Monday, December 2, 2013

Let's get water to Myanmar

After decades of neglect, the water resource management system is coming under the spotlight in Myanmar. The second-largest country in Southeast Asia, home to about 62 million people and with a land surface of over 676,000 square kilometre, is finally seeing its leaders turn their interest to the provision and protection of potable water – opening up an array of opportunities for companies operating in the sector.
Forty-nine years of military rule have left Myanmar’s water management system in a dire state. The current water supply system in Yangon, the country’s economic capital, is over 50 years old; 40 percent of the water passing through its pipelines is estimated to be lost due to leakages and unreliable meter systems.
Despite the local government adding pipelines at a rate of 290 miles a year, only 60 percent of the city has access to tap water. With too few sewerage plans, water which does make it to the tap is not safe to drink and needs to be boiled or filtered. The situation outside of Yangon is not any better: throughout the country, septic tanks can be seen emptied into open drains, polluting rivers and groundwater reserves and causing long-term detrimental effects to the environment.
The water infrastructure outside of cities is almost inexistent, forcing rural populations to rely on unregulated boreholes and wells which dry up in the summer. Nationwide, an antiquated and inadequate water supply infrastructure means that only 6 percent of the potential water supply available in the country is being utilised, and demand far exceeds supply.
Things finally appear to be changing – Thein Sein’s government has made the supply of potable water a top priority to Myanmar’s initiatives in opening up its economy. Public-private partnerships are springing up throughout the country to speed up infrastructure renewal in the areas of flood protection, water quality and water supply.
In Yangon, Japan’s International Cooperation Agency (JICA) is working on building a masterplan for water supply and sewer works in the city’s metropolitan region; water and wastewater company VCS Denmark is completing a feasibility study to build a high-tech pipeline system to provide clean water to the capital’s residents. Countrywide, the Dutch institute Deltares has started collecting the knowledge and data required to develop an integrated water management system for Myanmar.
Local initiatives are also contributing to a changing water management landscape. The disappearance of the junta’s authoritarian rule has facilitated NGOs’ access to populations and rendered easier the collaboration with local governments in expanding connection to the water grid. Now rural villages are setting up pumping stations, digging artesian wells as well as laying pipelines, coordinating neighbourhood mapping and focus groups to identify shortfalls, design solutions, set budgets communicate progress reports to authorities. The government also plans to pass stricter environmental laws to regulate fresh water provision and protect the country’s biodiversity.
This trend provides a major incentive for water management companies to turn their attention to the “Golden Land.” The country is in dire need of pipelines, pumping stations and sewerage plants, demand for which is expected to rise significantly in the next few years. What’s more, besides the need to build the physical water infrastructure, the necessity is to establish water management techniques and know-how throughout the water resource management system.
For example, sector employees need to learn how to locate seepages using equipment, as well as determine whether meters are operating correctly or if water is being illicitly siphoned off. Specialised engineers need to be involved in the rehabilitation and extension of the distribution network, taking into account varying geographies and the differing water levels between seasons. And overall, water education needs to be provided – populations require information and advice regarding hygiene, water economies as well as agricultural irrigation.
Entry in Myanmar’s embryonic water market presents a number of challenges – frequently changing legislation, uncertainty regarding environmental regulations, under-developed supporting infrastructure, as well as rampant corruption throughout the country.
For companies which can harness and overcome these challenges early on, the water industry in Myanmar offers plenty of opportunities to capitalise on the country’s economic liberalisation. A solid strategy, healthy finances, trustworthy contacts and a strong set of nerves will be essential – but once the potential is unlocked the benefits are certain to be rewarding.
Note: This article was originally published on Myanmar Business Today on 18 November 2013

Tuesday, October 8, 2013

The Phantom Driver

Following the steps of Google –whose self driving car is currently being tested on public roads in California –, it was German luxury car-maker Daimler AG’s turn to reveal a Mercedes S-Class Sedan capable of driving itself at this year’s Frankfurt Motor Show. The latest unveiling of driverless technology is part of a recent trend wherein major automotive players, including General Motors, Ford, Volkswagen, Audi, Toyota, BMW, Volvo and Nissan, are turning their interest to driverless car systems in a bid to claim a slice of the potentially lucrative market.

