This section of the brief explores how urbanization and infrastructure development is shaping globalization, how Asia is the natural integrator of future globalization across the Gap, and how China's and America's interests overlap in the future evolution of Africa.
Entries in infrastructure (12)
You can see my first impression scribbled on the paper:
1) LATAM bigger than NorthAm; and
2) Asia equal to NorthAm and Europe combined.
Surprising to me: only $2T for the rest of the Gap.
Reminds me of talking to a GE exec a few years back and him saying they could make all the money they need on just water and electricity in Asia--a $13T chunk of business in total.
You remember my WPR telecom special feature a while back, where I highlighted Indian firm Bharti Airtel's purchase of Kuwaiti firm Zain's mobile customer base in Africa. In that piece, I noted the Bharti model of subcontracting most of the basics while concentrating on expanding the customer base.
Here, in an NYT blog, we see how Bharti is pulling along longtime partner IBM to the tune of a $1.5B investment:
Samuel J. Palmisano, I.B.M.’s chief executive, doesn’t jet around the world to make an appearance every time the technology giant wins a services contract. But the announcement Friday morning in Nairobi is different, says I.B.M.
[Bharti Airtel Samuel J. Palmisano, I.B.M.’s chief executive, left, with Sunil Bharti Mittal, the chairman of Bharti Airtel.]
I.B.M. will supply the computing technology and services for an upgraded cellphone network across 16 nations in sub-Saharan Africa. Its customer is India’s largest cellphone operator, Bharti Airtel, which paid $9 billion a few months ago for most of the African assets of Kuwait’s Mobile Telecommunications Company, or Zain.
Under the 10-year agreement, I.B.M. will handle customer service for Bharti and provide the hardware, software and services to run everything from billing and call-traffic management to delivering new services like music and video. The deal takes the broad partnership between Bharti and I.B.M., begun in 2004, beyond India. I.B.M. is not disclosing the dollar size of the deal, but analysts estimate it at more than $1.5 billion over the decade-long span.
The Bharti contract also punctuates I.B.M.’s Africa strategy. The company’s presence in Africa dates back 50 years, but in the last five years I.B.M. has invested $300 million in the region to build data centers, add country offices and foster technology training programs — and it plans to expand aggressively in the region.
“This is a huge step forward for I.B.M. in what we think is the next major emerging growth market — Africa,” said Bruno Di Leo, general manager for growth markets for I.B.M.
Though it looms small in the global technology market today, Africa is primed for growth, according to Frank Gens, an analyst at IDC. “And I.B.M. is, as it’s done before, getting in on the ground floor,” Mr. Gens said.
The company’s strategy calls for the growth markets — not only the well-known BRIC countries, Brazil, Russia, India and China, but also dozens of others — to increase as a share of I.B.M.’s revenue from 19 percent to 25 percent by 2015. That is the equivalent of $1 billion in new sales a year.
In these nations, I.B.M. is targeting the linchpin industries of economies including telecommunications, banking, transportation, health care and energy.
Same logic Enterra brought to our Development-in-a-Box work in northern Iraq: focus on the fastest connections to be built.
A serious example of how seriously multinationals (nay, globally integrated enterprises--to quote Palmisano) are beginning to appreciate Africa's growth trajectory.
Guardian piece via WPR's Media Roundup.
Top of the story:
Blades slicing through the morning heat, the helicopter rose from the tarmac and swept into a cobalt sky, high above Rio's Guanabara Bay.
It powered north-east over deserted beaches, dense Atlantic rainforest and fishing boats that bobbed lazily in the ocean below. Then finally, 80 minutes on, the destination came into view: a gigantic concrete pier that juts nearly two miles out into the South Atlantic and boasts an unusual nickname: the Highway to China.
Dotted with orange-clad construction workers and propped up by dozens of 38-tonne pillars, this vast concrete structure is part of the Superporto do Acu, a £1.6bn port and industrial complex that is being erected on the Rio coastline, on an area equivalent to 12,000 football pitches.
