Must-Read Reports

Fossil fuels will still contribute significantly to primary energy supply in 2040

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Renewable energy constitutes only a small proportion of total primary energy supply in the future

When I graduated with Chemical Engineering degree from the Birmingham University in the UK in the 1980, I chose to work with ESSO Malaysia. This was because ESSO Malaysia (now EXXON Mobil) was one of the two biggest companies in Malaysia. They paid high salaries for their engineers. The other company was SHELL Malaysia, also an oil company. Today, these two companies continue to pay good salaries but they are considered less attractive as employers under the current environment that oil companies contribute to global warming.

A new report by energy consultancy, Wood Mackenzie, forecasts that coal, oil and gas will still contribute about 85 per cent of primary energy supply by 2040, compared with 90 per cent today. The report noted that 1 terawatt of installed solar and wind capacity makes up about around 8 per cent of total power generation as of 2019.

This equates to just a fraction of total energy consumption. “The world risks relying on fossil fuels for decades to come,” the report said. It also forecasts carbon emissions will continue to rise, with growth only slowing in the 2030s. This will put the world far off course in meeting the Paris climate goals, to limit global warming to well below 2C, despite growing political momentum to prevent climate change. Energy demand, led by growing populations in emerging economies of Africa and Asia, will increase by at least 25 per cent by 2040. Yet carbon emissions would need to halve over the same period to comply with the Paris Accord, posing a huge challenge for energy systems. “This is a wake-up call for governments and the energy industry,“ said David Brown, one of the authors of the report.

While there is much focus on creating renewable electricity, Mr Brown said greater attention needs to be paid to clean up sectors like aviation and shipping. Governments also need to take the lead in developing low-carbon technologies, rather than the private sector, given the scale of what needs to be achieved.

“If the world  wants to de-carbonize, they need to take a leap, and come out with targeted policies,” he said.

The costs of renewable power is falling rapidly and it is the fastest growing source of energy  supply globally But reaching a fuel mix whereby 50 per cent or more of energy demand is derived from solar and wind would require huge changes in infrastructure—from power storage systems to modernized grids.

The issue is not generation of electricity. The move towards zero carbon in the utility industry is advancing well and will continue so long as solar and wind plus storage are significantly cheaper than making electricity by burning coal, oil or gas. It is other industries like heating and cooling buildings, shipping, air travels, cement production, and transportation that are not moving fast enough to embrace low or zero carbon technology.

One factor that could accelerate the de-carbonization of these sectors is moving some of the money currently targeted for direct fossil fuel subsidies—almost US$400 billion globally— to subsidies for renewable energies and other low carbon technologies.

Other effective strategy would be making those who emit carbon dioxide to the atmosphere pay a fee for the harm they cause. Why should industries be allowed to escape paying for proper disposal of their waste products? Is it because of all the employment opportunities they offer?

That makes sense on the surface of things but is totally false when subjected to deeper analysis. First, industries won’t cease to exist if they are required to pay for the harm they do. Second, clean technologies promise more jobs than will be lost if a carbon fee became widespread. Third, there would be no industries if most human and the other species on the Earth are wiped out by rising temperatures.

So let’s stop feeling bad about polluters.

It’s time to change our thinking and stop apologizing for wanting to keep the global temperatures from skyrocketing. We have a right to demand a clean environment, one that allows humans and all species to thrive.

What could be objectionable about that?

And, finally, don’t let little Greta Thunberg, the 16-year Swedish schoolgirl, fights climate change alone!                 

World Unique Innovation

Better quality of life for kidney patients

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A dialysis machine

People with kidney failure could soon be spared regular trips to hospital thanks to a new dialysis machine the size of a microwave.

My late father used to visit a government dialysis centre twice a week, for almost 10 years. Fortunately, we had a friend who ferried him to the dialysis centre, which was about 10 km from our house. Some kidney patients are less fortunate who had to travel a distance to receive a dialysis treatment.  

A British company, Quanta, had announced that it had has raised £38m from investors to launch a much smaller than traditional dialysis machines, called SC+. Currently only 5 per cent of UK kidney patients, some 1,500 people, are treated at home. Quanta, based in Warwickshire, United Kingdom, said patients could be taught how to use the SC+ either at home or at a self-service clinic.

Quanta’s compact dialysis machine

John Milad, head of Quanta, said the device would allow dialysis patients to take “greater control of their lives”. In the future, dialysis could be as easy as visiting a “cash machine”.

“We believe there should be tens of thousands of them,” he added.

Approximately 3.5m people around the world require dialysis treatment.

Quanta was spun out of British engineering giant IMI in 2008, and was created after the technology used to mix soft drinks in bars was applied to blood dialysis. It now plans to ask for permission to launch the new compact dialysis machine in the US this year.

The cash injection came from several investors, including a private Swiss family office, Wellington Partners and Seroba Life Sciences.