Expectations for the market are high. A recent Navigant Research report estimates the sales of autonomous vehicles to reach 95.4 million annually by 2035, a whole 75% share of all light-duty vehicle sales. According to Google co-founder and special projects director Sergey Brin, the opportunity for ordinary people to have a self-driving car will be a reality in less than five years. With Nissan announcing it would have a street-ready driverless car in 2020, the race is now on among car manufacturers.

In the United States, statistics show an increase in the number of older age citizens who are active drivers. By 2020, 26% of the country’s population will be over 66 years of age. The industry’s spotlight is now on the potentially cash-rich “silver tsunami” that is sweeping across the globe, with automakers turning to the potential of driverless technology to engineer safer cars for an ageing population with decreased abilities.

Car makers have designed a customized “ageing suit” to obtain insights on the challenges faced by elderly drivers. The suit mimics the constricted movements of an elderly while specialized goggles distort colours and simulate poor eye vision, thus helping car makers design features promoting a safer driving experience. Features include blind spot monitoring and lane departure prevention systems, as well as seatbelt-mounted rear airbags given elderly motorists appear more prone to thoracic injuries.


Moving to the local front and riding on the driverless technology wave is Singapore’s first electric autonomous vehicle. As part of a two-year collaboration between Nanyang Technological University, JTC Corporation and Induct TEchnologies, the vehicle will be on trial soon. This is a timely breakthrough as a similar demographic shift awaits Singapore – by 2030, one in five Singaporean residents will be age 65 and above. Though owning a Singapore-made driverless vehicle remains a distant dream, the reality of being able to be hands-free while driving on the roads is not a far-fetched one.

Tuesday, September 17, 2013

Abenomics

For a student of Keynesian economics, it is fascinating to see how his policies are applied, almost textbook-style, by Japan's Shinzo Abe - arguably the most dynamic - and divisive - Prime Minister Japan has had in a while. The media has been quick to christen his raft of economic policies Abenomics, after Abe, with his sheer force of personality and political charisma, rammed the policies through, even bending the Bank of Japan to his will.

Abenomics is spearheaded by the so-called 'Three Arrows' - massive fiscal stimulus, aggressive monetary easing, and structural reforms to bolster Japan's competitiveness going forward.
The first two arrows are textbook Keynesian plays, which led a falling yen and a sharp rally in the Nikkei. The effects, as one would expect from pumping money into a system, are rather direct - a falling yen made Japanese exports more competitive, boosting the cash pile and stock prices of Japanese giants like Toyota, and generating inflation and more housing market activity in Japan. Good news considering that Japan has been dubbed the 'miraculous zero-growth economy' for the past  two decades.
The third arrow, focusing on the creation of sustainable growth, however, has been widely panned by critics and observers as falling way short of its mark - this critical third arrow, they allege, consists of the same tired set of ideas that have been toyed around with during Japan's 'lost decade'. Abe, despite all the hype, was not doing anything more radical than Keynesian pump priming to bring a flagging economy back to capacity, or, in economic terms, to its production possibility frontier.

What is critical, however, is pushing this economic frontier forward and outward, to ensure that growth is long-term and sustainable - this is why the Third Arrow is perhaps the most crucial, and where Abe has fallen short of his self-declared mark. The markets reacted with a sigh and sputter since June when the third arrow was notched and fired.

The lesson here, perhaps, is that there are no quick, textbook fixes for the economy. It is only in taking deep structural reforms - in essence, taking a calculated risk, a bold plunge into the unknown (the future), that genuine gains will be made. In Japan's case, this means having to revisit almost 'taboo' topics such as immigration to make up for a rapidly-ageing population, and agricultural and labour reforms in preparation for the Trans-Pacific Partnership - issues no politician would be willing to raise.


