Mondelez ( Kraft ) Dumps Botswana and Namibia

Mondelez Chewing Gum leaves bitter taste in Southern Africa

Mondelez International (Kraft) to Close in Botswana and Namibia - Port Elizabeth to expand and Swaziland to remain open

For years Botswana had been jokingly known in the region as the chewing capital of Southern Africa. Under the previous Cadbury ownership the plant that operates in Commerce Park in Gaborone had long been the source of all of Southern Africa’s Stimorol chewing gum. The nick-name seemed fitting given that the Chappies plant in Swaziland made that country the bubble gum capital of Southern Africa. But in 2010 the UK food giant Cadbury was eaten by an even bigger fish, the American firm , Kraft  Foods. Kraft had in turn been acquired by the US tobacco giant Philip Morris in 1988. With this rather unfortunate direct ownership of Kraft, a food producer by a very big tobacco giant it was time for basic rebranding to make sure that the company’s chocolate consumers were as a far away  as possible from the foul smell of Philip Morris cigarettes  and its many tobacco litigation cases in the USA. Following the merger with Cadbury, Kraft split off its global snacking business and  rebranded and renamed it  in 2012 as ‘Mondelez’- meaning ‘delicious world’ in French.

There was something very British, almost colonial about the structure of Cadbury in Southern Africa, having plants producing specialized products in 4 of the 5 SACU countries. Specialty chocolates were made in Namibia, chewing gum in Botswana, Bubble gum and candy in Swaziland and in South Africa chocolate products (with most of the 900 jobs) in Port Elizabeth,  South Africa. When Kraft took over in 2010, Cadbury could still be seen as an example of what SACU could be – a region where all the countries benefited from the customs union and its industrial development potential and not just South Africa which normally gained all the economic benefits of industrial development and in return handed out a fat cheque every year to the treasury of other SACU members as compensation.

This cosy arrangement may have worked well for Cadbury but a  giant like Mondelez International with global sales of USD 35 billion in 2013, controlling 15% of the world’s confectionary market and operating in global value chains,  a rationalization of its many African operations was inevitable. Mondelez International was going to have none of this Cadbury model  and so Mondelēz International has confirmed that its factory in Gaborone will close at Christmas  with the loss of 134 jobs and the Namibian facility has also been shut with the loss of 28 jobs. So who will become the new chewing capital of Africa- you guessed it the jobs are going to South Africa ...and to Europe, probably Mondelēz International’s facility in Poland. Mondelez South Africa spokesperson Navisha Bechan-Sewkuran explained the move in the following way: ‘Mondelēz International has decided to focus its resources on scale manufacturing facilities where it can generate greater efficiencies, to reinvest in growth. Demand for pellet gum produced in Botswana has dropped over the last period as there has been a shift in the gum consumer market preference towards slab gum. Based on careful consideration of the future viability of Cadbury Botswana, Mondelēz International is announcing its intent to cease manufacturing in Botswana.’

 

 

For Botswana’s struggling manufacturing sector, already reeling from closures of its textile and garment plants in the last few years this is no small body blow. Chewing gum had become one of the nation’s largest manufactured exports in 2011 valued at P157 million   and ranked as the 11^th biggest export, only slightly behind our exports of chilled beef. At present workers and management are negotiating a redundancy package so that Christmas for the unemployed Mondelez workers in Gaborone will not be as bitter as it might otherwise be.

This outcome should by no means be a shock to anyone who understands global value chains and even though it will be no recompense to workers at the Gaborone plant  and the 1,000 or so dependents who rely on it for income, there was no way that a small plant producing relatively small volumes of chewing gum was going to survive inside a giant like Mondelez International. The supply through one point in Africa i.e. Port Elizabeth was a result that was predictable and production throughout the continent will almost certainly be limited. At the time Cadbury was acquired by Kraft in 2010 it had operations in 10 African countries and this was largely as a result of the very high tariffs that most African countries had in place on imported confectionary. But globalization and liberalization of trade in Africa have lowered these tariffs and now, as part of that ‘sweet harvest’  it will get much cheaper chewing gum from its huge Mondelez International and South African operations as a result.  Whether these savings will be passed on to consumers is quite another matter.

These are the views of Professor Roman Grynberg and not necessarily those of any institution with which he may be affiliated.

