Russia’s Northern Sea Route: The Superior Course for Maritime Trade in the Arctic

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ABy:  Anthony J. Riddle,  Lynx Global Intelligence

 

The Chinese government intends to redraw the lines of power in maritime trade. In a Chinese-language only report distributed by the Chinese Communist Party (CCP), they signaled their intent to encourage Chinese shipping companies to utilize trade routes in the arctic circle. This will catalyze a paradigm shift in global maritime trade because China is the first major power committed to utilizing the Arctic Circle; setting a new precedent in naval history. Specifically, the CCP prioritizes the increasingly navigable Northwest Passage which crosses through Canadian and American territorial claims. Shortening transit times for maritime shipments is the primary motivation for using emerging Arctic sea routes to link China to European markets. The Chinese Maritime Silk Road ends at the Port of Piraeus, Greece, and leads through the Indian Ocean and Suez Canal. The current route cuts 10 days off the journey to Central or Eastern Europe when compared to routes which lead around the Horn of Africa. [1] Because of this accelerated transit speed “most of China’s $1 billion in daily exports to Europe [now] traverse the Gulf of Aden and the Suez Canal.” [2] The CCP now looks to the Arctic to further expedite shipments to European consumers at a time when China’s “online revenue [is] projected to double to $1.1 trillion by 2020.” [3]

China currently controls fourteen of the top twenty high volume sea ports and has launched the One Belt, One Road Initiative with the intent of establishing new trade routes to bolster its economy and expand its international influence. The maritime component of this initiative initially used a shipping route that ran through the Indian Ocean, the Straits of Malacca, and the Suez Canal. [4] This route, however, forces shipping vessels to transit through three high risk piracy zones which increases shipping costs resulting from the combination of higher insurance premiums and augmented security measures. Costs to shipping companies are increased by $726.1 million a year when transiting just the East African piracy zone because of the additional security merchant vessels require to do so safely. [5] By shifting priority to the increasingly navigable arctic, Chinese shipping companies can effectively bypass these costly and dangerous areas when shipping goods to European markets. China’s Maritime Safety Administration spokesman Liu Pengfei was quoted as saying “Once this [arctic] route is commonly used, it will directly change global maritime transport and have a profound influence on international trade, the world economy, capital flow and resource exploitation.” [6]

The Russian controlled Northern Sea Route will become navigable far sooner than the Northwest Passage according to climate change models; additionally it will have the largest ice free area comparatively to other routes. [7] The Northern Sea Route is also approximately 40% shorter than using the Suez Canal trade route [8] and shortens voyages from Shanghai to Hamburg by 2,800 nautical miles. [9] Such a significant input cost reduction for delivering goods to European markets will be irresistible for shipping companies participating in Chinese trade. An example of how arctic transits create significant savings is “the Nordic Orion, a Danish bulk carrier, [which] saved $200,000 and four days’ transit time by shipping 15,000 metric tons of coal from Vancouver to Finland via the Northwest Passage in 2013.” The Arctic Ocean therefore represents an approximate savings of $50,000 a day in transit costs while simultaneously removing the necessity for Maritime Security teams that are required to safely transit piracy zones. This will drive Arctic and non-Arctic states to compete for access to these lucrative routes that are partly claimed by the United States, Russia, Canada, Denmark and Norway. [10]

122333The Russian government has heavily invested in making the Northern Sea Route navigable for trade to compete with the Northwest Passage. China stated in their 2015 military white paper that they place great importance on “managing the seas and oceans and protecting maritime rights and interests” [11] and, as a result, they made history in 2014 by having the first unescorted commercial vessel transit the Northwest passage which delivered a shipment of nickel ore. [12] This same year China and Russia signed a 30 year and $400 billion dollar deal for GAZPROM to supply China with Russian oil in an attempt to further link Russian and Chinese economies. This deal ultimately was crippled by plunging price of oil from the $100/barrel at the time of the deal and the global supply of Liquid Natural Gas (LNG) which has become more attractive because of the Paris Agreement on climate change. [13] Russia intends to manage their Northern Passage to circumvent western sanctions by taking advantage of Chinese economic growth to repair their own economy and improve Sino-Russo relations. The Chinese decision on which arctic route to rely on will rebalance global relations between the three superpowers.

To successfully attract Chinese shipments, Russia maintains forty icebreakers and has another eleven icebreakers on order to improve the viability of this emerging shipping lane. Additional signs of Russian commitment to controlling arctic trade are found in their four active Arctic combat battalions, recently established dedicated Arctic command, and creation of sixteen ports in the arctic circle. [14] Russia’s State Commission on Development of the Arctic Regions also founded a single company to boost the development of these new shipping routes and will oversee all logistical operations in the area. [15] The Northern Passage has already experienced a 30% increase in commercial traffic from 2008 to 2010. [16] Companies interested in participating in a region that is quickly becoming viable for trade, a first in recorded history, require both familiarity with the agreements between states in the region and to establish a dialogue with new partners already established there.