It is about swallowing the bitter pill now, rather than dither and hope the illness will go away on its own. Put flatly, it will not, but one cannot expect mere politicians, fixated in staying in office and commanding the popular vote, to make these difficult but ultimately necessary decisions. It takes a truly visionary statesman to do so - it remains to be seen if Mr. Abe is ready to step into those big shoes and take Japan out of its lost decades.

Friday, August 30, 2013

Towards ‘Green’ flow – Beijing’s strategies

Beijing – A city filled with historical tales and architecture, is also known for being one of the world’s most congested urban agglomerations. A supposedly forty minutes drive between the airport and downtown on a Sunday evening  lasted in reality ninety minutes – one cannot imagine what rush hour traffic is like. Beijing city recorded a car population of 4.2 million at the start of 2013, a number expected to hit 5 million by the end of the year.  Daily, this means an additional 2,214 vehicles on the capital’s roads. That certainly raises an alarm!

Striking the same chord with the government, easing traffic congestion tops Beijing’s work agenda. According to a news report, one of the goals of the local Transport Commission is to ensure the traffic congestion index within 5th Ring Road, Beijing’s main urban area, does not rise beyond level 5. The index measures the severity of congestion on the road and ranges from 0 (no congestion) to 10 (heavily congested). To do so, firm measures have been introduced to curb the traffic increase: an odd-even license plate system where driving your car within the 5th Ring Road is prohibited on certain days if the tail number of your license plate ends with a certain number, and a license quota system that requires those who want to purchase a car to register by the first eight days of every month (only 17,600 quotas are issued monthly).

Another strategy to alleviate the number of cars on roads is an affordable public transport system. Besides the existing bus and metro services, the municipal government is also launching a customised bus service at the end of August 2013. The new offering seeks to replace an estimated number of 30 private cars on a single bus. The service aims to connect dense residential areas such the CBD and the Financial Street.

Individuals have taken it up to themselves to make the government and population act on the traffic.  Wang Yong started to give strangers free rides thirteen years ago and has helped over ten thousand people – he has become Beijing’s campaigner of carpooling. His main objective is to convince the government to run carpooling campaigns across the city, and in June 2013, he helped launch a new campaign on the outskirts of Beijing where nearly 2,000 people joined.


The severity of the situation is growing on a daily basis – a recent headline in June read ‘Beijing Zombie Apocalypse Traffic Jam: Commuters leave behind vehicles in rush hour traffic’. Having government intervention is insufficient; the battle to ease congestion in Beijing is a long one which requires the concerted effort of every citizen in Beijing.

Tuesday, August 6, 2013

Expecto PETRONAS!

Expecto PETRONAS!

A few months ago, in one of our posts, we highlighted that Malaysia could be facing a credit downgrade due to poor fiscal discipline on the part of the government, which still does not have the political gumption to cut back on a raft of populist policies that helped it win the last general elections (held in May 2013) with an unconvincing margin.

Ratings agency Fitch did not mince its words when it stated flatly that 'Malaysia's public finances are its key rating weakness', while revising the outlook for Malaysia to Negative from Stable a few days ago.
Is this the beginning of the slippery slide down to a credit downgrade?

While we certainly do not have a crystal ball, we can try to make a few predictions and informed guesses based on current global trends and directions.

Malaysia's over-reliance on oil-and-gas (O&G) revenues to finance expansionary budgets will most certainly come under pressure from the new developments in shale extraction techniques, which will have a profound impact on global energy dynamics. It certainly will not be business as usual for the OPEC and other petroleum-producing countries - even Saudi Arabia is feeling the heat; what more for Malaysia?

From this perspective, it is worrying to note that Malaysia still sees conventional oil-and-gas and vast PETRONAS (Malaysia's state-owned O&G company; incidentally also its only Fortune 500 firm) capital expenditure as the key driver of the economy and supplier of government funds, under the ambitious Economic Transformation Programme which aims to break the country out of the middle-income trap. To this point, there is a joke that goes - Malaysia is like a Harry Potter tale - when the going gets tough, there is always the PETRONAS (Patronus for Harry) spell. However, with the shale revolution, there may come a day when even the all powerful PETRONAS may not be able to save the day for Malaysia.