 

 

 

  

 

How Botswana and Namibia Subsidize the South African Auto Industry by Rand 5 billion each

Botswana’s Rand 5.2 billion subsidy to the  South African Automobile Industry

…if one accepts President Masire’s version of what happened to Hyundai, South Africa in effect set out to destroy the motor vehicle industry in Botswana in the 1990’s and now Botswana is expected to pay Rand 5.2 billion in 2012 in lost customs revenues for the privilege of subsidizing the South African industry.

For years economists have said that Botswana cannot diversify, especially into the manufacturing of industrial products. They have argued that we should export services instead and put the nation’s youth into call centres as the Indians have done. But if you look at the figures  there was a point in the late 1990’s when manufactured (and other) exports made up almost 20% of our total exports. Since then manufactured exports  have never made any impact and with the demise of exports of garments to both the US and the EU manufactured exports fell to about 10% of total exports. It is only with the serious introduction of diamond polishing since the 2011 agreement with De Beers that manufactured exports have once again taken off.  But ironically because of this beneficiation Botswana is now more dependent on diamonds than ever before and while cut and polished diamonds may be manufactured products but they are still diamonds.

Killing Hyundai

The reason why manufacturing exports took off in the 1990’s in a serious way was because there had been a Hyundai assembly plant opened in Gaborone which started to export cars in a big way to South Africa from around 1994/5. Exports of automobiles became very substantial and, using the free trade access available under SACU, Hyundai was making major inroads into the South African market and giving Toyota and other South Africa based  producers a very hard time.   But in 2000 the factory was shut down and automobile exports came to an end.

There are really two explanations for why the company collapsed. The first explanation is that Mr Billy Rautenbach, the man who owned the Motor Company of Botswana (MCB), the owner of the Hyundai franchise was, in the words of the UN Conference on Trade and Development report running a  ‘a fly-by-night’ operation. The evidence from the period suggests that Mr Rautenbach was involved in all sorts of activities, many of questionable morality, if not legality. In other words the explanation rests on the fact that MCB was both badly managed and run by someone who was less than salubrious and thoroughly scrupulous.

But there is another explanation which is slightly more subtle. The South Africans, had, after the end of apartheid started to restructure their own automobile industry by massively lowering tariffs on imported cars from 115% in 1995 to about 25% now. In order to stop the complete implosion of their automobile industry the South Africans had started to provide massive subsidies for exports and thereby restructure their industry.  There was no way they were going to allow some small ‘screw-driver operation’, as their industry commonly calls the Hyundai factory in Botswana, to undermine their industrialization plans. So if one believes the views of Botswana’s leaders South Africa undertook a concerted campaign to shut down Botswana’s Hyundai factory. In his memoir former President Quett Masire said (pp179-180):

In the 1990’s, we established the Hyundai motor vehicle assembly plant to take advantage of the Customs Union provisions but it was also sabotaged by South Africa.  The South African motor industry was heavily protected by the external tariff , and we in Botswana paid very high prices when we purchased vehicles assembled in South Africa. Producers in South Africa were strongly opposed  to doing any assembly in Botswana…….Once the Hyundai plant was established, the South Africans alleged we were not assembling the vehicles, just uncrating them. Therefore, they said we should pay the full tariff on assembled vehicles, not the lower tariff that was levied on components. So, we brought the South African officials to Botswana  to show them that assembly was indeed taking place. Then they said we were not collecting the appropriate customs and excise duties. Again, we brought them here so our customs people could show that all the relevant duties had been paid.

South African authorities then accused the Hyundai dealers in South Africa of some illegality. We helped them fight the charge, and again we won. Finally, Hyundai’s South African partner apparently siphoned off money, so eventually Hyundai gave up, and our plant was closed.’

The full details of what the South Africans did to close Hyundai are still not public but they should be. In a recent interview Mr Kitso Mokaila, the former GM of the Hyundai plant in Gaborone said that it was ‘South African quotas which limited our exports to 1,000 units per month when our minimum profitable scale was about 1,800 per month which destroyed the business model’

There is no doubt that the Hyundai plant had originally begun its life as what is called in the industry as ‘semi-knock down’ factory and was alleged by the South African to not comply with the SACU rules of origin which were of course written by South Africa alone. But with the help of BDC and several banks MCB built a modern facility for $60 million in 1997/8 which was based on completely full knock down basis. This employed some 600 workers and really did help to develop skills in the industry. This plant was supposed to comply with SACU rules.     

