The importance of SME’s

It is well-known that SME’s (small and medium-sized enterprises) are responsible for the majority of job creation and innovation in Europe. According to the OECD, SME’s account for 95% of firms, 60-70% of employment and 55% of GDP. The European Union has acknowledged their importance and thus has created the SME Performance Review, a tool to monitor and assess countries progress in implementing the “small business act” (an SME policy framework). The role this type of enterprises play in the economy is critical for the economic development of the Eurozone (and worldwide too). However, it seems that all the attention is focused on the benefits they create, while they negative impacts are forgotten: SME and micro-enterprises create 80% of the pollution worldwide. This is a fact that I am sure most of the public ignores, as they commonly relate pollution to big multinational corporations. So despite the positive effect these type of companies have on development and innovation , there is still a lot of room for improvement, specially when it comes to CSR.

It is common perception that to have a CSR department it is necessary to be a big company with a lot of resources. However, this is not necessary when CSR is integrated in the company’s behaviour. How can CSR be easier to manage in a SME than in a large corporation?

Many people can see the size of SME as a disadvantage, but when it comes to implementing ethical values in its workforce size can be a very valuable asset. These companies are generally managed by their owners (oftenly the founders too) who can express their values (which are hopefully socially and environmentally friendly) into their workforce through a direct communication path. So size becomes a clear advantage when it comes to expressing social needs into the workforce. Also, SME’s tend to be more personal and involved in their local communities. Unlike large corporations, SME’s relate with their community not as a marketing tool, but because they need each other to operate. This creates real motivations to be engaged with their stakeholders (either community or employees). An extreme case is that of Aaron Feuerstein, CEO of Malden Mills, who continued paying the salaries of its employees while his factory was being rebuilt after a fire. This lead the company to a bankruptcy, but reveals the level of commitment an individual can have in the community.

So despite the limitations SME’s have when trying to implements CSR strategies (i.e. money, size, resources…), it is worth reminding that they can have it easier than large corporations if they identify their strenghts and use them to integrate socially and environmentally friendly values, which can act as positive drivers for the community and for them as a way of competitive advantage.

 

References:

– http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm

– http://www.forbes.com/sites/insead/2013/08/14/when-it-comes-to-csr-size-matters/

 


In what sense are the 2030 policy framework on climate and energy aligned with the 2050 goals?

The European Union has ambitious goals in order to reduce the emissions of greenhouse gases. Different dates with different goals have been established. For example, the 2030 framework (under consideration at the moment) aims to cut emissions to 40% below 1990 levels, while the aspirational goal for 2050 is to cut these gases by 80%-95% by domestic reduction alone. It therefore makes sense that the 2030 goals are aligned with the 2050 ones. But, where are we now?

The European policy framework has managed to reduce 18% greenhouse gases by 2012, and there is an expected reduction of 24% by 2020. Further to this, already 44% of the world’s renewable electricity is in Europe. So by looking at these figures we assume that the future goals are achievable. Below I will explain the two different road maps:

2030: proposed 40% reduction. It considers a progress towards a low-carbon economy that ensures competitive and affordable energy for consumers. This should create growth and jobs and ensure security of supply with reduced import dependence for the whole union. These goals are intended to be achieved in line with the cost-effective pathway from the 2050 roadmaps.

2050: aspirational 80% reduction. It sets milestones which form a cost-effective pathway.

1. Gradual reduction. Emission reductions will be stepped up gradually from approximately 1 percentage point compared to 1990 in the first decade, 1.5 percentage points in the second decade until 2030 to 2 percentage points in the last two decades until 2050. These changes are gradual but not linear, and the interesting thing about this issue is that the 20% reduction in 2020, the 40% in 2030 and 80% in 2050 are all in the same linear pathway.

The roadmap also includes a way in which the main responsible sectors responsible for European emissions (i.e. power generation, buildings, agriculture…) can make a transition to a low carbon economy. Below is a table with the expected reductions for the future from each sector.