Lifestyle choices, modern diet and increased life expectancy are all negatively impacting renal health across the globe and End Stage Renal Disease (ESRD) affects millions of patients worldwide. Haemodialysis is a lifesaving treatment delivered to an estimated 3 million people globally, with this figure expected to double in the next decade.

At present, haemodialysis is primarily provided by specialist clinics and centres. The rigid clinic scheduling means that the patient is not in control of when they can dialyse. It is clinically proven that more regular dialysis improves outcomes and quality of life for the patient, and a number of studies have shown that 30-40% of patients would be capable of performing self-care dialysis.

Issues of patient benefit, cost and clinic capacity are driving the growth of home and self-care modalities of haemodialysis. A major factor limiting the growth of self-care and home haemodialysis is the lack of convenient, compact and easy-to-use dialysis systems.  Quanta addresses these issues and puts the focus on the patient, allowing them to take greater control of their treatment.

Visit website of Quanta: http://www.quantadt.com/

Economic Matters for Innovators

Why patience is a workplace virtue

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Tortoise is slow and patient

We read an interesting article by Jonathan Black in Financial Times on June 24th, 2019.

He wrote that most people do not seem to think that deploying patience is a viable course of action at work. The word, which originates from the Latin word for “suffer”, nowadays tends to suggest passivity, forbearance, tolerance and even resignation. None of which are prized in the working world. Yet it has a distinguished history, with the first known use of the phrase “patience is a virtue” in the late 14th century poem “Piers Plowman”, by William Langland. And patience was listed as one of the seven heavenly virtues by the Roman Christian poet Prudentius 1,000 years earlier in his book, Psychomachia (Battle of the Soul). Patience may be unfashionable, but it is making a modest comeback.

He had interviewed a number of people working across a variety of sectors — the law, banking, the civil service and scientific research — all of whom thought patience could be active and effective. Most of them saw it as an important workplace skill, along with teamwork, leadership and communication.

An interviewee thinks patience can be an asset in the civil service: “If you can crack patience as a tool, then you stand a good chance of being seen as professional and reliable.” Yet he had sometimes seen patient people being marginalised by more dynamic and impatient colleagues. And he notes that “patience should not, however, be seen as an excuse for indecision.” While those who are naturally impatient can use it as a tool, they too have to learn how to manage their impatience and use it wisely. He considers that patience is learned, often through mistakes, rather than taught and concludes that patience can be used as one of many, interconnected skills.

Another interviewee, who recently retired after a career as a senior corporate tax adviser, agrees that “patience is a hard learned and useful art form”. She reflects that passing her professional exams required stamina, resilience and an element of impatience, in order to qualify as quickly as possible. In contrast, she says, “clients had to be managed with saintly patience, as did senior staff with unrealistic expectations of workload management”. More broadly, she found that “patience is useful when you are faced with a lack of understanding, political motivation to block, or just misogyny and racism. That said, too much patience allows these factors to hold you back.”

A third interviewee, who is a senior postdoctoral researcher, reported that her career in life sciences academic research has depended on patience. Success is based, she thinks, on “resilience and perseverance and is mostly incremental wins, while plagued by failures and disappointments in experiments, paper and funding application rejections”. She also cites the need to exercise patience with managers who are measuring success in tangible outcomes, while waiting for her detailed experiments that can take months to reveal significant results. She thinks that patience gives her the courage and confidence to stand her ground against the “avalanche of information and alluring possibilities, the fear of missing out, and the infliction of instant gratification”. In these instances, patience at work is not to be confused with complacency, but is rather a learned stillness that allows us to evaluate before advancing strategically with intention and enthusiasm.

Mr. Black noted that technology has been the big enabler of impatience and speed: having letters typed and proofread involved a built-in reflection period that allowed time to reconsider and ideas to develop.

New graduates enter the workplace having been trained by social media that they can, and therefore are expected to, respond instantly. The 24-hour news cycle creates a febrile atmosphere in which patient deliberation can be seen as a personal weakness. No one wants to be seen as inactive in case it looks like inability to act or complacency. And it is easy to confuse activity with progress — whereas allowing time for consideration and just letting things play out can be a more effective approach. An interviewee observes that “even if one is impatient to act, you still have to time when to strike; that can require patience itself.” Patience at work is not to be confused with complacency, but is rather a learned stillness that allows us to evaluate before advancing strategically.

Mr. Black noted that when we are impatient for change — is also a useful tool for managing one’s entire career. An interviewee thinks that “impatience for change is critical for a successful career”. This was echoed more formally by another interviewee, who every three years asks himself: “Do I like what I’m doing and should I stay?”

In some fields, patience and impatience are built into the career development structure. An interviewee, who left the British Royal Navy as a commodore in 2002, says that after becoming a lieutenant commander, promotion relies on being selected from the pool, or “zone”. Officers do not enter the zone for promotion to the next rank for a period of years, in order to consolidate skills and experience — an approach which he describes as, “guided patience”.