Adding insult to injury

What South Africa did from the very outset of its own post-apartheid trade liberalization policy in 1995 was to set up the Motor Industry Development Plan (MIDP) which provided customs rebates for every rand of automobile exports outside the SACU region. So who paid these export subsidies? If you open up the annual budget documents of the South African treasurer you will find an annex which gives you the impression that it was somehow the South African taxpayer who pays for this. In total over the last four years for which there was data (2008-2012)  some ZAR 57 billion was handed out in subsidies to the SA automobile industry under the MIDP. The reality is that this was money that would otherwise have been paid to SACU members. Based on the distribution of the customs pool in 2012 about 32% would have gone to the government of Botswana.  Thus if one accepts President Masire’s version of what happened to Hyundai, South Africa in effect set out to destroy the motor vehicle industry in Botswana in the 1990’s and now Botswana is expected to pay Rand 5.2 billion in 2012 in lost customs revenues for the privilege of subsidizing the South African industry. If Namibia, which also received 32% of the customs pool in 2012,  and Botswana had not been these paying  subsidies since 1995, they could almost certainly have paid for the building of the trans-Kalahari railroad. 

A final bitter twist in this sad Hyundai saga is that Hyundai South Africa confirmed that they will be opening a Hyundai assembly factory in September this year in Benoni to assemble trucks for the SACU market. The factory will be using, according to Cramer media,  ‘completely knock down’ kits as was the case with the post 1997 factory in Botswana.

Sovereign Rights

As long as it does not cause injury to others or is based on exports then international trade law allows every sovereign state the right to subsidize its industry. The MIDP has now been replaced by Automobile Production and Development Program (APDP) which is not based on export subsidies which are illegal under WTO law, but is now based on value addition. Despite requests, SARS refused to release data on the costs of this APDP program in 2103 saying that the cost will only be available in the next South African budget but those in the industry do not expect lower subsidies than in 2012/13.

South Africa, if it so chooses, must have the right to subsidize its automobile industry. Botswana exports some automobile parts such as batteries and electrical harnesses and also gains from this program.  The only question is why the Batswana should pay South Africa’s subsidises and vice versa, especially given the value of Botswana’s subsidies compared to South Africa’s? There is a simple solution to this subsidization issue. SACU members that use SACU customs and excise revenues to subsidize their industry should have the cost of those subsidies deducted from their annual SACU earnings and the money returned to the SACU revenue pool for re-distribution and in that way we each pay our own subsidies.

But of course South Africa, like everyone else, would much prefer to have someone else pay their bills for them. The automobile industry in South Africa now wants the APDP to be extended to bus and truck manufacturing and given that 83% of the cost will be paid by the citizens of the Botswana, Lesotho, Namibia and Swaziland, why would the South Africa Department of Trade and Industry object?

These are the views of Professor Roman Grynberg and not necessarily those of any institution with which he may be affiliated.

Why Beneficiation or How Professor Hausmann got it wrong !

Why Beneficiation?

For the better part of a decade the word beneficiation or adding local value to basic raw materials has, as an economic policy, been a dirty word amongst economists in the major capitals of the developed world and in their institutions such as the OECD and the World Bank. For those in Africa, the process of adding value locally to what few raw materials one has in a small country only seems logical. To many in the older generation who were trained 30years ago in economics, beneficiation has been seen rather as a holy grail. If you look at the SADC industrial policy framework  beneficiation of raw materials is a central plank of economic and industrial policy throughout the entire southern African region.

So why are institutions such as the World Bank and even researchers at what is supposed to be Africa’s bank, the African Development Bank so adamant about not bothering to beneficiate our raw materials and continuing to export raw unprocessed materials? Some of the reasons offered are valid, others make far less sense. The most valid ones is that beneficiation  to the next stage of a raw material such as copper or nickel is often very capital intensive and usually does not create that many jobs and therefore it is no panacea for Africa’s many problems that hold back investment. This is certainly true of copper in Zambia or zinc in Namibia or even diamonds in Botswana - these have hardly been sectors that have been the sources of major employment generation. They tend to create a few, sometimes even a few thousand, relatively good well paid jobs and then there is no more growth because the sector does not go add more value. Government’s obvious reply is that  when you are faced with the option of the market place producing very few good jobs at all then beneficiation looks pretty good to policy makers.

