Infrastructure Opportunities in Latin America Are Deep and Wide

A report published by the Economist Intelligence Unit (the EIU) asserts that "Latin America lags most of its regional peers in terms of infrastructure investment. According to the Global Infrastructure Hub (GI Hub, a G20 initiative), Latin America spent 2.2% of its GDP in 2023 on infrastructure, but actual investment needs are estimated at 3.5% of GDP. The difference of 1.3% of GDP represents nearly US$90bn in unmet infrastructure needs, and that gap will only widen if infrastructure investment does not pick up."

The EIU also notes that the shortfall in infrastructure investment is reflected in its "Operational Risk scores, which place Latin America far behind OECD economies in the infrastructure category." For example, "Poor infrastructure weighs on the business environment and growth: the lack of proper transport links raises supply‑chain costs; unreliable electricity distribution disrupts economic activity; and patchy ICT coverage leaves entire regions and their inhabitants isolated."

The report's other key findings include:

• Latin America's infrastructure remains below par by international standards, limiting competitiveness and economic growth. Many of the region's governments are operating under significant fiscal constraints, which means that they will look to the private sector to take a more prominent role in developing much-needed infrastructure in 2024.
• There are myriad opportunities for private investors in all sectors across the region. Most Latin American countries have adopted the public-private partnership (PPP) model, but policies, regulatory frameworks and risks vary widely from country to country. Uncertainty surrounding the policy direction of some governments—particularly in Argentina and Colombia—is another obstacle to attracting investment.
• Even countries with well-established frameworks and experience with PPPs—such as Colombia, Mexico and Panama—will face setbacks. In particular, a lack of consensus between governments, businesses and local communities will stoke social unrest and delay development.
• National governments do not have a monopoly on PPPs: in Brazil, for example, states and municipalities have used PPPs to accelerate their own projects—a trend that will continue in 2024 and beyond.

The EIU explains how the infrastructure gap is holding Latin America back in keeping up with new technologies. "Because of its sizeable infrastructure gap, the well of investment opportunities in Latin America is deep and wide," the report says. "The region's logistics and utilities infrastructure is in dire need of expansion and modernization, but sectors at the forefront of innovation and technology also deserve attention. The rollout of 5G technology, for example, has been slow in some countries, but progress this year—Argentina finally carried out its long-awaited 5G auction in October and Colombia in December—will generate some opportunities in 2024."

The report importantly adds:

Investment in renewable and sustainable energy sources, like solar and wind, is also growing but remains far below Latin America's potential. The region could become a crucial player in the supply chain to power the global green energy shift, owing to its large reserves of critical minerals, wide use of renewable energy sources and water availability. However, it lacks the necessary infrastructure and funding to produce the batteries and green hydrogen that will fuel the world in the decades to come. Investments in these areas are on the radar of governments in Latin America's major economies, but the biggest infrastructure opportunities—in the near term at least—will be in logistics, including road, rail, energy distribution, and ports in the likes of Argentina, Brazil, Colombia and Mexico.

What are your thoughts about the private sector taking a more prominent role in developing Latin America's much-needed infrastructure in 2024?

​Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Helping Policymakers and Stakeholders Understand Risk and Design Effective Policies for Urban Resilience

According to a report developed by Economist Impact and supported by the Tokio Marine Group, "The world is facing unprecedented challenges. Extreme weather events, from hurricanes and wildfires to flooding and heatwaves, are becoming more frequent and their effects more devastating." Furthermore, "Emerging risks like cyber-attacks loom larger as technology dependence deepens. Our cities are exposed to all of these risks and more. Lives and livelihoods depend on our ability to understand and mitigate the evolving threats to our urban centers."

The Resilient Cities Index highlights three phases to resilience. "Preparation and mitigation come first. Understanding the risks, how they are evolving and taking steps to minimize their impact is essential if cities are to avoid the worst. The second phase is response, necessitating swift reactions and timely assistance to save lives and diminish the impact when disasters occur. Last is recovery, emphasizing the need to learn from tragedies and rebuild stronger, better-equipped communities for future shocks and stresses."

Aiming to help policymakers and stakeholders understand risk and design effective policies for urban resilience, Economist Impact developed a benchmark of 25 cities. To gauge the resilience of these cities, the report's authors took measurements across four pillars: critical infrastructure, environment, socio-institutional and economic. This white paper combines index analysis with expert commentary to identify patterns, common strengths, deficits and best practices across index cities.

