Developing countries are attracting a huge flow of foreign direct investments. Despite country risks, investors are primarily interested in access to natural resources: oil and gas, coal, uranium, wood and mining products. They are also interested in the infrastructures that have to be built in these countries under demographic pressure. All sorts of investors are competing: multinational companies, but also equipment suppliers, banks and various types of funds (from private equity to hedge funds and sovereign funds). These investors proceed with the traditional approach: risk identification, risk analysis and risk mitigation. Among foreign investors, one may notice the fast-growing intervention of Chinese and Indian entities. Everywhere in the world where there is oil, Chinese companies are there. Developing countries offer immense opportunities for China's external growth. Chinese companies' strategies are closely linked and supported by their government. They are able to propose ‘global packages' to developing countries which may combine an oil, gas or coal investment combined with the building of roads, railways, power plants, refineries, hospitals and schools - and some luxurious private homes for the ruling class. In addition, the Chinese government may propose loans and financial facilities to local governments.
The Chinese way of doing business tends to fit the governance structure of developing countries. This is particularly true in Africa. Chinese firms are integrated into global business systems that combine various integrated value chains. This favours ‘network trading' in which local capitalism is closely associated with Chinese businessmen. Chinese entities bring new forms of aggressive competition in which corruption, civil rights and protection of the environment are not fundamental issues. This strategy is paying off: relationships between China and oil-exporting African countries have been established on a broad interdependent basis. Angola, Sudan, Nigeria and the Republic of Congo have become China's major oil suppliers. In Sudan, Chinese companies have taken the place of multinational oil companies.
The central messages of the 2008 Global Monitoring Report on the Millennium Development Goals are clear: ‘On current trends, the human development MDGs are unlikely to be met . . . Progress toward MDGs is slowest in fragile states, even negative on some goals.' The diagnosis is still more pessimistic in the 2008 UNCTAD Report. As the IEA's chief economist points out: ‘These prospects are unacceptable - morally, economically and politically. That is why decisive policy action is needed urgently to accelerate energy development in poor countries as part of the broader process of human development'. The goals are unlikely to be met because there is not enough money and not enough investment and also because of bureaucracy, poor governance and lack of skilled resources. Indeed, developing countries suffer from many sorts of vulnerabilities and, in addition, they now face a great number of uncertainties concerning the effects of climate change and the evolution of prices for food and energy. All these difficulties are much greater for them than for rich countries.
This vulnerability is exacerbated by the current growth of population that increases the need for food, water, energy and infrastructure. The increasing demand for food in developing countries poses the question of a ‘global food crisis', a spectre that has haunted the world since 2007. High food prices have particularly hit vulnerable populations that spend a large amount of their income on food. Poor urban populations have been hit hard leading to the wave of riots, demonstrations and strikes which took place in more than forty countries in 2008. According to the UN FAO (May 2008), the food import bill of the Low Income Food Deficit Countries was expected to reach US$169 billion in 2008, 40 per cent more than in 2007. Security of food supply is at risk. At the same time, the same people have faced a rocketing escalation of energy prices. The measures that have been taken by governments to alleviate the burden (fiscal measures, price control, subsidies and restrictions) are political short-term measures that may give temporary respite but will exacerbate long-term problems if the situation continues. Price increases hit the very poor. They also tend to aggravate income inequalities and to exacerbate social tensions. Despite all the vulnerabilities, uncertainties and difficulties, all possible actions and efforts should be mobilised to accelerate the economic and sustainable development of poor countries.
The World Bank and other UN organisations play an important role in launching programmes and projects. They integrate environmental issues into national and local development plans. They play the role of catalyst for mobilising financial resources and mitigating project risks. In addition to the actions of large organisations, we believe that new forms of capitalism will play an important and growing role in economic development. From a global energy and environmental point of view, two issues are dominant: the access to electricity and climate change mitigation. Electricity for all: Access to electricity symbolises the improvement of daily life through lighting, access to information, communication and new business opportunities. Access to electricity is developed through governmental programmes, with the support of international organisations, but during the past few years there has been a multiplication of private initiatives or private-public partnerships which focus on small local projects that favour decentralised economic development by combining access to electricity, clean technologies and business initiatives. Some examples are the Small Scale Sustainable Infrastructure Development Fund (S3 IDF), the African Rural Energy Enterprises scheme (AREED) and the Sustainable Energy Finance Initiative and Share the World's Resources scheme (see their web sites for more information). Climate change mitigation: Climate change mitigation is another priority which has a number of dimensions.
The development of renewable energies and the improvement of energy efficiency are two major components of a national energy policy. At a more general level, developing countries face climate change issues. Some of them will have to adapt and the cost of adaptation might be very high in terms of agricultural production, human health and migration. The World Bank is heavily committed to projects that address the short-term impacts of climate variability and to reducing climate change vulnerability. Through the Kyoto initiatives, developing countries may also benefit from the Clean Development Mechanism which could play a significant role in encouraging sustainable investments. In this article, we have described an explosive interaction between population growth and a world of scarce resources including arable land, food, water and energy resources. We are at the heart of the ‘equation of Johannesburg': more energy for economic development and reduced emissions of greenhouse gases. These interactions create political and social tensions globally and, within a number of countries, they threaten political stability.
The question of deforestation is a dramatic illustration. Whois going to pay for limiting deforestation? This could be the moment for proposing a New Marshall Plan for the South, a plan associated with the post-Kyoto instruments. A New Marshall Plan is needed because the situation is dramatic and because the current instruments and mechanisms, both in the public and private sectors, are not sufficient to provide sufficiently rapidly a dynamic of sustainable development. The objectives of the Marshall Plan were ‘to fight against hunger, poverty, desperation and chaos'. Do we not face the same problems today? Poverty is a threat to peace and freedom.
Our website is not responsible for the information contained by this article. Articleinput.com is a free articles resource thus practically any visitor can submit an article. However if you notice any copyrighted material, please contact us and we will remove the article(s) in discussion right away.
Note: This article was sent to us by: Peter Wilson at 12292009
1. Oil routes diversification
All articles are property of their respective authors. Please read our Privacy Policy!
© 2009 ArticleInput.com.