A lot, thus, will have to hinge on the government having the political will to cut subsidies and widen its tax base through implementing the long-delayed Goods and Services Tax, besides charting new growth trajectories for the economy beyond a reliance on natural resources, and spending prudently to build capacity and competitiveness for the future instead of on ever-ballooning operational expenditures. As it is, the Malaysian economy is facing significant headwinds from increased competition, falling exports, low crude palm oil prices, and a massive brain drain.


The PETRONAS spell won't be able to fix this mess in an instant - only a return to good and accountable governance, and a focus on building long-term competitiveness will. It is also not wise to rely on one spell alone, as any Harry Potter fan will tell you.

Wednesday, June 12, 2013

Economics again: The example of AirAsia

In our last instalment, we discussed the vast gulf in terms of bus ticket prices across a stretch of land. While bus tickets from Singapore to Kuala Lumpur cost $30, it may be surprising to know that for that same journey, one can an air ticket on Malaysia-based budget carrier AirAsia for the same price.

So how do the economics work out here then?

Initially, we have to understand that the airline industry is a cutthroat and extremely price-competitive business. Ultimately, this competition benefits the ordinary consumer by driving prices down and raising service standards. The presence of national airlines receiving government support and the fact that the aviation business is ultimately a regulated one also help to ensure that no one player is able to completely dominate the market by strategically undercutting its competitors.

The fact that AirAsia has expanded aggressively from its initial 2 planes and 6 domestic routes in 2002 to become a leading regional carrier, has led to massive consolidation and economies of scale for the airline. With overhead costs spread over a larger fleet and passenger haul, the airline is in a position to offer very compelling fares. Which sometimes, as raised earlier, can be even cheaper than the price of a bus journey.

Still, this is not yet a satisfactory answer. There are many large airlines in the world with deep reserves and an impressive fleet – what then, is the secret ingredient that places AirAsia firmly in the black, while its more illustrious peers such as Malaysian Airlines and even Singapore Airlines struggle to balance their budgets?

The magic element is: operational efficiencies. AirAsia has managed to streamline its costs to such an extent that you would hear of top management inspecting and complaining about adding extra padding to the seats, which they calculate would subsequently weigh down the plane and cut fuel efficiency. Building an airline around a single kind of aircraft (the Airbus A320), focusing on a quick plane turnaround and a no-wastage policy, make AirAsia's economic model a very lean and mean machine – one that is difficult to emulate by others, giving it a sustainable competitive advantage which it has capitalised on to expand aggressively.

The fact that AirAsia is gradually shifting its company base to Indonesia is also another shrewd move to keep operating costs down, while at the same time tapping into a booming consumer market.

With a combination of sound management and of being in the right place at the right time at the heart of ASEAN's economic boom, one expects AirAsia to not just give its fellow airlines a run for their money, but even the long-distance bus companies. And that is how surprising – and pleasant – economics can turn out to be for the ordinary man on the street, who, compared to 20 years ago, does not have to be a big businessman to be able to take a weekend off in Bali.


Monday, May 13, 2013

The economics of a Singapore-Kuala Lumpur journey


A bus ticket from Singapore to Kuala Lumpur costs S$30.
A bus ticket from Kuala Lumpur to Singapore, same company, same time and day, will cost you RM45, or S$18.
Why the price difference?

As an economist, I can think of various possible answers.

Purchasing power in Malaysia is lower than that in Singapore, so individuals living in Malaysia should be expected to pay less than those living in Singapore. According to Numbeo.com, consumer prices in Singapore are 94.22% higher than in Malaysia. So individuals making the return trip from Singapore to Kuala Lumpur (KL) could be expected to pay less, in absolute terms, than individuals living in KL and doing the inverse trip.