We are experiencing a paradigm shift in global trade. One that can be capitalized on if effectively managed through careful analysis of real-time competitive intelligence. Companies wishing to take advantage of this development require a dedicated team of subject matter experts who are familiar with the political forces affecting global supply chains. They will also require a network of professional partners who are firmly established in these expanding markets. Without a carefully constructed strategy to mitigate potential risks created by the geopolitical pressures between states, the subsequent volatility could cause irreparable damage to a company’s supply chain.

By introducing an Artificial Intelligence (AI) driven analytical dashboard to assist a diverse team of experts, Lynx Global Intelligence is uniquely positioned to provide the services necessary to successfully emerge from this transition ahead of the competition.

 

 

[1] http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf

[2] http://www.huffingtonpost.com/joseph-braude/why-china-and-saudi-arabi_b_12194702.html

[3] http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf

[4] http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf xi, 21

[5] http://oceansbeyondpiracy.org/reports/sop/summary

[6] http://af.reuters.com/article/commoditiesNews/idAFL3N17N1JK

[7] Scott Stephenson, University of Connecticut, https://www.newsdeeply.com/arctic/community/2016/02/10/scott-stephenson-the-future-of-arctic-shipping

[8] http://www.gallois.be/ggmagazine_2013/gg_02_03_2013_90.pdf

[9] http://www.scmp.com/news/china/society/article/1937327/china-wants-its-shipping-use-faster-arctic-route-europe-opened

[10] http://www.maritime-executive.com/article/rival-claims-to-the-changing-arctic

[11] http://thediplomat.com/2016/04/going-blue-the-transformation-of-chinas-navy/

[12] http://www.latimes.com/world/asia/la-fg-china-ships-alaska-20150902-story.html

[13] http://www.reuters.com/article/us-russia-china-gas-exclusive-idUSKCN0UT1LG

[14] SEN PERDUE (R-GA): Senate Armed Services Committee Holds Hearing on U.S. Southern Command and U.S. Northern Command Witnesses: Gen Lori Robinson (CDR USNORTHCOM) PG 25

[15] http://e360.yale.edu/features/cargo_shipping_in_the_arctic_declining_sea_ice

[16] https://www.afsc.noaa.gov/publications/misc_pdf/iamreport.pdf PG 16-17

China’s Craft Beer Revolution is Under Way

The time is ripe to invest in China’s growing market.

By:  Conner Murphy, Lynx Global Intelligence

 

Background

The craft beer market is going to get a lot bigger as small and medium sized competitors gain traction across China. The time is ripe for China’s craft beer revolution.

According to a recently released report from Drink Sector[2], a beverage industry research organization, China’s beer market is set to become the world’s largest in value by 2018. This shouldn’t come as much of a surprise – China is, after all, a very big country, and has long been the world’s largest consumer of alcoholic beverages (China surpassed the United States in 2011).  However, tastes have been shifting across the country. Traditional liquors such as baijiu, a sorghum based liquor, have dwindled in popularity, while red wine and beer are becoming increasingly popular alternatives. Though beer has always been readily available in China, traditional options such as Tsingtao and Budweiser do not quite appeal to the young, internationally minded, growing middle-class. For a generation raised on designer brands and the newest iPhone, domestic beer just doesn’t make the cut. Drinking cultures and tastes are changing. As put by a local beer representative in a recent CCTV report[3], younger generations prefer to drink until you are satisfied, not drink until you are full (ie. drunk). Enter craft beer.

China’s Beer Market at a Glance

Beer is not new to China – domestic names such as Tsingtao (青岛啤酒), Harbin 哈尔滨啤酒, and Snow雪花啤酒) have long dominated the market, and remain favorites from restaurant goers to the bar crowd. Large international breweries also have a strong presence in the country, with Budweiser and Heineken readily available from Shanghai to Chongqing.  However, while beer production is at an all-time high, revenues have been on the decline since 2013[4]. The market is changing, and consumers are demanding something different from the watered–down lagers of the past century. Small breweries in Beijing and Shanghai that were once exclusively frequented by expats are now full of locals looking to experience the craft beer craze that has exploded across the US and Europe.