GHG reductions compared to 1990

2005

2030

2050

Total

-7%

-40% to -44%

-79% to -82%

Sectors

Power (CO2)

-7%

-54 to -68%

-93 to -99%

Industry (CO2)

-20%

-34 to -40%

-83% to -87%

Transport (CO2, including aviation but excluding maritime)

+30%

+20 to -9%

-54 to -67%

Residential and services (CO2)

-12%

-37 to -53%

-88 to -91%

Agriculture (Non-CO2)

-20%

-36 to -37%

-42% to -49%

Other Non-CO2 emissions

-30%

-72 to – 73%

-70 to -78%

(Source: EU Commission)

Ways in which to achieve these reductions is by energy saving and “green innovation”. The aim is to produce energy in a local manner and with a higher use of renewable sources. Like this, dependency on expensive oil and gas imports will be reduced (expects to save € 175-320 billion annually in fuel costs over the next 40 years). In regards to innovation, the EU would need to invest an additional €270 billion or 1.5% of its GDP annually, on average, on renewable energies, energy efficient buildings, smart-grids and carbon capture and storage technologies. These investments would be in the span of the next four decades, essential to make a transition to a low-carbon economy. From my point of view, the expanding of renewable energies is a pivotal factor in the whole process, and if the intended proposals are taken into real action, a greener and more efficient energy system could arise in Europe. The Union is already in this path, with countries like Germany embracing risky transitions to renewables: for example, Germany has decided not to build any more nuclear plants (the goal is to phase out nuclear power by 2020) and aims to have 60% of total energy coming from renewables by 2050. These huge investments and transitions to RE might seem to some a risk for security of supply as it apparently lacks back-ups. However, investments in back-up sources like natural gas come along with investments in RE, and further to this, deployment of RE in Spain and Germany reveal that the system can take more RE than the industry claimed a few years ago.

From what the EU has already achieved, it seems that that the 2030 and 2050 policy frameworks are feasible. A part of the advantages mentioned above, these ambitious goals might also act as an inspiration or motivation for other nations to follow. Europe could be the first in the “game” that has met its ambitious targets, hence being a reference in the field of sustainable policies that take into consideration global responsibilities.

REFERENCES

European Commission Climate Action, found at:

http://ec.europa.eu/clima/policies/roadmap/index_en.htm

European Commission, “A policy framework for climate and energy in the period from 2020 to 2030”, 22.1.2014

European Commission, “Energy road map for 2050”, found at: http://ec.europa.eu/energy/energy2020/roadmap/doc/roadmap2050_ia_20120430_en.pdf


Two big problems in Spain; two entreprenurial solutions

The concept of social entrepreneurship is a relatively new one but one that is going to become more common in the years to come. Identifying and addressing social needs with an entrepreneurial approach can be an easy way to define the term. I have to say that I have enjoyed a lot the lessons learned during the sessions of this module. I believe it has given me the motivation and courage to apply the knowledge learnt in a near future.

Considering the amount of social problems that are arising in Spain due to the 2008 economic crisis, it is obvious that the country needs social entrepreneurs more than ever. The first step to become a social entrepreneur is to be motivated to solve a social problem, which “luckily” Spain does not lack at the present time. I have identified a couple of present issues and developed two possible social enterprises that can tackle the problem:

· Hunger: According to the National Institute of Statistics (INE), 21.8% of Spanish households are at risk of being below of what is considered to be the poverty line (those in poverty risk line are earning less than 427€ per month). This leads to economic problems which ultimately can lead to hunger. Despite the inaccuracy from different sources, it is roughly estimated that between 2 to 3 million kids in Spain are suffering from hunger at least one time a day. This seems quite unconceivable in a European country, however this is the reality of the situation and it is an opportunity for philanthropists to take action.

 

“Salvamercados”: Ever wonder the amount of food waste supermarkets generate on a daily basis while there are people suffering from hunger? As a result of this social injustice, the social enterprise “salvamercados” intends to form a partnership with well-known supermarkets in the district of Tetuan (Madird) in order to save food waste generated at the end of the day and giving it back to families with more than four children (after making sure that their quality is in accordance to consumer regulations).

 

· Evictions: The role of a government is to ensure basic needs to its population: shelter, clothing, food and jobs. Well, it seems that nowadays they give priorities to the banks, by using public money to pay their debts while their population is being evicted from their houses and unemployed. This is an area of concern where social entrepreneur can focus their efforts, skills and knowledge.

“NO+DESAHUCIO” A social enterprise aimed to provide shelter to those families affected by evictions in the city of Madrid. Nowadays there are a lot of buildings that are empty due to the housing crisis, while lots of families are left on the streets as they cannot pay the mortgage. Why not use the empty space in the city to provide shelter for those in need of one? “NO+Desahucio” gets in contact with local neighborhoods where there is availability of space for people evicted to inhabit, and makes sure that the community agrees that these empty buildings can be inhabited by these people. Like this, possible conflicts are avoided and a growing social problem is solved.


(Used buildings: 88%, Not used: 12%. source: financialred.com)

 

The two projects mentioned above are only initial ideas but can act as an inspiration or milestone for future social enterprises as the problems they intend to solve have huge socio-economic implications. I am sure that they will receive the approval of civil society and will capture the interest of philanthropic institutions (i.e.Caixa Forum). Like this they will receive funding and support from the population, two key factors for a social enterprise to perform well.