Key findings from the inaugural edition of the Resilient Cities Index include:

• Cities performed well in the critical infrastructure pillar of the index, but there are some weak points that require strategic focus. The cities with the highest scores were Dubai, Shanghai, New York and Singapore. These capital-rich market locations have greater opportunities to develop new infrastructure, compared with European cities constrained by decades- or centuries-old systems. Within this pillar, digital infrastructure and transportation were a drag on cities' resilience.
• Cities that use data and technology to create operational efficiencies and share information with their citizens—i.e., smart cities—are better at dealing with shocks. Patchy internet quality, which can impede access to digital services, pulled down the overall resilience score in the critical infrastructure pillar. Digital technologies and advanced data analytics can help to predict risks, optimize existing systems and keep the public informed. Greater digitalization comes with risks, especially to critical infrastructure, but most cities in the index have built safeguards against this.
• Most emerging economy cities lack adequate regulatory frameworks, strategies and incentives for futureproofing infrastructure. Only a few cities in the index achieved high scores for future-proofing, which involves ensuring infrastructure preparedness for shocks while managing current and future emissions. One way cities can future-proof is by incentivizing sustainable designs for buildings, such as installing green roofs, incorporating modularity and retrofitting for energy efficiency—a practice only found in high-income cities in the index.
• Efforts to achieve environmental resilience are led by innovative solutions. Cities are employing a variety of nature-based solutions to adapt to flooding and heat stress, from planting rooftop vegetation and mangrove forests (green infrastructure) to rehabilitating wetlands (blue infrastructure). Cities are also decarbonizing by adopting renewable energy and negative emission technologies, such as carbon capture, storage and removal. However, the scalability of these technologies is likely to be challenging for resource-constrained emerging market cities.
• Cities demonstrated poorer performance in the socio-institutional pillar, mostly due to income inequality and poor health and well-being metrics. Only nine cities have a single, comprehensive plan to support vulnerable groups. However, one bright spot is that cities are promoting a culture of readiness to act in the event of a disaster. The majority of cities scored highly on this or are working to improve their readiness.
• Cities had the lowest average scores in the economic pillar, dragging down some cities that performed well in other areas. The low penetration of financial safety nets hinders safeguards against threats and undermines a city's ability to recover from shocks. Another aspect of economic resilience is a city’s ability to incubate innovation, which can foster solutions to a range of problems, from congestion to water stress. Unfortunately, most cities scored poorly on the indicator for start-up ecosystems.

The report's conclusion points out that "A resilient city is not only prepared for shocks but has the ability to bounce back and thrive. Recognizing both existing and looming threats will help cities better understand their vulnerabilities and design targeted actions. However, building such cities requires stakeholders from government, businesses and communities, as well as individual city-dwellers, to engage in holistic resilience thinking at community and municipality levels."

Moreover, "While resilience needs to be tackled in myriad ways, a number of critical strategies have been identified in the course of this research and are summarized below."

• Empower the community to be active participants. This is contingent on the democratization of information. All city-dwellers should have equal access to government information, including what to do in an emergency. Some cities, like Singapore, do this very well, using digital channels to disseminate information to everyone simultaneously. Fostering a culture of readiness and the ability to manage hazards will require investment to train and educate people at governing and grassroots levels to be stewards of their city. Recognizing that information is key, municipalities could consider partnering with a digital platform to minimize misinformation and ensure the city moves in one direction, despite disruption.
• Social cohesion efforts need greater advancement across the board. Cities are nothing without the people who inhabit them. Greater attention to social cohesion will help to ensure cities are less fragmented, adaptive and better prepared for shocks. City governments should overlay resilience efforts with initiatives that aim to improve the lives of urban residents. This process should be driven by city leadership and engage civil society. The majority of cities in the index have some way to go to strengthen social cohesion through integration programs for society's most vulnerable.
• Early warning systems (EWS) are vital for safe cities but investment is needed to hit the 2027 target. National governments and municipality leaders will have to collaborate to ensure universal early warning systems coverage by 2027. There are two challenges that need to be met. First, capital is needed to bridge the investment gap for technologies with a greater push for the development and adoption of frontier and horizon tech–from drones to AI. Second, governments need to facilitate the necessary legislation to connect these EWS to emergency and response plans to ensure there are protocols and resources in place to deal with climate extremes and hazards. Community acceptance and responsiveness to early warnings are essential in the effectiveness of EWS. This can be achieved through systematic training and education and awareness programs.

