolution becoming an exporter in Europe, the United States of America, followed by Canada (third place) and Qatar fourth, with Iran downgraded following US sanctions, followed by Norway, China, Saudi Arabia, and Algeria, which ranked ninth. These data should be interpreted with caution because thousands of deposits can be discovered, but not profitable according to financial standards depending on operating costs and the evolution of the international price itself depending on the demand and competition of substitutable energies As for some experts who speak of an OPEC gas market in the image of OPEC oil, it should be stressed that the gas market is not in this month of August 2020, a global market  but a market segmented by geographical areas  while the oil market is homogeneous, due to the preponderance of pipelines, being impossible to meet the same criteria, the solution being cooperation within the FPEG which consists of 11 member countries (5 in Africa (Algeria , Egypt, Equatorial Guinea, Libya, Nigeria) – 2 in the Middle East (Iran, Qatar);  3 in South America (Bolivia, Trinidad and Tobago, Venezuela) and Russia, 9 non-member countries with observer status: Angola, Azerbaijan, the United Arab Emirates, Iraq, Kazakhstan, Malaysia, Norway, Oman and Peru, the United States, one of the world’s leading gas producers, are not part of the FPEG.. To one day reach a gas market that meets oil market standards (daily listing), the share of LNG would have to increase from 30% to more than 80%. Until then, because investments are hefty, everything will depend on the evolution between 2020/2030/2040, on-demand for LNG which will depend on the new global energy consumption model that is moving towards the digital and energy transition with an increase in the share of renewables, energy efficiency and between 2030/2040 hydrogen which risks degrading a large part of the transition energy.

What about the current tensions in the eastern Mediterranean regarding the energy sector which is not immune to OPEC’s action, but indirectly affecting the price of energy and the market share of Algeria towards Europe its principal customer, recalling that there is a gas organisation independent of that of OPEC. 

 A friend, the polytechnician Jean Pierre Hauet of KP Intelligence, France rightly notes that the energy scene comes alive in the Mediterranean with at least two significant fields of manoeuvring which it is interesting to try to understand the ins and outs that explain the current tensions, especially in the eastern Mediterranean. The first theatre is that of renewable energy (wind, concentrated solar, photovoltaic) which has been characterised by the launch of major initiatives based on the idea that technical progress in direct current transmission lines would allow taking advantage of the complementarity between the electricity needs of the countries of the north and the availability of space and sun of the countries of the South. At the time, we were talking about 400 million euros of investments and the satisfaction of 15% of Europe’s electricity needs. Today, the Desertec project is instead at half-mast, due in particular to the withdrawal of major industrial players, Siemens and Bosch, and the consummate disagreement between the Desertec Foundation and its industrial arm the Desertec Industrial Initiative (Dii). Dii continues its ambitions to integrate European, North African and Middle Eastern networks, while the Desertec Foundation now seems to favour bilateral initiatives in Cameroon, Senegal and Saudi Arabia. The second theatre of operations is recent: it relates to the discovery from 2009 of deep offshore gas resources in the eastern Mediterranean, which explains the current tensions. Large companies that used to operate other more accessible, profitable fields or near facilities nearby, on land, are now turning to the eastern Mediterranean, off Egypt, Israel, Lebanon, Cyprus and Turkey, all countries that do not necessarily have good neighbourly relations. Because several gas deposits have been discovered off the coast of Egypt, Israel, Lebanon or Cyprus, at the heart of the so-called Levantine basin, it is estimated by the US Geological Survey at 3,452 billion cubic meters (m3).  “For the producing or future producing coastal states, this gas resource offers the opportunity to achieve energy independence and a way to bail out their economy through potential exports” according to the Mediterranean Foundation for Strategic Studies in a well-documented report. That is why Turkey is conducting research. Even if Greece and part of the international community accuse it of having entered the Greek maritime space, international law is unclear in this situation which does not delineate borders and geographical boundaries. Gas resources can be found on or offshore limits of a country or in either transboundary or not clearly defined boundaries reservoirs, and the Turkish initiative could be the beginning of a long series of tensions that could transform regional balances. Because geological formations do not know the political borders, oil and gas companies have explored the marine subsea soils of neighbouring countries. This was followed by the uncovering of the Leviathan field (2010) also off the coast of Israel, Zohr (2015) in Egyptian waters, then Aphrodite (2012), Calypso (2018) and Glaucus (2019) around Cyprus. Exploration of Lebanese and Greek waters is not advanced. Athens has already allocated parcels to ExxonMobil, Spain’s Repsol or Total. On February 19, 2018, a historic $15 billion contract between Egypt and Israel provided for the supply of natural gas from the Tamar and Leviathan offshore reservoirs to Egypt, according to a report by the Mediterranean Foundation for Strategic Studies (FMEN). To ease tensions, although the countries of the Mediterranean all face the problem of energy security, it is above all a question of strengthening cooperation especially in the energy field, which can represent a vital link between the north and the South of the Mediterranean.

