Creating value from amazon rainforests and malaysian investment in ethiopia
CREATING VALUE FROM AMAZON RAINFORESTS AND MALAYSIAN INVESTMENT IN ETHIOPIA: DEFINING THE NEW GLOBAL ARENA<br />Opportunities for the Munk School of Global Affairs<br />September 28, 2011<br />Jim de Wilde<br />www.jimdewilde.net <br />www.twitter.com/jimdewilde <br />Let’s start with a thought experiment: imagine how a class in Santiago would look at the dispute over Kashmir. How would it differ from a class in Montreal or London? How would a group of technology entrepreneurs in Helsinki view the establishment of rule of law in Niger differently than their colleagues in Shanghai? How is the global economic realignment viewed in an investment bank in Nairobi differently than one in Frankfurt? If even as a quick thought experiment, you see that as a unique approach to the politics of the 2010s and the global decision-making required for entrepreneurial and political success in the next fifty years, you have created a brand.<br />You have already read my introductory lecture to the ROTMAN course on Global Capital markets looking at the underlying global trends, illustrated through case studies like the Malaysian sovereign wealth fund, Khazanah’s restructuring of Asian health care investments and Daewoo’s attempts to purchase arable land in Madagascar. For international institutional investors, the new value propositions underlying the global economy will determine the relative success of their investment strategies. The skill of being able to link an understanding of geopolitics with an understanding of capital market strategies will determine the future leadership of this 21st Century global economy.<br />Today, I want to speak about the unique opportunities confronting the Munk School of Global Affairs in dealing Canadian perspectives into the major decisions about how the global economic realignment will be managed.<br />Let’s look behind some headlines: <br /><ul><li> TURKISH PRESIDENT VISITS SOMALIA: “Pax Turkana”.
KOREAN CORPORATE PURCHASE OF ARABLE LAND IN MADAGASCAR TRIGGERS POLITICAL CHANGE: Daewoo’s investment in Madagascar.
MALAYSIAN FOREIGN INVESTMENT IN EAST AFRICA AND MADAGASCAR DICTATES A NEW ROLE: PETRONAS investment in Ethiopia.
ECUDORIAN OIL MINISTER CALLS FOR AN EMBARGO ON OIL PRODUCTION IN AMAZON RAINFOREST: Acosta on valorizing Ecuadorian rain forest.
MANDATE OF EBRD MAY EXPAND TO NORTH AFRICA: EBRD as a player in North Africa.
MALAYSIAN SOVEREIGN WEALTH FUND INCREASES INVESTMENT IN TURKEY: Khazanah expands in healthcare investment.</li></ul>The world is being redefined by political activists and analysts on a global scale. There are innovative ideas in Ankara, Quito and Kuala Lumpur. How we understand them is the challenge for those who want to be leaders in this new global economy. <br />At one level, the development of a new perspective on global public affairs, whether by Parag Khanna with his unique and strategic discussion of SECOND WORLD, or Kishore Mahbubani on THE NEW ASIAN HEMISPHERE or even Nicholas Taleb’s reformulation of capital market strategies in BLACK SWAN is simply the replacement of what north Europeans call the “Anglo-Saxon” view of economic liberalism and the era where U.S. centred thinking dominated foreign policy discussions with a “Nordic model”.<br />At another level, these new trends reflect sociology of knowledge (to use the too-infrequently used expression from German philosophy in the 19th century) or a new paradigm (to use a more familiar phrase). We choose case studies to look at to reveal the characteristics of the new global economy. The lessons of the Cold War look different in Angola than in Helsinki. The lessons of the post 9/11 world look different in Casablanca and Sofia. <br />How do we get a handle on these new realities? The opportunity for defining a perspective on global affairs that derives from the thousands of global dialogues going on in the new arena is tangible and new. Five years ago, it would have been wildly improbable for an international politics course in a university or an international business course in a B-School to talk about Turkey’s role in the Arab world, Malaysian investment strategies and new forms of value being designed to preserve Ecuadorian Amazon rainforests as core ingredients of the new global politics. <br />No one is suggesting that traditional questions do not endure: it is still essential to understand the organizational structure of NATO to understand the Libyan story; the IMF has never been more important than when Christine Lagarde assumed her much welcomed and appreciated global leadership role. But the opportunity for innovators in the study of global affairs is to ask the new questions, so that five years from now, they are the ones who understand the next PAX TURKANA or KHAZANAH INVESTMENT STRATEGY.<br />That gets us back to “sociology of knowledge” and the learning experience which can take place at the Munk School. As game theorists have told us for decades, setting the menu is more important and reveals more power than allowing someone to order a meal. The menu is potentially infinite. <br />With that in mind, let’s return to the case studies I set out at the beginning and ask:<br /><ul><li> Why is there so relatively little attention in North American universities and B-Schools to the development of new capital markets strategies in the Indian Ocean zone (try Googling the topic)?
Where are the theoretical assessments of how a North African equivalent of the EBRD and the strategic plans for a North African Bank of Reconstruction and Development? Who is teaching the business strategies of the EBRD and their implications for global political economy?