What do you think of the report's findings and conclusions? Do you have additional recommendations on how policymakers and stakeholders understand risk and design effective policies for urban resilience?

​Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

A Toolkit for Startups in the Utilities Sector Seeking to Partner With the Public Sector

"Cities in low-and middle-income countries are home to one billion people lacking access to affordable, reliable, safe, and sustainable utility services," Max Cuvellier, GSMA's Head of Mobile for Development, writes in the Forward of a toolkit that was created for startups in the utilities sector that are seeking to partner with the public sector. He adds: "This urban service gap is being exacerbated by rapid urbanization, climate change and widening inequalities posing complex challenges to city authorities, municipalities, and utility service providers."

In its press release announcing the publication of the toolkit, the GSMA, a UK-based organization that represents the interests of mobile operators worldwide, notes: "Partnerships between start-ups and the public sector have emerged as an innovative and impactful way to address critical gaps in essential urban services – particularly when it comes to reaching low-income urban populations in informal settlements. They have the potential to combine the technology, innovative financing, and agility of start-up ventures with the public sector’s scale, service mandate, and resources."

The GSMA's announcement further says: "Over the last decade, through the GSMA Innovation Fund, we have supported more than 100 start-ups and SMEs working across LMICs. In that time, we have observed how central partnerships are to startups' scaling journeys and wider social impact. We have also seen how partnership formation between stakeholders with different organizational cultures, time horizons, and strategic priorities can pose challenges. Meanwhile, there has been little research and few resources tailored towards start-ups and early-stage private sector innovators pursuing partnerships with the public sector."

This toolkit therefore aims to:

1. Highlight the role of start-up-public sector collaboration in the context of the many challenges facing cities in LMICs;
2. To provide a conceptual framework of how to think through, frame, and define startup-public sector partnerships;
3. To offer practical tips and tools to startups navigating these complex partnerships; and
4. To highlight additional resources that might be relevant to those aiming to catalyze startup public sector collaboration.

The toolkit presents the following conclusions:

• Innovation: Digital solutions have demonstrated their value for improving urban services in LMICs. However, more innovation is needed to develop business models that can be deployed on a wide scale and account for the financial constraints of utilities and municipalities, as well the needs of low-income customers.
• Urbanization and climate change: Though the startup-public sector partnership landscape for improved urban utility services is still nascent, trends such as rapid urbanization, urbanization without structural formation, and climate change will mean that municipalities and public utilities will have to collaborate with startups and private sector innovators to close the urban service divide. While there has been more attention placed on the opportunities related to startup-public sector partnerships for urban utility services, it is also clear that there are many barriers to such partnership models, particularly when it comes to taking such partnership models to scale.
• Pioneers and challenges: Examples in countries that have pioneered these partnerships such as Kenya, India, and Bangladesh highlight that start-up-public sector partnerships can support cities in making urban utility service delivery more affordable, reliable, safe, and sustainable. Despite these successes, it is important for startups to be aware of the challenges and complexities associated with public sector collaboration, and better assess where synergies with the public sector lie and how their service can support the public sector in meeting its objectives.
• Collaboration: This toolkit sought to highlight the role of startup-public sector collaboration in the context of many challenges facing cities in LMICs (Section 1), provide a conceptual framework of how to think through, frame, and define startup-public sector partnerships (Section 2), offer practical tips and tools to start-ups navigating these complex partnerships (Section 3), and highlight additional resources that might be relevant to those aiming to catalyze startup-public sector collaboration (Section 4). Given how nascent many partnerships and the wider start-up public sector ecosystem are, it will be critical to continue to conduct research on the developmental, commercial, and social impact of these innovative partnerships, and use case studies to generate granular insights.
• Drivers for change: Trends will continue to drive startup-public sector partnerships for improved urban utility service provision. These include increasing devolution and public sector programs that encourage and incentivize startup participation in urban service delivery, the increased relevance and maturity of circular economy use cases, increased adoption and availability of frontier technologies and digital payments, as well as increased availability of funders and funding models to support multi-stakeholder partnerships.
• Digital Utilities Partnership Hub: The GSMA Digital Utilities program convenes startups, relevant public sector organizations such as state-owned utilities, and other relevant corporates such as MNOs to catalyze innovative partnerships and collaboration for urban utility service provision. Alongside this toolkit, the GSMA Digital Utilities program is launching the Digital Utilities Partnership Hub. The hub is GSMA's comprehensive source of information on the role of digital solutions and innovative partnerships for improved urban service delivery, highlighting key insights and case studies from our work with public and private sector stakeholders over the last decade.
• Support: The GSMA Digital Utilities program is committed to supporting startups and their public sector partners aiming to form, sustain, and scale partnerships for improved urban utility service delivery. To achieve GSMA's objectives, the program engages in:
• De-risking and catalyzing innovative urban utility services: Providing grants to private sector innovators to test and demonstrate the role of digital urban service solutions;
• Research and insights: Generate rigorous evidence on innovative solutions to essential service provision by gathering insights from Innovation Fund grantees and conducting research with partner organizations with deep expertise in utility service provision; Partnership facilitation and convening of key ecosystem stakeholders: Drive replication and scale through convenings and leveraging our own networks as well as those of key partners who work to enable similar solutions; and
• Technical advice to MNOs, municipalities, and utility service providers: Provide advice on the role of digital innovation for improved utility service provision and insights on how to achieve multi-stakeholder partnerships.
• Enabling Forums: GSMA's market engagement team is looking forward to convening public sector stakeholders and startups for our next digital urban utility forums in Bangladesh and Kenya in Q4, and GSMA's program is looking forward to leveraging their strategic partnerships with key enablers and funders such as Imagine H2O Asia, the International Water Association, GOGLA, the World Bank, the Asian Development Bank, the World Resources Institute and other partners to continue to drive public-private collaboration to close the urban service divide.