REFERENCES

http://www.deltaworld.org/economy/21-8-Of-Spaniards-are-below-the-threshold-of-risk-of-poverty/

http://financialred.com/nueva-ley-del-alquiler-desahucio-en-10-dias-0-impuestos-para-las-socimis/


TRIP TO CHINA. A country of contrasts and opportunities

Before travelling to China I had a lot of initial expectations of how the country would look like but no actual first-hand knowledge of it. When I arrived some of my expectations were certified to a certain extent. For example, I was expecting everything to be big in Shanghai, but the size of the buildings and population actually surpassed my initial thoughts. I have learned a lot of valuable things during the trip, both from the academic sessions held at Jiao Tong University but also from the business visits and cultural trips, which opened my eyes in a more practical manner, allowing me to see the real life of Chinese people.

During the 10 days spent in the country we have learned the Chinese way of doing business, with both its opportunities and limitations. I have considered different factors that have to be acknowledged in order to understand China and its business practices: Culture, Size and its economic system.

 


 

Culture

 

Chinese people have a complete different culture to western people, and as a Melia Hotel Manager in Asia-Pacific told us at Jiao Tong University; the best strategy in order to enter this market is to learn and adapt to their culture, instead of trying to change it. Their culture is completely different to ours in basically all aspects; gastronomy (which I personally enjoyed a lot), timetables and specially their relationships with others. During our first day in Shanghai we were introduced to Chinese history, geography, culture and values by an excellent lecturer (Jason Inch). Two concepts were outlined during this session: “Guanxi” and “Mianzi”( also referred as “Face”).

· Guanxi

This is basically the networks of influence a person has and how they keep a good connection. This can involve treating people with special care by giving gifts in special occasions. On the other side this also implies that it is unnecessary to show courtesy to strangers. I experienced this while walking through the streets, where vehicles show little or no respect for pedestrians.

· Face

This is an important cultural concept that must not be underestimated. It is one’s perception to the eyes of others. For example, treating someone with respect gives them “face”, while criticizing or saying “no” directly can cause people to lose face.

These two concepts are of great relevance for managers working with Chinese employees or business contacts. Another curious cultural issue, predominantly seen in Shanghai is showing off with luxury products. Business men in Shanghai need an expensive car in order to give a good image necessary to do business. Same happens with watches, clothes and jewelry.

 

Size

 

Despite being a country, China is more of a continent due to its size with huge regions, each with their own culture and dialect. Therefore when addressing a customer segment or trying to enter a market it is essential to differentiate between the different needs of each region. To put China’s size in context, Shanghai has a population of roughly 24 million; this is approximately half of the whole population of Spain. Further to this, what are considered to be medium size cities have around 5 million people; this is more than most European capital cities. So size matters in China and it can be advantage for doing business, as a small segment group of 1% can be of huge potential for marketing. During a marketing segmentation session we had, it seemed that children accessories and luxury products have big opportunities for future development. CSR can also play a major role in the future as pollution in major cities like Beijing and Shanghai is affecting the well-being of its citizens.

 

(Lujiazui, the financial district of Shanghai. What seems to be fog is actually air pollution, a growing and uncontrollable problem in developing cities of China)

 

Economy

 

Most of the economic activity is concentrated in the East coast, while the west remains wild for doing business. However, as the east consists of most of the economy, the west is starting to flourish, opening the door for massive business opportunities. When considering the business opportunities in China it is important to take into consideration the constant change the country is experiencing. Salaries in Shanghai are increasing at an average rate of 10-15% per year; therefore the perception of cheap labour is changing in the east, enabling the west part of the country to be exploited.

In terms of Government participation in the economy it is huge. Most private companies coming from Europe or the US are in partnership with the Chinese state. Therefore they are not wholly private and so have constant relations with government officials. During our visit to Baosteel and Volkswagen Shanghai we were able to see how government intervention is not as bad as we in the west believe. Our visit to the Volkswagen assembly surprised me for its efficiency, cleanliness and working conditions. It was a fully new and efficient plant that operated very well. On the other side, you can see the lack of transparency when sharing information. One of our teammates asked a simple question to the person in charge of the tour: “How many employees do they have in the plant?” And the tour guide was unwilling to answer the question, as if it was better not say a word. This is an example of how chinese companies are not as “open” as European companies when it comes to the sharing of information.

 


Bureaucracy is another important issue as we were explained during a session on “how to establish a business in China”. Companies trying to establish in China need to pay special attention to tax systems and are recommended to have constant relations with institutions that help ameliorate private and government relationships (like the European Chamber of Commerce).