Reputedly the largest industrial port complex of its type in the world, Açu is also one of the most visible symbols of China's rapidly accelerating drive into Brazil and South America as it looks to guarantee access to much-needed natural resources and bolster its support base in the developing world.
When Acu opens for business in 2012, its 10-berth pier will play host to a globetrotting armada of cargo ships, among them the 380-metre long Chinamax – the largest vessel of its type, capable of ferrying 400,000 tonnes of cargo.
Millions of tonnes of iron ore, grain, soy and millions of barrels of oil are expected to pass along the "Highway" each year on their way east, where they will alleviate China's seemingly unquenchable thirst for natural resources.
"This project marks a new phase in relations between Brazil and China," Rio's economic development secretary, Julio Bueno, said during the recent visit of about 100 Chinese businessmen to the port complex, which is being built by the Brazilian logistics company LLX and should receive billions of dollars of Chinese investment.
This new phase of engagement with Brazil and South America, is part of China's "going out strategy" – an economic and, some say, diplomatic push for Chinese companies, many of them state-run, to invest abroad, snapping up access to minerals, energy and food by pouring the country's colossal foreign reserves into overseas companies and projects.
Ah, I thought we were going to fight the Chinese for access to all these resources, when it turns out China can just buy them and Brazil is more than happy to sell them in bulk on long-term contracts.
Where do they come up with these devious tricks?
"What, no f--king assassin's mace?" A.J. whines to Carm and Tony. Disgusted, he surfs off the History Channel over to MTV.
And an entire continent falls to the Chinese, because, as everyone in America knows, if you're the biggest buyer of South American commodities, everybody down there obeys your every wish and command!
FT story on the need for port privatization across Africa to boost connecting trade, especially in countries where past civil strife led to a deterioration of infrastructure.
Maputo, Mozambique is held up as shining example, thanks to privatization seven years ago, with DP World taking over 40% ownership (yes, the very same company we ran out of America on this very subject). DP also has a 60% share in the container terminal there, partnered with a railroad company.
Overall, DP runs 3 ports in Africa, a Danish company runs six, and a Hong Kong company runs one. In each instance, experienced hands are upgrading infrastructure and improving operations and--most importantly--convincing regular customers to move in.
No, privatization is no panacea, and the roads issue can still starve a port, but once you establish the potential for throughput, you trigger more demand for better roads, etc. The business will come, all right, if you give them a good reason.
WSJ story on planned federal government initiative "Perfect Citizen" to detect cyber assaults on private companies and gov agencies running critical infrastructure. Naturally, it will be a vast and expanding program--a la the WAPO series by Priest and Arkin.
The surveillance by the National Security Agency, the government's chief eavesdropping agency, would rely on a set of sensors deployed in computer networks for critical infrastructure that would be triggered by unusual activity suggesting an impending cyber attack, though it wouldn't persistently monitor the whole system, these people said.
Defense contractor Raytheon Corp. recently won a classified contract for the initial phase of the surveillance effort valued at up to $100 million, said a person familiar with the project.
An NSA spokeswoman said the agency had no information to provide on the program. A Raytheon spokesman declined to comment.
Some industry and government officials familiar with the program see Perfect Citizen as an intrusion by the NSA into domestic affairs, while others say it is an important program to combat an emerging security threat that only the NSA is equipped to provide.
Hard to argue against some government effort to surveil the critical infrastructure domain, and hard not to see the effort stay fairly secret, because as I learned with Y2K, the critical infrastructure industry isn't exactly interested in advertising its vulnerabilities.
FT story that states "US antipathy to foreign investment in its infrastructure threatens to deprive the country of much-needed capital as a time when state and local governments are struggling with rising deficits."
So warns legendary Felix Rohatyn, famed Lazard banker.
This dislike for foreign ownership is Kafka-esque; much of our country was built on foreign capital.