Do you see value in this toolkit for startups in the utilities sector? What recommendations do you have for how startups and the public sector can partner?

​Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

How to Reduce Africa's Reliance on Commodities

"Despite being home to 17% of the world's population, Africa is an underinvested market," a newsletter published by Morgan Stanley, a financial services firm, says. The newsletter also points out that "72% of investors surveyed do not currently invest there. We believe that despite near-term challenges, the continent offers compelling long-term opportunities vis-à-vis private markets and infrastructure."

Moreover, "Africa's median age, at 19.7, is considerably lower than those of Asia and South America, at 32.0 and 32.1, respectively. Furthermore, according to the World Economic Forum, Africa is expected to have the world's largest working-age population by 2034. The expected increase in the working-age population will likely promote middle class growth, building on trends already in place."

As an investor and entrepreneur, I appreciate how these statistics represent future opportunities. However, as an advisor to several officials representing African nations, I wish these leaders understood the importance of these statistics and the opportunity that exists for the citizens they represent. In my conversations with African government officials, I am often asked for my opinion on how to attract foreign direct investment to grow their private sector. While I strongly advocate for establishing policies and making investments to build a thriving digital economy in Africa, these officials mistakenly focus our conversation on how to increase their overdependence on raw materials and commodities such as minerals, oil, gas, and lumber.

Even The Economist notes that "many African economies have relied too much on raw materials for too long." The article further explains that "The UN defines a country as dependent on commodities if they are more than three-fifths of its physical exports. Fully 83% of African countries meet that threshold, up from 77% a decade ago. Some depend on produce such as tea, but most rely on mining or on pumping oil. When commodities crashed in 2015, foreign direct investment (FDI) and growth tumbled and have yet to fully recover."

The article importantly adds: "Broad averages obscure some of the progress that has been made to diversify economies. Over the past decade resources have become less important to GDP. The share of commodities in goods exports from the continent as a whole has fallen, too. And in countries such as Botswana and Malawi, services have grown strongly. Even manufacturing is rebounding."

However, "Africa has a long way to go if it is to break free of the resource curse. In countries rich in diamonds or oil, political power can be a license to loot. So unscrupulous folk are tempted to grab and hang on to it by any means available. Resource-rich countries are more likely to suffer dictatorships, and also tend to have more and longer civil wars."

Building a thriving economy while strengthening government institutions with better transparency and will require investments in education and infrastructure. Using Sierra Leone as an example, The Economist says the west Africa nation "now spends about 21% of its budget on education, up from 13% in 2017. As a result, more youngsters are passing their final exams than ever before. Mining began in Sierra Leone about a century ago. 'If we had invested in humans for a hundred years,' sighs David Moinina Sengeh, the education minister, 'we would be in a much better place today.'"