Big breweries, wary of the competition they are facing abroad, are hoping to take advantage of the changing demands as quickly as possible. Tsingtao has been rebranding itself across wealthier cities, spreading its Tsingtao 1903 brand as a premium alternative to its typical party-go happy image. Small taprooms have sprung up in Beijing and Shanghai, serving beers such as Tsingtao IPA and Tsingtao Stout.

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[5] Tap options at Beijing’s Tsingtao 1903 SoHo Taproom.  The Beijinger

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[5] Tsingtao Standard with Tsingtao Stout. The Beijinger

Meanwhile, AB-InBev has increased imports of it’s The High End line of beers into China. Beers such as Goose Island IPA and Elysian Jasmine IPA are readily available across Beijing taprooms, and continue to increase their foothold as premium beer staples. Meanwhile, AB has begun targeting local operations, and in March acquired Boxing Cat Brewery[6], one of Shanghai’s most well-known craft breweries.  These trends signal two things: First, opportunities in China’s craft beer market are readily available. Second, it is crucial to enter the craft beer market before large brewing companies gain a stronger foothold.

china 3

At Beijing’s Home Plate BBQ, AB InBev’s Goose Island now tops the draft beer list. Photograph by Mark Leong, Fortune[7]

Opportunities

Partnering With a Local Craft Brewery

This is by far the most direct method of entering China’s craft beer market. Partnering with a local startup is a great way to make your brand known, develop a robust local market, distribute directly to the customer, and maintain a strong understanding of your business operations. Small craft breweries are popping up across China, and while capital is readily available, know-how is in short supply. Entrepreneurs are seeking foreign partnerships and brew masters to assist in creating strong competitors, premium internationally supported brands, and sound business strategies.

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The Next Generation of Chinese Brew masters – Graduates from the China National Research Institute of Food & Fermentation Industries. Photo provided by Jeff Li, Graduate

Collaboration Projects

Less direct than a direct partnership, opportunities exist for collaboration projects in beer production. For example, a brew master guest-training program could be arranged between US and China partners; a US brewery provides the knowhow and helps to create a collaborative collection of beers. While this option provides less control over ground operations, it does represent a chance to make strong connections on the ground, gain a better understanding of the market, and help make your brand known in specific locales. This would also open the door for future opportunities, and provide an opportunity to test the waters of a future partnership with local breweries.

Import

Finally, exporting to China remains an option. The current trade climate appears positive, with the government steadily removing trade barriers on everything from agricultural goods to natural resources[8].This means the cost of exporting to China will go down. However, while this represents an easy inroad, it is also the least likely to bring future success. The trick is not to sell beer in China, it is to spread brand awareness and become a leading presence in the future beer market. This is both incredibly difficult and risky without a local presence.

Risks and Hurdles

As with any business practice, risks exist. Foreign and domestic competition will only continue to grow, highlighting the importance of early entry into the market. Marketing and branding strategies need to be adjusted on a locality-by-locality basis – what works in Shanghai may not work in Beijing. Open and frequent communication with local partnerships will help to ease the localization of your brand. Government regulations concerning the production and distribution of alcohol are constantly changing, and differ from city to city. Local partnerships again represent the best method for overcoming regulatory hurdles, as partners have the know-how necessary for meeting local compliance standards. Finally, intellectual property rights infringement represents a leading risk across China. Recipes and trade secrets should be kept secret unless absolutely necessary, and an on-the-ground presence is essential.  Distribution channels and retailers must also be monitored, and supply chain disruptions cannot go unnoticed. These risks, while prevalent, represent hurdles, not barriers. With an on-the-ground presence and a strong understanding of Chinese business practices, success in China’s craft beer revolution is possible.

 

 

[1] China’s taste for craft offers fizz for global brewers. Reuters. March 7, 2017. http://www.reuters.com/article/us-china-beer-idUSKCN0W813B

[2] China Craft Beer Market Report 2017. Drink Sector. January 2017. http://www.drinksector.com/reports/china-craft-beer-market-report-2017

[3]央视关注精酿啤酒啦!好消息?坏消息?。 爱啤酒。September 17, 2015. http://mp.weixin.qq.com/s/rFk4C6dCn–fxMy6JpdFYw

[4]Annual Report, 2016. Tsingtao Brewing CO., LTD. December 2016.  http://quote.morningstar.com/stock-filing/Annual-Report/2016/12/31/t.aspx?t=:TSGTF&ft=&d=475f0936590f75fc5557807a2271822e

[5] Tsingtao Opens Its Own Bar in Galaxy Soho With IPA (Occasionally) on Tap and Export Quality Bottles. The Beijinger.  https://www.thebeijinger.com/blog/2016/07/20/tsingtao-opens-its-own-bar-galaxy-soho

