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Major oil and gas exporters face unprecedented challenges in years ahead

MD Staff

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Major oil and gas exporters have weathered many upheavals in recent decades but a renewed commitment to reform and economic diversification will be vital to cope with the changing dynamics of global energy. These include rising production from new sources such as shale, uncertainties over the pace of oil demand growth and deployment of new energy technologies, according to a new report from the International Energy Agency.

The analysis, the Outlook for Producer Economies – a special report in the World Energy Outlook series – examined six resource-dependent economies that are pillars of global energy supply: Iraq, Nigeria, Russia, Saudi Arabia, United Arab Emirates and Venezuela. It assessed how they might fare to 2040 under a variety of price and policy scenarios.

The rollercoaster in oil prices over the last decade has brought into sharp relief the structural weaknesses in many of the major exporters. Since 2014, the net income available from oil and gas has fallen by between 40% (in the case of Iraq) and 70% (in the case of Venezuela), with wide-ranging consequences for economic performance.

The volatility of hydrocarbon revenues presents dilemmas for countries whose budgets depend on them, especially if their economies and finances are not resilient. The extent to which producer countries steer through essential economic transformation can have major implications for energy markets, global environmental goals, and energy security, according to the report.

The new report comes at a time of high oil prices, which are a double-edged sword. Higher revenues provide the means to reform, but they can also appear to reduce its urgency. However, as was seen in the past, higher energy prices encourage production elsewhere while accelerating structural changes in demand, which affect the producers’ long-term markets.

“More than at any other point in recent history, fundamental changes to the development model of resource-rich countries look unavoidable,” said Dr Fatih Birol, the IEA’s executive director. “Following through with the announced reform initiatives is essential, as failure to take adequate action would compound future risks for producer economies as well as for global markets.”

The countries examined are very diverse, and the report considers a wide range of experiences and prospects. Many of them have pushed forward plans to boost investment and growth in the non-oil sectors of their economics. Venezuela, though, provides an example of how badly things can turn out when economic and energy headwinds gather strength.

Some of the world’s largest producers face strong pressures from rising numbers of young people entering the workforce. More than 50 percent of the population living across the Middle East is under the age of 30; the proportion is more than 70% in Nigeria. In many major producers, income from oil and gas will not be large enough to provide for these growing populations, even in scenarios where oil demand continues to grow to 2040 and prices remain relatively robust.

The energy sector has an important part to play in the reform agenda. This report focuses on six key responses: capturing more domestic value from hydrocarbons, for example via petrochemicals; using natural gas as a means to support diversified growth; harnessing the large but under-utilised potential for renewable energy, especially solar; phasing out subsidies that encourage wasteful consumption; ensuring sufficient investment in the upstream (the ability to maintain oil and gas revenues at reasonable levels is vital for economic stability); and playing a role in deploying new energy technologies, such as carbon capture, utilisation and storage.

“The reform process should be much wider than energy; but it relies on a well-functioning energy sector, said Dr Birol. “Successful reform programs can open a broader range of strategic options for producers, as well as new opportunities for engagement on a range of energy issues. There is a lot at stake.”

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Women in leadership bring better business performance

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Businesses with genuine gender diversity, particularly at senior level, perform better, including seeing significant profit increases, according to a new report from the Bureau for Employers’ Activities  of the International Labour Organization (ILO).

The report, Women in Business and Management: The business case for change , surveyed almost 13,000 enterprises in 70 countries. More than 57 per cent of respondents agreed that gender diversity initiatives improved business outcomes. Almost three-quarters of those companies that tracked gender diversity in their management reported profit increases of between 5 and 20 per cent, with the majority seeing increases of between 10 and 15 per cent.

Almost 57 per cent said it was easier to attract and retain talent. More than 54 per cent said they saw improvements in creativity, innovation and openness and a similar proportion said effective gender inclusivity enhanced their company’s reputation, while almost 37 per cent felt it enabled them to more effectively gauge customer sentiment.

The report also found that, at national level, an increase in female employment is positively associated with GDP growth. The finding is based on an analysis of data from 186 countries for the period 1991-2017.