Overall I have been amazed and shocked by the cultural differences between the east and the west. I have learned a lot on how to do business in China and my final conclusion is that in order to be effective when dealing with Chinese business partners is it important to respect their culture and to learn their modus operandi (i.e. Guanxi). The country is full of contrasts and contradictions. You can see people begging in front of brand new massive skyscrapers and a political regime which seems to work perfectly with its new economic trend: communist China is a capitalist paradise.


Population Growth: A problem without solution?

Our generation is probably facing the toughest challenge in human history. The present world population is 7 billion while in 1950 it was only 2.53 billion. The socio-economic implications of this massive increase in population are huge as all these people require of earth resources for shelter, food and energy. The high consumption rates and therefore wastes and emissions have led to a crisis situation where the long-term consequences are unpredictable. Climate change, poverty and environmental degradation are all an effect of this population increase, therefore the only way to successfully tackle these problems is through population control. The question is how to achieve a sustainable level of population that is in accordance with the world’s carrying capacity. As Paul Ehrlich stated in his book The Population Bomb, it is either population control or race to oblivion.

History reveals two ways in which nations have seen (or tried) a reduction in population:

1) Enforce population control policies. The famous one-child policy of China is the best example. This has proven to be the wrong approach as families prefer to have a male descendent, causing a huge difference in the ratio between male and female populations, having huge sociological implications (i.e. a lot girls put up for adoption).

It is also worth mentioning that a lot of new extremist groups, like “The Voluntary Human Extinction Movement” that advocate non-breeding have arisen in western societies, attempting to influence policy makers and civil society.

2) Achieve stable population through development. As seen in Europe in the last decades, most developed nations have achieved a stable or even a fall in population as a result of development. As women are introduced in the workforce they do not have time to take care of a lot of children, and as middle class flourishes there is less need for families to have a lot of children to sustain their parents (as pension systems appear too).

The second of the two approaches mentioned above is likely to be the most successful manner to ensure a sustainable population. It is common knowledge that rich nations have lower birthrates than poor nations, therefore if countries with huge birthrates like Ethiopia (total fertility rate 6.2 children per women) manage to achieve a decent level of development it is very likely that fertility trends will change. It is estimated that by 2050 the global population will be around 9 billion. It is countries like China, Pakistan, Nigeria and specially India (with the largest contribution to population increase with an estimated addition of 570 million more people by 2050) that will make the change (UN Population Challenges and Development Goals Report 2005). On the other side, developed nations like Russia, Japan and Italy will see a considerable fall.

(Source: United Nations population division)

However, the problem of the development approach resides in the fact that in order for these countries to develop, they must experience a phase of growth in which they increase their economic activity. This can lead to increases in populations until they achieve the desired outcome (as the case for India and China, which are developing at a fast rate but also increasing their population disproportionally) thus boosting the global problems caused by population increases (pollution, scarcity…). So the dilemma is that the intended solution can escalate into bigger problems. Another factor to take into consideration is cultural and religious differences. For example, back in the 1950’s in Spain most of the population were devoted Catholics which were willing to have a numerous family as good Christians, but as the transition to democracy and a more neo-liberal economic system kicked in, a change in culture was visible, as families were having less and less children. Will countries in the Middle East and certain parts of Africa follow this path? It is a mystery for the time being, but as it happened in western societies, if women are accepted into the work force it is very likely that they will also follow the same path.

Below are some links related to the subject matter:

1) Hans Rosling documentary, in which he defends the theory that if all nations reach a certain level of development, world population growth will stop (at aprox. 11 million people)

http://www.youtube.com/watch?v=1nvdeEi2mEc


2) David Attenborough, BBC’s famous documentary presenter talking about the issue

http://www.youtube.com/watch?v=dN06tLRE4WE

 

REFERENCES

– Feltham, Colin (2009), The Guardian, “An uncomfortable truth”, http://www.theguardian.com/commentisfree/cif-green/2009/feb/27/population-control-climate-change

– http://www.overpopulation.org/pop-sustainability.html

– United Nations Population Challenges and Development Goals, 2005,

http://www.un.org/esa/population/publications/pop_challenges/Population_Challenges.pdf



TRIP TO CHINA

As the fastest growing economy in the world and one the most influential countries, it is a pleasure and an honor to travel there for a week and a half in order to study their business styles. The excitement built during these days is huge as china not only has completely different businesses but also a wonderful culture that has seen constant change: from the quing dynasty to the people’s republic of china, and now experiencing an unprecedented  economic growth.