What is the case for Algeria where according to SONATRACH’s balance sheet in 2019, it makes up about 33% of its revenues, to which must be deducted the costs and the share of partners dependent on natural gas in order to have the net profit? The structure between natural gas exports through the two major Medgaz pipelines via Spain capacity, of 8 billion cubic meters gas and Transmed via Italy between 35/40 billion cubic meters of gas, currently under capacity, represents about 75% of the total towards its primary market Europe. LNG about 25% that provides it with more flexibility, Algeria is strongly competed against between 2020/2025 by the American, Russian, Qatari LNG. The latter has installed large capacity two to three times that of Algeria and for the gas piped by Russia the North Stream (55 billion cubic meters of capacity and the South Stream (capacity of 63 billion cubic meters gas), not forgetting as previously highlighted the discoveries in the Mediterranean. Nigeria and Mozambique are important producers with the latter country having the largest reserves in East African countries, with nearly 5 trillion cubic meters, on two offshore blocks in the province of Cabo Delgado in the far north of the country. By 2025/2030, Mozambique is likely to become the fourth-largest gas exporter in the world behind the USA, Qatar and Australia. In order to export to Asia, it will have to bypass the entire cornice of Africa posing the problem of profitability, in addition to the operating costs is added an exorbitant transport cost, unable to compete with Russia with the Siberian China gas pipeline, called “Power of Siberia”, more than 2000 km at the Chinese border, transporting 38 billion cubic meters of Russian gas to China each year by 2024/2025, a contract, estimated at more than 400 billion dollars over 30 years, signed by Gazprom and the Chinese giant CNPC, signed by Gazprom and the Chinese giant CNPC. Not to mention Iran and Qatar close to Asia. In the end, everything will depend for Algeria to enter the global market of cost requiring new strategic management of Sonatrach whose operating account for several decades depends fundamentally on external factors beyond its internal management, the international vector price, which led the president of the republic to demand an audit of this company. As for the world price between 2007 and September 2020, it fell by more than 75%, much more than for the oil. It has gone from 15/16 dollars for the GLN to 4/5 dollars and $9/10 for natural gas (GN). It has fluctuated between 2019/2020 between $1.7 and $2.5 per MBTU, in the open market. And recently between January 2020 and September 2020, we will have to take into account the dollar/euro rating which has depreciated by more than 11%, due to the uncertainties of the US economy and especially the swelling of the budget deficit bringing it back to the constant price thus having to draw the currency balance  

In short, energy is at the heart of the sovereignty of states and their security policies. The world is moving during 2020 through 2030, inevitably towards the digital and energy transition with a new model of energy consumption and knowledge imposing on our leaders a cultural renewal far from the material mentality of the past that cannot lead the country with expensive projects, uncertain profitability to the impasse.  Economic dynamics will alter global power relations and affect political recompositions within and regional spaces, hence the importance of understanding geostrategic energy issues and appropriate solutions, far from unrealistic discourses.

ademmebtoul@gmail.com

Four strategies for growth in MENA

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The London based WARC posted a summarised page of News on 16/09/2020 of its report covering how Four strategies for growth in MENA would be best to be followed in the MENA region.


An analysis of the results of this year’s WARC Prize for MENA Strategy reveals key takeaways for the region’s marketers looking for growth opportunities, from finding niche audiences in smaller markets to developing more resonant touchpoints.

“As certain MENA markets are already enduring their second wave of COVID-19 and several continue to be buffeted by economic recession, identifying new strategies for growth is vital for brands,” says Lucy Aitken, Managing Editor, Case Studies at WARC.

“In this report, we’ve identified new approaches that this year’s winners have incorporated in their campaigns that can help brands to build strong strategic frameworks that have growth baked in.”