While I agree with the authors of Morgan Stanley's newsletter that many investors are missing out on lucrative opportunities in Africa, there is evidence this is changing. As reflected in the chart at the top of this post, African startups raised $4.4 billion in 2021, which was more than 2.5 times the amount raised in the previous year, according to "Africa: The Big Deal," a website managed by Max Cuvellier and Maxime Bayen.

With respect to specific sectors, fintech startups raised $2.3 billion from investors last year (see chart below). While this sector captured 53% of funds raised, other key sectors such as energy, retail, healthcare, education, and logistics and transportation are also on the rise.

I do not completely believe the notion that institutional investors in America or Europe are investing in African startups because they see the market as a great investment opportunity. Their investment is a result of chasing higher yields since the average junk-bond yields in America and Europe are 5.1% and 3.3%, respectively, well below inflation. And while there is good reason to cheer the recent increases in investments on the continent and the revenues some of these startups are reporting, I am still waiting for announcements of profitability and successful exits through an initial public offering or acquisition. Nevertheless, as someone who has supported tech startups in Africa for over 20 years, I am optimistic that the trend in the number of investors, amount raised, and overall number of startups on the continent will continue to grow for years to come.

I look forward to future conversations with government leaders in Africa on how to reduce their reliance on commodities by investing in education and infrastructure. Such investments will only help their growing working-age population enjoy the fruits of a middle-class lifestyle.

What opportunities and risks are you seeing in Africa's startup ecosystem?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

EIU Report Explores How Latin America Can Take Advantage of Shifts in the Global Supply Chain

"The coronavirus (Covid-19) pandemic has exposed the fragilities of globalized supply chains, raising the possibility that many of them will be localized over the coming decade to reduce operational risks," says a report published by The Economist Intelligence Unit (The EIU).

Titled Will Latin America take advantage of supply chain shifts? the report explains that "[g]iven its proximity to the US market, localized supply chains would present a big opportunity for Latin America where, aside from Mexico, the region has not really been part of the boom in global supply chains in recent decades." Furthermore, "As the pandemic has exposed the fragilities of the global supply chain—and the enormous disruption that can take place when only a few links in the chain are broken—nearshoring some of this production to Latin America has become a more attractive prospect."

With an approximate population of 129 million, according to the Central Intelligence Agencies' World Factbook, The EIU asserts that "Mexico is the country in Latin America with the most success in regional supply chain integration, owing to the 1994 North American Free Trade Agreement (NAFTA) with the US and Canada. Currently, about 80% of Mexican exports are orientated to the US, of which the bulk are manufactured goods, including vehicles, electronics and machinery."

What is more, "the current moment should provide a golden opportunity for Mexico to increase its share of manufacturing in US-bound exports from East Asia. Instead though, so far at least, the pandemic has caused Mexico's share of US imports to slump badly to just 20% of Asian imports in May, although there were signs of recovery in June. The immediate question, then, relates to when Mexico can get back on track and be seen to manage coronavirus-related uncertainty."

In addition to the aforementioned finding about the Latin America region not being part of the boom in global supply chains in recent decades, the report's key findings include:

• The region faces considerable obstacles to supply chain integration, including poor infrastructure and logistics capabilities and legal and regulatory deficiencies. As such, although there is some opportunity for localization, the region as a whole is unlikely to take full advantage.
• Mexico seems best placed to increase its position in the US supply chain, but there are issues here too. In the very near term, the problem will center around the country's slow emergence from the health and economic effects of Covid-19. More fundamentally, Mexico will struggle without government policy to actively promote supply chain shifts, and without policy that attracts investment more broadly.
• Looking elsewhere in the region, a number of key metrics in The Economist Intelligence Unit's business environment rankings suggest that Mexico, Costa Rica, Chile and Colombia are, relatively speaking, better placed to compete with Asia in supply chains.

"Labor markets, economic policy and political effectiveness are crucial," the report notes. "Although weaknesses in logistics have been central to the failure of Latin America (with the exception of Mexico and Central America) to integrate into major global supply chains, there are clearly other challenges. One of these is the region's readiness to adopt new technologies and preparedness for industry 4.0 (the fourth industrial revolution) as firms in all sectors increasingly adopt, for example, artificial intelligence (AI) and robotics into supply chain processes."

The EIU assesses global technological readiness in its Business Environment Rankings, "looking at issues such as research and development (R&D) spending and infrastructure, the quality of e-commerce and e-government, patent applications, and technology usage. Taking all of these factors into account, and combining our assessment of technological readiness with an assessment of the infrastructure capacity of countries in the region, our rankings show that Chile, Mexico, Argentina and Colombia stand out ahead of the pack in Latin America."