The first thing I consider when travelling there and in particular when doing the business is the cultural differences. As I haven’t been there before I do not know first hand what the cultural barriers will be, but I assume that they will be huge. Therefore anticipitating and particularly respecting their culture will be a must when getting to know company’s and individuals. I also believe that language will be a barrier, but considering that most chinese people, specially my generation,  are learning Enlgish I believe it will not be hard to communicate. Also Shanghai is the biggest city in the wolrd (in terms of population), covering an area of more that 300km squared. So unlike the rural areas of china, people in Shanghai will be a lot more educated in what languages refers.

My personal perception (mainly influenced by western popular culture) of chinese business is that they are very hard-working, responsible and respectful with traditions. Therefore I will go there with these assumptions and trying to experience all the differences the east side of the world has to offer.


Plastic oceans

The oceans are full of different ecosystems which provide the human race with vast amounts of goods and services. Our dependency on the natural resources coming from oceans is unquestionable. Since the commercialization of plastic products in the 20th century there has been a huge transformation in the composition of these valuable waters, affecting its wildlife and therefore us, major consumers of fish and other biotic factors. From the approximately 100 million tons of plastic produced each year, 10% ends in the sea. Most of this trash is thrown from land, while only 20% comes from ships (Greenpeace.org). Once in the ocean, plastic travels around the world due to the currents, so a plastic bottle thrown in the coast of Japan might end somewhere in the west coast of Mexico.

(“Plastic Vortex” in the Pacific Ocean, where plastic concentrates due to currents, occupying an estimated area as the size of Texas)

The environmental implications this waste has on the quality of water and sea life is only starting to be acknowledged. The main problem with plastic waste is that it is not biodegradable, thus generating different kinds of problems:

Firstly and probably the most problematic of all is that animals tend to eat plastic waste as they get confused with other sources of food. It is estimated that over a million sea-birds and one hundred thousand marine mammals and sea turtles are killed by plastic injection or entanglement. Further to this, plastics act as “chemical sponges”, concentrating damaging pollutants like POP’s (Persistent Organic Pollutants) (Greenpeace.org). The effects of this are unpredictable, and considering the current levels of overfishing it is possible that fish with plastic or chemical pollutants might end in our dinner if certification schemes are not more severe with quality.


The second problem is that plastic is slowly broken down into smaller particles due to sunlight and wave action. Around 70% of discarded plastic sinks to the bottom. Dutch scientists have counted a total of 110 pieces of litter for every square kilometer of seabed. Microscopic particles of plastic are ingested by tiny animals, killing the sea life and contaminating the vulnerable ecosystems and the food chain (Gannon, 2012).

 


Despite the pessimistic news from the scientific community there are still possible solutions to the problem:

1) Plastic-Eating bacteria: Scientists have found bateria-like cells in the ocean that seem to digest plastic. It is still unknown if the digestion produces harmless by-products or if it introduces toxins into the food chain (Zaikab, 2011). Either way, it is a potential area for investigation in order to achieve a way to get rid of waste.

2) Waste prevention. The most usefull to way reduce risks associated with water contamination is to reduce the amount of waste thrown at it. Raising awareness of the issue is a must in order for countries, particularly developing ones (which do not have such an environmental consciousness as developed ones) to reduce waste. At present time there are several campaigns doing this and volunteers that are collecting trash from the ocean.

 

 

 

References

Greenpeace website,

http://www.greenpeace.org/international/en/campaigns/oceans/pollution/trash-vortex/

UNEP Regional Seas Report and Studies No. 178, http://www.unep.org/pdf/EcosystemBiodiversity_DeepWaters_20060616.pdf

Johnson, C. (2011), CNN, “Plastic-eating bacteria found in ‘ocean desert,’ scientist says” , http://news.blogs.cnn.com/2011/03/30/plastic-eating-bacteria-found-in-ocean-desert-scientist-says/

Gannon, M. (2012) Live Science, “Plastic trash invades the artic seafloor”, http://www.livescience.com/24247-plastic-trash-arctic-seafloor.html

Zaikab, G. D., (2011) Nature, “Marine microbes digest plastic”,

http://www.nature.com/news/2011/110328/full/news.2011.191.html



Historical and philosophical view on natural resource management

Depletion of natural resources is one of the major concerns of modern societies and it seems as if it is a new trendy concept, but the reality of the situation is that depletion of resources (both biotic and abiotic) has occurred along human history. The difference between present and past exploitations is that the current depletion is global, while centuries ago it was local. To put a simple example, back in the day human settlements could have overfished a lake, finishing with a fish species thus altering the entire ecosystem. Today the problem is global, and the consequences in biodiversity are unpredictable. One curious example of altering a natural area is the case of the Monegros Desert in Spain. In the XVI century, during Phillip II of Spain kingdom, the navy required tons of timber in order to build the famous Spanish Armada. There is a theory relating the massive deforestation of a forest with the creation of the Monegros desert. According to it, this well-known desert of Spain was once a very large forestland. This example proves the point that humans have a cornucopian approach towards the environment (the belief that resources are infinite)