[6] China’s taste for craft offers fizz for global brewers. Reuters. March 7, 2017. http://www.reuters.com/article/us-china-beer-idUSKCN0W813B

[7] China’s New Craft-Beer Bully. Fortune. Mar 16, 2017.  http://fortune.com/2017/03/16/china-craft-beer-ab-inbev/

[8] Cheniere Circles China After Trade Deal Portends Gas Export Boost. The Wall Street Journal. May 12, 2017. https://www.wsj.com/articles/cheneire-circles-china-after-trade-deal-portends-gas-export-boost-1494619903?mod=e2fb

Accessing Cuban Medical Technology

Cuba’s medical technology could be enormously beneficial to American businesses

By Tyson Guajardo, Lynx Global Intelligence

 

It’s no secret that the United States would considerably benefit from open trade with Cuba.  Access to the country’s medical technology could be enormously beneficial to both American businesses and the general population alike.

Although Cuba may be struggling in many measures of development, healthcare is one area where the communist nation vastly excels.  In 2015, there were an estimated 37,000 Cuban nationals working abroad in 77 countries (1).  Remarkably, Cuba boasts more doctors per capita than any other country in the world (Vice News), features a life expectancy almost identical to the United States (2), and has a lower infant mortality rate than its northern neighbor (3).  How is this possible for a nation that has been economically crippled for the past several decades?  The isolation endured by Cuba due to the U.S. trade embargo and the collapse of its largest financial lifeline, the Soviet Union, have led to a necessity to design its own medical innovations.  Furthermore, the Cuban government treats healthcare as a basic human right and invests heavily into the development of new medicines.  In recent years, the country has achieved great success with a few major medical advancements:

  1. A lung cancer vaccine called CimaVax developed by Cuba’s Center of Molecular Immunology is already in the process of approval for use in the United States. In fact, it has already been cleared for testing by the Food & Drug Administration (4).  This vaccine was designed not as a preventative measure, but as a method to freeze growth and reduce the likelihood of recurring non-small cell lung cancer (5).  The treatment has been available in Cuba since 2011 and in its most recent trial on the island, patients who received CimaVax lived between three to five months longer than those who did not.  Moreover, individuals with high concentrations of E.G.F., or Epidermal Growth Factor in their blood survived much longer (5).  Outside of Cuba, the vaccine is also available in Peru, Paraguay, Colombia and Bosnia.
  2. Heberprot-P is a drug used to treat diabetic foot ulcers that was invented by scientists at the Center for Genetic Engineering and Biotechnology in Havana in 2006. This treatment prevents the need for amputations in individuals with the condition, in turn extending their overall life expectancy.  So far, Heberprot-P has been used to aid over 165,000 patients in 26 different countries worldwide since its launch into the global market (6).  The medication is injected near the affected area to speed up the process of skin restoration and can heal a wound in about three months.    Current treatment options for diabetic foot ulcers remain scarce in the United States where approximately 73,000 American adults with diabetes underwent amputation of their lower limbs in 2010 (7).
  3. The Center of Molecular Immunology in Havana has also developed Nimotuzumab, an anti-cancer drug used against advanced tumors in areas such as the head, neck and brain (8). Monoclonal antibodies in this medicine connect to epidermal growth factor receptors on the surface of the cancer cell and stop it from spreading.  As of 2014, the treatment is recognized under orphan drug status in the United States for the treatment of glioma.

While most Cuban goods are still restricted from importation under the long-standing trade embargo, the US Treasury Department can grant exemptions for certain medicines and healthcare products.  Lynx Global Intelligence is leading a trade delegation to Cuba on July 23-27, presenting a great opportunity for firms in the healthcare industry to learn more about prospective medications and technologies on the island, as well as access to top Cuban business and ministry resources that can facilitate commercial activities with the United States.  Visit us at  http://www.lynxglobalintelligence.com/ for more information.

 

 

[1] https://www.forbes.com/sites/billfrist/2015/06/08/cubas-most-valuable-export-its-healthcare-expertise/#d238fe5195eb

[2] https://www.theatlantic.com/health/archive/2016/11/cuba-health/508859/https://play.hbogo.com/episode/urn:hbo:episode:GWKN9LQatN4m4wwEAAAAR

[3] http://abcnews.go.com/Health/cubas-major-medical-achievements/story?id=43844344

[4] https://www.nytimes.com/2016/11/15/health/cancer-vaccine-cuba-medical-tourism.html?_r=0

[5] http://www.huffingtonpost.com/gail-reed/renewed-uscuba-relations-_b_6537518.html

[6] http://www.huffingtonpost.com/entry/cuba-medical-innovations_us_56ddfacfe4b03a4056799015

[7] http://www.who.int/features/2013/cuba_biotechnology/en/

Agriculture as it Used to Be: Cuba’s Natural Crops have Massive Potential in Upscale Markets

By:  Colin Gaiser, Lynx Global Intelligence

 

When the United States relaxed travel restrictions to Cuba in 2015, it was an exciting moment for those of us who were always drawn to the island by photos of surreal, pastel-colored buildings and streets lined with classic cars. And Cuba is indeed an exciting place to visit — yet beyond the famous old city of Havana is a lush 110,000 km2 island, where 30 percent of land is used for agricultural production.

