Category Archives: Resource Based Economy

Montana's Economic Performance

Department of Labor and Industry, Research and Analysis Bureau

Montanas economy has been outperforming the national economy since the turn of the century, including having better performance during the 2007 recession and a faster, stronger economic recovery exiting the recession. Montanas outperforming economy is evidenced in nearly every economic metric: Montanas unemployment rate has been lower than the U.S. unemployment rate since the 2001 recession and has remained about 1.5 percentage points lower than the U.S. rate throughout 2014. Montana has the 8th fastest GDP growth among states over both the last five years and ten years (ending in 2013), and Montanas GDP growth was faster than the U.S. average in every year since 2000, except for 2012. Montanas personal income growth has also outpaced the national average, ranking as the 6th fastest over the last five years and 7th over the last ten years. Montana has the fifth fastest wage growth among states for both the five and ten year timeframes. Montanas economy is healthy, posting above average job growth and improvement in all economic indicators.

However, not all areas of the state have performed equally. In general, the Eastern region has posted rapid economic growth in the past decade, with rapid expansion of employment and rising wages for many counties affected by the development of the Bakken oil fields. Many counties in the eastern edge of the state have experienced the very low unemployment rates indicative of worker shortages. The Northwest and Southwest regions of Montana experienced strong growth leading up to the recession, but the concentration of construction and wood product manufacturing employment resulted in significant contraction during the national recession. Both the Northwest and Southwest regions lost over 8,000 jobs during the recession. While the Southwest region rebounded quickly, the Northwest suffered through an extended recession and still has elevated unemployment rates. Montanas seven reservation areas also posted economic growth for the last decade, but remain some of the most economically sensitive areas of our states, often with unemployment levels two to three times higher than their surrounding regions. Figure 1 illustrates the 2013 unemployment rates in the five labor market areas of Montana, along with the seven reservation areas.

Montanas strong economic growth has not yet been enough to raise Montanas wage and income levels up to the national averages. With an average annual wage of $37,575 in 2013, Montana ranked 47th among states in average wages in 2013, ahead of only Idaho, South Dakota, and Mississippi. Montana performs better comparatively in terms of income, ranking 35th for personal income per capita among states. Personal income includes income from business ventures, rental payments, royalties, social security, government transfer payments, and other sources in addition to wages. Montanas high rates of entrepreneurialism and business ownership improve our rankings for income compared to wages.

Montana is in this position of low wages and income compared to other states partially because of the slow income growth in the last half of the 20th century. Figure 2 compares real per capita income in Montana and the U.S. using all available data back to 1929. Per capita income measures the total amount of income received in the state divided by the population, providing a measure of relative wealth that can be used to compare to other areas. Figure 2 illustrates that per capita income was relatively equal in Montana and the U.S. from 1929 to about 1952, with Montanas per capita income being higher than the U.S.s per capita income for a short period from 1946 to 1952. From 1952 to 2000, the U.S. per capita income rose faster than Montanas, creating the large gap in income levels that our state is now trying to overcome. However, Montana has been on the right path since 2000, with wage and income growth faster than the national average, narrowing the gap between Montanas and the U.S. per capita income levels.

It is difficult to isolate one cause for the slower growth of Montanas economy during the second half of the 20th century. Some economists contribute the decline to the natural resource curse, which is a phenomenon where economies concentrated in natural resource industries (such as agriculture, mining, and petroleum refining) have slow long-term growth rates despite the infusion of capital into the economy from natural resource development. Other economists note the slower growth in the early 1980s corresponds with the closure the copper mine and smelter in the Butte and Anaconda area. Even others point to the slow adoption of computers and technology in the Montana economy compared to the more rapid adoption in the U.S. economy during the 1990s. The adoptions of desktop computers and technology advancements in the 1990s resulted in large productivity gains for the U.S. economy, driving up workers wages and income levels. Some data suggests that Montana lags behind other states in the adoption and use of technology, and as a result, has lower productivity levels than other states. In actuality, all or none of these factors could have slowed Montanas growth in the latter half of the 20th century.

The diversification of Montanas economy over the last sixty years has also influenced the composition and performance of Montanas economy. Figure 3 illustrates the changing roles of industries in the composition of Montana income since 1930. Like the U.S. and other developed countries worldwide, Montana has become more of a service-based industry over time as consumers have demanded more services than goods. The goods-based industries of manufacturing, construction, mining, and agriculture now comprise about 24% of Montanas personal income derived from work. The goods-producing industries are still expanding in terms of the value of their products, generally increasing production value in real terms over time, but their share of the overall economy has shrunk because the service-based industries are growing at a faster rate than the goods-based industries. This trend is expected to continue as Montana builds its post-industrial economy.

Although the service-based industries are often described as low-paying industries with undesirable jobs, like retail or tourism jobs, the service sector also includes high-paying, high-skill jobs that require advanced degrees, such as those in the professional services, health care, or financial services industries. Service-based industries also contribute to Montanas exports, bringing new money into Montana from the sale of their services, and make a sizable contribution to our states GDP. For example, financial activities is a service-based industry that includes banks, investment firms, and insurance agencies. In 2013, the average wage for the industry was over $55,000, and the industry provided 17.3% of Montanas total GDP more than any other industry.

In general, greater economic diversification is associated with faster and more stable economic growth in the long-term. The movement towards the service-based industries has increased demand for well-educated, high-skilled workers, especially in industries like professional services and health care. While it is difficult to directly compare the rate of diversification, Montanas economy may have lagged behind the national economy in the movement to a service-based industry, which could have contributed to the lagging income growth in the second half of the 20th century.

In terms of the current industry mix, there are some differences in the types of industries in Montana compared to the U.S. that may help to explain wage differences. However, the differences are too minor to fully explain the lower wages in Montana or the cause of the lagging growth over the last half century. For example, when compared to the U.S., Montana has a slightly higher concentration in the lower-paying industry of leisure activities (which includes many tourism type businesses such as hotels, bars, restaurants, and ski resources), and a lower concentration in the high-tech, high-paying professional services industry. The differences in these industry concentrations could be used to explain Montanas lower wages. But there are also industry mix differences that would suggest that Montana should have higher wages than the U.S., such as Montana having a higher concentration than the U.S. in mining and healthcare, both high-paying industries.

Figure 4 illustrates Montanas 2013 industrial composition using three different economic metrics GDP, work earnings, and employment to help demonstrate the relative size of Montanas industries and the differences in how each industry contributes to the economy. Financial activities was the largest industry for GDP, followed by the government and trade sectors. GDP measures the overall value added by the industry for economic activity, and can be thought of as the value of sales minus the costs paid for non-labor inputs. Wages earned by Montanans are included in GDP because they represent the value of economic activity added by workers to the production of goods and services in Montana.

Compared to the U.S., Montana has a much smaller share of manufacturing (12.5% in the U.S. compared to 7% in MT). However, larger concentrations in agriculture, mining, and construction make up this shortfall, leaving the goods-producing industries in Montana as roughly 24% of GDP (slightly higher than the 20% of U.S. GDP that lies within the goods-producing sectors). Montanas manufacturing is likely stymied by the long distance from Montana to major consumer cities and ports, which increase transportation costs for manufactured goods. The transportation sector comprises a larger share of Montanas economy compared to the U.S., likely because Montanas large size and rural nature requires a lot of transportation to ship our goods to consumers. Montanas share of health care is larger than the U.S., partially due to Montanas older population (the demand for health services increases as a person ages).

Personal income is also shown in Figure 4. Personal income is the amount of income received by Montana residents as a result of economic activity. Personal income includes the wages and benefits earned by workers, plus proprietor income, royalty income, rents, or government transfers. However, only work earnings (workers wages, benefits, and proprietor earnings) can be assigned to an industry, so other types of personal income are not included in Figure 4. The largest industry in terms of personal income earned from work (work earnings) is health care and education, along with government and trade.

Finally, the largest private industries in terms of employment are health care, trade, and leisure activities. These three industries combined employ nearly 45% of Montanas workers. Government is also a large employer with roughly 18.8% of employment, most of whom are employed by local governments. Employment represents the primary way that the benefits of economic growth are distributed through the economy, with most Montanans receiving their income from wages instead of capital rents like dividends or royalties. GDP, personal income, and employment all equally measure important elements of the Montana economy, just like all industries are important to the proper functioning of the Montana economy. All industries work together to create a dynamic economy.

In conclusion, Montanas economy is performing well, gaining ground on the national average in terms of wages and personal income because of rapid growth. Continued growth faster than the U.S. average is needed to regain our competitiveness with other states in terms of per capita income and higher wages, which was lost over a long period of lagging growth in the second half of the 20th century. A number of changes occurred in both the U.S. and Montana economies during this time, making it difficult to determine why Montanas economy experienced this extended period of slower growth. Diversification into a more service-based economy likely accelerated wage growth in both the U.S. and Montana. Lagging diversification, and differences in industry mix between the U.S. and Montana, may present partial answers, but they are not the full explanation. Much to the chagrin of policy makers and economic developers, Montanas economy is influenced by an infinite number of factors, many of them that are outside of our control. However, it is within our control to ensure that Montanas businesses and workers are responsive to economic changes and prepared to navigate an ever-changing global economy. This preparedness can be achieved by ensuring our workers have the education and training needed to adapt, prosper, and innovate in whatever situation is presented in the future. In this way, our workforce can become more productive, earning higher wages and greater profits for the Montana economy.

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Economy - Montana

Indigenous, territorial and federal governments are discussing a new, privately funded conservation model for the Northwest Territories.

The model is called Project Finance for Permanence, or PFP. It partners private investors with communities and governments to design a localized, long-term conservation model.

PFP tries to build a conservation economy where a communitys economic growth comes from the environmental protection being simultaneously developed.

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Proponents say PFP challenges more traditional conservation models that can place projects at odds with economic development.

They point to the use of PFP to protect ecosystems like sections of Brazils Amazon rainforest and the Great Bear rainforest in British Columbia.

Last month, officials from participating governments met with representatives of the Pew Charitable Trusts an organization representing donors interested in financing Indigenous-led conservation in the NWT to explore what shape PFP might take in the territory.

The Government of the Northwest Territories is ready to explore this opportunity that could support a healthy, sustainable future for all northerners, NWT environment minister Shane Thompson said in a statement.

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We value our partnerships with Indigenous governments and we look forward to exploring other ways to diversify the NWT economy and support Indigenous stewardship over the long term.

Discussions are being facilitated by the Indigenous Leadership Initiative, the organization originally approached by the donors trust about the project.

The leadership initiative, known as ILI, has established a working group that will meet over the course of the next year to see if the project can go ahead and how it might look.

Governments in the NWT have already established internationally recognized Indigenous-led conservation projects like Edhzhe and, most recently, Thaidene Nn.

In a news release, ILI said the territory is an ideal candidate for private environment protection investment as donors can already see a strong drive toward unique conservation efforts.

Its this opportunity to take a really big-picture approach to our relationship to the land and water in the NWT, said Dahti Tsetso, deputy director of ILI.

At the Dehcho First Nations, Tsetso worked on the Dehcho Khodi Stewardship and Guardians Program and Edhzhe national wildlife area.

She drew a link from environmental protection to social well-being, arguing Indigenous-led conservation initiatives can develop young leaders and strengthen cultural identities, offer new opportunities for addictions support and prevention strategies, and ultimately decrease demand for healthcare support.

It can help build a bridge between our communities and knowledge systems and broader society, Tsetso said.

Here in the North, were trying to sort out not just climate change issues and rights recognition, but also how we will have a sustainable, healthy future for future generations.

Prior to the first meeting of the working group last month, ILI spoke with Indigenous governments across the territory to get a sense of interest in this kind of financing.

Tsetso said there was strong interest in initial discussions to share priorities for a long-term conservation model.

One theme she heard throughout those consultations was capacity-building, including training opportunities and investments in equipment and infrastructure.

The PFP model represents an opportunity to strengthen our culture, languages, and ways of life here in the NWT, she said.

I think its important that that we start working together at all levels to find viable solutions that will enable a healthier future, and not just for land and water, but also for people.

British Columbias Great Bear rainforest is protected under a similar conservation model to the one being considered in the NWT.

While each privately funded project is unique, Great Bear illustrates how private donors, industry, environmental groups and various levels of government including First Nations can be brought together to pursue shared conservation goals.

The Great Bear rainforest is about the size of Ireland. The coastal region, combined with the Haida Gwaii island cluster, is home to one of the largest remaining temperate rainforests on the planet.

It is also the unceded traditional territory of more than two dozen First Nations.

Before establishment of a conservation agreement, little of the rainforest was protected from clear-cut logging.

In 2007 after more than a decade of negotiations the BC government, First Nations, environmental groups and forest industry representatives agreed how the rainforest would be managed and conserved.

The result was the Great Bear Rainforest Agreement which, since its creation, is reported to have protected 85 percent of the forest from all logging activities.

The conservation agreement secured $120 million of private and public money to transform the regions economy from one based in resource development to one based in conservation.