An interviewee views her career as a “purposeful continuum, which requires assessing my current position and strategizing the next; if done mindfully, this requires time and patience”. The urge to act quickly — responding immediately to an email or chasing a promotion — may have underlying behavioural reasons.

Economists call this tendency hyperbolic discounting, or “present bias”, in which humans place a higher value on the more imminent reward when considering two future events. Taking action immediately can give a psychological pay-off and show how engaged you are — even though ultimately it may be less effective at making progress. With decision-making timeframes under increasing pressure, the virtues of both patience and deliberate impatience risk being forgotten at work and when we think about our long-term career plans.

According to Mr. Black, while we do learn from our mistakes, teaching the importance of patience may result in fewer mistakes in the first place — which is surely the better outcome.

Advice from Mr. Black on to use patience as a tool at work

If you are going to be patient, or impatient, do it deliberately. Include “wait and see”, or “do nothing yet”, as an option for all decision making.

Do not respond to all requests instantly; even the urgent or important may need time for consideration.

Do let people know what you are doing. If naturally impatient, use the phrase, “I need to think about this before I can respond”.

If you are too patient, especially on your career, do not wait for others to look after you. Set yourself deadlines, tell other people your plans, and act on them.

Biodata

Mr. Jonathan Black is Director of Career Service, Oxford University, UK.

Brief

You can now taste caviar from Madagascar

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Lake Mantasoa in Madagascar where sturgeons are farmed

My Iranian MBA students proudly said that Iran produces the best caviar from sturgeons caught in rivers near the Caspian Sea. These sturgeons are now bred in commercial farms as wild sturgeons are declining in number. With the caviar selling at expensive prices in fancy restaurants, and travelers in first and business classes of airlines such as Singapore Airlines and Emirates are served caviar, many entrepreneurs in several countries are entering the aquaculture of sturgeons to harvest their eggs. An example was a commercial sturgeon farm in Malaysia, using South Korean expertise, which was started several years ago but failed.

Recently, it was reported by Jane Flanagan in The Times on July 6th, 2019,    that now there are successful sturgeon entrepreneurs in Madagascar.  

A lake in the highlands of Madagascar has become an unlikely source of caviar in the race to meet demand for the delicacy amid a worldwide shortage.

Entrepreneurs in Madagascar have produced a tonne of caviar after a painstaking process that began six years ago using the fertilised eggs of rare sturgeon imported from Russia.

“We took the time to prove that this is serious,” Delphyn Dabezies, the head of Rova Caviar, said, admitting that the enterprise was rather a gamble.

Producers in the Caspian Sea still boast the most prized caviar from Beluga sturgeon but steadily constricting quotas in response to dwindling stocks of fish have led to farms springing up outside Russia. Lower supply and higher demand has only increased caviar’s currency as a symbol of wealth and prestige.

The French entrepreneur, who has lived on the island for years, sold her first harvest within weeks — at £90 per 100g — half the price or less compared with caviar farmed in Europe. Her customers are luxury shops and restaurants in Madagascar and its neighbours Mauritius, the Seychelles and Réunion.

The world’s most expensive caviar, from albino sturgeon caught off the coast of Iran, regularly fetches up to £2,000 for 100g.

Lake Mantasoa, which is perched at a cool altitude of 1,400 metres and east of the capital Antananarivo, was identified as an ideal place to develop a nursery to hatch the imported eggs. Three hundred staff have been trained to manage the exacting process of raising the sturgeon until they weigh 1.5kg, when only the females are kept until their eggs are ready to be harvested.

The quality and taste of the caviar tests the skill of Gaston Sovani’i Thomas, 23, who, knife in hand, has no margin for error as he extracts the precious black eggs from each fish. “At first I was afraid to destroy or contaminate the eggs, but now everything comes automatically,” he said.

We hope the venture would be hugely successful. Visitors would now be able to enjoy spoons of caviar after spending time at Madagascar’s parks to watch lemurs, which are the island’s famous tourist products.

http://www.adastraip.com/
Jobs and Automation

Robots and the Japanese mind

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In Japan, robots are perceived positively

My youth was filled with Japanese robots such as Ultra Man while my children were occupied with Transformers. We note an interesting article by Gillian Tett in Financial Times on June 12th, 2019. The article touched on the positive acceptance of robots in Japan as compared to other countries, mainly the UK and US.

She wrote that a survey by Pew last year suggested 83 per cent of Japanese people think that automation raises inequality. But they are less concerned that using automation will make it hard for them to find a job, and an unusually high proportion think that a robot-filled economy would be far more efficient.

Meanwhile, the Japanese tend to view robots as a source of pride, not terror, since they highlight the country’s ability to innovate, with 300-plus robots per 10,000 employees, Japan has the highest take-ups of robots in the world.