Cuba’s climate could hardly be better for agriculture — lying just south of the Tropic of Cancer, Cuba has a tropical climate with temperatures moderated by year-round northeastern trade winds. It also has a predictable, May-October rainy season. And while Cuba is historically better known for tobacco and sugar, the island also grows ample amounts of coffee, potatoes, rice, numerous tropical fruits, and citrus (the island is actually the world’s third-largest producer of grapefruit).

Organic and Sustainable

Unfortunately, a combination of Castro regime policies, lack of access to fuel and supplies after Soviet Union’s collapse, and the island’s economic and political isolation have made agricultural production relatively inefficient. A lack of fertilizer and modern agricultural technology hampers yields. And while the government has turned land over to independent farmers to lease, it still requires most of them to grow food for the state.

However, there is an upside: This unique situation left Cuba’s agriculture largely organic, dominated by small-scale farms (many in urban areas) that rely on more natural methods of production. With many Americans willing to pay a premium more for organic, sustainably sourced products, Cuban agricultural products could be very attractive to the upscale market.

Plus, there is reason to believe more economic liberalization is not far off. Raúl Castro is scheduled to hand over power to Miguel Díaz-Canel, his younger vice-president, in February 2018. Díaz-Canel supports increasing internet access (currently very spotty) as well as more economic openness, which is strongly endorsed by public opinion in both Cuba and the United States.

Brewing a New Market

Coffee, in particular, is a likely beneficiary of more economic openness. Despite a drop in overall production since the 1990s, it is one of the first Cuban agricultural products accessible to American citizens within the United States.

Swiss-based Nespresso is the first company to make Cuban coffee available to Americans. Though not on store shelves yet, for a limited time one could order their Cafecito de Cuba coffee pods online or over the phone. While this is just a small step toward providing Americans the experience of drinking Cuban coffee, the thawing relationship between the two countries makes one optimistic about the possibilities of coffee on the luxury market.

In the meantime, the president of Nespresso USA, Guillaume Le Cunff, has stressed that Nespresso is interested in developing a long-term arrangement to ensure a steady supply of Cuban coffee for U.S. customers. This project would also work to improve living conditions for Cuba’s farmers. Such a combination of a novel, high-quality product along with real corporate responsibility could strike a chord in the U.S. premium market.

A Bright Future

While the timetable is unclear, Cuba seems destined to liberalize and become more economically open to the rest of the world — and when this occurs, the challenge will be to maintain the sustainable, organic quality of Cuban agricultural products. This will not just be attractive to American consumers, but also necessary to maintain the magnificent environment and biodiversity of Cuba. Both the economic and social returns on investment could be huge for companies that take on this challenge.

 

 

Sources:

https://www.nytimes.com/2016/06/22/dining/cuba-us-organic-farming.html?_r=0

https://www.usatoday.com/story/news/world/2016/06/20/cuban-coffee-sold-in-united-states-nespresso-technoserve/86117020/

http://www.economist.com/news/americas/21719812-revolutionary-economy-neither-efficient-nor-fun-what-tourist-industry-reveals-about

https://www.entrepreneur.com/article/273135

 

The Paris Climate Agreement and Future Business Implications

Pursuing the goals of the Paris Climate Agreement will ensure businesses long-term success while allowing them to participate in the reshaping of the economy while saving the environment.

By:  Jenya Sakaeva, Lynx Global Intelligence

 

In light of recent political events, the environmental future of the United States, and consequently the world, may look quite bleak. Fortunately, as the saying goes, every cloud has a silver lining. For the planet’s climate, this silver lining could be businesses big and small leveraging their power for global good. While the Trump Administration has yet to formally withdraw from the 2015 Paris Climate Agreement, the executive orders to date signify the United States’ noncompliance with the goals set forth to prevent global temperatures from rising another 3.6 degrees Fahrenheit. This is a point when scientists have agreed the Earth will be irrevocably locked into “a future of severe droughts, floods, rising sea levels, and food shortages” [1].