Moreover, companies in the region making supply chain location decisions "will take into account factors such as policy towards private investment and foreign direct investment (FDI), the prevalence of free-trade agreements (FTAs) with other key players in the supply chain, and political and policy effectiveness and predictability."

Importantly, "An assessment of all of these factors, along with infrastructure, technological readiness and labor markets, taken from our Business Environment Rankings, suggests that, within Latin America, the economies most prepared for supply chain integration are Chile, Costa Rica, Mexico, Colombia and Brazil. This preparedness matters, given the stickiness of local investment. Moving manufacturing from one place to another is difficult and expensive. So, notwithstanding considerations that companies are giving to supply chain diversification and resilience, relocating requires the right conditions. There are sectoral implications here too: it is much easier to relocate a textile manufacturer than an autoparts or aerospace manufacturer, for example."

The EIU encouragingly maintains that "Latin America clearly has the opportunity to gain from nearshoring in the coming decade, given some comparative advantages, including its long list of FTAs, proximity to the US market and increasingly competitive wages. And some movement is likely, particularly to Mexico. To the extent that supply chain shifts happen, they would prove enormously beneficial, boosting local suppliers and helping the region's middle-income economies to move up the value chain."

Apart from those countries blessed with natural resources, the Latin American economy has experienced a variety of socioeconomic challenges in the past few decades often exasperated by corruption. However, with policy reform, support to expand infrastructure capacity, and private sector investment in technology R&D, I am expect to see a rise in regional supply chain integration. This will present opportunities for firms provided they effectively identify the country-level risks and prepare strategies to mitigate those risks.

Do you think Latin America can take advantage of shifts in the global supply chain?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Japan's Importance in the Future of Asia

While it has been 12 years since I conducted any business transactions in Japan, I hold fond memories of my trips to the East Asia island country and warm interactions with the Japanese people. In addition, as a resident of the state of Washington, I have come to appreciate the close relationship the Pacific Northwest has with Japan. Therefore, I was quite interested in attending the "Update on Japan and Role in Asia: Japan's importance in the future of Asia" conference on Mar. 31st, 2016 in Seattle, Wash. Sponsored by the Japan-America Society of the State of Washington (JASSW), this conference brought together Japan's foremost researchers and top political minds in the areas of economics, geopolitics, and international relations to discuss the current state of the country and projections for Japan's role in Asia's future. This post highlights two of the presentations made during the half-day event, which was comprised of three excellent speakers and a panel of four highly accomplished individuals.

Daisuke Karakama, Chief Market Economist for Foreign Exchange at Mizuho Bank, served as the first speaker with his presentation, "Abenomics and the Japanese Economy." He noted that "Japan has been suffering from low growth for two decades." The country's annual average real gross domestic product (GDP) rate has fallen from 4.7 percent in the 1980s to 0.8 percent in the 2000s. Furthermore, nominal GDP in 2012 at 475.1 trillion yen was the same in 1991. And while Japan's Consumer Price Index has increased 0.3 percent annually since 1990, the Urban Land Price Index has declined by 4.4% during the same period resulting in a drop of 65 percent over the past 25 years.

Mr. Karakama then provided an overview of economic policies advocated by Japan's Prime Minister Shinzō Abe, which are commonly known as "Abenomics." The three arrows of Abenomics include fiscal stimulus, monetary easing, and structural reforms. Mr. Karakama provided some indication that Abenomics is working such as Japan's unemployment rate fell to its lowest level since 1997 at 3.3 percent, the ratio (1.17) of job offers to applicants hit an 18-year high in 2015, and the Nikkei 225 Average reached its highest level since 1994.

Certain economic indicators are getting worse during the past two years of Abenomics, according to Mr. Karakama. For example, the rate of increase real wages (year-over-year) has gone from -1.0% to -2.2%, the ratio of non-regular staff increased from 35.6% to 37.9%, and the percentage of households with no savings increased from 26.0% to 30.4%.

Photo of Tokyo and
Mount Fuji: JASSW

Japan's economic recovery is stalling, Mr. Karakama explained. One cause for the stalled recovery is weak demand for Japanese goods by China as the Middle Kingdom's economy is experiencing a deceleration. While not as high as Malaysia's 8.4 percent or South Korea's 5.4 percent, value-added exports to China represents 2.2 percent of Japan's GDP.