One reason for that phenomenon is that robotics is an industry where Japanese business is ahead of international competitors, creating a sense of national optimism. Another subtle factor is that popular culture has tended to present robots as being friendly. Think of Astro Boy series, a manga and anime creation  that most adult Japanese watched on TV in their youth: its robotic protagonist presents  an appealing and helpful face that is easy to embrace.

In Britain, however, today’s adults grew up watching TV series such as Doctor Who, which offered a more ambivalent take on robots, with mechanized adversaries such as Daleks and Cybermen that truly terrifying for young viewers. So too in the US, where Hollywood’s robots were at least as likely to harm as to help –to be a relentless Terminator, say, as to be a cute R2 D2.

Then there is a third more tangible-issue that affects Japanese attitudes towards robots: demography. Japan’s birth rate is so low (1.43 births per woman) that its working-age population is shrinking at an alarming rate. Companies in Japan have responded by recruiting more women. Indeed, one little-noticed detail about modern Japan is that the population of women between 15 and 64 years old who now work is about 68.5 per cent, higher than in the US. The country has also started to hire a few more workers from countries such as China, Vietnam and India to fill positions ranging from elderly care to the development of AI.

Miss Tett says that these cannot entirely plug the labour shortage and there is a considerable hostility towards immigration. That makes automation seem less terrifying by default.

Then, there is a fourth issue: the social safety net. Last year’s Pew r survey revealed that 63 per cent of people in Japan think that it is up to the government—not  the individual— to help the population to adopt to automation. Perhaps that is not so surprising: Japan publicly-funded social safety net remains pretty robust, and there is still a high sense of social cohesion, common purpose and sacrifice.

In the US, however, only about 30 per cent of the public expect the government to help with automation, while more than double that number expect the burden to fall on the individual. That may sound more empowering, but Miss Tett suspected it is also a recipe for anxiety.

Miss Tett noted that our views on robots will change in the coming years. It would be interesting to see what happens, for example, in places such as Italy, where birth rate is also falling sharply. It would be more interesting to see whether political protest eventually forces the US government to take measures to strengthen the social safety net in the face of automation.

The key point is this: when it comes to robots, Japan may yet have an edge over other nations, not just in term of its technology but in its attitude too, or, at least, its recognition that robots may yet  enable the county to keep growing even its population shrinks. Call this the unexpected upside of Astro Boy –or maybe a sign that it is time for Hollywood to embrace robots more whole-heatedly.

The Situation in Malaysia

As a nation, Malaysia has a population of about 30 million The Malaysian government has been encouraging its citizens to have more children so as to reach a targeted population of 60 million for sustaining economic growth.

We noted a number of observations in our previous job as Adviser, Tabung Warisan Anak Selangor (TAWAS), a foundation that monitors and records the birth of new-borns in the state of Selangor. First, the number of children among a typical Chinese parent is two. Second, the number of children in a typical Malay family is five. It is projected that the percentage of Chinese in the Malaysian population will significantly decline due to this small number of children in the long run.

The increasing population will mean that the country must find jobs for its young adults. Recently it was revealed that a significant number of graduates are unemployed. This was worrying to the nation’s planners. Robots and automation may not be perceived to be friendly to Malaysians as robots would lead to less job opportunities.    

Brief

Snails offer path to the perfect glue

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Garden snails moving; note the mucus behind

At our small fruit garden at the back of our house in Seremban, Negeri Sembilan, Malaysia, snails are a menace, eating young papaya leaves through the night. These slow-moving snails can be found in the morning before they manage to hide under the stones and small logs or run across my neighbour’s fence. We will crush them with our feet, producing a crushing sound when their protective shells are broken. But some scientists are interested to study these menacing garden snails.    

We noted an interesting article on snails, which was written by Tom Whipple in The Times on June 19, 2019.  

According to him, scientists have long envied snails. When a snail wants to travel up a wall, it secretes a sticky mucus that holds it securely but still allows it to move. When it stops, the mucus hardens and fastens it even to rough surfaces with ten times that force. When it thinks it is time to move again, it releases more mucus and heads on up the wall.

Scientists struggle to do that: the glues they make are either strong and irreversible, such as superglue, or weak and reusable. A rare exception is Velcro, which can be extremely strong and can also be reused, but it requires a strip on each of the objects being joined.

Now, inspired by the remarkable mucus of snails, a team of researchers think they have cracked a glue that is both strong and able to be reversed: a Velcro in gel form. When wet the glue is wobbly like a snail’s slime. When dry it holds tight, then when rehydrated it returns to its mucus-like state.

The glue, described in the journal Proceedings of the National Academy of Sciences, was made from a “hydrogel”, a network of chemical chains that absorbs and swells in water. In experiments its creators showed that it was strong enough to hold up the weight of a human, who dangled off a support held by two square centimetres of the dried adhesive. He did not stay long enough for it to rain: when you add water the strength decreases tenfold.