Singapore's regulation requiring cars and buses travelling out of Singapore to fill their tankers at the ¾ could mean that the trip out of Singapore is more expensive to the bus company than the trip out of KL, resulting in a higher cost of the Singapore-KL journey. Taxes and duties make up to 30% of pump prices in Singapore. Every year, Malaysia spends US$14bn subsidising gasoline. The result is cheaper gasoline in Malaysia compared to Singapore. To prevent arbitrage, the Singapore government requires all motorised vehicles leaving the city state to have tanks full at the ¾. This could mean the cost of a Singapore-KL trip is higher than that of the inverse journey, where buses will fill up tanks cheaply in KL and make their way to Singapore running on cheap petrol. In most business models, higher costs mean higher prices, so Singapore-KL should cost more than KL-Singapore.

More travellers make the Singapore-KL journey than the KL-Singapore one. This could be a possible answer due to Singapore's role and position as a global hub. However, it rests on the initial hypothesis that more travellers arrive in Southeast Asia through Singapore rather than leave from Singapore. The reasoning goes as follows. Singapore is regional transport hub: the world's largest harbour, the region's largest airport. Singapore is often the main point of entry of foreigners to the region. Foreigners could be more likely to make their way out of Singapore towards the peninsula via land rather than air, due to the ease of bus and car travelling. Consequently, one could hypothesise that buses towards KL are fuller than those towards Singapore. (Checking this hypothesis would be rather easy, just by asking a few bus operators)

Whatever the correct answer, the lesson to remember is to not buy a return trip when leaving Singapore – cheaper is to buy it in KL when you arrive!

Wednesday, April 3, 2013

Globalisation in action


Harbours are fascinating places to witness the increasing interconnections the world is experiencing. A casual walk along the southern coast of Singapore, overlooking the harbour, provides just the experience.
For miles, ships are parked in the sea of Singapore. At night, their lights shine lightly along the horizon, while during the day their long shapes paint the horizon with narrow rectangles of maroons and reds. Awaiting their turn to offload and onload at the harbour, the writing along their sides hints at their port of origin. Hamburg Süd, Odfjell, 中国远洋 – Germany, Norway and China all meet in Singapore harbour.
Singapore is the world's second busiest port in terms of total shipping tonnage after Shanghai. Every day, millions of tons of furniture, cars, clothes, food are offloaded and unloaded along the city state's decks, managed by over 150,000 people employed across 7,000 companies. Every year, 7% of Singapore's total GDP is created in the huge warehouses and decks at the south and east of the city.
Ships from Europe, the Americas and Oceania gather here. In the port, thousands of containers are lifted in the air, containing the essential or superfluous elements for people all around the world. A Dutch ship might be travelling from Hong-Kong to Brazil with a stopover in Singapore, transporting thousands of remote-controlled cars assembled in Guangdong in China to excited children in Bolivia. These cars might have been constructed thanks to the trip undertaken by a ship registered in Australia, who earlier in the year sailed from Japan to China, filling a good part of its containers with electronic equipment designed by Japanese engineers. And too, a British-owned ship might have transported a new expatriate's luxury car from the United States to Singapore.
It is around harbours that one feels that the world is becoming increasingly small, and that distances are being slowly eliminated. More than cargo airports, which are often inaccessible to the general public, harbours are the physical face of globalisation.

Tuesday, March 19, 2013

A city on the verge of total gridlock


Jakarta. The political and economic capital of Indonesia. And a city which is increasingly turning into an urban nightmare.

Anyone travelling to Jakarta will with little doubt comment on the major traffic jams the city experiences. At peak hours and during monsoon downpours, millions of cars, vans, and motorcycles bring the city to a standstill. A few numbers illustrate the scale of the problem: between 2011 and 2012, car sales increased by 11%, and the total number of cars increased ten times faster than the number of roads they roll on. Amongst the total population of the city, 30% uses public transport while the remaining 70% use private cars to get around. In 2014, the government expects Jakarta to experience total traffic gridlock.