(Classic representation of cornucopia or “horn of plenty”, a symbol related to abundance)

Another case of absolute natural resource depletion is the case for the Roman Empire and the deforestation of Italy. Timber was considered one of the most valuable commodities in the ancient world, used for building, heating, agriculture and warfare. A lot of academic authors relate the massive deforestation of the Empire as one of the causes of its downfall as it depleted the soil, increased marshlands and fostered the abandonment of industry (as there was no forestlands left).

So it becomes clear that since ancient times, human economic systems are based on the concept of infinite resources, with no consequences from the depletion of them. This cornucopian approach can also be associated with the communist and capitalist systems. The problem that arises in our era is that this process is accelerated in a global manner. Therefore the consequences are no longer local but global. It seems as if we are adopting the Precautionary Principle. We as a society are aware of the risks that our actions have on the environment, but the lack of scientific evidence to prove long term risks does not stop us from continuing with natural resource depletion. It is obvious that the velocity at which we extract resources is not in accordance with the earth’s carrying capacity. It is agreed by the scientific community that by 2030 we will need two earths to fulfill our needs.

It becomes clear that the UN goal to achieve a sustainable development where we satisfy our currents needs without compromising future generations to achieve their own is unlikely to occur if we continue with the current status quo. However, this kind of behavior is what characterizes human behavior; until we are at the brink of ruin we do not react. We have a Promethean (the ability to overcome all problems) approach towards all of our obstacles.

References

–  Humans will need two earths, report says., (2006) http://www.nbcnews.com/id/15398149/ns/world_news-world_environment/

–  The role of deforestation in the Fall of Rome., http://news.bbc.co.uk/dna/ptop/plain/A2184473

Blaso-Zumeta, J., 1999, http://idd004kb.eresmas.net/monegros/bib/blasco1999.htm


An overview of the resource curse in Africa: a hinder for development?

The “Resource Curse” has been a topic of study for decades and is now a well-established term in both academic literature and the public mind. It can be resumed as a paradox: you would expect countries with a lot of natural resources to have big economic growth or GDP. Common sense suggests that natural resources, arguably the most important factor in any industrial society, brings with it development. However, this is far from reality. What are the causes for the curse and are there any solutions proposed by developed nations? And further to this, does foreign investment help or worsens development?

To put the resource curse in perspective; Angola, one of the top oil producers in Africa has one of the highest poverty and corruption rates in the world, while Luxembourg or Hong Kong, countries/regions with literally no natural resources experience a high standard of living. How can a country with huge oil reserves (oil being the motor of modern economies, hence arguably the most valuable resource in the world) have such negative rankings in terms of development? According to academia, there are several causes:

1) Dutch Disease: An economic phenomenon in which large export revenues cause the real exchange rate to appreciate. So revenues from natural resources cause an increase in the real exchange rate, damaging tradable sectors making them less competitive in world markets.

2) Revenue Volatility: Booms in commodity prices destabilize the economies that depend on them.

3) Governance: This seems to be at the core of the problem. Bad governance is the cause of corruption and conflict for natural resources. Crooked leaders often prefer to put the countries mineral or petroleum wealth into their pockets rather than investing in infrastructure and education.

 

From the top eight oil producers in 2011 (Nigeria, Algeria, Angola, Egypt, Libya, Sudan, the Republic of Congo and Equatorial Guinea), all of them have a negative score on the World Banks control of corruption index.

(World map showing the corruption levels amongst countries, source: Transparency International)

It is also common that countries with weak governance and abundant natural resources are prone to violent conflicts. Angola coloured dark red for its high corruption rate, also has experienced armed violence in regions where oil is produced (case for the oil-rich Cabinda province). These conflicts over the control of resources affect the safety of civilians. They also lead to the enrichment of the political elite.

So, after knowing the reasons why the curse exists, are there any solutions proposed? The answer is yes, and most of them address governance policies that ensure transparency, anti-corruption rules and  economic policies that promote diversified economies:

1) – The World Bank’s International Finance Corporation (IFC). It stipulates the requirements for investments in private sector projects. In 2011, it made revisions including improvements mandating contract and revenue transparency. However, a criticism is that IFC rules do not affect bilateral loans ( so deals are made secret from the public)

2    The Equator Principle (EP). A voluntary programme focused in the financial industry. Requires borrowers to consider social and environmental standards before banks provide loans. Since its creation in 2003, more than 70 banks are participating. Despite it being promising in theory, it lacks a mechanism for determining if the banks and borrowers are actually operating to EP standards.