Pursuing the goals laid out in the COP21 Paris Agreement will set businesses on a course of action that will lead to sustained success. In Lynx’s previous post, https://tinyurl.com/mnqbq9q, we outlined the ways in which corporate social responsibility and ethical business practices bring long-term prosperity to those who participate in them. Addressing climate change is a part of corporate social responsibility.

Why should businesses uphold the Paris Climate Agreement?

 A changing climate poses many risks to business. First, there is the risk of depleting natural resources that are either raw materials in a company’s product, or necessary to the process of manufacturing or shipping those products. There are tangible, physical risks associated with damage to facilities or manufacturing centers from a more extreme and volatile climate and weather events. Of course, there are financial risks that lack of natural resources or extreme weather will result in. Market risks in the form of shifting consumer preferences, behaviors, and demand are equally prevalent. Additionally, companies face reputational and regulatory risks for poor performance in climate related endeavors.

The Paris Climate Agreement is historic in terms of the goals set and number of countries that have committed to take them seriously. This reflects the global understanding of the multitude of issues stemming from climate related problems. The time to act is now.

In the words of some of our economy’s biggest players, “Implementing the Paris Agreement will enable and encourage businesses and investors to turn the billions of dollars in existing low-carbon investments into the trillions of dollars the world needs to bring clean energy and prosperity to all” [3].

The Paris Climate Agreement creates a global landscape in which business opportunities are plentiful. As the world economy and political powers move towards achieving reduced emissions and capping temperature rise, businesses will see a need to change their practices to support their country’s commitment to the agreement. Evaluating the strategic decisions now can put you ahead of the curve, but failing to adjust just means a more turbulent transition further down the road. Aside from political agendas impacting businesses and the Paris Climate Agreement, there are also economic, social and technological reasons to begin honoring the agreement sooner rather than later.

According to a business briefing on the topic by Cambridge University, “Companies such as GE, Unilever, Nike, IKEA, Toyota and Natura are already reaping the benefits of offering ‘green’ products and services, a market which has grown to over $100 billion” and “Unilever’s purpose-driven brands are growing at twice the rate of the rest of their portfolio and if GE’s Ecomagination was a standalone business, it would be a Fortune 100 company.” [4] Additionally, there are many economic opportunities to invest in renewable energies and new technologies, while oil prices may vary globally and contribute to higher energy prices.

Socially, consumers are increasingly more aware of the sustainability efforts and initiatives of the companies they purchase from and their behaviors are shifting to favor those businesses with more commitment to the environment. Patagonia is a classic example of a company that embodies the ideals of the Paris Agreement within the core functionalities of its strategy, and is rewarded for that by consumers. On the other hand, businesses that ignore these social patterns often witness consumer backlash and reputational damage.

Technology is already a rapidly evolving field in which some businesses have seen immense success. In order to reach the goals set forth in the Paris Agreement, many more technological advances will have to bridge the gaps between where we are now and where we aim to be. This presents businesses with huge potential. New business models, like the circular economy, have begun to emerge as an innovative response to dealing with climate problems. “Smart” technologies are becoming more customary in our daily landscape, from wearable technology to transportation solutions, and even smart cities. Also, the role of big data will only grow as the world tries to understand how to enact technological changes and incorporate them into society.

While the political approach to the Paris Climate Agreement remains uncertain in the United States, the rest of the world remains committed to the deal. As we know, neither climate nor the economy exists independently in one country or another. We live in a global world and a global economy, and businesses that realize the opportunities within the goals of the agreement will be successful in the long-term across many different aspects.

 

 

[1] https://www.nytimes.com/2017/03/28/climate/trump-executive-order-climate-change.html?_r=0

[2] http://www.cisl.cam.ac.uk/publications/publication-pdfs/A-New-Climate-for-Business.pdf

[3] http://www.lowcarbonusa.org/

[4] http://www.cisl.cam.ac.uk/publications/publication-pdfs/A-New-Climate-for-Business.pdf

 

Overview: The Future of the Republic of Turkey Remains Unclear After Failed Coup d’état

Turkish politics have taken a nationalistic turn as domestic affairs spiral out of control. Massive expulsions of bureaucrats, journalists, academics, businesses and political opponents continues to worry the international community.