However, Mr. Karakama seemed cautiously optimistic about the future of Japan's economy citing a continuing trend of declining unemployment rate and a gradual increase of active job opening-to-applicants ratio. Moreover, real wage income for Japanese workers will continue to increase at a solid pace due to the rise of employment of women and seniors. He also said the following three factors the Japanese economy will achieve a growth rate of one percent in FY2015: Support from monetary policy by a continuation of monetary easing due to the moderation of inflation, support from fiscal policy through the postponement of a further consumption tax hike coupled with implementation of emergency economic stimulus measures, and support from the low price for crude oil.

Noting that Tokyo, both the capital and largest city of Japan, will host the Games of the XXXII Olympiad (2020 Summer Olympics), Mr. Karakama said Olympic-related investments will push the GDP up even further through capital investments of JPY10 trillion by four Olympic-related sectors (services, real estate, transportation & communications, wholesale & retail). As a result of hosting the Summer Olympics, Japan's growth rate will improve to mid 1% by 2020.

Mariko Kawano, Professor of International Law at Waseda University presented "Regional Security and the Law of the Sea," which addressed maritime security and maritime disputes in Asia, the role of international legal rules in maritime disputes, the settlement or management of maritime disputes and the rule of law, effective and stable utilization of marine resources in disputed maritime areas, and the importance of the regional cooperation in the process of the settlement or management of maritime disputes.

Dr. Kawano presented three basis features of the dispute in the South China Sea, which contains a crucial shipping lane and high potential of marine resources, among China, Indonesia, Japan, Malaysia, the Philippines, and Vietnam. China's claim on the basis of the so-called nine-dash line for maritime features and maritime areas (see left map), a co-existence of the claims of several coastal states, and an accumulation of unilateral acts of coastal states to manifest or enhance their claims and entitlements.

Citing an op-ed that suggests the Association of Southeast Asian Nations (ASEAN), a political and economic organization of ten Southeast Asian countries, remain neutral on the South China Sea dispute, I had the opportunity ask Dr. Kawano if she agreed with this opinion. Or should ASEAN, together with India and Japan, join in a united effort to condemn China? While she refrained from providing a direct opinion, Dr. Kawano noted territorial disputes in Africa involved the support of countries that not have a direct claim in the dispute, but had an economic interest in seeing the dispute settled in favor of the claimants.

While this conference produced excellent information about the important role Japan has played in the geopolitical arena since the end of World War II, it is still unclear what role the country will play in Asia's future. It should be recognized that Japan is the world's fifth largest economy after China, the European Union, the United States, and India. However, for Japan to maintain its importance in Asia, it must address its domestic issues such as an ageing population, improving sexual equality (where the country is bottom of the rich world in most rankings), and increasing industrial production. For now, Japan will continue to play an important role in regional security and stability.

What is your view of the future of Japan's economy? Will the dispute in the South China Sea get resolved amicably?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

American Recovery and Reinvestment

President-elect Barack Obama recently gave a speech, "American Recovery and Reinvestment," at George Mason University in Fairfax, Virginia talking about his economic plan to save or create three million jobs by doubling the production of alternative energy; weatherizing 75 percent of federal buildings and two million American homes; digitalizing the country's medical records; updating thousands of schools, community colleges, and public universities; expanding broadband; and investing in science, research, and technology. (Photo courtesy of New Rushmore Radio)

I support Mr. Obama's plan to invest in America's infrastructure, but I disagree with his proposal to cut taxes. If taxes are cut, how will the president-elect fund infrastructure investments? Increasing the public deficit is not sound fiscal responsibility. No one likes to pay taxes, but I think many of us will feel more comfortable if our hard-earned tax dollars are invested more wisely.

An economic stimulus plan should balance the need to invest in public infrastructure and reduce the budget deficit. According a Congressional Budget Office (CBO) Analysis dated January 8, 2009, "The Treasury will report outlays of $1,032 billion through December 2008, CBO estimates, $319 billion more than in the same period last year." Furthermore, "The CBO estimates that the Treasury Department will report a federal budget deficit of $485 billion for the first quarter of fiscal year 2009, $378 billion higher than in the same period last year." I understand that it may be necessary to increase the country's deficit in order to invest in public infrastructure, but we must also take necessary action to minimize our debt burden.