3) – The Open Government Partnership (OGP). Launched in 2011, it is an international action for more government transparency and accountability.

 

After looking at the promising steps addressing the resource curse it is quite inevitable to feel some optimism that Africa can become prosperous. A recent study by the World Bank (Africa’s Pulse) states that since the beginning of the 21st century oil producing countries have achieved sustained growth. For Example, Angola has seen an annual growth rate of more than 7%. The issue here is whether this economic growth translates into a positive impact on poverty rates. According to the report “the benefits of growth have not reached the poorest segments”.

When looking at the controversial topic of the resource curse it is worth considering different perspectives on the matter, as it helps to understand the situation in a broader way. Some authors, like Daniel Lederman and William Maloney, have suggested that natural resources are not a curse. An example of this is Norway and Russia, with huge oil and gas reserves respectively, and both experiencing growth and a good standard of living. Further to this, the US used to have huge oil reserves while Europe benefited from timber. These examples dismantle the whole concept of the curse, as it reveals that resource rich nations can also experience positive drawbacks. From what I have investigated so far, it becomes clear that it is more a matter of tradition than of resources. Europe and the US have a long tradition of exploiting minerals and other resources, where areas like Africa do not (as they did not experience the industrial revolution). Therefore it is understandable that when industrialized nations finish with their reserves of resources they seek more elsewhere. This is what history reveals, and this is why most mineral and oil reserves in Africa are owned by foreign corporations.

The search for resources brings China into the game, probably the biggest player in Africa at the moment. As China is experiencing a huge industrial transformation, it seeks the resources it lacks in its territory, hence aiming at Africa. The investment of China in Africa has been gradually increasing over the years.

Some might argue that the case of China in Africa is a classic example of how multinational corporations take advantage of a country’s weak governance (low job security, no environmental regulations…) to exploit resources. However this is a one-sided view, as China provides infrastructure (such as roads) while leaving sovereignty to the people in the areas they operate, something western companies failed to do. They also provide cheaper products than their predecessors (western companies). For example, Chinese cellphones are selling a lot in Africa due to their low cost in comparison to western products. So despite the negative views of Chinese companies operating in Africa, it is clear that they are a key player in Africa’s telecom infrastructure expansion.

Foreign investment in Africa can be regarded as a way of exploiting their natural resources but also a path for development, as seen with China’s telecom aid. After investigating the resource curse, it has become clear to me that it might not be appropriate to describe the situation of resource rich nations with this term. As seen with Norway in Europe, it is not always the case. By looking at the causes and cures for the curse, it seems that there is chance for African countries rich in resources to develop. This will depend on Africa’s capability to improve their governance, as this is the key factor for change.

REFERENCES

Brautigam and Xiaoyang, (2010) “China’s investment in Africa’s industrial zones”,

http://siteresources.worldbank.org/INTRANETTRADE/Resources/Internal-Training/287823-1229467556379/BBL_China_Africa_Jan6_10_Brautigam_Tang.pdf

Brown, Peter (2009), “China’s phone firms help Africa go mobile”, http://www.atimes.com/atimes/China_Business/KK18Cb01.html

http://www.worldbank.org/en/region/afr/publication/africa-s-ample-resources-provide-an-opportunity-for-inclusive-growth

Lawson-Remer,Terra (2012), “Beating the Resource Curse in Africa: A Global Effort”, Council on Foreign Relations

http://www.cfr.org/africa-sub-saharan/beating-resource-curse-africa-global-effort/p28780

– Mengjie, (2013) “China helps enhance Africa’s self-development capability”, http://news.xinhuanet.com/english/china/2013-08/29/c_132673308.htm

Rosenberg, Tina (2013) “Avoiding the curse of the oil-rich nations”, The New York Times

http://opinionator.blogs.nytimes.com/2013/02/13/avoiding-the-curse-of-the-oil-rich-nations/?_r=0

– Shaxson, Nicholas (2013) “The resource curse, or the paradox of poverty from plenty” , Open democracy,

http://www.opendemocracy.net/ourkingdom/nicholas-shaxson/resource-curse-or-paradox-of-poverty-from-plenty

– Tran, Mark (2012) “Are natural resources a blessing or a curse for developing countries?”, The Guardian,

http://www.theguardian.com/global-development/2012/oct/25/natural-resources-blessing-curse-developing-countries


Sustainable Urban Planning and Rural Development. Colmenar Viejo : Traffic Congestion Problem

Colmenar Viejo is a town situated 30km north of Madrid. It is a perfect of example of modernisation as it has switched from a traditional mining and cattle raising economy into a commerce and service based economy. Its current population is more than 46.000. This figure is more than double than what it was in 1981. So in a lifespan of only 30 years the total population has doubled, having economic and ecological implications.