By:  Zana Silevani, Lynx Global Intelligence

 

Turkey’s significance in the international community

Historically, the Republic of Turkey has served the international community as a commercial hub which has facilitated international trade, communication and intercultural exchange for decades. Modern day Turkey is an extremely valuable partner as it has characteristically carried on it’s traditions of free trade, military cooperation and fortified secular values. Turkey has established it’s presence in the international community—it holds tremendous weight when discussing economic and political affairs. The economic and strategic value of Turkey is attributed to it’s physical coordination as it is situated in a unique geopolitical position. Turkey borders Syria, Iraq, Iran, Armenia, Georgia and Bulgaria with Russia and Ukraine just across the Black Sea.

turkey-2

In 2014, The Republic of Turkey ranked in as the 27th largest economy in the world [2]. The dynamic nature of the Turkish economy has facilitated strong partnerships with it’s primary import trade partners: China ($24.6B), Germany (23.5B), Russia ($14.7B), Italy ($12.3B) and the United States ($11.8B)—it’s largest export destinations: Germany ($16.9B), Iraq ($10.8B), the United Kingdom ($10.3B), France ($7.87B) and Italy ($7.58B) [2]. Furthermore, as a critical member of the North Atlantic Treaty Organization (NATO), Turkey is an important asset for US interests in the Middle East and Europe. Geopolitical configuration and a versatile economy puts partnerships with Turkey at a high priority, but the many successes of the Republic of Turkey overshadow the murky essence of recent Turkish political developments. Turkish nationalists such as President Reccep Tayyip Erdogan and his Justice and Development (AK) party have consolidated executive power after the recent Summer 2016 coup d’etat attempt which has resulted in the arrest and detainment of thousands of people accused of aiding the coup.

 

The failed 2016 coup attempt and a new face for the Republic of Turkey

July 15, 2016—chaos erupted as a faction of the Turkish military took up arms and attempted to overthrow President Erdogan. The military began with the occupation of the Bosphorus bridge which connects the two shores of Istanbul then attempted to control key points in the Turkish capitol of Ankara [3]. The separatist faction which called themselves the Peace at Home Council, were defeated when loyalists to Erdogan’s existing regime thwarted the coup attempt and restored power. Using state operated media (TRT) Erdogan was able to garnish support to abolish the coup and rally his supporters. At least 90 people were killed and nearly 1,100 more were injured during the coup attempt [3]. The coordination of the coup was ultimately blamed on the exiled cleric Fethullah Gulen who resides in Pennsylvania, USA and is a long time opponent of President Erdogan and his Justice and Development party. The coup attempt resulted in massive material losses, but ideological damage in Turkish civil society took the harshest damage as President Erdogan began a campaign aimed at suppressing opposition through detainments and arrests. Thousands of bureaucrats, academics, political leaders and military personnel have been expelled, arrested, or detained as a result of allegations of involvement in the coup.

The failed July 15, 2016 coup d’etat attempt in Turkey shook the foundations of the state and thrusted Turkey away from it’s traditional secularism and towards civic nationalism. President Erdogan has utilizes a parliamentary state of emergency to bypass constitutional provisions and mobilize political power to the executive branch. President Erdogan and his Justice and Development party have undertaken considerable measures to consolidate executive power [1]. After the summer of 2016, the Turkish state has detained over 35,000 individuals thought to have some sort of tertiary involvement in the influence or potting of the 2016 coup d’etat attempt [1]. Over 17,000 individuals have been arrested in connection with the coup attempt—one third of Turkish security forces have been arrested on specific charges. Arrests after the coup are based on allegation of affiliation with the Gulen movement. Ultimately, Erdogan has delineated executive power to suppress Kurdish influence in Turkey. Kurdish mayors, lawyers and activists have been expelled from their posts and accused of having ties to Kurdish separatist organizations. The new far-reaching executive authority has monopolized AK party initiatives.

 

The new US administration and the future of US-Turkey relations

In early February 2017 President Trump and President Erdogan publicly voiced mutual admiration for one another in a late night phone call, but the US has not established a stance on it’s future with President Erdogan. In the phone call president Erdogan remained firm in his stance to influence decisions which favor disarming Kurdish YPG militias in Syria. The US administration has not commented on future endeavors with Kurdish militias in Syria, but continues to maintain Turkey’s NATO status as a crucial geopolitical asset to strategic operations in Syria. Because of the geopolitical importance of Turkey in air/ground campaigns, Erdogan must cooperate and deter interest in weakening the Kurdish front against ISIS.

The US must leverage Turkish cooperation to grant Kurds in Syria resources to continue to engage ISIS on the ground in northern Syria. The YPG have proven to be non-confrontational and malleable to US interests on the condition of material support. The YPG are a crucial indigenous force who provide essential tactical and intelligence support to US Special Operations Command personnel on the ground in Syria. Ultimately, President Erdogan perceives the new US presidency as an opportunity to initiate communication which supplements Turkish interests in cooperation in the Syrian Civil War. Turkey is seeking to strengthen ties with the US to ultimately influence US military cooperation with Kurdish factions in Northern Syria. Through the recent radical political transition in Turkey in the summer of 2016 was drastic, President Erdogan remains opportunistic in seeking to gradually restore US-Turkish relations which experienced significant strain towards the end of 2016 with the departure of president Obama.