The key, said Anand Jagota, from Lehigh University in Pennsylvania, US, was to make a gel that became strong only after it had shrunk. “Most of the time, in the process of drying, something shrinks,” he said. “When a gel shrinks, if it also stiffens it develops stresses that break the bonds.” This means that even if it stuck down before, the shrunken version releases the bond.

Professor Jagota, who worked with Shu Yang from the University of Pennsylvania, US, said that their gel did not do this. “The secret is to shrink when you’re soft then stiffen when you’re not shrinking. That’s the trick, otherwise any old gel would work. That’s what we think the snail does.”

Then when you add water, “it has a memory, the material remembers its original state. Everything becomes soft and it comes off easily. To a great extent it goes back to its original shape.”

He said they thought that the glue could be used in a range of applications. “You can imagine many cases where you want a bond you can release. Bandages, for instance. You could well want something strong that you could unglue easily by pouring water on it.”

Our Comments

Given the scientific secrets of the common garden snails, now, we feel we should not crush them but release them to a place that they can enjoy eating other leaves rather than our young papaya leaves.

Secure corporate loans
Brief

US-China Trade War Affects Materials for New Energy Technologies

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Tin metal-Malaysia used to be the largest producer of tin in the world

New energy technologies require mineral resources such as copper, cobalt and lithium. A shift in the global energy system from fossil fuels- driven by cost reductions that are making new technologies  are increasingly competitive and by government policies to fight global warming and local pollution-is expected to result in steep increases in demand for some metals and other materials.

Demand for copper, for example, could rise by 275 to 350 per cent by 2050, according to research by Yale University in the US. The World Bank estimated in 2017 that action to limit the rise in global temperature to 2OC from pre-industrial levels could a seven-fold increase in demand for cobalt and an eleven-fold increase in demand for lithium by 2050.

 Chinese companies have been investing to secure supplies of these minerals, buying up mines in countries from Australia to South America.

Simon Moores of Benchmark Mineral Intelligence, a research firm, said the importance of technologies such as electric vehicles and battery storage meant “whoever controls these supply chains controls industrial power in the 21st century”.

Concern about mineral supplies has been growing in the US administration and Congress and has been heightened by China’s warnings of plans to curb export of rare earths. China accounts for mote than 80 per cent of world rare earths production.

The US commerce department has published a report in 2018 looking at 35 critical minerals, which found that imports accounted for more than 50 per cent of US domestic demand for 29 of them, and 100 per cent for 14 of them.

The list of the 35 critical minerals include the following:

  1. Aluminum (bauxite), used in almost all sectors of the economy.
  2. Antimony, used in batteries and flame retardants.
  3. Arsenic, used in lumber preservatives, pesticides and semiconductors.
  4. Barite, used in cement and petroleum industries.
  5. Beryllium, used as alloying agent in aerospace and defense industries.
  6. Bismuth, used in medical and atomic research.
  7. Cesium, used in R&D.
  8. Chromium, used primarily in stainless steel and other alloys.
  9. Cobalt, used in rechargeable batteries and superalloys.
  10. Fluorspar, used in the manufacture of aluminum, gasoline and uranium fuel.
  11. Gallium, used in integrated circuits and optical devices like LEDs.
  12. Germanium, used fir fiber optics and night vision applications.
  13. Graphite (natural), used for lubricants, batteries and fuel cells.
  14. Hafnium, used for nuclear control rods, alloys, and high-temperature ceramics.
  15. Helium, used fir MRIs, lifting agent, and research.
  16. Indium, used mostly in LCD screens.
  17. Lithium, used primarily for batteries.
  18. Magnesium, used in furnace linings for manufacturing steel and ceramics.
  19. Manganese, used in steelmaking.
  20. Niobium, used mainly in steel alloys.
  21. Platinum group metals, used for catalytic agents.
  22. Potash, mainly used as fertilizers.
  23. Rare earth elements group, primarily used in batteries and electronics.
  24. Rhenium, used for lead-free gasoline and superalloys.
  25. Rubidium, used for R&D in electronics.
  26. Scandium, used for alloys and fuel cells.
  27. Strontium, used for pyrotechnics and ceramic magnets.
  28. Tantalum, used in electronic components, mostly capacitors.
  29. Tellurium, used in steelmaking and solar cells.
  30. Tin, used as protective coatings and alloys for steel.
  31. Titanium, used as a white pigment or metal alloys.
  32. Tungsten, used to make wear-resistant metals.
  33. Uranium, mostly used for nuclear fuel.
  34. Vanadium, mostly used for titanium alloys.
  35. Zirconium, used in high-temperature ceramic industries.

Source: www.usgs.gov.

Reference for article: Ed Crook Financial Times, June 12th, 2019.

Economic Matters for Innovators

States Create Useful Money

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We have created a new category, Economic Matters, which features economic topics which would be useful to innovators in understanding how economies work.