(Source: INE – Instituto Nacional de Estadística)

As seen in the above graph, the population of colmenar has exponentially grown in the past century, particularly after the 1970’s. This has lead to huge advances in economic activity and infrastructure. An example of a development in transport infrastructure is the re-opening of the train station in 2002. Facilitating transport communications between Colmenar and the capital Madrid explains the increase of residents from 34 thousand in 2001 to 46 thousand as of 2012. However, this growth has lead to problems, like the rise in traffic congestion particulalry at morning ‘rush hours’, increasing noise and air pollution. The town has left its quiet and peacefull reputation and turned into a developed and noisy area.

Why is there congestion problems and what can be done to solve this issue?

To start with, it is worth mentioning the fact that Colmenar has a solid public transport system, consisting of several urban and intercity buses and constant trains departing to Madrid. The problem seems to be in the exit roads, where all cars seem to agglomerate at the same time every morning. According to RACC (Real Automóvil club de Catalunya), a recognised club known for road assistance services, the biggest congestion in the roads of Colmenar towards Madrid (M-607) is between 07:30 to 09:00 am. By the time the road reaches the next town, Tres Cantos, the fluidity of traffic comes back to normal. So it is clear that the issue resides at the exits.

(Source: RACC)

The above graph shows the intensity of vehicles every 30 minutes. The purple line, representing the M-607 (lane from Colmenar to Madrid) shows that in between the morning rush hours there is a huge increase in the number of vehicles, increasing from 400 cars at 07:00 to 1400 at 07:45 a.m.

Between 2002 and 2005 there has been an annual traffic increase of 4,4% in the access lanes to Madrid. This suggests that certain policy reforms must be undertaken to deal with the issue. Several proposals have been made by different organisations in order to deal with congestions coming from neighbouring towns of Madrid. RACC suggested short-term proposals like fomenting public transport and improvement of infrasctructure. However, the most promising proyect was the ‘Bus Lane Vao’, currently waiting to be exectued due to austerity measures. This proyect consisted on two main alternatives:

Alternative A. Reduce the width of lanes and shoulders (arcenes)

Increasing road capacity. Beneficial in ‘rush hours’ as it will help traffic fluidity. However, it will imply a reduction in velocity as cars would be more close together (affecting road security) due to the narrowness of shoulders.

Alternative B. Reduce from 3 to 2 the normal lanes

Transforming one of the lanes into bus-vao lane in ‘rush hour’ , while leaving it normal the rest of the day. The problem with this measure is that it is hard for people to understand and accept as it hard to conceive one lane less specially at that time in the morning.

 

Colmenar urban problem resides in the size of its roads, which cannot satisfy the needs of its citizens at a certain time in the day. Unlike the American model, where roads are huge as growth in towns was expected, Colmenar cannot afford to invest to extend its roads. This would imply a huge investment which is not affordable considering the economic crisis, and it would only bring the problem of noise and air pollution closer to its inhabitants. From what it is suggested, it seems that the solution resides in the use of public transport and Slugging:

Slugging. A form of carpooling, but more organized. People going to the same destination can share a car and take advantage of HOV lanes. According to RACC, higher occupation of private vehicles is the best solution to congestion problems.

Public Transport. Promoting the use of buses and specially the train can help. The issue with Colmenar train station is that it is situated in the outskirst of the town, making it unaccessible for most people. A strategy could be to promote the use of bycicles to get to the station.

In order to fulfill these last two suggestions, community involvement is a must. The best way to promote Slugging and public transport (and the use of bycicle to get to train station) is for the town council to raise awareness through campaigns. Considering the citizens willingness to change the situation ,it is understandable that campaigns promoting the use of bycicles and car sharing will be well received, plus it is more cost efficient than expensive changes in infrastructure. With these two methods, the town can solve both congestion and environmental problems.

Sources:

http://ecomovilidad.net/madrid/propuesta-carriles-bus-vao-de-bajo-coste

http://www.econduccion.es/es/el-racc-propone-10-soluciones-para-la-congestion-en-los-accesos-madrid

http://imagenes.racc.es/pub/ficheros/adjuntos/adjuntos_estudio_congestion_webb_jzq_9adadbd7.pdf

http://www.colmenarviejo.com/

http://www.ine.es/



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