I have written in this blog about how the "New Economy" includes a focus on the renewable energy and green technology sectors, which should increase America's competitive edge in a global economy. The healthcare technology sector is emerging and electronic health records will become a commonly-used tool in the coming years. It is imperative that we invest in these essential sectors and public infrastructure projects such as modernizing schools, fixing the country's transportation sector including repairing bridges and roads, expanding rail lines, and updating the national air traffic control system. However, the government (federal, state, and local) must manage our investments well and take necessary, and often difficult, measures to stabilize our deficit.

Haïti: Using Tourism as a Means for Sustainable Social and Economic Development

As explained in post, Haïti: Pearl of the Caribbean, despite the ongoing problems in Haïti, there are several beautiful destinations for visitors in this unique country. Growing a viable tourism sector could provide Haïti the economic and social tools to resolving many of its development needs. As part of my assessment project, I visited key locations the Haïtian Ministry of Tourism designated for tourism development and was provided with several documents and a presentation that collectively provided details to Haïti's tourism strategy.

The Tourism Ministry's impressive 94-slide presentation provided details of the vision and objectives of the tourism strategy. The presentation included statistical data of the number of tourists who visited Latin America, Central America, and the Caribbean, both as a region and by a few selected countries. According to the statistics provided from the presentation, in 2005, Haïti had 110,000 visitors compared to 3.9 million, 3.7 million, 2.26 million, or 1.5 million in Dominican Republic, Puerto Rico, Cuba, and Jamaica, respectively. Regarding the number of hotel rooms, Dominican Republic (60,000), Puerto Rico (13,500), Cuba (50,000), and Jamaica (22,500) compared to Haïti's 800 rooms available to house its visitors.

Photo of the Port of Jacmel:
Marc Roger

Haïti's tourism strategy is based on three components: history, experience, and the environment, which provide a strong basis for establish an ecotourism industry. Other strengths to the tourism strategy include establishing a partnership between the Haïtian parliament and municipalities; strengthening private enterprises including private-public partnerships; drafting regional and international cooperation agreements; recognizing the need to train tourism professionals and create a national branding and marketing strategy; and developing channels for research funding.

The tourism development plans I reviewed are very comprehensive regarding urban planning and land use issues, but based on my assessment lack a realistic implementation timeline with measured benchmarks and defined clear accountable results. In addition to defining and establishing benchmarks, I recommend establishing a collaborative partnership among the other Haïtian governmental departments and integrate the tourism development strategy into a national strategy to ensure that tourism is balanced with broader economic, social, and environmental objectives at national and local levels. In other words, the tourism development strategy should serve as an anchor to rebuild and strengthen Haïti's education, health care, private sector, capacity building in the public sector, public infrastructure development and maintenance, and protection and restoration of natural resources.

This national strategy should be based on the knowledge of environmental and biodiversity resources and integrated with national and regional sustainable development plans. It should also enhance prospects for economic development and employment while maintaining protection of the environment.

To achieve maximum success, the planning and implementation process should be completely transparent to all stakeholders including government agencies, civil society, private business, and the general population. Moreover, the Haïtian government should encourage the development of partnerships with primary stakeholders and provide stakeholders with ownership shares in projects and a shared responsibility for success.

Photo of Ile à Vaches: Marc Roger

Branding and marketing is essential in promoting tourism in Haïti. The first step is defining a "corporate image" to promote a positive view for Haïti, in particular in terms of safety and security for travel and tourism. In addition, marketing various activities as part of an ecotourism package will provide value for the visitor.

Another hurdle the government will have to overcome is financing the strategic plan. By partnering with international aid agencies, foreign governments, the private sector, and most importantly, the Haïtian Diaspora abroad should engage in financing the implementation of the tourism plan. I recommend creating a foreign equity fund that will allow the Diaspora to collectively contribute and participate in developing and implementing the tourism strategy. Through this fund, the Diaspora will have an opportunity to take an active role in their home country's development while receiving a financial return to their investment.

The Diaspora would contribute up to 70 percent of the fund's assets while the Haïtian government, whether through financial reserves or foreign assistance, contribute the difference. A financial holding corporation would be formed with government officials and representatives from the Diaspora community serving on the board and third-party managers managing the assets.

Photo: Marc Roger

Despite the ongoing crises in Haïti, there are several great places to visit. I am impressed that the Haïtian government has a vision to grow an ecotourism industry and I appreciated the opportunity to assess their strategic plan. With the right tools and tactics, this strategic plan should serve as the centerpiece to a national sustainable development strategy.

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.