Today, we highlighted the article written by Martin Wolf, a well-known economist of Financial Times, on 29th, May, 2019.

According to Martin Wolf, the state is the most important of all our institutions.  It is the ultimate guarantor of security. But its power makes it frightening. For this reason, people sometimes pretend it is weaker than it is.

In one area of economics, this is particularly true; money. Money is a creature  of the state. Modern monetary theory, a controversial account of this truth is analytically correct, so far it goes. But where it does not go is crucial: money is a powerful tool, but it can be abused.

L Randall Wray of the University of Missouri-Kansas City set out these ideas in Modern Monetary Theory (MMT). They have the following fundamental elements:

First, taxes drive money. This doctrine is called “chartalism”. Governments can force their citizens to use the money it issues, because that is how people pay their taxes. The state’s money will thus become the money used for domestic transactions.

Banks depend upon the government’s bank-the central bank- as lender of last resort. The lOUs  of banks-the predominant form of money in today’s economies-are imperfect substitutes for such sovereign money. They are imperfect, because banks may become illiquid or insolvent and so may default  That is why banking crises are common.

Second, contrary to conventional wisdom, no mechanical relationship exists between holdings of central bank  liabilities by banks (that is, reserves) and the creation of bank money. Since the financial crises, central bank balance sheets and bank reserves have grown hugely, but broader monetary aggregates have not. The explanation is that the dominant driver of the money supply is the (risk adjusted) profitability of lending, which is high in boom times and low in busts. The weakness of credit also explains why inflation has remained low.

Third, governments need never default on loans in their own currency. The government does not need to raise tax or borrow to pay its way; it is possible for it to create money it needs. This makes it simple for governments to run deficits, in order to ensure full employment.

Fourth, only inflation sets limits on a government’s ability to spend. But, if inflation emerges, the government has to tighten demand, by raising taxes.

Finally, governments do not need to issue bonds in order to fund themselves. The reason for borrowing is to manage demand, by altering interest rates, or the supply of reserves to the banks.

This analysis is correct, up to a point.  It has also implications for policy. A sovereign government can always spend, in order to support demand. Again the expansion of the central bank balance sheet does not make high inflation likely, let alone inevitable.

Some believers in MMT argue that the power to create money should be used to offer jobs  guarantee or finance programmes such as the Green New Deal proposed by Democrats in the US. But such ideas do not follow from their analysis. These are suggestions for where the state should spend.

What then are the problems with MMT?

These are twofold: economic and political

An important economic difficulty, clear from the painful western experience in the 1970s, is that it is hard to know where “full employment”  lies. Excess demand may exist in some sectors or regions, and deficient demand elsewhere. Full employment is a highly uncertain range, not a single point.

A still more important economic mistake is to ignore the expectations that drive people’s behaviour. Suppose holders of money fear that government is prepared to spend on its high priority items, regardless of how overheated the economy might become. Suppose holders of money fear that the central bank has also become entirely subject to the government’s whims (which has happened often enough in the past). They are then likely to dump money in favour of some other asset, causing a collapsing currency, soaring asset prices and booming demand for durables. This many not lead to outright hyperinflation. But it would lead to a burst of high inflation, which becomes entrenched.

The focus of MMT’s proponents on balance sheet and indifference to expectations that drive behaviour are huge errors.

The mistakes are economic ones but there is a related and far worse political error, as Sebastian Edwards of University of California, Los Angeles, has argued. If politicians think they do not need to worry about the possibility of default, only about inflation, their tendency may be to assume output can be driven far higher, and unemployment far lower, than it is possible without triggering an upsurge in inflation.

That happened to many western countries in the 1970s. It has happened more often to developing countries, especially in Latin America. But the economic and social consequences of big spikes in inflation can be very damaging.

Yet the same is also true for high employment.

So in managing a modern monetary economy, one has to avoid two gross errors. One is to rely on private sector to much, since that can all too easily end up with highly destructive financial booms and busts.

The opposite error is to rely on government-led demand too much, since that may well generate destructive inflation booms and busts. 

The solution, nearly all the time, is to delegate the needed discretion to independent central banks and financial regulators. Yet proponents of MMT are right that during a period of structurally feeble private demand (as in Japan since 1990) or a deep slump, a sovereign government must and can act, on its own or in cooperation with the central bank, to offset private weaknesses. 

There is then no reason to fear the constraints. It should just go for it.   

Brief

Sand: Under-The-Radar Key Global Commodity

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Sand is an important construction material

In late 2008 I was tasked by the then Chief Minister of the industrial state of Selangor of Malaysia, in which Kuala Lumpur, the capital of Malaysia is also located, to re-organize the state’s sand industry. The sand industry has been rife with illegal sand extraction and corrupt officials. The state collected only a small amount of royalty from its sand resources.  