‘Neo-imperialists’ vrs ‘Economic Illiterates’

The arguments on both sides of the beneficiation debate tends to have a great deal of emotion attached. Those who are arguing against beneficiation are often simply dismissed by their opponents as ‘neo-imperialists’ who want to keep Africa in exactly the same position it was a century ago shipping raw ivory to the coast for export to Europe and Asia. Those who oppose beneficiation see it as a failed economic policy that has not succeeded in most locations and is the policy of what they refer to as ‘economic illiterates’. Instead, they argue, countries should just try to develop industries that are similar in complexity and technology to their existing technical capacities.

Those industries downstream of their raw materials often require technologies and  skills that are often not available locally. Those in Washington as well as some in Tunis at the African Development Bank think we should simply stick to simple economic activities that are close to their existing skill set.

Hausmann over Botswana

The economist most closely associated with anti-beneficiation argument is Professor Ricardo Hausmann who was dispatched to Botswana and South Africa by the World Bank to convince the two countries most closely committed to the idea of beneficiation that ‘beneficiation is a poor policy paradigm’. I once heard Professor Hausmann present an interesting analogy. Businessmen, he said,  are like monkeys in a tree, if they try to swing to branches that are too far they are likely to fall. If however they swing to branches that are technologically close to what they are doing now then they are more likely to succeed. This seems perfectly sensible ‘motherhood and common sense’ – stick to the simple stuff until you get really good at producing complex things. How can one argue with that?

The good professor argues that few countries ever have been able beneficiate. He looks at  three goods -sugar, textiles and logs. Countries that export these commodities rarely if ever move downstream and beneficiate to produce confectionary, clothing and furniture. Professor Hausmann’s view is that the development path of countries is technology and skills driven but the reality is that it is driven by money and the trade rules created by the developed countries. Scores of countries in the developing world never went beyond growing and milling brown cane sugar not because they lacked the  technology and skill to refine sugar as suggested by Hausmann but because the EU and the USA did not want exports of refined sugar under their quota regimes. The import of sugar milled beyond 88 polarity i.e. to refined sugar was not sought after by the Europeans wanted the sugar for their own refineries.  For decades the EU paid very high prices to a dozen or more developing countries ( e.g Mauritius, Swaziland, Guyana etc) to keep them producing only brown sugar.

In the garment industry for decades up until 2005 the countries that produced and exported garments to the US and parts of the EU were determined by whether they got an Multi Fiber Agreement  quota and not whether they were particularly good and effective at producing garments. Tropical log exporting countries never went beyond exporting raw logs to exporting sawn timber, let alone furniture not because of the technology but because it is such a corrupt industry where loggers frequently, with very small sums of money, are able to  bribe customs officials to misclassify mahogany as box wood and hence despite often high export taxes they never processed the logs locally. The amount of money to be made from this corrupt trade meant exporting raw logs to Malaysia and Korea where they were in short supply was the most profitable thing to do with tropical logs and certainly not to process them locally.

Botswana – export sugar and coffee??

Professor Hausmann came to Botswana 2011 for a very short visit and suggested we not proceed with beneficiation and instead move to industries that are similar to the ones we already have- an early harvest as he called it. He and his trusty computer model suggested some new industries that were technologically similar to what we grow and produce, what he called an ‘early harvest’ and he suggested we start producing such commodities as sugar and coffee. Interesting!  Clearly if Professor Hausmann had left the Grand Palm hotel for a while or known something about either crops he would have thrown such folly out the window as neither crop is possible on a commercial scale in Botswana. Subsistence cane sugar is already grown in Botswana but commercial sugar requires lots of cheap water at the right time of the crop cycle – and while we will get lots of expensive water from the Zambezi, cheap water is something Botswana does not have. ( Please try Swaziland) Coffee requires a climate, altitude and soil types also not readily available in this country ( please try Uganda Tanzania or Kenya) . What was he thinking? Computers can only do so much- sometimes economists need to leave their 5 star hotel, talk to real people and then do some basic homework before they give developing countries advice. 

Competitiveness Matters

Beneficiation of diamonds has created over 3,500 jobs in Botswana but this has not grown and as long as we stick with the current business model for beneficiation diamonds that means we are uncompetitive at cutting any diamond below at sizes below 1 carat rough. This in turn will mean that the industry will never grow much. God did not make that many 1 carat diamonds and so we are in effect at saturation with 21 factories and 3,500 jobs. Over 80% of all rough diamonds coming from the earth are under 0.2 carat and this means the Indians will continue to beneficiate most of our diamonds unless we learn to become more competitive than we are now.