Coast Funds was the organization created to manage this money.

The $120 million was broken down into two separate funds. The first $60 million was raised by private donors and placed into a conservation endowment fund. Since the initial investment, this fund has grown to $95 million.

The second $60 million was contributed by provincial and federal governments later in the negotiation process. This money was put into an economic development fund. Fifteen years later, $11.5 million of this fund remains.

Dallas Smith of the Tlowitsis Nation was an architect of the Great Bear agreement. He was one of two negotiating parties representing the 27 First Nations involved.

He said he was skeptical, when discussions began, of protecting the environment with private funds.

Nothings ever really changed for the better for us since colonization has happened, Smith said.

It was important for us to really understand: What are they trying to buy? What is this money for? You know, hows it going to be spent? And that was quite a rigorous process.

By the time the agreement was finalized, Smith said he realized donors intentions were good.

This model put more tools in our hands to actually manage the areas and develop our own conservation-based economy, he said, whereas other traditional models were simply just about the protected area itself, not about enhancing First Nations opportunities.

Funding received through the agreement gave communities a financial foundation on which to develop more extensive eco-tourism and land stewardship operations.

Stewardship officers have been installed in many communities and trained to collect and analyze environmental data.

While the fund gives us a good start, weve taken some of our own revenue that weve developed through other avenues and are investing it to have more boots on the ground in our territories, Smith said.

He estimates that since the agreement was first created 15 years ago, around 1,100 jobs have been created.

When we first started training guardians in our territory, it was displaced and out-of-work fishermen or forest workers who lost their jobs because of some of the protection that we brought in, Smith said.

Now we have youth who are getting university educated to continue to be stewards in our territory Its really been transformational.

The challenge now, he said, is to keep the momentum going and continue fuelling the economy created through the agreement.

He said Coast Funds plans to raise money to extend similar protection to the marine world.

Smith said working out a proper system for allocating and managing the money was critical in gaining his trust.

Both the endowment and economic development fund are managed by a board of directors, of which Smith is the chair. Directors are appointed by First Nations, the BC government, and the various environmental foundations involved.

The second operating body within Coast Funds is a members committee featuring representatives of the original funders and participating First Nations communities.

These members convene once a year to look over the boards strategic plan and ensure funding is being spent as planned.

Smith said three of the eight member seats are held by First Nations leaders and new committee members are brought on fairly frequently.

Over the 10 years, most of the communities have had a chance to sit in that oversight role and be able to see how it actually works, he said.

A formula was created to establish how much funding each community could receive. A community is entitled to receive more money if it is conserving a larger piece of land.

Each of the 27 First Nations has a certain allocation that is theirs, that they can apply for on a yearly basis, Smith explained, adding it is up to each First Nation to apply each year.

Smith said when the board was first established, he felt there were colonial administrative demands placed on communities to track and report spending.

In hindsight, while a lot of those things looked restrictive in the beginning, theyve actually been good for the due diligence and management of the money, Smith said, adding that since the agreement was created, reporting methods have become more accessible.

Coast Funds has set up a team that works with communities to develop the proposals needed to access their allocation. Some communities do that work on a yearly basis, while others amalgamate several years of funding into the right project when it comes up.

In the beginning, it was something that was set up for Indigenous people, Smith said.

Now, its an Indigenous organization.

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How could privately funded conservation work in the NWT? - Cabin Radio

When large reserves of natural gas were discovered in the Netherlands in the 1970s it boosted government revenue, funding the good times without the pain of taxation. However, it brought its own economic, social and environmental problems. These gave rise to the term the Dutch disease to describe the economic challenges of a boom based on exploiting natural resources as such resources are generally finite, such booms are essentially temporary.

Natural resources such as oil or gas eventually run out. In the meantime, as the flow of money from gas or oil builds up, it adds to demand in an economy. If there is an independent exchange rate, there is an appreciation of the currency. Once that economy reaches full employment, the increased demand leads to a rise in inflation.

The combination of inflation and a stronger currency, in turn, results in the closure of many traditional firms who cannot stand the loss of competitiveness. This is not a major problem if the staff concerned are already leaving for higher paid jobs in the natural resource-based economy. However, the end result is an economy hooked on the natural resource income.

This is okay while the flow of income from exploiting the gas or oil continues. However, once it begins to run down, the problems set in. Traditional firms, who were trading successfully before the boom, are no longer there to take up the increasing slack. It is easy to shut down a business but much more difficult to start it up again.

The field of economics that studies how to manage these temporary booms was led from the 1980s by the late Prof Peter Neary of UCD. That work shows the economic recipe to avoid this boom-bust cycle. Instead of immediately spending the proceeds of a natural resource boom, it is wiser to invest the income abroad, easing demand pressures and the stress on the exchange rate. When the income from the boom begins to dry up, a country can then live off the income coming from its foreign investments.

Norway is a very good example of how to deal with the problems of success. While it has used some of the oil income to boost the already high standard of living, its sovereign wealth fund has built up huge investments abroad. By reducing the upward pressure on the exchange rate, it has ensured that traditional businesses continue to be successful in export markets. All of this will ensure a soft landing as oil revenues run down over the coming decades.

However, many other resource-rich economies have not shown the same wisdom. Russia is an example where the riches from oil and gas have had a serious negative impact on normal domestic business. If Europe manages to shut down much of the flow of income from Russian fossil fuels in the coming months, the Russian economy will have little to fall back on. Its oil-fuelled boom has prevented normal exporting businesses from developing. Having become dependent on oil revenues, it is very difficult to return to a more normal economy.

US multinationals

Ireland is also currently enjoying temporary windfall revenues, not from natural resources, but from possibly time-limited tax receipts from US multinationals who have located intellectual property here. The recent report from the Irish Fiscal Advisory Council (IFAC) highlighted the danger that the Republic may be suffering from early-stage Dutch disease from the boom in corporation tax receipts. The council pointed out that, like depleting oil and gas revenues, between 6 billion and 9 billion in tax revenue could disappear quite quickly if US tax policy changed. If the Government continues to spend this revenue, it will keep the good times rolling while the revenue lasts, but a consequence would be some traditional exporting firms would lose competitiveness and close. If the tax receipts then disappeared, we would have a major problem, both for employment, and for sustaining public services.

It looks as if the Government could run a surplus this year and Department of Finance projections suggest a growing surplus out to 2025. As IFAC suggests, the obvious solution is that the Government should invest the exceptional revenues in a fund. If the revenue continues, the Government could safely spend income from that investment fund as it builds up. However, if the revenue suddenly stopped, the fund would help provide for a gentle transition to a more normal world.

This is the right strategy to adopt. However, the temptation to buy popularity by spending the revenues will build as we approach the next general election.

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Government should put some of the corporate tax windfall into a rainy day fund - The Irish Times

Though the epidemic prevention situation is harsh at present there should be nothing missed in the planned economic work, Kim Jong Un said last month. The North Korean leaders appeal to keep up economic production while combating a COVID outbreak which Kim described as a great upheaval, an unusually strong formulation to refer to a domestic situation in North Korea shows just how vulnerable the countrys economy is. Pyongyangs surprising acknowledgment of a COVID-19 outbreak in the country raises many questions, one of which is how the epidemic might impact the economy. That it was already ailing before COVID arrived is something Kim himself has alluded to and admitted on multiple occasions.

Notwithstanding the high level of interest in the North Korean economy, it is a murky topic for most followers of the country. For a nation that devotes a great deal of its media space to economic news, it reveals surprisingly little useful information about the actual state of the economy. Even the annual budget breakdowns and production growth rates at parliamentary sessions the only set of official economic statistics provided by the North are all percentages and not actual amounts, which is hardly helpful to economists seeking hard data on the countrys economic conditions. Articles that seem as though they might provide some insight into the Kim regimes thinking on economic policy are often long and obscure, taking the art of deciphering state propaganda to new heights.

While numbers and percentages may provide instant gratification in finding answers to North Koreas current economic conditions, the fundamental matter at hand is economic policy, for it is this that will have longer-term consequences for the future of the country and possibly even the Korean Peninsula. And central to North Koreas economic policy is the Kim regimes current and future calculus on market-oriented measures, which this article shall loosely refer to as reform. How much progress North Korea makes on these initiatives, as well as the extent to which it is willing to forge ahead with them, will shape the countrys domestic and foreign policy agenda. How North Koreas increased focus on defense programs as demonstrated by its missile campaign since the beginning of the year that included intercontinental ballistic missile tests figures into its economic thinking also is food for thought.

In that vein, the questions to ask at this juncture are as follows: What is the status of North Koreas economic reform under Kim Jong Un? What might we expect of the countrys discourse on reform in the light of reinforced central control, the Norths renewed commitment to strengthen its nuclear and missile capabilities, and its apparent lack of interest in diplomatic engagement with the United States and South Korea? Pyongyangs continued quest for reform will to a large extent hinge on how it manages issues related to control, as well as the allocation of national resources. This balancing act will be seriously challenged by the countrys pivot to greater centralization and isolationism.

Kims Reform: A Work in Progress

In December 2011, Kim Jong Un inherited a decrepit economy that was still reeling from the aftermath of a failed currency reform two years earlier. Resuscitating the economy was clearly a top priority on his mind. The new leader sought to do just that by resuming his fathers July 1 economic measures, reforms that were launched in 2002 but in effect had been reversed by the end of Kim Jong Ils rule. Immediately after his fathers funeral, Kim gave senior Workers Party functionaries broad guidelines on economic management methods of our style, a code for market-oriented policies within the parameters of socialism that would be the governing principle of his economic policy.

After undergoing a period of research, planning, and conducting trial runs, North Korea between 2014 and 2015 rolled out reforms in farms, enterprises (the equivalent of companies in a capitalist system), and the financial and banking sector, in that order. The essence of the reforms was incentivizing individual units and workers to become more productive by decentralizing decision-making. Notably, North Korea codified Kims hallmark reform initiative, the socialist enterprise responsibility management system, or SERMS, in the constitution in 2019, indicating the regimes firm resolve to continue with its reformist policies. SERMS grants individual enterprises actual management rights across planning, resources, production, and profits.

Where, then, does North Koreas reform stand now? After a decade, Kims reform-oriented economic measures are still a work in progress. Reform has suffered setbacks, most clearly evidenced in the form of greater central control, but there is no evidence that these initiatives are being reversed.

North Koreas Eighth Party Congress in January 2021 generated much debate among North Korea watchers about the fate of Kims economic reform. The prevailing view seemed to be that reform was in retreat, with some arguing that reform was still in place, albeit with increased emphasis on centralization.

It is understandable why the party congress readout should have led to so many conclusions about North Korea backtracking on reform: State medias summary of Kims report to the party congress contained formulations indicating tighter central control, such as the states unified guidance on or management of resources and products, and the restoration of the states leading role and control in commerce. Moreover, greater central control had been a dominant theme in North Korean propaganda in the months leading up to the Eighth Party Congress.

The question then becomes: Is greater central control necessarily an antithesis of market-based economic reform? Or is Pyongyang trying to achieve both implementation of reform in a more controlled setting, one where it can better manage how reform initiatives are carried out? Evidence points to the latter.

North Korea continues to publicly endorse reform initiatives in enterprises and farms at authoritative levels. Reform in the financial and banking sector continues to be supported less publicly in academic journals by scholars who are likely involved in economic policymaking. Kim Jong Un, in his concluding speech at the Eighth Party Congress, called for push[ing] forward energetically with the research and completion of the economic management methods. This, when placed in the context of Kims earlier remarks that pointed to greater central control, indicated the countrys intent to carry on with reforms in a more controlled environment. In fact, the North is still in the stages of continuously improving and completing economic management methods of our style, according to a recent meeting of the North Korean Cabinet.

Logically and technically speaking, greater centralization results in reduced autonomy, initiative, and creativity in individual work units and among workers all essential ingredients of economic reform. But we need to recall that reform in the North Korean context comes with certain strings attached. In short, central control specifically the states unified guidance of the economy, giving greater freedom to enterprises within the bounds of the socialist economy, and the partys leadership over economic work has been an innate part of Kim Jong Uns reform policy since its inception.

Bumps in the Road

The general assessment is that giving greater autonomy to farms and enterprises and incentivizing workers have by and large resulted in increased production and the growing marketization of the economy under Kim Jong Un. But one can reasonably deduce that economic reforms have not been as easy to shape or implement as Kim Jong Un had hoped. If nothing else can serve as a data point, this can: Nine years after Kim called for the completion of economic management methods, North Korea is still working on them.

There are multiple internal and external reasons for this difficulty. The most obvious one is that there has been no progress on the nuclear issue, without which international sanctions will remain in force and continue to undermine the countrys economy and its prospects for reform and opening. The border closures the North has instituted since early 2020 to keep COVID-19 at bay, including nearly two years of suspended trade by rail with China and the continued prohibition of border crossings by individuals, and the recent outbreak of the virus at home have posed further obstacles.