The four key takeaways highlighted in WARC’s 2020 MENA Strategy Report are:

1. Target the frontier markets

Pragmatic solutions that help specific communities in MENA’s frontier markets can be instrumental in driving growth. Empowering marginalised communities, particularly within the region’s smaller markets, can be an effective way to brand-build.

This year’s Grand Prix-winning initiative from Tunisie Telecom helped female farmers access social security via their handsets. The technological innovation instigated by the campaign set the precedent for a new digital government vision.

Melek Ourir, Strategic Planner at Wunderman Thompson Tunisia, advises: “Resist the temptation to ignore smaller markets and audiences that could unlock significant growth for your business.”

2. Unconventional touchpoints can underpin strategy

Identifying new, creative touchpoints strengthens strategy, resonating with or delighting audiences.

Three standout campaigns addressed consumer challenges and were not constrained by where the brands were traditionally ‘allowed’ to be present: clothing retailer Babyshop promoted the long-term health of mothers; cheese brand Puck reclaimed share at breakfast and lunch; and NGO Donner Sang Compter encouraged those who spill their own blood onto the streets in the tradition of Ashura to donate it instead.

Admiring the risks and the rulebreakers among this year’s winners that explored new touchpoints, judge Sunjay Malik, Associate Director, Strategy at PHD UAE, says: “Media mixes are rulebooks that we set ourselves, which over time make us less imaginative and less brave. Long live the rulebreakers, who in challenging themselves inspire us to be better.”

3. Humour: a strategic shortcut to likeability

Making people laugh is one of the most powerful ways to connect and can make your brand distinct from the competition.

Winning brands that used humour include Burger King, which launched a new spicy menu with its Who Said Men Don’t Cry campaign; telco Jawwy, which used entertaining video content to resonate with Saudi youth; and Egyptian telco Etisalat crafting a comic campaign to win customers over to its hybrid offer.

Jury member Shagorika Heryani, Head of Strategy at Grey MENA, says: “There’s always a place for humour – even during a crisis. Smart brands understand the relationship between humour and humanity. Companies know that we buy from brands and people we like. And humour is a shortcut to likeability and authenticity.”

4. Localise to resonate

This year’s winners are a treasure trove of local insight, proving how time invested upfront to unearth strong local insights tends to pay dividends in terms of a robust strategy.

Best-in-class examples include: KFC in Saudi Arabia, which communicated its commitment to locally-sourced chicken by turning all of its brand assets green – the colour of the Kingdom’s flag; and Grand Prix winner Tunisie Telecom, which devised a programme to offer social welfare coverage to female farmers.

WARC’s 2020 MENA Strategy Report can be downloaded here. The full report is available to WARC subscribers and includes chapter analysis of the four themes with views and opinions from the judges; objectives, results and takeaways of the winning case studies, and what these mean for brands, media owners and agencies; and data analysis.

WARC’s Lucy Aitken will deep-dive into using humour as a successful marketing strategy at Lynx Live on 5-7 October in her keynote ‘Humour: the smart shortcut to brand fame’.

The WARC Prize for MENA Strategy is a free-to-enter annual case study competition in search of the best strategic thinking from MENA’s marketing industry. Next year’s prize will open for entries in January 2021.

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Lebanon: Time for a regional EU strategy

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The Mediterranean region: America’s presence is fading, while China is investing heavily in the region (Photo above: Flavius Belisarius) with at its southeastern shore Lebanon: Time for a regional EU strategy.

By Shada Islam and Cleopatra Kitti from Brussels

The tragedy in Lebanon must spark a deeper European Union rethink of its engagement in the Mediterranean.

The focus at the moment is – quite correctly – on urgent assistance to help the people of Lebanon. The EU is also right to highlight the need for structural reforms and anti-corruption measures in the country.

But more, much more, is needed – and not just in Lebanon. Even before he rushed to Beirut following the devastating explosion, French President Emmanuel Macron had called for a stronger EU role in the Mediterranean, insisting that “Many crisis factors are coming together there: maritime disputes, destabilisation of Libya, migration, trafficking of arms and people, access to resources.”

A “real” European policy for the Mediterranean was an urgent necessity to resist the growing influence of other powers, Macron said, pointing to the high-stakes geopolitical game – involving Russia, Turkey, as well as Israel, Egypt, and Saudi Arabia – being played out in the region.