We have never beneficiated our base metals and have sold copper/nickel matte for refining in other countries. Unless there is a profound shift in policy nothing much will happen.  The South Africans would dearly love us to stop beneficiating our cattle i.e. selling beef to Europe and instead sell our cattle as weaners to them so they can ‘beneficiate’, much like our neighbours in Namibia do.

Then what can beneficiation do for Botswana? It can only be a beginning of industry that then obliges government to see how we can make our industries truly internationally competitive. The more clamour from the private sector there is for international competitiveness the more government will have to move to assure that services are provided competitively and that our prices are right. If we could make our diamond cutting industry genuinely competitive there would certainly be no more unemployment in Botswana and we would be able displace India as the world’s premier diamond cutting centre.  It is a prize worth fighting for. But to do this would require a steely eyed commitment from government to being hard and fiercely competitive, no matter what the political costs. This fierce commitment to make Botswana ‘win, no matter what the cost’,  was not entirely evident during the 1990’s with the FAP when only employment considerations were paramount, and certainly not evident in government’s dealings with BMC which, without government loan guarantees, would now be shut. If that ‘will to win’ does not surface with diamond beneficiation then it will surely go the same way as our previous attempts to  diversify.  

These are the views of Professor Roman Grynberg and not necessarily any institution with which he may be affiliated.

 

 

China and Base Metal Beneficiation in Africa

What China is Doing to Africa

‘If Botswana wants to refine copper it will not get the voluntary agreement of the mine owners. They want off-take agreements that give them maximum flexibility which means they will want to sign agreements that are for the life of the mine. The Ministry of Minerals Energy and Water Resources must put its foot down and say no and give the copper miners the same deal that was given BCL decades ago- a five year renewable off-take agreement that terminates when Botswana has its own refinery. If we do not do this as a first step then in thirty years we will be left with holes in the ground as in the case of BCL and Tati. The next step will be to assure that a refinery is actually built.’

This week Botswana’s emerging as well as existing copper and base metals firms along with government are meeting in Maun to discuss the road ahead for beneficiation in the country. Two things are pretty clear. The copper companies will want nothing to do with  the country’s desire to beneficiate its base metals and, at least for the moment,  the iron ore and coalminers  will. It is rare that a simple answer explains  such a difference but to bend slightly President  Clinton’s very successful election campaign  slogan against George Bush the Elder in 1992- ‘it’s the price –stupid’.

For the country’s emerging and existing copper miners the price of copper remains reasonably firm and while July prices are at USD7,115 clearly off its February 2011 peak of around $9,600 per tonne these decreases do not begin to compare to the hammering that the price of  coal and iron ore have taken over the same period. South African coal export prices are at $74/tonne or  roughly half what they were at their peak of $125/tonne in April 2011. The July spot price for 62% Iron ore  is approximately $90 again  approximately half its 2011 peak. Given that it costs the same to truck a tonne of copper concentrate as it does a tonne of low grade coal and iron , coal can only be transported by rail and copper concentrate can reasonably be trucked, if governments are willing to allow the mining companies to clog up and  destroy the nation’s roads.

The interests of those who own iron ore and coal assets in Botswana is at the moment  completely different to that of the copper miners. Copper and nickel companies are not the slightest interested in beneficiation i.e. processing in Botswana. But iron ore and coal companies are, in the absence of an effective railway, desperately looking for any way to beneficiate their low cost  products locally and to find local markets. Its all about the price and the cost of transport.  The iron ore deposit owners are looking at producing pig iron and the coal mine developers are all desperate to establish power plants at their mine heads to export electricity to Zambia, South Africa and Namibia. They are unwitting but natural allies of those who do not just see commodities but see the birthright of the people of Botswana as a vehicle for its development and transformation.

Copper concentrate is approximately 27% copper and hence roughly three quarters of  the trucks going from the  mines in Botswana and the Western provinces of South Africa are simply clogging and destroying roads by carrying waste to Durban which will then be shipped to India and China. Why would anyone carry waste so far you ask, rather than ship it as refined copper cathode? The answer is -‘It’s the price stupid’

China and the Great Compression

The world’s biggest market for copper is China and they have undertaken industrial policies over the last few years that have expanded their capacity to smelt and refine copper well beyond their domestic supply of concentrate and even above what they can be reasonably acquired from mines in proximate markets. Their copper smelters and refineries were  operating at levels of capacity of around 60% in 2013 and yet China continues to build ever more and larger refineries. This over-expansion has meant they have been desperate to acquire concentrate so they can increase their rate of capacity utilization. This in turn has driven down smelting and refining margins over the last decade that there were reports that in 2011 Chinese smelters were willing to refine for prices close to zero just to get the capacity through their plants.