As is often the case, the bigger, more fundamental challenges have lain tucked within the intricacies of policymaking. Of all these, Pyongyang seems to be faced with two enduring dilemmas associated with economic reform: the balance of control and the allocation of national resources. They have no doubt shaped discussions within the regime about the direction of, and impacted its ability to deliver, reform. And they will determine the future of North Koreas reform, depending on how Pyongyang chooses to tackle these issues.

Control Versus Autonomy

It would not be an exaggeration to say that the question of central control versus autonomy for lower-level economic units lies at the heart of North Koreas reform. The North has wrestled with this issue for the past decade. It will likely remain a sensitive issue as the regime continues to research, improve, and perfect its reform initiatives.

North Korean academic journals often serve as a platform for policy discussions that are not evident in central media like newspapers, where messaging tends to be more consistent and uniform. The journals are thus useful for gaining insight into the different lines of argument taken in the countrys policymaking circles sometimes vocally, sometimes subtly on a range of reform-related topics, some of which are contentious. And all key reform issues discussed in these journals boil down to lines of responsibility between central institutions and individual economic units, how much control the party or the cabinet should exert, and how much latitude typically expressed in terms of initiative and creativity lower-level units and workers should be granted. And more articles actually support giving greater autonomy to individual economic units than we might expect.

The cabinet-party dynamic is another key problem associated with control. North Korea continues to reaffirm the cabinets leading role in the national economy at high-level party and state meetings despite Kim Jong Uns repeated criticism of the cabinets failure to lead the economy properly. This is meaningful in the North Korean context, as the cabinet traditionally has stood for pragmatism (economic reform) and still appears to while the party has represented conservatism (ideology). However, North Korean media have both emphasized the partys economic leadership and repeatedly attempted to clarify a long-standing principle governing the party-state relationship in the management of the countrys economy: the partys role is to provide broader guidance on party policies without encroaching on the execution of party policies by state organs, including the cabinet. This recurring reminder suggests the lines of responsibility between the party and the cabinet are not always clear and there is room for the party to exert more control over the economy than is intended or desired.

As North Korea continues to struggle with the fundamental question of control and lines of responsibility, the countrys shift to a hard line since the collapse of the Hanoi summit in February 2019 is concerning. The countrys stronger pivot to conservatism since it sealed off its borders in early 2020 makes it probable that North Korea will stay on the course of greater centralization revolving around the party for the time being.

Kim Jong Uns main message at a party meeting held in April 2019, while the wound was still fresh from the failed Hanoi summit, was self-reliance, an isolationist term historically used by North Korea when it is not interested in engagement or diplomacy with the outside world, namely the United States. Kims message was quickly followed by North Koreas resumption of missile launches that coincided with a broader media campaign emphasizing ideological purity, the rule of law, and discipline, including in the economic sector in short, tightening the noose and preparing the populace to hunker down for a potentially prolonged period of hardship. The head-on breakthrough battle policy that Kim proclaimed at the December 2019 Party Plenum as he warned of a protracted confrontation with the United States was an extension of the self-reliance narrative.

North Korea has further expanded social controls and reportedly exercised greater dominance over markets since it instituted border closures, partly taking advantage of self-isolation to rein in the public and partly out of need to control market prices and foreign currency reserves. In early 2022, the North Korean premier said the country will keep working to recover the unitary trade system of the state, indicating unified resource and foreign currency management by the state and diminished (or perhaps little to no) trade autonomy for enterprises. Pyongyang appears poised to tighten the partys control even more as it combats the COVID-19 outbreak, with Kim Jong Un repeatedly emphasizing unconditionally obeying party policies at a recent meeting with the countrys top leadership. North Korean state media has renewed calls since early 2021 for building communism, the supposedly ideal end state of socioeconomic development and a concept that was wiped from the party charter and the constitution in the last reigning years of Kim Jong Il. These calls may simply be exhortative and have limited, if any, policy implications. But the campaign reflects a conservative shift in the country and is by no means reassuring from the viewpoint of reform.

Civilian Economy Versus National Defense

Kim Jong Uns ambition to continue nuclear development, coupled with the Norths resumption of intercontinental ballistic missile tests and a probable seventh nuclear test, begs the question of whether North Korea is reverting, or already has returned, to the byungjin line of simultaneously developing the economy and nuclear forces. The byungjin line was in effect from March 2013 to April 2018, when Kim declared the victory of byungjin and announced a transition to the new strategic line of concentrating all efforts on the economy. During the byungjin years, North Korea accelerated its nuclear and missile programs and declared that it attained the goal of completing the state nuclear force. And Kims commitment in recent months to prioritize the economy while defining national defense as an invariable priority policy and goal would seem to signal a return to byungjin, although North Korean medias focus by and large remains on the economy. Unlike in the past, Kim is present at only select missile launches, and missile launch reports, if they are carried by state media at all, have been pushed back to the second or third page of the countrys most authoritative daily, Rodong Sinmun.

If North Korea has in effect returned to byungjin without publicly announcing such a major policy transition from the new strategic line, it would only underscore the sensitivities of reconciling increased defense spending with Kim Jong Uns people-first principle. Irrespective of North Koreas current policy brand, Pyongyang has clearly shifted to a greater prioritization of national defense, and this will almost certainly have negative ramifications for reform. It is not so much that byungjin and economic reform are incompatible. In fact, North Korea introduced and made progress on its reform initiatives during the years of byungjin, while at the same time making strides in its weapons programs. But a greater focus on national defense does mean competing priorities and possibly even a shift in policy priorities. This leads us to a question fundamental to reform: resource allocation.

A study of North Korean journals suggests that the regime has been discussing questions relating to defense spending and the allocation of resources between the civilian economy and the defense industry for years. These questions revolve around the defense industrys place in the national economy, whether the industry contributes to the civilian economy, and whether the country should be spending more money on longer-term investment like national defense or on the more immediate economic needs like spurring growth and providing greater material incentives to workers.

And North Koreas position on these questions will have profound consequences for reform. This is because the more foothold gained by those in the North Korean leadership who support building up national defense, the more resources that will be earmarked for defense spending, leaving that much less resources for revitalizing the civilian economy and for reformist ideas and initiatives to blossom and take root. Unfortunately, North Koreas renewed pledge to advance its nuclear and missile programs suggests that the regime may once again be diverting resources away from the civilian economy to the national defense industry. North Korea typically cites the Iraq and Libya examples to emphasize the importance of strength. Likewise, it is possible that the Russian invasion of Ukraine has empowered proponents of greater defense spending in Pyongyang.

At this juncture, Kim Jong Uns remark at the countrys first national defense exhibition in October 2021 may be worth highlighting: [A]ny development and success of our revolution is inconceivable separated from the preferential development of the national defence capability. North Korea typically uses the logic that strong national defense is essential for stable economic development when it needs to justify greater defense spending.

Looking Ahead

There is a clear pattern of North Korea shifting to diplomatic engagement when it prioritizes economic development and intends to give impetus to economic reform. A peaceful external environment would be favorable to economic development not only because it increases the likelihood of improving diplomatic relations with the United States and attracting foreign capital but also because it is easy to justify directing more resources to the civilian economy.

The connection between Pyongyangs increased diplomatic outreach and economic development was clear in the lead-up to and following the launch of Kim Jong Ils economic reform measures in July 2002. Kim Jong Il sought to improve relations with the United States, met with the South Korean president for the first time, held summit meetings with the Chinese and Russian presidents and the Japanese prime minister, and established relations with European nations. Similarly, North Korea made diplomatic overtures toward China, South Korea, and the United States in early 2018 in the lead-up to a major policy shift from byungjin to concentrating on the economy.

Given this history, we may say North Koreas current lack of appetite for diplomatic engagement since 2019 indicates economic reform is not a top priority. North Koreas continued endorsement of reform at the highest levels indicates it has not reversed or given up on it, but the regime appears to be content experimenting with and improving reform initiatives for the time being. Pyongyangs priority appears to be maintaining the economic status quo and, if possible, improving the economy. It appears to believe it can manage to keep the economy afloat even improve it by using this self-isolation period to work out various domestic political and economic issues and maximizing the countrys capacity for self-reliance, primarily through encouraging local production and recycling and improving science and technology, which are some of the prominent economic themes in North Korean literature.

When North Korea decides it is time to focus on economic development and by a natural extension of that, reform, it will return to diplomacy as it did in 2018. But that likely will happen only after the North attains or at least makes substantial progress with its weapons advancement goals as outlined during the Eighth Party Congress, which it believes will give the country more negotiating power vis--vis Washington. And the current global environment, one where the United States and the West are pitted against China and Russia, provides the perfect opportunity for Kim Jong Un to advance his nuclear and missile capabilities without running too many political or economic risks.

Kim clearly envisioned improving the economy by injecting foreign capital into the country. To that end, the North enacted and amended investment laws and even created special economic zones between 2013 and 2019. For now, all these ideas, laws, and zones look good on paper only. The next time Pyongyang decides to return to negotiations, enough progress will hopefully have been made for the country to follow through on these and other economic initiatives. Until then, North Korea will chug along wearily but tenaciously as it always has, with promised economic development and reform remaining far from reach.

Rachel Minyoung Lee is Regional Issues Manager at Vienna-based Open Nuclear Network and a nonresident fellow at Stimson Centers 38 North Program. Lee was a North Korea open source collection expert and analyst with the U.S. government from 2000 to 2019.

Image: CC-BY 2.0, Flickr user Prachatai

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Kim Jong Un's Tortuous Path to Economic Reform - War on the Rocks

The Economic and Social Council concluded its 2022management segment today with a round-table discussion on the theme of Leveraging ECOSOC for an inclusive and resilient recovery guided by the 2030 Agenda.

The discussion aimed to integrate key messages from the Councils subsidiary bodies and the United Nations system on the main theme, develop action-oriented recommendations for follow-up and feed into the high-level political forum on sustainable development (as mandated by General Assembly resolution A/RES/75/290A).

Chaired and moderated by Lachezara Stoeva (Bulgaria), Vice-President of the Economic and Social Council in charge of the management segment, the round table featured panellists: Armida Salsiah Alisjahbana, Under-Secretary-General and Executive Secretary of the United Nations Economic and Social Commission for Asia and the Pacific(ESCAP); Chantal-Line Carpentier, Chief, United Nations Conference on Trade and Development(UNCTAD) New York Office; Mathu Joyini, Permanent Representative of South Africa to the United Nations and Chair of the Commission on the Status of Women at its sixty-sixth session; Jamil Ahmad, Director, United Nations Environment Programme(UNEP) New York Office; Jose Antonio Ocampo, Professor at the School of International and Public Affairs, Columbia University and Chair of the Committee for Development Policy at its twenty-fourth session; Geraldine Fraser-Moleketi, Chancellor of Nelson Mandela University and Chair of the Committee of Experts on Public Administration at its twenty-first session; and Daro Jos Meja Montalvo, Political Scientist, National University of Colombia and Chair of the Permanent Forum on Indigenous Issues at its twenty-first session.

Ms. STOEVA noted that, at the inaugural Economic and Social Council coordination segment, held on 3 and 4February, the organ identified key areas where it, its subsidiary bodies and the United Nations system could deepen policy reflection, identify innovative solutions or work more closely together. These included mainstreaming gender perspectives, poverty reduction, food security, education, digital transformation, access to technology and bridging the digital divide, sustainable infrastructure, the green economy, climate resilience and approaches based on human security. She noted the Secretary-Generals Global Crisis Response Group on Food, Energy and Finance warns that around 1.7billion people in the world live in 107economies estimated to be severely exposed to a shock of one of the dimensions of food, energy or finance. Against that backdrop, she invited panellists to build on the coordination segment discussions and the guidance provided by Member States, and engage to consolidate key messages.

Ms. ALISJAHBANA, speaking via videoconference from Bangkok, said the seventy-eighth ESCAP session adopted a declaration, with member States committed to leaving no one behind, putting women and girls at the centre of development and protecting the planet. They further addressed enhancing trade, improving digital cooperation and boosting partnerships. Citing highlights from the regional forums, she noted the ninth Asia-Pacific Forum on Sustainable Development focused on enhancing social protection, quality education and prioritizing nature-based solutions for climate mitigation. The Arab Forum for Sustainable Development emphasized achieving a green recovery from the COVID-19 pandemic, and promoting information and communications technology(ICT) start-ups. She noted the Africa Regional Forum on Sustainable Development highlighted the need to unlock financing to build forward better from the pandemic. For its part, the Regional Forum for the Europe region highlighted a need to focus on systematic change and accelerate progress on the Sustainable Development Goals. Finally, she cited the Regional Forum of the Countries of Latin America and the Caribbean on Sustainable Development, which called for renewed regional integration to advance the 2030Agenda, leveraging innovative financing, and addressing impacts of climate change and natural hazards.