The demand for sand was huge as it is an important material for building and road construction.  Anjana Ahuja  wrote in Financial Times on 23rd, May 2019, that, according to a UN report, sand is being mined, dredged and even stolen to satisfy the global demand for infrastructure. Strikingly, sand comes second only to water in terms  of the volume of material resources that are extracted and traded globally.

While it is being poured into much-needed urban development, particularly in China and India, sand is not a limitless gift of nature. The world has a “sand budget” and we are spending it faster than it can be replenished.

The environmental consequences of sand extraction are becoming plainer by the day. The plunder of lakes, rivers and coastal areas reduce biodiversity, destroying fishing communities, causes pollution, lowers water table and, by ferrying away natural deposits increases flood risk.

It can also threaten  tourism in countries like Morocco with illegal extraction providing half of the annual sand needs, beaches are in danger of being stripped back to rock.

“It is a challenge to the paradigm of infinite sand resources,” concludes the UN report.

We tend to think sand as the powdery stuff that slips between our toes. In fact, sand falls into two categories. The first is mineral sand, which contains such minerals as zircon and is used to make ceramics and as pigments. It comes mainly from river beds and coastal areas like beaches. In inland and non-tropical areas, sand is mostly made of silica, or silicon dioxide. The second class is aggregates, a generic term  for crushed rock, sand and gravel. This easier-to-bind coarse variety of sand is coveted by the construction industry. Up to 50 million tonnes are removed from rivers, pits, quarries, coast lines and marine areas each year.

Illegal or unregulated sand extraction flourishes in countries where, variously, rules are lacking, enforcement is lax or corruption thrives. Because transporting sand is expensive, generally the material is generally used near to its source. Tracking where infrastructure is springing up can yield clues about which ecosystems might be targeted. According to Dr Latham of the Imperial College in London, UK, the great sand drain presents a technical challenge: how to come up with alternative materials, perhaps using desert sand. “It is a huge reserve that is already on land, so removing it arguably less of an environmental  problem. The industry needs to look at this.”

An Imperial College student start-up is trying to develop a building material out of smooth –grained sand; the re-usable, biodegradable composite is currently only suitable for temporary structures.

Sand is becoming a geopolitical irritant too. Singapore’s expansion via land reclamation has been linked to the loss of 24 sand islands from neighbouring Indonesia. China’s territorial expansion in the South China Sea depends on imported sand.

My Own Experience

There is a veracious demand for sand in our state of Selangor and in Kuala Lumpur for construction of roads and infrastructure. Sand extraction from agricultural lands, ex-mining lands and river turned them into large water bodies with few alternative uses. Declining supply of sand from the state of Selangor requires sand to be transported from other states such as Perak in the north. Large trucks are used to transport sand, which often cause busy traffic on the highways. Illegal sand activities have been vastly reduced, and the income from the sand royalties for the state of Selangor had increased substantially.

But everyone must know that sand is a limited resource and may not be available where it is needed for urban development. Society needs to prepare to pay a higher price for this take-for-granted natural resource.

Guest Contributor

“The old men and the sea”: Terengganu’s coastal fishermen

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Pulling in the day’s catches on the high sea of South China Sea. Picture is captured from Malaysian Insight, taken by Nazir Sufari on 21st October, 2017.

Long coastline, largest number of fishers

The state of Terengganu in the east coast of Peninsular Malaysia has a long coastline stretching for about 244 km. Famous for its white sandy beaches, the long coastline facing the vast South China Sea is dotted with quaint fishing villages, turtle landing sites and quite a few beach hotels, resorts and chalets. The wide expense of the South China Sea is rich in natural resources of different marine life. Naturally therefore, fisheries has developed to be an important food and also income sources that contribute significantly to the livelihoods of local coastal communities for decades and through generations. About 11,000 locals are earning their living from the sea as coastal fishers or more commonly called coastal fishermen, the largest in the peninsular (fishing activities within 30 nautical miles from shore is classified as coastal fishing or inshore fishing while beyond 30 nautical miles as offshore fishing or more commonly known as deep sea fishing)

Operational zones, boats sizes & gears

The Malaysian fishing waters are divided into zones to facilitate orderly fishing, avoid unequal competition between diverse players and also to avoid conflicts.

Zone A is for fishing operation within 5 nautical miles from shore. This zone is for the traditional fishers and owner operated boats using traditional gears like hooks and lines and fish traps or bubu. An estimated 55% of Terengganu coastal fishers are from this category.

Zone B is between 5 – 12 nautical miles from shore for owner-operated commercial fishing vessels of less than 40 GRT (Gross Registered Ton) using non motorised gears as trawl nets, purse seine nets, drift nets, gill nets as well as hooks and lines. It is estimated that 35% of Terengganu coastal fishers are from this second category.