America’s presence is fading, while China is investing heavily in the region. The EU has been sidelined in its attempts to untangle the web of confrontation and violence in Syria and Libya.

The need for a strategic rethink of the EU’s out-dated and under-performing trade and aid-focused “neighbourhood policy” is truly urgent.

Years of development assistance and piecemeal trade benefits have done little to bring economic and political stability, security or peace to the region. The impact of COVID-19 and climate change are set to make an already-difficult economic environment even more precarious.

Viewing the Mediterranean solely through the distorted migration and security prism has led to an emphasis on restrictive border measures and controversial deals with Turkey and Libya.

But migration flows from the region are likely to continue. More favourable conditions at sea as well as the deteriorating situation in Libya have led to an increase in the number of refugees attempting to cross the Mediterranean Sea.

Life for the 1.6 million Syrian refugees sheltering in Lebanon is also expected to become harder in the wake of the explosion.

The short-term focus on building ever more migration barriers has blinded the EU to the Mediterranean’s economic potential and geopolitical importance.

But if Europe is to succeed in its Green Deal and the new One Africa strategy it must first bolster its southern neighborhood.

A revamp of Europe’s policies towards the Mediterranean must not be about re-engineering outdated perceptions, practices and policies.

Instead, the EU must think more long-term, focus on empowering women and, despite the challenges, create the conditions for real region-wide economic transformation.

First, this requires that EU works with governments and business leaders in the Mediterranean to invest in the power of regional trade and value chains.

China has its ASEAN markets embedded in its value chain and North America has Central and South America. The EU should be similarly co-producing in the Mediterranean.

If calculated to include the area from Spain to Cyprus, the Balkan rim of the Mediterranean, Turkey, and so-called MENA countries, (Middle East and North African) the region counts 500 million people who produce 10 percent of global GDP.

At the moment, global trade flows through the region with little national or regional impact and only a quarter of the trade is intra – regional.

Given the post-pandemic discussion on the need for proximity to value chains and production capacity, the EU should use the opportunity to build sustainable value chains in its Mediterranean rim with a focus on up-skilling and good governance.

Second, more attention must be paid to empowering women in the labour force.

Although most countries have made progress in girls’ enrollment in primary education, some of the world’s worst performers in women’s employment are in the region.

For example only 11 percent of women in Algeria and 24 percent in Morocco and Tunisia are in the work force, compared with a global average of 45.6 percent.

The poor performance can be attributed to lack of proper data collection in capturing women’s contribution in the economy – formal or informal – or because existing legal codes, and social services prevent women’s access to decent income and social safety nets including pensions.

In any case, it is a serious obstacle in achieving much-needed sustainable development, economic growth and equal rights.

Third, the EU and Mediterranean states must step up their cooperation to fight climate change.

With oil and oil products currently the main exported and imported items trading across the region, both Europe and Mediterranean countries need to reflect on what this means for the EU’s Green Deal and their climate change commitments.

Questions to be considered include just how capital is allocated for investments in the production and distribution of renewables.

European financial institutions in the region like the European Investment Bank and the European Bank for Reconstruction and Development must work harder with national agencies and governments to ensure there is a significant reallocation of capital and skills from fossil fuel dependent economic models to a new modeling based on the EU Green Deal.

Finally, EU attempts to redefine its interaction with Africa by pulling the different regions into one and focusing on relations with the African Union, should go hand in hand with equally strong relations with the continent’s regions, including the Mediterranean.

This is critical given that culture, resources and priorities differ across regions. EU relations with the Mediterranean states therefore should not be sidelined in the pursuit of a policy focused on “One Africa”.

Past EU actions in the Mediterranean have under-performed for a variety of reasons. It is now time to change course.

The tragedy in Lebanon, conflicts in Libya and Syria and the region’s worsening economic situation should spur a serious EU reflection on crafting a strategic new “neighbourhood” policy which recognises the Mediterranean’s economic potential and geopolitical significance.

Shada Islam is an EU commentator who is also founder of New Horizons Project, a consultancy firm. Cleopatra Kitti is founder of The Mediterranean Growth Initiative, an economic think-tank

Developed Countries to compete with Low-Cost Labour in the Developing

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The COVID-19 pandemic will accelerate the rise of industrial automation and enable manufacturers in developed countries to compete with low-cost labour in the developing world. As such, developing countries must respond by developing local industrial capabilities with new technologies and skills that will allow them to become more integrated into world trade. As per the AMEinfo published on 3 July 2020, this interesting essay is worth reading, especially since it might affect the MENA region countries.