Ms. CARPENTIER said that the strengthened coordination must be a two-way process. Greater opportunities should be given to the Economic and Social Council to give guidance and recommendations to the work of its subsidiary bodies to ensure their alignment with its work and the 2030Agenda for Sustainable Development. It is also imperative for the Council to draw on the specialized technical advice of its expert bodies more effectively. UNCTAD, as Secretariat of the Commission on Science and Technology for Development and of the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting, convene these subsidiary bodies in Geneva. In UNCTADs view, alternating New York and Geneva gives the Economic and Social Council more exposure to the Geneva-based subsidiary bodies and their work. The Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting, for instance, is the United Nations focal point on accounting and corporate governance matters, and the Council should hear more about that bodys work. The same goes for the Commission for Science and Technology for Development.

Ms. JOYINI stressed that women and girls remain unduly affected by the pandemic, facing disproportionately high job and livelihood losses and education disruptions. The pandemic has created a global care crisis, which has left millions of children and care-dependent adults without support, and despite womens central role in responding to the pandemic, they are still largely bypassed for leadership positions. Womens health services have faced major disruptions, and there also exists a shadow pandemic of increased violence against women and girls, in particular domestic and intimate partner violence. However, the global disruption has also provided an opportunity: We must seize the momentum for gender-responsive change in socioeconomic systems, she said, highlighting calls for an intersectional feminist approach. The world is not on track to achieve gender equality by2030, she said, as out of 18indicators for Sustainable Development Goal5, only one is close to target. She called for bold action for accelerated implementation of the Beijing Declaration and Platform for Action, as well as the gender-responsive implementation of the 2030Agenda.

Mr. AHMAD said recovery from the pandemic represents a once-in-a-lifetime opportunity to transition the global development paradigm towards low-carbon, resource efficient, nature positive and socially inclusive economies. The United Nations Environment Assemblys strong engagement can make an important contribution to the Councils role in enhancing an inclusive and resilient recovery and the organ can further enhance an inclusive and resilient recovery by sharing best practices on national alignment of energy security policies with climate security goals, removing market distortions, such as fossilfuel subsidies, and increasing access to low- and zero-carbon technologies. He noted the Council can also help identify options to finance the green shift and identify pathways for countries to create the conditions to deploy financing solutions to reduce debt burdens and ensure just and equitable transitions to circular economies to address climate, pollution, nature and inequality crises.

Mr. OCAMPO said the Committee this year concluded that industrial policies should also strongly back the integration of micro-, small and medium-sized enterprises into broader productive networks. Post-pandemic industrial policies will need to consider new realities, including those associated with the green and blue economies. The Committee members noted that fulfilling the potential of industrial policy requires effective regional and global frameworks, effective institutions and cooperation, including South-South cooperation. The Committee recommended that the Council encourage Member States to adopt and implement evidence-based industrial policies, building forward from the pandemic-induced crisis and addressing the preexisting crises of climate change and growing inequalities. The Committee further recommended in2022 that the Council call on the relevant United Nations entities to support developing countries, in particular those least developed.

Ms. FRASER-MOLEKETI noted that building forward better from COVID-19 and achieving the 2030Agenda call for stronger, more effective and credible public institutions, focusing on reopening and rebuilding economies in a sustainable manner, including providing assistance to countries in managing debt levels and inflation. Stressing that the environmental goals of the 2030Agenda have stagnated or deteriorated across all regions, she noted that such poor performance is due in large part to institutional factors. Ecosystem management, territorial development and a clear distribution of responsibilities across all levels of Government are part of the solution, she said, noting that environmental accounting was key for creating such market-based incentives and promoting transparency and accountability. She also noted that technology and hybrid models of public service delivery are necessary to leave no one behind, given the basic challenges of energy availability, electricity and Internet access. She further called for expanded efforts to develop and adopt international norms and standards on managing fiscal stimulus packages and fiscal policy in times of crisis.

Mr. MEJA MONTALVO cited regional discussions on the theme Indigenous peoples and pandemic recovery, pointing out that vaccination campaigns in indigenous languages remain a challenge due to distances and even security issues. He noted the impact of a lack of infrastructure and digital education tools, while economic pandemic measures adopted by Governments have exacerbated human rights violations affecting indigenous people, with increased large-scale energy and mining projects threatening their territories. The Permanent Forum underscored the importance of desegrated data, moving towards a collaborative approach on the Sustainable Development Goals. Calling for earmarked funds for indigenous initiatives, he emphasized that the preservation of ecosystems should not lead to greater injustices. He further urged subsidiary bodies and the United Nations system to advance initiatives including involving indigenous women specifically in their work.

When the floor opened for dialogue, the representative of Italy said his delegation serves as a co-facilitator to draft the declaration at the 2022high-level political forum on sustainable development, acknowledging the richness of inputs from the United Nations system while stressing the important role of the Council in achieving the Sustainable Development Goals.

The Czech Republics representative recognized the need to ensure reliable, comparable and quality data, including disaggregated data, to be able to make evidence-based policy decisions in addressing the impacts of the pandemic and achieving the Goals.

The representative of Colombia said the Economic and Social Council must continue to include the gender perspective, with every subsidiary body considering the impact of decisions on women and girls. Also needed are nature-based solutions, and a discussion on the debt issue, focusing on every States context. He agreed on the contribution of middle-income countries, per the SecretaryGenerals comments.

The representative of Thailand said the Council must draw on technical advice from subsidiary bodies, with its system putting the most vulnerable people at centre of all of its work. Partnerships are crucial, she stated, including with regional and non-regional groupings.

In response to comments by delegates, Ms. CARPENTIER said that to overcome the cost of living crisis, there is a need to address the financial crisis. Therefore, financial support to developing countries is vital. UNCTAD provides some recommendations on how funding can reach the most vulnerable countries. Warning that financing for technical support is drying out, she stressed the vital importance of supporting technical capacity-building in those countries.

Mr. OCAMPO encouraged Council members to read the Committee for Development Policys analysis of voluntary national reviews. The Committee is monitoring countries that are graduating and have graduated from the least developed category, and reviewed the progress of one recently graduated State, namely, Vanuatu, and seven graduating countries, namely, Angola, Bangladesh, Bhutan, Lao Peoples Democratic Republic, Nepal, Sao Tome and Principe and the Solomon Islands. The Committee expressed its concern at the limited national capacity of those countries to address diverse challenges, including the pandemic, natural hazards and debt sustainability.

Mr. AHMAD said that the achievement of environmental goals of the 2030Agenda are lagging behind, compared with other goals. The poorest and most vulnerable countries must have access to financing for the necessary transition to low-carbon economies. They must also have the ability to use financing appropriately.

Ms. FRASER-MOLEKETI, citing the principles for effective governance for sustainable development, said issues including those of integrity and participation were salient at the subnational level. Affirming the centrality and importance of strong institutions and public services at all levels, she emphasized the importance of Sustainable Development Goal16 as cross-cutting for all the Goals. Over the past year, the Committee of Experts on Public Administration responded directly to themes identified by the Council, building its work around that to affirm its relevance to Member States.

Ms. JOYINI said it is clear all are pursuing similar goals, and the coordination segment and round tables are key in bringing out synergies on policies, and necessary actions to be taken. She reinforced the importance of focusing on women, girls and other vulnerable people in achieving the Goals.

Ms. ALISJAHBANA said the Goals were not on track, even before the pandemic, especially in developing countries. She noted the common concern over vulnerable populations, interlinkages between the Goals, and the need for financing alongside the increasing risks of the debt crisis. She further highlighted the opportunities offered by digitalization.

Mr. MEJA MONTALVO proposed a comprehensive approach focused on rights and duties. Indigenous peoples rights still lag behind as 2030approaches but concerning the rights of nature, those populations are ahead, as they preserve 80percent of biodiversity. Increasing coordination would benefit all United Nations entities and subsidiary bodies, he said, stressing the need to renew the social contract with indigenous peoples to address inequality, exclusion and provide access to justice for all.

Ms. STOEVA, noting that less than eight years remain before2030, posed questions regarding gender mainstreaming and ways to accelerate progress on the attainment of the Sustainable Development Goals.

Mr. AHMAD said that women are at the forefront of taking the brunt of environmental challenges. UNEP has special focal points for gender issues, and it convenes a meeting of women ministers for environment to share experiences.

Mr. OCAMPO underscored the issue of financing as vital to the achievement of the Goals. Official development assistance(ODA) has more or less remained the same. The least developed countries need additional funding. In the wake of the 2008-2009 global financial crisis, there were major initiatives by multilateral development banks. But, today, no similar process has been seen to tackle the current crisis.

Ms. FRASER-MOLEKETI said what is really required to implement the Goals is political will and change of mind. Also, it is important to adequately allocate resources and budgets and ensure that the 2030Agenda is integrated in national and local plans. Peer pressure can accelerate implementation of the Goals, but that can work only if the 2030Agenda is not seen as an add-on. On gender mainstreaming, it also requires political will and a change of mindset.

Mr. MEJA MONTALVO emphasized that women are the primary driver in every sphere of society. On the 2030Agenda, increasing the participation of indigenous peoples is critical. Communities that are at the forefront of implementing the Goals must receive financial support.

Ms. ALISJAHBANA said that, to achieve the Sustainable Development Goals, priority must be the provision of basic rights and services, especially related to human capital, including education and health. Digital technologies also offer a potential to accelerate implementation of the 2030Agenda. Women and girls must be at the forefront. It is vital to get the macroeconomic policy right, including budgets and spending on the Goals.

Ms. CARPENTIER said it is important to capture the opportunities of orphan Sustainable Development Goals in the green, blue, orange and purple economies, and empower small and mediumsized enterprises. With the serious crisis facing the Goals, developing countries must increase their fiscal space and liquidity access for social protection systems. She called for recapitalized development banks, more flexible lending ratios, reactivation of rapid disbursement mechanisms and new special drawing rights.

Also speaking was the representative of Indonesia. The European Unions representative also spoke, in its capacity as observer.

Before the round table opened, the representative of the United States, addressing Tuesdays elections to outstanding vacancies, noted Ethiopia won an uncontested election to the Joint Executive Board of the United Nations Development Programme(UNDP)/United Nations Population Fund(UNFPA)/United Nations Office for Project Services(UNOPS) from the African States. Any State in that position must be the strongest advocate for each of the mandates of those organizations worldwide in particular championing the rights of women and girls to protection from sexual and gender-based violence, and justice for victims. Countries in conflict often experience conditions in which women fall victim to gross human rights violations, she noted, and Ethiopia has been no exception. Citing its recent initiatives towards a humanitarian truce, she urged the Government to continue investigations of sexual and gender-based violence related to the conflict in northern Ethiopia.

The Council will next meet on Monday, 20June, for a one-day meeting on the transition from relief to development.

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Concluding 2022 Management Segment, Economic and Social Council Focuses on Role in Attaining Inclusive Recovery Guided by Sustainable Development...

Russias invasion of Ukraine has heightened concern about NATOs ability to maintain its core mission of providing security and stability to allies across Europe. This concern is most acute in smaller, former Soviet states with Russian ethnic populations that are close to the Russian border, as is the case for the Baltic StatesEstonia, Latvia, and Lithuania. These security issues include political, economic, and military factors. NATO, as the political-military organization that guarantees security in the region, is critical to answering those concerns. Understanding how NATO currently works to protect vulnerable allies, such as the Baltic States, and how it might initially respond to a Russian incursion can provide insight into how U.S. strategic and operational activity can influence European security and global stability.

To understand the context of strategic competition in Europe, it is important to understand the underlying resources that Russia and the NATO Allies can leverage to achieve their goals. In this resource-based sense, Russias relative power in Europe, though not at its nadir, is weaker than it has been over much of the past two centuries. Russias political and diplomatic power in Europe have not fully recovered from the collapse of the Soviet Union. In addition, Russia suffers from a weak economy with structural problems exacerbated by a comparatively small population, and a relatively small conventional military force with limited capacity for meaningful expansion because of increasing economic and political constraints.

NATOs collective conventional force structure is dramatically larger than Russias. North American military forces number 1.4 million (mostly U.S.) personnel. Remaining NATO allies account for another 1.8 million personnel.1 Russia, meanwhile, has 850 thousand active-duty personnel.

At a more technical level, Russia has produced some of the most sophisticated weapon platforms in the world. However, because of its funding weaknesses, Russia lacks the ability to field significant numbers of those forces, so that any loss in major conflict would be operationally or even strategically significant. For example, Russias Severodvinsk submarine is widely viewed as one of worlds most capable nuclear-powered, cruise-missile capable submarines; but, with only three operational hulls (two in the Northern Fleet, one in the Pacific Fleet), the class is dangerous, but poses a limited threat.