True enough: we were the rising China of the 19th century and got ahead with tons of foreign direct investment.
Recent polls say Americans are 80% opposed, because, I would surmise, the question is always framed in terms of foreign ownership rather than crumbling infrastructure.
Experts say we ned $2.2T in upgrades and repairs in the next half-decade alone. Meanwhile, lots of cities are pressing ahead with privatization schemes, but even when US financial entities are involved, these efforts have a checkered history.
Caught it first in FT special overview of infrastructure, but then went to source for chart.
Of the $40T to be spent by 2030, $6.5 in North America, $9.2T in Europe writ large, $7.5T in LATAM, $1.1T in Africa, $0.9T in Mideast, and $15.9T in Asia.
Per the Core Gap map, light in the middle and thicker along the edges.
Breaking it down by category, it's $22.6T in water, $9T in electricity, $7.8T in road and raid, and $1.6T in air & sea.
A lot will be internal improvements, but plenty will be external improvements, i.e., improving linkages between states and regions.
Hardly the picture of a world de-globalizing, yes?
NYT story with the usual gripe for emerging markets: external infrastructure better than internal.
S. K. Sahai’s firm ships containers 2,400 nautical miles from Singapore to a port here in four or five days. But it typically takes more than two weeks to make the next leg of the journey, 870 miles by rail to New Delhi.For most of that time the containers idle at the Jawaharlal Nehru Port near Mumbai because railway terminals, trains and tracks are severely backlogged all along the route. Counting storage and rail freight fees, Mr. Sahai estimates the cost of moving goods from Mumbai to Delhi at up to $840 per container — or about three times as much as getting the containers to India from Singapore.The problem is presented as a symptom of democracy, in contrast with China's authoritarian ability to build networks on demand.
WSJ story by Shai Oster. Pic is of smart-grid demo center in Yangzhou.
GE, Siemens and others all competing fiercely to gain footholds in "one of the world's biggest markets for advanced power transmission and distribution systems."
I remember talking to a GE exec in 2005 in Williamsburg: he said GE would make the bulk of their future profits on electricity and water alone--in Asia.
At least $100B spent over next decade, comparable to what we're spending for upgrades to our currently, far too dumb grid. China likewise expected to spend $60-80B per year on gear, but Chinese companies will dominate there, so the smart-grid operation niche is where it's at for the West.
The BOP (bottom of the pyramid) logic is clear:
GE says the size of China's expected demand also offers opportunities for economies of scale in smart-grid products. Long term, that could make products exported to other countries cheaper to produce. GE said it would expand research facilities it already has in Shanghai.
Right now, China's losses due to bad transmission are roughly tripled that in the West (8% compared to OECD average of 2.5%).
Map found here
FT story on Bank of China investing $1.1B in China railway per government direction, resulting in 15% stake. This just after announcement of $900M investment in high-speed Shanghai-Beijing line, something on which the BoC may actually get its money back.
China is spending $120B on RRs this year. The most fantastic estimates of Chinese defense spending land in the same range.
The US spends in the range of $600-700B on defense and nowhere near any such number on RRs, which get less maintenance money each year that the interstate system does.
One World Bank expert says China's RR expansion is the biggest thing since the US built its interstate highway system. China, BTW, is just finishing up its own such system.
Earlier this spring Luiz Inacio "Lula" da Sivla, outgoing president of Brazil, announces the second phase of the government accelerate growth program (PAC2). First phase (2007-2010) was for half a trillion. Didn't meet all its targets, but met plenty and was significant factor in Brazil's growth. With PAC2, investment as a percentage of GDP rises from just under 17% to above 21%.
The key bottlenecks are electricity and roads. Of the 1.6km of highways, only 12% are paved. Moving stuff on unpaved roads costs, on average, one-third more. At 8.5m square km, Brazil is close to the size of the US and China (both roughly 9.5m square km).