“We expected to see a positive correlation between gender diversity and business success, but these results are eye-opening,” said Deborah France-Massin, Director of the ILO Bureau for Employers’ Activities. “When you consider the efforts companies make in other areas to get just an extra two or three per cent in profits, the significance is clear. Companies should look at gender balance as a bottom line issue, not just a human resource issue.”

Gender balance in senior management is defined as 40-60 per cent of either gender, the same as in the general workforce. The report says that the beneficial effects of gender diversity begin to accrue when women hold 30 per cent of senior management and leadership positions. However, almost 60 per cent of enterprises do not meet this target, meaning they struggle to reap the rewards. In addition, in almost half of companies surveyed, women account for less than one in three of their entry-level management recruits – meaning that the pipeline to senior management may not deliver the talent needed.

Almost three-quarters of the enterprises surveyed had equal opportunity or diversity and inclusion policies, however, the report says more specific actions are needed to ensure that women are visible and promoted to strategic areas of business.

Some key factors preventing women reaching decision-making positions were identified. Enterprise cultures that require “anytime, anywhere” availability disproportionately affect women, relative to their household and family responsibilities, while policies that support inclusivity and work-life balance (for both men and women), such as flexible working hours and paternity leave, need to be improved.

Another factor is the “leaky pipeline”, the tendency for the proportion of women to decline as the management grade rises. The “glass wall” describes the incidence of women managers in roles such as HR, finance and administration that are considered less strategic and less likely to lead to chief executive and boardroom positions. Fewer than a third of enterprises surveyed had achieved the critical mass of one third of women board members. Around one in eight reported they still had all-male boardrooms. More than 78 per cent of enterprises who responded had male CEO’s, and those with female CEO’s were more likely to be small enterprises.

“The business case for getting more women into management is compelling,” said France-Massin. “In an era of skill shortages, women represent a formidable talent pool that companies aren’t making enough of. Smart companies who want to be successful in the global economy should make genuine gender diversity a key ingredient of their business strategy. Representative business organizations and employer and business membership organizations must take a lead, promoting both effective policies and genuine implementation.”

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Advanced economies still have plenty of work to do to reach Sustainable Development Goals

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With only 11 years left to achieve the 2030 Sustainable Development Goals, some of the most economically advanced countries have still not met targets in areas like poverty reduction, youth employment, education and training, gender equality and numerical literacy, according to a new OECD report.

Measuring Distance to the SDG Targets 2019: An Assessment of Where OECD Countries Stand finds that in most OECD countries there is widespread access to electricity, mobile networks and basic sanitation. Countries have met targets for maternal and infant mortality; and are making progress in reducing deaths from AIDS, TB, Hepatitis B, and road accidents. They are also cutting smoking and gradually adopting renewable energy sources. Yet, OECD countries are still leaving many people behind, and are struggling to reach the targets related to gender equality and to reducing inequality. Even more worrisome, some countries are moving in the wrong direction on some targets, with worsening performance since 2005.

In particular, medium-term GDP growth and productivity growth are on the wane in many countries. One in seven people in the OECD area live in poverty, and one in four 15-year-olds and adults lack basic numerical competency. Obesity and unemployment have been rising in one third of OECD countries since 2005, and in 13 countries vaccination coverage is dropping, risking outbreaks of diseases thought to have been eradicated. The number of threatened species is on the rise in two thirds of OECD countries.

“The SDGs and the 2030 Agenda objective of leaving no one behind are our promise and our responsibility to future generations. Unfortunately we are very far from being able to declare Mission Accomplished,” said OECD Secretary-General Angel Gurría, launching the report at the start of the annual OECD Week. “We must all redouble our efforts, with countries working together to make sure that the goals are achieved within the deadline that the international community set four years ago. We owe it to our children and to our planet.”

The report uses a unique methodology that enables a comparison of countries’ progress and data gaps across the 17 SDG Goals and the specific targets that underpin them, using the UN Global List of 244 indicators as a starting point. It also finds that over half the 2030 targets involve a transboundary effect, meaning that achieving them in one country will have an impact in others or on global goods, such as climate.