In view of the meaningful gap between NATO and Russian economic and military power in a conventional sense, Russia has outsized regional economic leverage through its energy exports and has invested effectively in asymmetric capabilities. However, Russia's poor timing in starting its invasion of Ukraine in spring has allowed NATO and the EU to build consensus and a plan to largely disconnect from Russian energy supplies, mitigating Russia's strength in this area. Notably, Russia has developed sophisticated cyber-warfare capabilities and, perhaps more important, continues to invest in significant information and influence operations. From a conventional force perspective, Russia also enjoys certain asymmetric advantages it could leverage to present strategic and operational challenges to NATO in a physical conflict scenario. Specifically, it enjoys a comparatively clear and unified command-and-control (C2) architecture closely aligned to its political objectives; it can choose the time and place of conflict; and it has short internal lines of communication, providing significant advantages to its ability to maneuver and supply operational forces. Russias missteps in Ukraine have demonstrated that this tight organization can also be a curse as politics and corruption appear to have undermined information flow, planning, and decision making in ways that have seriously undermined strategic and operational goals. Nonetheless, these advantages would allow Russia to seize the initiative and dictate tempo in a conventional conflict.

In contrast, NATO has a notoriously complex command-and-control structure whose actions are tied to political consensus across 30 countries. Gaining consensus for action, particularly major military commitments, can be challenging, especially in a chaotic situation. Moreover, the NATO military structure is a command-and-control (C2) construct that sits on top of existing national military C2 organizations, adding complexity for forces used to operating under national command structures. While this permanent allied C2 structure is necessary and better than any alternative, some of the force structure advantage that NATO enjoys over Russia is simply a standing allied C2 organization, not necessarily direct combat power.

In a conflict with Russia, delays caused by the decision-making processes may be exacerbated by the fact that most NATO forces are stationed away from the Russian border. While some tactical units have moved east, including high readiness elements of the NATO Response Force (NRF) a large NATO military response to any Russian incursion would have to move hundreds of miles across multiple countries. Even the likely addition of Finland and Sweden to NATOs rolls would not immediately shift the preponderance of NATOs military force disposition, though it would significantly increase NATOs flexibility in potential force deployments along Russias border. In addition, to be effective for a conflict, those forces need significant logistical support from their parent nations or NATO. Executing force movement and establishing local or expeditionary logistics support for the incoming forces in any area, even the Baltic, takes time. The net effect is that physical distance of forces from the conflict area compounds with decisional delays to cede important time to Russia in a crisis. Time to operate in an uncertain or weakly opposed environment may enable Russia to use a brief window of confusion to quickly seize its objective.

NATOs conventional advantages point to eventual NATO success in any long-term and large-scale conventional conflict with Russia. Accordingly, Russia wants to avoid any extended, major conflict scenario with NATOin fact, the Russian government is clearly unhappy to be engaged in a long-term conflict with a NATO-armed Ukraine. However, there might be conditions under which Russia could perceive an opportunity to foment chaos and quickly seize NATO territory. Russias aggressive move in Georgia and invasion of Crimea exploited chaos and confusion to delay international response while Russia established control of territory. It sought to do the same in its invasion of Ukraine, deflecting and denying reports of mobilization and flooding accessible media outlets with disinformation or Russian government talking points. Clearly, the Russian government miscalculated the skill and spirit of Ukraines defenders as well as the commitment of the international community (particularly NATO and the EU) to resisting Russian expansion.

Russias missteps in executing its invasion of Ukraine leave it mired in a major conflict that is consuming its operational forces and their equipment at an alarming rate. Even worse, rather than deliberating ineffectually, the NATO has responded more forcefully than Russia expected and looks set to expand to Finland and Sweden, both major strategic setbacks for Russia. This experience should suppress any desire to test international resolve with a new military adventure in the near term, though expansion of the current conflict remains a key concern. In targeting a NATO ally, Russia would need to be more cunning and subtle with its execution, though the potential reward of undermining the NATO alliance might be worth the risk.

A plausible Russian strategy for action against NATO might be to engineer a chaotic situation in a Baltic state and act quickly and forcefully while chaos or misinformation causes strategic indecision among the allies. In this scenario, Russias operational plan would be to seize a small piece of one of these states while NATO is confused and deliberating. An ideal target would be a frontier area with friendly ethnic Russian presence and little tactical or economic value. This might give Russia the chance to negotiate a political settlement in which they retain annexed territory or extract some other diplomatic concessions in exchange for retreating without major combat.

The strategic objective in this Baltic scenario is not to add land or strategic depthRussia has always had plenty of the former and would gain little depth without wholesale seizure of the Baltic states. Rather, the goal is to begin to restore its status as a regional hegemon, lost with the dissolution of the Soviet Union. Integral to that goal is its objective to undermine confidence in NATO, stop its growth, and begin to sow the seeds of its disintegration so Russia can replace it. Russia wants to demonstrate that NATO will not fully live up to its commitment to protect all members equally.

As the most powerful alliance in the world, with deep political and economic resources and global ties, NATO has considerable strength to engage diplomatically and economically with Russia, including through coercive mechanisms. Such nonmilitary action is NATOs first means to dissuade Russian adventurism in Europe. NATOs continued efforts to send the message to both allies and adversaries that the alliance is united and will uphold its commitments are an important part of keeping Russian aggression in check. Miscalculation is often a prelude to conflict, so NATO consistency in its message of mutual commitment to the security of all members, especially the Baltic States, is important to prevent Russia from perceiving some weakness in the alliance. This message is prominent in NATO communications and at a national level among allies as well.

When confronted with Russian posturing, NATO, or collections of allies, can respond with their own political and economic leverage, imposing costs on individual Russian oligarchs or their business interests through sanctions and international legal actions. Recent examples include the sanctions imposed broadly following the 2022 invasion of Ukraine. In addition, NATO allies perceiving imminent crisis can call for Article 4 consultations, as eight NATO member states did prior to Russias invasion of Ukraine. These consultations inherently focus global attention on any crisis and accelerate political decision making, as the world witnessed the immediate wake of Russias offensive. When taken early, these collective actions help send a message of resolve and remind Russia of the broad coalition of states and extensive power base against which it is competing.

There also are defensive military actions that NATO can take early or in advance of crisis to help prevent conflict. Perhaps the most useful pre-crisis activities are NATOs regular military exercises that build tactical and operational interoperability. While generally not focused specifically on Russia, these activities demonstrate commitment of resources and attention to relevant common defense priorities. In the maritime domain, the annual Baltic Operations exercise demonstrates NATOs ability to cooperate effectively in the Baltic region. More broadly, Exercise Neptune Shield provides the opportunity to train maritime forces in Allied C2 and combined operations throughout European waterspace. NATO can also use exercises to practice the movement of forces to potential conflict zones, developing familiarity with requirements that would speed the deployment response process in a real crisis and demonstrating the will to do so if necessary. The United States leads this type of initiative with its Defender exercises, begun in 2020, which practice joint movement of large U.S. Army formations into Europe to respond to crisis (though not specific to the Baltic States).

Beyond this present activity, NATO or individual allies can incrementally demonstrate their concern and readiness by repositioning mobile standing forces (e.g. Standing NATO Maritime Group, Neptune Challenge, BaltOps exercies) to the proximity of the conflict. Their ability to be close to a potential flashpoint while remaining in international waters and away from the confusion on the ground is valuable. In the land domain, NATO began its enhanced forward-presence deployments to Eastern European allies in 2016 for the express purpose of demonstrating Allies solidarity, determination, and ability to defend Alliance territory. Highlighting or adjusting that commitment of forces would also reinforce the Alliances message and complicate Russian operations in their vicinity.

Once Russia has violated NATO sovereignty, possibly by seizing some piece of destabilized territory along the Latvian or Estonian frontier, NATOs potential responses expand dramatically. The first and most significant response at the political level is an Article 5 decision; formally, the unanimous decision that a foreign entity has attacked a NATO ally and the alliance will respond with such action as it deems necessary, including the use of armed force, to restore and maintain the security of the North Atlantic area. Once decided, the political pathway to increasingly severe political, economic, and military action is clear.

Invoking Article 5 triggers the start of significant collaborative military efforts, including conventional warfare operations. Immediate actions following NATOs Article 5 declaration in 2001 provide many examples that could be extrapolated to this scenario. For example, allied efforts might begin with enhanced intelligence sharing, both to better inform military actions as well as political decision making. NATO may also expand existing authorities governing the use of standing NATO forces as well as their tactical disposition and the rules of engagement that constrain their actions, particularly regarding collective defense. NATO would likely activate its Response Force, including its Very High Readiness Joint Task Force, which can mobilize in as little as three days, to blunt Russias initiative and send a collective message of military commitment.

Generalized overflight and access to airfields and ports for the purpose of large-scale force movement and reception also would be expected as the Alliance signals to Russia that it is preparing for a prolonged and concerted effort to reverse the invasion. In addition, activating and integrating forces under operational command of Joint Forces Commands Brunssum and Naples, as well as Striking and Support Forces NATO, would send a clear message to Russia that its efforts to achieve a quick resolution are bound to fail.

Russia continues to seek to rebuild its influence on the peripheral states where it was once a hegemon. Russias actions in Ukraine demonstrate the threat, and President Vladimir Putins own words show the intent. NATO presently acts as an effective shield for allies, with its tremendous political, economic, and conventional advantages over Russia. Despite these strengths, NATO must be mindful that Russia has its own asymmetric advantages in a potential conflict in its near abroad.

NATO has rightly pursued a path to avoid conflict with Russia by maintaining political unity as well as military interoperability and readiness through combined exercises and operations. NATO must continue to maintain that unity and readiness to prevent Russian aggression. Should deterrence fail, swift and credible action to demonstrate collective commitment to NATO defense will be critical to successful defense of the Baltic, and the health of the Alliance as a whole.

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NATO, Russia, and Competition for Strategic Influence in the Baltic - USNI News

Over the years, Pakistans economy has been confronted with a dilemma it has not been able to overcome: In the event that it registers lackluster growth, it will not be able to create enough jobs for its massive (more than 65 million) and growing labour force, thus remaining stuck in low income-low-employment-low living standards vicious cycle.

In case the economy grows at a moderately healthy rate of five per cent or above, the growth pace will exacerbate external imbalances mainly in the form of galloping imports, and drive up prices exorbitantly, making economic expansion difficult to sustain. As a result, stabilization (read: growth compression) measures will have to be instituted to cool down the over-heated economy.

In the latest manifestation of this dilemma, the National Economic Council, the apex government body for economic matters, has targeted a five per cent growth rate for the upcoming financial year, because a higher growth rate would have become problematic (read: unsustainable) in the face of the state of the economy and IMF conditionalities. When an economy is liable to overheating at growth rate exceeding five per cent, its obvious that its edifice rests on flawed fundamentals.

The, to put it euphemistically, growth-stabilization dilemma is rooted in elementary economics. The total demand in an economy can be met either by domestic output or through foreign goods or services (imports). When on the back of a relatively robust economic growth rate, the domestic demand shores up, local and foreign products will compete to satisfy it.

As a rule, the lower the capacity of the local industry to cater to the heightened domestic demand, the wider space will be available to foreign products to rack up their presence in farms, factories, offices, and at homes. Characteristically, in the case of Pakistan, an uptick in domestic demand drives up imports, as local supplies lag well behind the increased ability and willingness to buy in the economy.

One obvious objection to the foregoing reasoning is that it disregards the fact that acceleration of economic growth is accompanied by an increase in the scale of domestic output. The answer to this objection consists in the distinction between short-term economic growth and long-term or potential economic growth. Short-term growth, as opposed to the potential growth, is undergirded only by an increase in total demand without a corresponding increase in the productive capacity of the economy. An example seems in order here.

Suppose an economy can produce 100 million shirts and 100,000 cellphones annually. This output is the maximum attainable, given the resource base and productivity levels. Cost-saving and profit-maximizing businesses in either industry will not necessarily produce to their capacity. The actual number of shirts and cellphones manufactured each year will depend on their projected demand. In a typical year, 75 million shirts and 80,000 cellphones are manufactured.

Suddenly, because of the induction of a charismatic leader in power or for some other reason, the economy receives great amounts of remittances from the patriotic expatriates residing across the globe. Anticipating an increase in demand, garment factories and cellphone manufacturing units will jack up their production to 80 million pieces and 85,000 units respectively. The increase in production and sale of the two products will be duly reflected in the expansion of the countrys total output or the GDP.

The increase in remittance inflows keeps on increasing and with it the number of shirts and cellphones produced, and the size of the GDP remains on an upward trajectory until in five years the demand for shirts rises to 100 million and that for cellphones reaches 100,000 units.

Everyone now seems better off. Consumers, by and large, have more shirts to wear and more smartphones to use. Factories are hiring more labour and buying an increased volume of raw materials and components and racking in higher revenues. The government has a cause for boasting that its pro-growth policies have been consequential.

This scenario does have a fly in the ointment. During all these years, the productive capacity of the economy has remained stuck at 100 million shirts and 100,000 cellphones, because no new investment has been made in either industry; nor has the productivity of the workforce gone up. This means that the short-term growth has not translated into long-term or potential growth. As the actual shirt, as well as cellphone, output has already reached the maximum capacity, a further increase in demand on the back of ever-increasing capital inflows can only be met by imports.