Zone C, between 12 – 30 nautical miles from shore is for commercial fishing vessels of between 40 – 70 GRT. Motorised fishing gears are allowed such as trawl nets, purse seine nets, drift nets as well as gill nets. Only an estimated 10% of Terengganu coastal fishers are engaged in this sector.

Zone C2 is for vessels of more than 70 GRT and are not included in the discussion here as these are deep sea fishing vessels operating beyond the 30 nautical miles from shore in the EEZ (Exclusive Economic Zone). These are offshore fishers and not coastal fishers.

Thus, most of Terengganu coastal fishers or about 90% of them are operating less than 12 km from shore under class A and class B categories using boats of less than 40 GRT. And when categorised according to boat sizes, 72% of Terengganu coastal fishers are using boats of 15 GRT and lower. Only 18% are operating with boats of 16 – 40 GRT while 10% with boats of 40 – 70 GRT (Only boats of 40 – 70 GRT are considered medium sized boats, while boats of under 40 GRT are considered small boats)

Seasonal and weather dependent occupation

In general, November to February is the North East Monsoon season in Terengganu. During this period wind speed can reach 40 knots or more and sea waves can reach 4 meters in height. This is too rough and dangerous for A and B class fishers with boats of under 40 GRT to go out to sea to fish. The downtime period of about 4 months leaves these fishers without incomes. Few of these fishers are able to seek other alternative incomes or jobs during this period. Most will only tend to their boats and mend their nets while waiting for the opportunity to resume fishing again – the only skill they know or posses for most. For most as well, incomes from the active fishing period from March till October will not be able to help them tide this rough period. Thus, many will be dependent upon the allowance from the government to survive.

All in a day’s work for coastal Terengganu fishers

A typical day for these traditional fishers and majority of B zone fishers of Terengganu begins with them setting out very early in the morning in their boats so as to be at their chosen fishing spots before the sun rises. Most are already old and very few young people are interested in this kind of job as it involves very hard work. For traditional fishers it is a task carried either individually or accompanied by another crew using a boat fitted with an outboard motor. For drift or gill netters with boats of under 15 GRT a four or five men crew is the norm. A purse seiner however requires a lot more crew. A 25 GRT purse seine boat for example requires a crew of 14. For these non trawlers, it is their routine to head to artificial reefs or to spots they have laid their unjangs to carry out their fishing business. Unjang or also unjam is a crude form of fish aggregating device made from palm fronds tied with tree branches that will attract marine life to feed, shelter or even for shade when submerged in the seawater – a lure of sort if it is temporary and doubled as an artificial habitats for marine life if permanent.

For traditional fishers this is the spot for them to lay, check or to retrieve their fish traps or bubus and gather the catches. Similarly to hooks and lines fishers it is the place to throw their lines and reel in the catches. For drift and gill netters as well as purse seiners they would be very busy laying their nets and after a couple of hours pulling in the catches. This process is then repeated for a couple of times but at different spots. And by mid day many of them would call it a day and would begin preparing to head to shore after way past noon. Often these fishers reach the shore and the jetties in the evening to the waiting middle men or buyers. Here they are rewarded for what they have got or caught. A good day’s catch would bring home the smiles on their face. If not they just have to put on a brave face and try their luck another day. Such is their life – unpredictable and uncertain.

Fishermen’s woes

The life as coastal fishers of Terenggganu is hard. Not only is the cost of living high, their incomes are also falling and lower than before. These fishers are bringing back much lower catches now, that even the current high fish prices are not enough to compensate them for the lower quantity of fish landed. A common argument put forward for the dwindling fish resources in coastal Terengganu waters is due to over fishing. Statistic wise, that is quite debatable as the number of coastal fishers in Terengganu is quite stable for a long time. So too are the fish gears issued. And the Fishery Department is constantly monitoring and controlling the issuance of license for fishing permits as well approvals for fishing gears.  But opinion of over fishing has its merit if one considers the issue of encroaching foreign fishing boats from Vietnam and Thailand. These illegal fishermen are using big trawlers fitted with illegal nets that sweep the sea bed and hauling everything, unjangs, fish traps, juvenile fish and more, leaving the sea bed bare and clean. As a result the sea is pretty much destroyed of its complex marine ecosystem and deprived much of its needed marine life to breed and regenerate. Some Malaysian trawlers from outside the state are reported to be doing similar thing and illegally encroaching into the areas reserved for traditional fishers at night and when there in no enforcement.  Hence, enforcement or more appropriately the lack of it is the issue here.

So what is the future for them?

These coastal fishers are important to the country and need to be protected and helped for the interest of food security of the country. We already have good system and regulation in place. It only needs fine tuning from time to time. What is important is for all parties to abide by the rules and regulation. Proper enforcement of the regulation is therefore the key to solving the problem.

About the guest contributor

Mr Ahmad Rozi is a stingless bee farmer in Terengganu, Malaysia. He writes on interesting topics about foods, places and traditional medicines in his state and region.