Granting Turkey greater autonomy to influence US defense policy will significantly alter US-Kurdish partnership in Syria. Turkey will ultimately remain a formidable and valuable US defense partner. Though Turkey has taken an abrupt nationalistic and at time anti-western turn, the United States needs Turkey as a partner to supplement it’s campaigns in Iraq and Syria. Turkey provides invaluable resources to the US with optimal strategic capabilities in the global war on terror.

 

[1] http://www.newyorker.com/news/news-desk/the-end-of-democracy-in-turkey

[2] http://atlas.media.mit.edu/en/profile/country/tur/

[3] http://www.businessinsider.com/turkey-istanbul-military-bridges-2016-7

[4] (image) https://www.wired.com/2016/07/turkey-coup-livestream-map/

[5] (image) https://twitter.com/alivelshiot/status/499693038328094720

Why Cuba? The Race to Havana

Let the race to Havana begin with these economic insights.

By:  Tyson Guajardo, Lynx Global Intelligence

 

Under the Obama administration, the world witnessed the restoration of diplomatic relations between Cuba and the United States following decades of mutual antagonism.  Since this historic event, U.S. Citizens have seen their restrictions on travel to the Caribbean island come tumbling down.  Individuals who fall within 12 categories previously needed to apply for a special license to visit Cuba, but are now merely required to check a box on a form, committing not to engage solely in tourist activities during their stay.  Regular commercial airline flights, cruise, ships and ferries have also been recently authorized.  Although the trade embargo remains in place, this easing of US economic sanctions on the island provides numerous investment opportunities that few dared to dream of just a few years prior.  And while President Trump has threatened to undo almost all of Obama’s executive orders pertaining to Cuba, many experts see this as an unlikely move, as it would go against an increasingly one-sided public opinion and vast commercial interests.

It would be wise for many businesses in the United States (and anywhere else for that matter) to consider the possibilities of investment in Cuba, following its trend of economic liberalization: Since Raul Castro took over for Fidel in 2008, state regulations on private enterprise have steadily decreased.  This has opened a world of new markets for outsiders.  There are numerous prospects in the industries of tourism, agriculture, energy and manufactured goods.  Moreover, Cuba is abundant in highly skilled and educated workers.  Even more compelling is the strategic port location that the island provides for several other nations in the Caribbean and the southeastern United States.  And in 2018, Raul is scheduled to step down as president, which could lead to further economic restrictions being busted wide open under his successor.  Let the race to Havana begin with these economic insights:

Tourism

Cuba is hoping to build 21 new hotels in the Cienfuegos, Trinidad, Guardalavaca, Playa Santa Lucía and Covarrubias areas.  The state companies owning existing hotels are searching for new management contracts including 19 for new hotels and 14 for those already in business.  The government entity CubaGolf intends to “promote the island as a golf-holiday destination” and is already in negotiations with numerous foreign partners to establish joint ventures for the creation of tourism-golf condo complexes.  However, in exceptionally popular locations such as urban Havana and Varadero beaches, prospects are still mostly reserved for state owned enterprises.

Agriculture 

Most land is owned by the state with only 15 percent available to private farmers and another 7 percent for farmer cooperatives.  Despite this, Cuba is looking for joint ventures in cattle, pork, and poultry production; as well as in citrus, peanuts and shrimp farming.  Additionally, Cuba is open to a partner who would be willing and able to invest $10.3 million to create a “leading brand on the international level” of premium coffee grown in specific regions of the hills in Guantánamo Province.  Other opportunities will be available in greenhouses for vegetables, hog production, soy processing, confectionary facilities, and dry yeast production.  Unfortunately, sugar will remain with heavy restrictions, as well as tobacco/cigar industries and lobster fishing & processing.

Energy

While opportunities for joint ventures in petroleum extraction onshore and offshore will be available, Cuba’s goal is to raise the percentage of electricity produced from renewable sources from the current 4 percent to 24 percent by 2030.  This means that foreign investment in hydro, biomass and solar energy is in high demand (for wind farms, Cuba will allow 100% foreign ownership!).

Manufactures

Aluminum cans are in short supply as the firms Bucanero (InBev) and Los Portales (Nestlé) are the current primary clients tasked with producing 577 million of these in joint ventures.  In tech manufacturing, Cuba wants foreign investors to help produce desktop computers and tablets.  The current annual demand is only 75,000, but this is expected to grow to around 1 million in 10 years.

 

Source: Open for Business: Building the New Cuban Economy, Richard E. Feinberg