Imports are not bad per se; import of raw materials, components and capital goods may be necessary for keeping the wheels of the economy turning. Likewise, export of certain consumer goods, such as food and pharmaceuticals, is unavoidable. However, when exports become stagnant or their growth lags well behind import growth, it becomes a cause for concern: foreign exchange reserves dry up, the domestic currency takes a pounding, and external deficit balloons up. Soon the euphoria generated by the short-run growth fizzles out and the government has no alternative to swallowing the bitter pill of cooling down the economy and reversing the much-trumpeted pro-growth policies. All of a sudden, the need for undertaking the painful but eventually fruitful reforms becomes the talk of the town.

Be that as it may, growth compression policies are not sustainable either. It may be a tautology, but undeniably a developing economy must keep growing, especially one that has a relatively high population growth rate. Politically, no elected government would like to leave its office with economic stagnation mocking its balance sheet. People want jobs, which can be generated only when the economy expands. Businesses are keen to sell more, which is possible only when consumers have rising incomes and better job prospects. The creditors, which are looking to get their capital back along with the mark-up, would like the debtor country to jack up its earnings. So soon after surviving the meltdown, the economy is back on the growth track jerrybuilt, though it may be. Somberness, again, gives way to euphoria and economic reforms are put on the backburner.

Pakistan goes through this economic cycle every four or five years, coinciding with the election cycle. The malady is all too familiar but has proved a hard nut to crack. At 15.2 per cent, Pakistans investment-to-GDP ratio is among the lowest in the world, which needs to significantly go up. Not only that, we need the type of investment that raises the productive capacity of the economy. This entails diversion of scarce funds from quick yielding speculative investment in stocks and plots to the real sector (manufacturing, agriculture, and value-added services), with the right tax and other incentives or disincentives, as the case may be. As in the past, such a move may come a cropper in the face of stiff resistance from the powerful realty sector. Anyway, an increase in productive capacity of the real sector is essential for easing supply-side constraints and putting the country on a long-term economic growth trajectory.

The quality of output is as important as its scale. Production of sub-standard products, even if on a massive scale, cant provide a secure basis for long-term growth. In Pakistan, quality is widely regarded as the most negotiable feature of goods and services. Likewise, businesses are geared more towards keeping wages down than towards ratcheting up the productivity of labour. Because the domestic industry is heavily protected, it can conveniently sell low-quality products at home. However, the same enterprises are either shy of entering foreign markets or find it arduous to compete therein. As a result, export growth is stifled and cant match import growth, with all its adverse implications. This calls for putting in place a proper regulatory-cum-facilitatory framework to protect consumers and encourage the domestic industry to become competitive.

A market economy needs entrepreneurs to pilot its ship. Entrepreneurs are a special breed among businesses, taking abnormal risks and venturing into new areas or new ways of doing business. As family-based well-entrenched but risk-averse business houses have held sway over the corporate landscape and both governments and banks have been reluctant to support startups for their risky ventures, Pakistan has remained remarkably short on entrepreneurship, which has impaired long-term growth prospects. Through preferential credit and taxation and simplified incorporation procedure, entrepreneurship needs to be supported.

Email: hussainhzaidi@gmail.com

Twitter: @hussainhzaidi

The writer is an Islamabad-based columnist.

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An over-heated economy - The News International

Premier John Horgan has issued the following statement on his trip to Tahltan Territory:

Over the past two days, I have had the opportunity to meet with leadership from Tahltan Central Government, Iskut Band and the Tahltan Band. I was joined by Bruce Ralston, Minister of Energy, Mines and Low Carbon Innovation, and Nathan Cullen, Minister of Municipal Affairs and MLA for Stikine.

Together, we travelled through Tahltan Territory in northwestern B.C., including stops at Dease Lake, Telegraph Creek and Iskut. I am grateful to the Tahltan for hosting me, as the first premier to visit the region in over 30 years.

We stopped by schools in Dease Lake and Iskut, where I was able to speak with young people about their communities and aspirations for the future. I heard from local leadership and industry about the good work that is being done to bring natural resources to market in a responsible and sustainable way.

For thousands of years, the Tahltan have mined obsidian for their families and for trade. Today, mining continues to play a significant role in the local economy, providing almost 3,000 direct and indirect jobs and attracting approximately $1.8 billion in international investments from July 2018 to March 2021. The natural abundance of minerals in Tahltan Territory are creating good local jobs, supporting communities and helping to power B.C.s economy.

Earlier this week, our government took a historic step forward in partnership with the Tahltan Central Government. We entered into the first consent-based decision-making agreement under the Declaration on the Rights of Indigenous Peoples Act. We recognize the inherent rights of the Tahltan to make decisions on their territory and to serve as stewards, as they have done since time immemorial.

The Eskay Creek project will be the first of its kind to meet the consent standards set out in Section 7 of the Declaration Act for an environmental assessment. It represents a new chapter in the long and storied history of mining and natural resource development in Tahltan Territory.

The impact of this agreement extends far beyond northwestern B.C. When investors look to B.C., they will see a jurisdiction where shared decision-making with Indigenous Peoples is vital to predictable and sustainable development.

The Tahltan Nation is a strong partner. Together, we are demonstrating reconciliation in action with real benefits to the Tahltan Nation and all British Columbians.

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Premier's statement on meeting with Tahltan Central Government | BC Gov News - BC Gov News

Africas oil and gas industry is entering a new era. As the world looks to accelerate its transition away from fossil fuels, the pressures on the continents oil and gas producing nations are mounting. Our analysis has found that most are highly exposed to the global energy transition, as their economies depend on oil and gas revenues, while their reserves both cost more to produce and are, on average, more carbon-intensive than oil and gas from other regions.

At the same time, energy demand on the continent threatens to outstrip supply. Over the next two decades, rapid population growth and industrialization are expected to drive strong energy demand growth across the continentincluding for fossil fuels. McKinsey modeling estimates that African energy demand in 2040 could be around 30 percent higher than it is today, compared with a 10 percent increase in global energy demand (Exhibit 1).

Exhibit 1

While these dynamics bring challenges that will need to be negotiated, they also create a clear opening for the continent to take stock and reconsider its energy approach. If oil and gas producing countries in Africa consider steps to create enabling environments, improve access to available capital pools, and attract the right skills and capabilities, they could both meet the energy needs of their developing populations and position themselves strongly in a new energy landscape.

The ongoing invasion of Ukraine, which has had deep human, social, and economic impacts across countries and sectors, adds another layer of consideration. European gas prices have increased by more than three times over the past 12 months, based on our data analysis. And since the start of the conflict, the European Commission has announced a plan to make Europe independent of Russian fossil fuels before 2030 through a combination of acceleration of renewable energy and diversification of natural gas supplies. This could result in increased demand for oil and gas from the African countries that have the reserves and infrastructure in place to help meet that demand.

In this article, we unpack how the energy transitionand a potential restructuring of global natural gas supply sourcescould shape the future of Africas oil and gas sector, and we share high-level options that affected countries could consider to encourage the necessary investments and build long-term resilience at this critical juncture.

It is increasingly clear that the global momentum toward sustainability and away from fossil fuels is accelerating. For the first time, the United Nations Framework Convention on Climate Change Conference of the Parties (COP26) explicitly referenced a shift away from coal and the phasing out of fossil fuel subsidies in its 2021 decision text, while governments, investors, and consumers around the world are signaling plans for a more rapid shift away from fossil fuels. McKinseys current trajectory energy transition scenario suggests that global oil demand could peak by 2027, while global gas demand could peak by 2040. If leading countries achieve their net-zero commitments through targeted policies, the transition could be even faster. Under this achieved commitments scenario, global oil demand could peak as soon as 2024, while global gas demand could peak around 2030.

This shift is bringing new pressures to bear on the oil and gas sector from stakeholders and regulators. In its net zero by 2050 road map, the International Energy Agency (IEA) highlighted that the global energy sector needs to achieve a significant reduction in the use of hydrocarbons by 2040including the phasing out of all unabated coal and oil power plantsin order to reach net zero by 2050.

At COP26, several new commitments were made, giving further momentum to the transition. In total, more than 150 countries have put forward new or updated emissions targets, with several African countries, including Botswana, the Democratic Republic of the Congo, Egypt, Ghana, Kenya, Morocco, Nigeria, and South Africa, making various commitments to restrict methane emissions, halt and reverse forest loss, phase out coal, and end international financing for fossil fuels. Nigeria also joined some of the worlds largest energy exporters, including Saudi Arabia, in committing to net zero by 2060.

Outside Africa, many countries are also starting to implement carbon pricing and taxes, which could have an impact on African countries dependent on oil and gas exports. The European Unions Carbon Border Adjustment Mechanism, for example, will require EU importers to secure carbon certificates on imported goods corresponding to the carbon price that would have been paid, had the goods been produced under the EUs pricing rules. And while South Africa is currently the only African country with a carbon-pricing systemsigned into law at the end of 2019others could soon follow.

In this context, oil and gas majors are increasingly challenged to deliver higher returns more sustainably. As a result, many are opting to reduce their African upstream exposure and rebalance their portfolios across resources with lower emissions intensity. Investor scrutiny for oil and gas projects, meanwhile, is intensifying as capital providers factor environmental, social, and governance considerations into their decisions. This shift is contributing to a widening gap between oil and gas company valuations and renewable-energy company valuations.

More than half of African oil and gas producing countries rely on oil and gas exports for more than 50 percent of their total export revenues.

This trend creates several considerations for African oil and gas producing countries that are highly dependent on global capital pools to fund their hydrocarbon projects and maintain their oil and gas operations. African oil and gas assets are on average 15 to 20 percent more costly to develop and operate and 70 to 80 percent more carbon intensive than global oil and gas assets. And as global capital pools for hydrocarbon projects begin to reduce, our analysis suggests the cost of oil and gas production in Africa is expected to rise, making African oil and gas projects potentially even less competitive in global markets.

Under McKinseys achieved commitments energy transition scenario, the replacement of approximately 60 percent of Africas current oil production could become uncompetitive by 2040 (Exhibit 2). As oil majors shift toward lower-emission basins, Africas oil-producing countries could find themselves deprioritized for further development and facing an increased risk of stranded assets with significant oil and gas reserves remaining untapped. This could put further pressure on government spending and impact development priorities; more than half of African oil and gas producing countries rely on oil and gas exports for more than 50 percent of their total export revenues. In Nigeria, for example, petroleum exports make up more than 85 percent of the governments total export revenues.

Exhibit 2

Despite these challenges, the shift to a low-carbon future could create significant opportunities for oil and gas producing countries in Africa; several options exist for them to potentially strengthen the resilience and sustainability of their resource bases and build robust positions in the new energy businesses of the future. The speed and the urgency of the actions required, and which levers to pull, will depend to a large degree on the level of reliance that each country has on oil and gas revenues and where they sit on the global hydrocarbon cost curve.

African countries can be categorized into four archetypes based on the resilience of their crude oil reserves and the extent of their economic reliance on oil and gas revenues (Exhibit 3). Countries with more than 50 percent of projected oil production at risk in the event of a more rapid energy transition (achieved commitments scenario) can be considered vulnerable, while those with less than 50 percent of production at risk are likely to be more resilient to global shifts. This analysis focuses primarily on the competitiveness of African crude supply, given the global nature of oil demand and supply dynamics. In general, countries with significant gas production could expect their gas reserves to be more resilient than their oil reserves under a range of energy transition scenarios. However, it is worth noting that in Africa, more than one-third of gas production is associated gasgas produced as a byproduct of crude oil productionand therefore the resilience of gas production in Africa is linked, at least partially, to the resilience of the continents crude oil production.

Exhibit 3

Nigeria and Angola are examples of countries that have both lower oil-resource resilience and economies that are heavily reliant on the production of oil and gas. Countries in this archetype could consider implementing levers to strengthen the cost competitiveness of their resources, such as optimizing fiscal terms, addressing sources of cost premium (for example, insecurity), and improving the ease of doing business. These countries could further strengthen the resilience of their resources by considering initiatives to decarbonize their existing oil and gas operations and encouraging investment in lower-carbon energy infrastructure such as gas pipelines. This could reduce the risk of stranded gas resources. Countries in this archetype could diversify their energy revenues by fostering an enabling environment to encourage scale-up of renewable-energy projects that provide exposure to new energy revenue streams and help to ensure energy supply.

By contrast, Senegal and Cte dIvoire are examples of countries that are less reliant on the production and sale of oil and gas but have oil resources that are less resilient under a more rapid energy transition. Countries within this archetype could focus on spurring investment in renewable-energy or carbon-offset businesses, while also decarbonizing their existing production to extend their license to operate.

Countries with higher resource resilience and lower oil and gas revenue reliance, such as Egypt or Ghana, could focus on protecting their already resilient reserves by decarbonizing their existing oil and gas operations. This would help to maintain the competitiveness of their production in key destination markets such as Europe, which are likely to be subject to carbon border adjustment mechanisms. These countries could also focus on growing investment into renewable-energy businesses to generate new revenue streams.