Key findings in the report include:

  • Around 14% of the OECD population lives in relative poverty, far from the goal of halving poverty rates (half of the median rate in OECD countries is 5.5%).  
  • Across the OECD, 14% of youths are not in education, employment or training. Rates are above 20% in Italy and Turkey, and are at least 17% in Chile, Mexico and Spain.
  • Women hold fewer than one-third of seats in national parliaments on average in the OECD, with no country achieving the target level (i.e. equal representation).
  • Official development assistance (ODA) is still running at less than half the UN target of 0.7% of national income.
  • Some 6% of women across the OECD report having been subjected to violence by a partner in the last 12 months [and as high as 11% in some countries]. This is far from the target to eliminate all forms of violence against women and girls.
  • Significant data gaps for the UN Global List of indicators mean that performance on more than one-third of the SDG targets cannot be assessed in OECD countries. Environment goals contain some of the biggest data gaps. 

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Data Collaboration for the Common Good

MD Staff

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Delivering on the promise of public-private data collaboration for the common good requires attention in five priority areas according to a new report, Data Collaboration for the Common Good, published by the World Economic Forum today.

The report, done in collaboration with McKinsey and Company, represents a year-long effort with business, government, civil society leaders, experts and practitioners to advance public-private data collaboration to address some of the world’s most pressing humanitarian and sustainable development challenges.

The linking, connecting and sharing of data has emerged as one of the primary factors shaping today’s digital economy. From 2017 to 2019, the number of companies forming data-related partnerships has risen from 21% to 40%. Against this backdrop, the report provides an evidence base of use cases of data collaboration for the common good as well as pragmatic tools for strengthening stakeholder trust.

“Having experienced the positive impact of public-private data collaboration in improving the epidemic readiness in South Korea myself, I sincerely believe in the promising future that public-private data collaboration will lead us into,” said Dr. Chang-Gyu Hwang, Chairman and CEO of KT. “I would like to encourage more world leaders and thinkers to join World Economic Forum’s effort to make lasting and fundamental changes for humanity with trustworthy data and data collaboration.”

The report provides a holistic governance framework designed to strengthen trust, balance competing interests and deliver impact. It offers insights to balance both the need to innovate in the use of data and the mandate to protect vulnerable populations against known and emerging harms.

“Data holds great promise as a transformative resource for social good,” notes JoAnn Stonier, Chief Data Officer, Mastercard.

The report identifies five key areas for action, across the data collaborative lifecycle:

Stakeholder alignment – Ensure stakeholders commit to intended outcomes by conducting rigorous due diligence to ensure commitment and resource availability

Responsible data governance – Build a secure, resilient and fit-for-purpose governance and technical infrastructure and invest in comprehensive data-impact assessments to identify and manage the risks to vulnerable populations and communities.

Insight generation and validation – Verify the provenance, completeness and accuracy of data inputs and establish effective governance processes on how packaged data products/services will be used to make decisions in the field.

Insight adoption – Invest in last-mile implementation capacities and the leadership to create a data culture within organizations with

Economic sustainability and scalability – Look beyond early stage data philanthropy and donor underwriting to create sustainable economic models.

Given the likelihood and severity of disease outbreaks and natural disasters resulting from climate change, the report calls for a greater focus on how private sector data can be used for epidemic readiness and natural disaster preparedness.

“Public-private data collaboration is foundational for building a shared digital future that is more inclusive, trustworthy and sustainable,” notes Derek O’Halloran, Head of the Future of Digital Economy and Society, World Economic Forum. “This new report provides pragmatic approaches for using private sector data to deliver faster decision-making during natural disasters, a better understanding for how to be ready for epidemics and new ways to measure progress on achieving the SDGs.”

Project advisors and participants include representatives from Bayer, Cloudera Foundation, Dharma AI, Digital Impact Alliance, Edelman, Facebook, Flowminder, Global Partnership for Sustainable Development Data, GovLab, Harvard University, Kaiser Permanente, KT Corporation, MIT, Mastercard, MERL Tech, NetHope Inc., New York Presbyterian, Nielsen, SAP, Sustainable Development Solutions Network, University of Washington, UN Global Pulse, UNOCHA Centre for Humanitarian Data, Verizon Communications, World Bank.

Key Priorities Across the Public-Private Data Collaboration Lifecycle

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