Developing countries could lose out as automation competes with low-cost labour

  • WTO: Future of global value chains depends on China’s industrial strategy and the global adoption of 4IR technologies
  • UNIDO: Developing countries must bolster local capabilities with new technologies and skills to become more integrated into global value chains
  • mPedigree: African SMEs enter global value chains as virtual technologies lower business costs

The COVID-19 pandemic will accelerate the rise of industrial automation and enable manufacturers in developed countries to compete with low-cost labour in the developing world; multinational corporations are already considering repatriating some manufacturing production as a result of the unprecedented disruption the pandemic has caused to global value chains; developing countries must respond by developing local industrial capabilities with new technologies and skills that will allow them to become more integrated into world trade.

These are some of the key findings from the first virtual panel discussion between representatives of the World Trade Organization (WTO), the United Nations Industrial Development Organization (UNIDO), and Africa-based technology company mPedigree at the Virtual Edition of the Global Manufacturing and Industrialisation Summit (#GMIS2020)

Xiaozhun Yi, Deputy Director-General of the World Trade Organization (WTO), highlighted that more than a third of the predicted decline in world trade brought on by the COVID-19 pandemic was caused by a rise in trade costs and temporary disruptions to transport and logistics.

He stressed that the future structure of global supply chains depends on whether the pandemic accelerates two key trends that have been underway for several years. These include China moving up the value chain due to its industrial strategies or rising labour costs, and the increasing adoption of labour-saving technologies in modern manufacturing. “We believe that this pandemic may accelerate the trend of production automation and we know that this trend may reduce some opportunities in low skilled manufacturing,” Yi said.

However, he added that governments of developing countries can still attract multinational companies by introducing measures to limit trade costs, such as lifting tariffs and minimising travel restrictions and border controls. 

Cecilia Ugaz Estrada, Special Advisor, Directorate of Corporate Management and Operations, United Nations Industrial Development Organization (UNIDO), agreed that automation erodes the comparative advantage that low-cost labour gives developing countries over developed countries and this could lead to production being brought closer to the headquarters of transnational corporations that are at the head of global value chains. In response to this shift, developing countries should accelerate efforts towards more regional integration, allowing them to expand markets and trade more with their neighbours, said Ugaz Estrada.

However, Bright Simons, Founder and President of Africa-based technology company mPedigree, said COVID-19 has affected regional trade in Africa as much as global trade and that in some cases regional trade is more impacted. He cited a number of barriers to expanding regional trade within the continent, including high transportation costs, which can make it more expensive to trade within Africa than to trade internationally. “It’s not that easy, even if you wanted to, to maintain a sourcing regime that involves cutting yourself off from global value chains,” he said.

Simons added that the capacity of small and medium enterprises (SMEs) in Africa to export had been constrained for many years by stringent standards requirements and supplier certification programmes in developed countries, particularly in Europe. However, he added that technologies are now emerging that can streamline these processes and reduce the cost for all businesses.

“What virtual capabilities now enable is to reduce the cost of skills importation, so we have had situations where certification bodies are now able to conduct end-to-end audits online,” he said. “That cuts costs by as much as 95% and this for the first time makes it possible for some SMEs to meet these demands and be able to export overseas.”

Hosted by former BBC Journalist Declan Curry, the virtual panel discussion on ‘Glocalisation: localising production and capacity building for survival and success’ is the first of a sequence of weekly sessions of the #GMIS2020 Digital Series that commenced today, and will lead up to the Virtual Summit on September 4-5, 2020. The session is available to watch on-demand here

Under the theme – Glocalisation: Towards Sustainable and Inclusive Global Value Chains, the third edition of the internationally recognised Global Manufacturing and Industrialisation Summit will virtually, for the very first time, bring together high-profile thought-leaders and business pioneers from around the world to shape the future of manufacturing, discuss the impact of pandemics on global value chains, and highlight the role of fourth industrial revolution (4IR) technologies in restoring economic and social activities. At the top of the #GMIS2020 virtual edition agenda will be the topic of digital restoration – how 4IR technologies are helping to restore the global economy and overcome unprecedented challenges.

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