Finally, Algeria and Libya are examples of oil-producing nations whose reserves are more cost competitive and for whom oil and gas revenues represent a large share of overall national revenues. These countries could prioritize protecting their cost-competitive reserves by taking measures to reduce emissions from their existing operations, while also exploring opportunities to diversify their energy revenues through investment in renewable-energy projects.

No matter where a country falls in this matrix, prioritizing the sustainability of oil and gas production will be increasingly important for all. To position themselves optimally in the energy landscape of the future, we highlight three dimensions on which African oil and gas producing countries could focus: decarbonizing and improving the cost efficiencies of their existing resource bases, increasing their energy supply through lower-carbon infrastructure projects, and investing in renewable energies.

Decarbonizing oil and gas production could help African countries reduce emissions while also extending their license to operate into the future. Focusing on sustainability and decarbonization also presents an opportunity for oil and gas producers to reduce their cost of capital and retain access to customers who are increasingly prioritizing production that has lower carbon intensity. For example, last year Occidental Petroleum delivered two million barrels of carbon-neutral oil to Reliance Industries in India. The emissions offsets for the transaction were sourced from a variety of projects and applied against the crude cargo shipment.

Technologies to decarbonize the extraction and production of hydrocarbons already exist and many are economically viable. A potential first step could be to optimize operations by minimizing heat and power demands and optimizing feedstocks to ensure more energy efficiency. Sustainable-design choices, for example, monetizing wasted gas from flaring, minimizing fugitive emissions, and deploying zero-carbon energy supplysuch as solar power for energy at the well pad are also now available for deployment and increasingly present economic benefits. Further downstream, CO2 released from large point sources such as oil refineries could be captured and used in other applications or permanently stored in deep geological formations, including depleted oil and gas reservoirs or saline formations. Beyond initiatives to directly decarbonize operations, oil and gas sector players could consider, as a last resort, offsetting their emissions or generating carbon credits by implementing nature-based solutions that protect or improve natural ecosystems that sequester atmospheric CO2. Such initiatives could include forest conservation, reforestation, and improved land practices, among others.

To improve the cost competitiveness of their resource bases, African oil and gas producing countries could consider a range of levers. First, national governments could explore optimizing their fiscal regimes to improve their resources position on the resource supply curve. For example, Nigeria recently passed the Petroleum Industry Act, which among other provisions introduced a fiscal framework designed to improve the cost competitiveness of the basin. Host governments could additionally consider initiatives to reduce operating costs, by addressing regional insecurity, for example. There are also regulatory levers that African producer countries could consider to improve the cost environment, including ensuring that local content regulations strike an appropriate balance between building local-industry capacity and reducing costs. Lastly, African oil and gas producing countries could implement measures to generally improve the ease of doing business, including streamlining the permitting processes and strengthening contract enforcement, which could also help to reduce operating costs.

As Africas demand for energy increases, the need for projects that boost energy supply on the continent will likely rise, notably in the core demand centers of its larger economies: Egypt, Nigeria, and South Africa. Investment in lower-carbon-energy infrastructure projects, especially gas pipelines, processing infrastructure, and liquified petroleum gas (LPG), could enable African countries to promote intraregional trade and boost global exports of African energy products, while also helping to strengthen regional energy access. To ensure bankability, these infrastructure projects would likely need to incorporate decarbonization or carbon offset levers.

For example, McKinsey analysis suggests that despite having the largest proven gas reserves on the continent, Nigeria could find itself in a situation in which gas demand outstrips gas supply by 2030 by at least three billion cubic feet per day. This presents a potential opportunity for investment in gas infrastructure such as gas pipelines, gas processing facilities, and coastal LNG regasification to connect currently stranded gas reserves onshore and offshore with domestic industrial, commercial, and power demand centers.

Certain natural gas investments are consistent with Nigerias recently announced commitment to reach net zero by 2060. Our analysis indicates that Nigerias net-zero 2060 plan will require significant expansion of on-grid electrification. In the short term this will come from flexible gas-based power generation to compensate for renewables intermittency until cost-competitive, long-duration energy storage solutions become available. Expanding on-grid electricity supply via increased gas-powered generation will require investments in gas pipeline and processing infrastructure to move natural gas from its source of supply to gas-powered generation plants. Increasing on-grid electrification could also help to displace more carbon-intensive decentralized power sources; McKinsey estimates that there is between 40 and 60 gigawatts of installed capacity of diesel and petrol generators in Nigeria, generating approximately 33 metric tons of CO2-equivalent (MTCO2e) each year12 percent of Nigerias total emissions.

Countries in West and East Africa with significant gas reserves could consider developing cross-border gas pipeline infrastructure to connect to regions where gas will be in significant demand, including countries in North Africa and southern Africa. Alternatively, African countries with significant natural gas demand could invest in coastal LNG regasification plants to allow gas to be imported from other African countries with LNG export capabilities.

Looking globally, there is also potential for increased demand for natural gas resources from Africa, after the European Commission announced a plan to make Europe independent of Russian fossil fuels before 2030, following the invasion of Ukraine. This demand could potentially be met through investment in gas-export infrastructure such as LNG export terminals or continental gas pipeline projects to deliver African natural gas to European and other global customers.

For refined petroleum products, McKinsey analysis suggests that African demand will grow from 4.1 million barrels per day today to approximately 5.3 million barrels per day by 2040, nearly half of which will need to be imported based on existing and planned refining capacity (Exhibit 4). This could create opportunities for lower-carbon projects such as biofuels production, including bioethanol and biodieselto partially offset gasoline and diesel demandor increasing LPG production, bottling, and distribution infrastructure. For example, in Nigeria, carbon-intensive cooking, such as firewood, charcoal, and kerosene, generates an estimated 37 MTCO2e per yearroughly 14 percent of Nigerias baseline emissions. Expanding access to LPG in Nigeria by investing in distribution infrastructure could stimulate the uptake of cleaner cooking fuels for the more than 100 million Nigerians who rely on carbon-intensive cooking fuels, while also being a potential source of carbon credits.

Exhibit 4

Across the continent, a number of such infrastructure projects could be undertaken to simultaneously enhance energy supply, including decarbonizing existing refineries, increasing storage and distribution capacity for refined products, and upgrading port terminal infrastructure.

To help secure energy resilience into the future, African oil and gas producing countries could also consider investing in renewable-energy projects.

To help secure energy resilience into the future, African oil and gas producing countries could also consider investing in renewable-energy projects. Given the high demand for electricity in many African countries, several alternative energy sources such as solar and wind energy have attractive outlooks. Since 2009, renewable-energy solutions have experienced rapid cost improvements. Installation and operational efficiencies have fallen in the past decade, with reduced lead times across both solar and wind energy. Blue and green hydrogen, nascent technologies with unit costs projected to decline, also hold potential for future export to European demand markets. The government of Namibia has recently announced plans to develop a 300,000-ton green-hydrogen project to supply green hydrogen (hydrogen produced from electrolysis of water using renewable energy) and derivatives to regional and global markets.

African oil and gas producing countries could also look to their natural ecosystems for significant new carbon-abatement revenue streams. For instance, protecting, sustainably managing, or restoring Africas plentiful natural ecosystemscould represent a carbon abatement opportunity of 1.2 gigatons of CO2 per year.

New business opportunities such as these would likely require support from a number of stakeholders. Market changes may also be necessary. In the case of blue hydrogen (hydrogen produced from natural gas through the process of steam methane reforming), for example, carbon pricing would be an important enabler.

Each new project would need to be assessed on its ability to attract funding and how well it aligns with its host countrys Nationally Determined Contribution, and the suitability of development in that region. For example, Algeria, Chad, Egypt, and South Africa are particularly well placed for wind and solar energy, while the availability of plentiful natural gas resources in countries such as Nigeria presents opportunities for the production of blue hydrogen.

While the speed of the energy transition is uncertain, there is no doubt that the world is moving toward a low-carbon future. African oil and gas producing nations will need to evolve their strategies to prepare for this, taking into account the particular challenges and opportunities at stake in their context. In charting a pathway toward the new energy landscape, we present here three broad actions that could be considered.

Create an enabling environment to stimulate investment

A supportive environment could enhance the development of renewable-energy projects.

African governments could consider initiatives to stimulate investment in the decarbonization of existing operations and in new energy projects while pioneering sustainable-energy opportunities in Africa. Some countries including Kenya, Malawi, and Rwanda have already introduced incentives such as tax holidays, value-added tax exemptions, and import-duty exemptions for renewable-energy businesses to encourage the sector to scale up. Kenya has also announced plans to launch an emissions-trading system that allows companies to buy emissions allowances through a carbon-credit and green-asset registry.

African nations could also consider facilitating collaboration among key stakeholders in the private sector, nongovernmental organizations, and others, to develop perspectives on sustainable-energy policies to stimulate investment, consider cross-border decarbonization approaches, and to enhance contract approval processes for renewable energy opportunities that reduce the time and costs incurred in the contracting phases.

Access available capital pools

Ensuring energy resilience and security in the new energy landscape may require different approaches to financing projects. Investment in renewable energy has increased tenfold in Africa over the past decade, from $5 billion from 2000 to 2009 to approximately $55 billion in 2010 to 2020approximately 70 percent of which was destined for southern and North Africa. Stakeholders could look to tap into these financing sources including governments, donors, climate-focused investors, and international energy playersthat are already active in the new energy sector and offer attractive access to capital pools.

To improve bankability of oil and gas projects, project sponsors could prioritize decarbonization in the design phase and consider incorporating carbon-offset opportunities. A recently announced $10 billion deal between TotalEnergies SE, the China National Offshore Oil Corporation, the Uganda National Oil Company, and the Tanzania Petroleum Development Corporation is a case in point. The project, which aims to develop crude oil production in East Africa, also intends to take steps to limit greenhouse-gas emissions to below 20 kilograms CO2e per barrel of oil, including by solarizing the East Africa Crude Oil Pipeline and extracting LPG for use in local markets to offset more carbon-intensive cooking fuels. The project also includes a commitment to develop one gigawatt of renewable energy.

Additionally, as global funding shifts away from oil and gas projects, African countries may need to increasingly seek domestic sources of financing to unlock lower-carbon energy projects. Governments, sovereign wealth, and export/import banks could play an important role as anchor investors. For example, in the past year, the African Export-Import Bank (Afreximbank) signed a $1 billion deal with the state-owned Nigerian National Petroleum Corporation (NNPC) to finance petroleum exploration.

Attract skills and develop the capabilities needed for the energy future

McKinsey analysis suggests that approximately 40 percent of oil production in African countries is controlled by international energy players that are increasing their focus on renewable energy, carbon-emissions reduction, and cost containment. There is a significant risk of a technical and skills gap if international players continue to divest from the region. To help address this, African countries could consider increasing and strengthening local oil and gas workforce capabilities while also attracting and investing in the talent, skills, and expertise needed to grow sustainable-energy businesses. In the short term, stakeholders could look to drive regional content policies to increase local participation across the oil and gas value chain and coordinate global recruitment campaigns to attract the required professionals.

In the longer term, there may be an opportunity to explore the development of regional centers of excellence to share best practices and develop oil and gas knowledge and to create knowledge-transfer mechanisms between international and national partners. Stakeholders could also invest in partnerships with local universities to develop relevant new curricula to nurture homegrown talent and skills to support the energy transition. It will also be vital to develop programs to reskill and transition oil and gas workersto adjacent opportunities. For example, in Nigeria, Actemium oil and gas training has, since 2020, been helping to transition oil and gas workers into the offshore-wind sector by offering a suite of safety and technical training standards and qualifications developed by global skills organization Opito to address the skills requirements of a net-zero economy.

McKinsey analysis suggests that more than one million jobs in Africa could be vulnerable as global economies transition away from oil and gas and global consumption patterns shift in favor of lower carbon intensity of production. The UN Paris Agreement, a legally binding international treaty on climate change adopted in December 2015 at the United National Climate Change Conference (COP 21) in Paris, explicitly calls for countries to pursue a just transition that ensures environmental sustainability as well as decent work, social inclusion, and poverty eradication. Given that African countries continue to have among the highest poverty rates in the world, the importance of foregrounding just transition principles cannot be overemphasized.

As the world prepares for COP27, African oil and gas producing nations have an opportunity to be proactive in a rapidly evolving global energy sector. Operating in higher-cost, higher-carbon basins has become increasingly difficult in the face of mounting pressure from stakeholders and regulators alike. Furthermore, as African economies look to industrialize to meet the needs of rapidly growing and urbanizing populations, a rise in energy demand could leave many countries facing energy supply challenges. While these challenges are real, so are the opportunities. Specifically, African stakeholders have a significant opportunity to decarbonize existing production to maintain access to capital and customers. They also have the chance to leverage the energy transition to lead in the creation of renewable-energy businesses that will help to meet the growing energy demand on the continent and create new revenue streams and jobs.