The consequence of the Chinese industrial policy is global. All over the world countries that were once major refiners of copper such as the USA and Australia have moved out and even the world’s biggest copper miner- Chile has not been expanding its refining capacity significantly preferring to sell concentrate to the Chinese. This ‘Great Compression’ of copper refining margins caused by Chinese subsidies and industrial policy towards its state owned enterprises is the flip side of the rising copper and base metal prices which has so enriched large parts of Africa over the last decade. African miners don’t want to build refineries and only do so when they are forced as in Zambia. Why refine when the Chinese will do it for peanuts? While the Chinese have enriched the miners and the coffers of government their policy  has meant Africa cannot easily develop beyond digging holes in the ground and selling raw material to eventually enrich China.

China has provided massive benefits for all base metal miners driving up prices to achieve the supply needed for the frenetic pace of development and industrialization. But the Chinese know that it is not just a matter of importing copper cathode for wire and pipe but, like the Japanese before them, controlling this middle part of the value chain gives your end users of those base metals  a commercial advantage over foreign competitors. Japan, which has almost no mines, almost no electricity and relatively high cost labour was for three decades in 1970s’- 2000 able to refine and smelt aluminium, iron and copper from mines they partially owned in remote locations in Asia and Latin America, which allowed them to buy the base metals at prices that gave their steel, automobile and ship builders an enormous commercial advantage over Europe and America.

By compressing the margins at the middle of the value chain for products like copper, aluminium  and iron China is pushing more and more industry towards its shores. As a result its citizens are having trouble breathing for the toxic fumes and pollution this policy creates but it is transforming the country. What Chinese policy makers are doing  is giving their country commercial advantage in a similar way to what Japan did four decades ago. And just as Japan wiped out large segments of the American and European automobile, steel and ship building industries, China will do exactly the same in its down-stream industries. There was a great deal of mystery in the 1990’s about the reasons for Japan’s success at the time. Much of the discussion was about the apparent technological and management superiority of Japan but in reality Japanese policy gave a huge price advantage to their automobile, steel and ship makers producers. It’s the price- stupid!

Where to Botswana?

For certain we will repeat the same pattern as we did 30 years ago with the huge  BCL copper-nickel project. At the beginning of the project President Sir Seretse Khama demanded that the two main partners, Anglo and AMAC build a refinery at Pikwe. AMAC, point blank refused saying it had a copper refinery at Port Louisiana and was not going to build another. It was in the BCL project because it could acquire concentrate for its own refinery. As a result we made a blunder and moved to produce matte which is 70% copper rather than concentrate. This meant that Botswana’s matte was in high demand because there was little waste to transport and hence giving even less reason for refining copper and nickel locally. 

If Botswana wants to refine copper it will not get the voluntary agreement of the mine owners. They want off-take agreements that give them maximum flexibility which means they will want to sign agreements that are for the life of the mine. The Ministry of Minerals Energy and Water Resources must put its foot down and say no and give the copper miners the same deal that was given BCL decades ago- a five year renewable off-take agreement that terminates when Botswana has its own refinery. If we do not do this as a first step in thirty years we will be left with a hole in the ground as in the case of BCL and Tati. The next step will be to assure that a refinery is actually built.

A copper refinery, in and of itself, is really not much of a development for Botswana. It is capital intensive, creates few jobs and normally lots of pollution. But if we connect the dots by having refineries and of copper and nickel and zinc and iron there is much that can be done to assure that the youth of Botswana have a future with relatively good jobs. This is especially so if we price electricity to reflect our abundant coal resources. If we want to walk a road to industrial development it is not impossible as some economists suggest. We do not have to put the nation’s youth into dead end jobs in call centres to export services. We obviously cannot copy China and Japan as we have to find and walk our own road, but what they have shown is that when you have the right policies, the right infrastructure and the right prices great things can be achieved.

These are the views of Professor Roman Grynberg and not necessarily those of any institution with which he may be affiliated.