Where are the discussions of the new sources of value: the appropriate pricing of arable lands or the conversion of environmental assets into newly formed capital?</li></ul>There are people in Bangladesh and Dubai thinking about the first, people in Tunis and Qatar thinking about the second and people in Jakarta and Quito thinking about the third. The restructuring of Greek banks involves Qatari and Emirati financial decision-makers just as the 2007 recapitalization of Citicorp (a financial canary in a dangerous coalmine if there ever was one) required a phone call to Abu Dhabi. <br />The Indian Ocean zone has been approached from a number of geostrategic perspectives. Robert Kaplan has pointed out in his book MONSOON many aspects of these new naval and military trends and expands to the rivalries developing between India and China. The Indian ocean zone (the Zanzibar International Film Festival is known as the festival of the Dhow for the seagoing Omani capabilities which led to the Indian ocean zone being integrated into a trading network) has now many characteristics of a new global pattern of trade: Malaysian investments via PETRONAS in Sudan and Ethiopia, the significant Chinese presence in Ethiopia and Somaliland, the Canadian presence in Madagascar through mining company foreign investments in a francophone country, the unique capital market of Dubai fusing Pakistani, Indian, Iranian and Arab investment, the impact of the Chinese “string of pearls” strategy on internal Sri Lankan politics, the network of investments through the ASEAN zone which creates new dynamic capital market drawing Bengali and Tamil investors. <br />The EBRD has been an enormous success (in an era where international financial organizations and multilateral agencies are routines castigated as being ineffectual. Once again, we have a challenge as to how capital structures in an emerging region can be focused transparently on linking capital sources with entrepreneurial wealth creators. There are hundreds of thousands of well-educated Arabic speaking entrepreneurs who can transform the capital of institutions like the Libyan sovereign wealth fund into instruments of dynamic patient capital. (I have spoken frequently on the topic of trying to convert resource rents into dynamic patient capital, building pension plans out of Gulf of Guinea petroleum revenues and forming investment banks out of the revenues coming from new resource discoveries in geopolitically complicated regions like the Ogaden). It is hard to find case studies in North American business schools on issues like the successful strategies of the EBRD.<br />Finally, we have seen the creation of new sources of value in the global economy. Developed real estate has always created value and this underpins much global finance. Now, we are seeing new sources of value: property rights of rural agricultural workers newly irrigated or fertilized arable land, and environmental rights such as valorizing the Borneo or Ecuadorian rain forests as a way to create capital without the environmental degradation of resource development. The current global economic realignment has created new sources of value and will become a new kind of standard just as petroleum reserves and gold have been in previous eras. It is part of an emerging political economy which is being forged in places like Quito and Jakarta, not Washington and Tokyo. <br />I will wrap up by returning to the question of sociology of knowledge and the new perspectives required to give traction to these emerging trends. The conventional approaches to international political economy are being turned around by SECOND WORLD thinkers and the emerging generation of digital economy activists writing in Timbuktu Chronicles or Nubian Cheetah or developing microfinance activities in India and East Africa through mobile telephony based financial systems. The leading institutions of the 21st Century will reflect this new global perspective, with pursue what I have called a global conversation aggregating specific dialogues: the dialogues between Tamils and Somalis in Toronto as a new form of global politics, the conversation between Cambodians and Algerians in Montreal that track a similar dialogue. <br />This is a new political worldview. There is an enormous opportunity to:<br /><ul><li>Develop a Canadian perspective on global affairs which look at what is really happening and develops a liberal market approach to sustainable development and new property rights;
Define a post-colonial (we still haven’t come up with a better word) approach to the rule of law, “border” disputes and the development of efficient, i.e. non-corrupt capital markets and
Design an approach to global capital markets based on the realities of the new politics of capital formation.</li></ul>It is a responsibility that we have because it is not clear how the SECOND WORLD perspective will merge with liberal democratic theory if not by the leadership effort of Canadians (and Scandinavians and pro-democratic capitalist Nigerians, Indians, and Ivoirians and globally-oriented next generation Chinese and Brazilian leaders). <br />Pedagogically, it comes back to the development of new perspectives on global affairs. When you look at an article or a research project, ask the “second question” and “third question”, not “is the article any good”, but “why are we talking about this question this way?” and “is this the most important topic in global affairs given that we all have limited bandwidth .<br />For the Munk School to have the global impact we all want it to have, it must define a brand around the fusion of liberal capitalist theory with what is coming to be called a SECOND WORLD perspective. Above all, we have to be developing the frameworks of the future and having a bonfire with out-of-date paradigms and the private agendas of academic clubs. Sociology of knowledge provides perspective and the new world being defined by billions of market decisions in Hyderabad and Recife today looks at the questions of the past differently. <br />If we do that, we may not generate all the answers about 21st Century politics, but we will not be surprised when in 2016 we are discussing the equivalent of the rise of Turkey in Arab and Somali politics. We won’t be surprised because some of the ideas that give rise to those next trends will have been invented here.<br />