If successful, a strategic shift of this nature could unlock significant value for the continent while reducing the risks of climate change and help to secure a greener and more prosperous future for all Africans.

See more here:

The future of African oil and gas: Positioning for the energy transition - McKinsey

The UK governments proposals have since been included in the Animals Abroad Bill (2022), which may be tabled, in the next sitting of Parliament. The purported aim of these measures is to protect endangered wildlife but the likely outcome in Africa will be the opposite.

If these measures are enacted, we expect to see, in Africa, an acceleration in the rate of loss of wildlife, accelerated loss of biodiversity and yet more loss of wildlife habitat to unsustainable agricultural practices on marginal land. These proposals are ill judged and not well considered. The UK government has ignored both its own experience and the detailed submissions and reasoned arguments of the better informed. No African nation has the resources to offer off its citizens an adequate health or education service so it is hard to justify spending on conservation. Few people in the UK can have any conception of how harsh life is for the great majority of rural Africans. Even in Botswana where I live, one of the better-off African nations, there are many people struggling to exist on an income of less than P350 (=25) a month. The cost of living is not that different from the UK. Rural Africa is impoverished by unfair trade practices by developed nations, poor domestic policy, inadequate infrastructure and poor health services and education.

As a generality, those areas, which are richest in wildlife resources, are the most economically marginalised. The UK has no legitimate interest in how African states choose to manage their wildlife resources. No one in the UK suffers hurt, harm or loss neither from the practice of trophy hunting in Africa nor from the importation of the resulting trophies. This proposal is, in fact, a blatant assault on the sovereign right of African nations and their citizens to manage their wildlife resources as they see fit. There is an element of hypocrisy here too because the British government is the largest provider of trophy hunting opportunities in the UK through the lease of deer stalking by the Forestry Commission and its devolved off-shoots. Trophy hunting for deer generates significant economic benefits in Highland Scotland. The IUCN supports trophy hunting as a viable conservation tool because it generates revenue, which can be spent on management and protection of natural resources, and because it puts legitimate feet on the ground, which is a powerful deterrent to poaching.

Off-take rates are low, rarely over two percent compared to a safe harvest rate of 10 15% for most species. The great majority of animals shot are post-mature males (i.e. in late middle age), which have passed their breeding prime. This level of off-take has no negative impact on the population as a whole.

Trophy hunting generates large revenues for relatively low initial investment and subsequent operating costs. The trophy hunting revenues, which accrue to African governments, contribute significantly to their expenditure on conservation. Without such revenue, resource starved governments would find it hard to justify diverting scarce revenues from other sources to conservation. Few national parks, in which the primary form of wildlife use is game-viewing/photographic tourism, generate sufficient revenue to cover their operating costs nor do most generate sufficient economic activity in other sectors to justify a level of subsidy to enable them to be managed properly. Consequently, most are starved of the funds, manpower and equipment they need to maintain their infrastructure and adequately protect their wildlife and plant resources. In many instances, the former inhabitants of what are now national parks were evicted in order to establish the national park in the first place. Understandably, they and/or their descendants are disgruntled by the loss of their land and hostile to the existence of the park.

Over the past 35 years or so, there has been a paradigm shift in the approach to wildlife conservation over much of southern and central Africa. The old top down paradigm where governments claim to own wildlife and to be able to protect and manage it successfully has been shown to be false. A new paradigm, where the occupiers and users of the land are seen to be best able to protect and manage the wildlife on the land has arisen. It shows great promise and has led to substantial reversals of past losses of wildlife, habitats and biodiversity. In the most successful instances, where more rights to wildlife have been ceded to occupiers and users, wildlife numbers have increased substantially, the amount of land devoted to wildlife has increased greatly and biodiversity has increased.

All this has happened at little or no cost to governments and has been funded mostly by revenues from trophy hunting. The development of Community Based Natural Resource Management (CBNRM) initiatives in Zimbabwe, Namibia, Botswana, Zambia, Tanzania and elsewhere has enabled rural communities, mostly in remote and economically marginalised areas, to manage their own resources for their own benefit.

Such rural communities bear the brunt of the social and economic costs of living with wildlife, which are large. Under the old paradigm they got almost none of the benefits accruing from wildlife but suffered, often heavily, from crop and livestock losses as well as human deaths due to the depredations of wildlife. Under the CBNRM dispensation, communities are able to transform wildlife from a liability into a valuable resource whose protection they will invest in. In some instances, communities have foregone agricultural developments to make more land available for wildlife and limited their agricultural and livestock development ambitions due to the high returns from wildlife.

Most of these returns derive from trophy hunting by foreign visitors, British amongst them. Revenues have been invested by communities in education (building classrooms and hiring extra teachers), health care (building clinics & health posts and hiring extra nurses), rural transport services (mini-buses) and other developments, which the communities want but governments are unable or unwilling to provide. The most successful CBNRM operations have been able to make relatively large cash payments to residents.

All CBNRM operations have also generated substantial quantities of meat to be distributed to residents a benefit which is greatly valued. The widely quoted claim that communities only get two percent of the revenues is simply not true. Successful CBNRM initiatives also strongly discourage poaching or poisoning of wildlife as they demonstrate tangibly the economic and nutritional value of sound wildlife management and ensure that rural communities enjoy direct benefits from their wildlife resources. Poaching is rife throughout rural Africa due to poverty, hunger (especially for protein) and lack of alternative options. Kwashiorkor (protein deficiency in childhood leading to stunted intellectual and physical development) is widespread and common over much of the continent.

The UK government, through DfID supported a number of successful CBNRM initiatives in the 1980s whose main source of revenue was from trophy hunting. In Botswana, DfID supplied an officer to revamp the controlled hunting area system and the lease of hunting concession areas, which was an essential pre-condition for the introduction of CBNRM.

This same officer also played a key role in establishing early CBNRM schemes. Consequently, the UK government is well aware of the benefits brought by trophy hunting in terms of poverty alleviation and community empowerment. If that were not enough, a number of people with serious knowledge of the issues involved made direct submissions on the issue to DEFRA, most notably Dr Brian Child who coordinated the introduction of CBNRM in Zimbabwe, which were either not read or were ignored.

For example, in Sankuyo a community of around 370 people on the eastern margin of the Okavango delta in Botswana, the community was able to transform itself over a 15-year period. What had been a typical poverty ridden semi subsistence economy dependent on remittances from outside became a self-sufficient community with a vibrant land-based economy funded by trophy hunting.

The community formed a community trust to obtain a head lease on an 87,000 ha hunting area and a 6,000 ha photographic area. The trust leased out its hunting area to a safari operator for US$321,400 a year by 2011 and two camp sites in the photographic area to private operators for $112,280. The safari operator also provided a $15,000 fund for medical assistance to community members and delivered 70% of the meat from shot animals to the community. Community members gave the community a trophy hunting quota of 22 elephants and 98 other animals as well as a subsistence hunting quota of 28 animals for use. The total quota represented 0.4 percent of the assessed wildlife population. Poaching, which had been a significant element of the communitys livelihood strategy prior to the institution of the CBNRM project had virtually ceased by 2011.

By 2011, 67% of the communitys income came from trophy hunting, 24% from tourism in its own lease areas, three percent from other tourism and 10% from other sources. (The latter two being mostly remittances by relatives to residents.)

The safari operator and private tourism camp operators created 56 jobs for community members while the community trust itself created a further 63 jobs primarily using hunting income. The community trust spent 56% of its income on direct benefits to community members while 33% was spent on managing an office in Maun, which it was required to do. Among direct benefits paid to community members, the trust gave: US$75 to every household each year until 2010, A funeral grant of $825 to every bereaved family, An annual pension of $33,000 to every resident over 55 years of age, Sponsorship to the local football club, Scholarships for worthy students from the community Free transport to Maun (83km) three times a week. In addition, the trust implemented a number of community development projects including: Water reticulation with a connection to every household, Developing a community owned tourism campsite, which employed 15 people and was self financing, earning revenues of $85,000 a year, Housing for destitute residents, Installing a toilet in every household, and An upmarket tourism lodge. The latter two were not completed at the time the hunting ban was implemented in 2013. In the aftermath of the implementation of the hunting ban in 2013, the community trust was bankrupted and virtually all the community benefits ceased. Average household income fell by 35%, development projects came to a standstill, the trust retrenched 30 employees and overall employment within the community fell by over 50%. In addition, there was widespread hunger due to loss of game meat from the safari operator and elephant damage to crops. The situation has not changed radically since then and game viewing and photographic tourism has failed to replace these losses. Similar scenarios were repeated all over Botswana in all CBNRM trusts and, in total, some 6,000 jobs were lost as a result of the hunting ban. These losses have not been made good to date and the damage to confidence and trust has been immeasurable.

Very large tracts of privately held land in South Africa, Namibia and Zimbabwe and smaller areas in Botswana and Zambia have been re-wilded and transformed from marginal or loss-making cattle ranches (many of which were arguably ecologically unsustainable) into viable, ecologically sustainable operations with improving biodiversity. A parallel process occurred in the Scottish Highlands in the 19th century. Uneconomic and ecologically unsustainable sheep walks were converted to deer forests, driven by high stalking rentals and low returns to sheep farming due to competition from Australia, New Zealand and elsewhere. This process could usefully restart today. Harvesting wildlife for meat is marginally profitable but the initial capital and subsequent running costs are both higher than for trophy hunting, while the revenues are much lower. Capital and running costs are also higher than for cattle ranching so neither conversion of cattle ranches to game-meat ranches nor initial development of the land as a game-meat ranch are attractive. The return to invested capital is too low.

The total area converted to wildlife use in South Africa, Namibia and Zimbabwe greatly exceeds the total area of National Parks, Game Reserves and other official conservation areas in these countries. This process is driven by the high revenues derived from trophy hunting and represents an enormous conservation gain. These areas are not only protecting the more common and huntable species but also rare and endangered species such as Black and White Rhinoceros. In some cases, these species have been removed from state land, where they are vulnerable to poaching, to private game areas where they are safer due to better security. Limitations on trophy hunting e.g. by banning the importation of trophies, is likely to put these desirable changes into reverse. This happened in Botswana between 2013 and 2019 when former President Ian Khama banned all hunting. Virtually all the CBNRM trusts went bankrupt, several thousand rural jobs were lost by people who lack skills in the 'modern' sector and are almost unemployable in the rest of the economy and all the improvements in the lives of residents of the community areas went into reverse.

Furthermore, there was a marked and immediate upsurge in poaching allied to a notable increase in harmful practices, e.g. the poisoning of elephant carcasses so vultures don't give poachers away and an apparent increase in overall off take from a number of populations. In addition, several private landowners who had started converting their cattle ranches into game ranches put the process into reverse until the ban on hunting in private land (but not tribal or state land) was rescinded. Overall, there was a general and widespread decline in support for conservation. The damage done and losses incurred in that period have not been made good yet. Kenya banned all legal hunting in 1977, primarily to shield the widespread ivory and rhino horn poaching operations of its political elite from public gaze. The consequences have been disastrous. Between 1970 and 2015, 17 of the larger wildlife species in Kenya experienced a combined decline in numbers of 72%, ranging from a 30% decline for Zebra to 94% for waterbuck. Over the same period the sheep and goat population increased by 79%, the donkey population increased by 70% and the camel population by11%.

However the cattle population declined by 25% over this period. These figures indicate two things, firstly that domestic livestock has largely displaced wildlife over most of Kenya while, secondly, and the decline in the cattle population indicates an overall decline in ecological conditions.

The country has witnessed a continuing decline in bio diversity and all wildlife populations since the mid 1970s and also the widespread poisoning of carnivores as well as elephants and other large herbivores, which damage crops. The reason is simple, wild animals have no value for rural Kenyans and are seen by them as nothing but a nuisance and a danger to life. To my mind, these proposals to ban the importation of hunting trophies are cynical, hypocritical, wrong-headed and the worst kind of gutter politics pandering to a noisy and ill-informed minority who have no knowledge of the hard realities of conservation in Africa nor of the harshness of the daily lives of most rural Africans - and appear to care less. Put bluntly, the proponents of this measure appear to care more about African animals than they do about African people.

If the UK government is genuinely concerned about the management of trophy hunting in Africa, there is a better way to tackle any issues that arise. The UK government could offer assistance to improve current practices where there may be a problem and encourage and assist practitioners to learn from best practice elsewhere. Indeed, many Scottish deer forests are very poorly managed and their owners and managers could learn a lot from best practice in southern Africa. Here in Botswana, our government needs to team up with the governments of other like-minded countries (Namibia, Zambia, Zimbabwe and South Africa) to put diplomatic pressure on the UK government to can this proposal. For a start our own President Masisi should pick up the phone to Boris Johnson to tell him about the realities of proper conservation. He did it at that meeting in the USA about elephants so he can do so again.

* Richard Whyte is a consultant and practitioner in wildlife management and rural development)

Originally posted here:

Impacts of the United Kingdoms proposed ban on importing hunting trophies - Mmegi Online