The Indonesian authorities have been surprisingly slow in reacting to the traffic situation. Regulations limiting secondary car ownership and auto loans deposits were introduced last year, but with little success thus far and with wide discontent. The Transjakarta busways, implemented on the format of the Bogota TransMilenio, introduced separate road lanes for buses but remains inefficient due to poor urban planning and an inexistent sewage system, a big problem in a city affected by major floods. The 3-in-1 car passenger policy is widely ignored, and a proposed monorail project is still in limbos.

The economic consequences of the Jakarta traffic congestion are serious. Every year, the city loses US$1bn due to gridlock, and in 2020 the total economic losses – including vehicle operating costs and travel time – are expected to reach US$6.9bn.

New plans urgently need to be implemented. The recent election of Joko Widodo to the role of Governor of Jakarta has raised hopes to have the traffic situation finally tackled, with his main pledge being to defeat Jakarta’s traffic problem. Widodo has revived the option of a long-abandoned railway project, and introduced new laws regulating street stalls which clutter the streets and aggravate congestion.

In an emerging country growing at 6% and international car makers investing $2.2bn annually, communication, collaboration and strong leadership will be needed to eliminate the traffic problem. 

Tuesday, February 5, 2013

Bali, the neglected island


A holiday in Bali can be eye-opening in many respects. The blackness of the beaches of the volcanic island reminds us of the importance of nature in shaping our environment. The rice paddies clinging on to the hill cliffs remind us of how humans have mastered the physical environment around them and created one suitable for them to live and thrive in. And the piles of bottles on public beaches, the odd shoes found on the sand at low tide, the plastic bags clogging up ditches also remind us that humans have forgotten about actually caring for the environment around them.

Tourism began in Bali in the 1970s, when groups of Western hippies came to the island, attracted by the beauty and spirituality of the landscape and the friendly and tolerant reputation of the island’s inhabitants. Tourism then was what is called cultural, with foreigners expressing interest and concern for the region’s culture, the locals’ lifestyle, the island’s architecture and history. However, cultural tourism slowly made way to mass tourism, booming in the 1990s and 2000s as developers realised the huge tourism potential of the region. Hotels and resorts started popping up all over Bali, erasing coconut trees and beaches to make way for private terraces and infinity pools. Other beaches were widened and the background nature was destroyed, transformed into parking lots to accommodate the masses of tourists flying in from Australia and Europe.

Bali’s environment is at threat of succumbing to mass development. Every year, 700 hectares of land is lost to hotels, luxury housing and roads. Every day, 13,000 cubic metres of waste is dumped and only half of it is recycled. Traffic jams are becoming increasingly problematic, with the island’s road connections struggling to accommodate the 13% annual increase in number of cars.

Today, the main environmental issue regarding Bali is water, with one expert saying that Bali could face a drinking water crisis by 2015. Waste dumping is dramatically polluting freshwater reserves. The non-existent garbage collection system leads to individuals and hotels disposing of their waste in open-air public dumps, polluting the groundwater as rain trickles through the waste and soil, filled with polluting products. Intensive water usage is also a concern, with hundreds of hotels absorbing a large part of the freshwater reserves, depriving locals of an essential irrigation and drinking resource.

Locals and foreign tourism organisations are slowly realising the need for a sustainable plan of action regarding water and waste. Previously non-existent regulation regarding waste dumping was introduced last year, and information campaigns regarding water scarcity are being organised. But locals and foreigners alike will all have to seriously tackle the environmental issues facing Bali. The booming tourism industry, which involves both industry players and tourists, will have to become more aware and informed, and actively play their part in protecting the island’s environment, which is, after all  the lifeblood of the tourism industry. With the participation of all stakeholders, the environment catastrophe looming over Bali will easily disappear and a lose-lose situation averted.

Monday, January 7, 2013

War on Two Fronts for the Personal Navigation Device

One of our navigation-related articles has recently been published on Coordinates, a monthly magazine for the location and navigation industries.

Check out the online link here!
http://mycoordinates.org/a-war-on-two-fronts-for-the-pnd/