Month: May 2017

In August, 2014, planners in the northeastern Chinese city of Hunchun argued in state media that it should be included in the “One Belt, One Road” project, Beijing’s vision laid out the previous year of a new Silk Road across Asia to Europe.

In 2015, the official Xinhua news agency ran stories about how Hunchun was accelerating its “OBOR” plans, and early in 2016, China’s cabinet released a list of Chinese cities included in “OBOR:” Hunchun was on the map.

The fact that the list came about slowly, and that some cities felt moved to lobby to be included, underlines how the pet project of Chinese President Xi Jinping is as amorphous as it is ambitious.

The challenge of defining exactly what OBOR means will come to the fore later this month, when heads of state and senior officials from around the world gather in Beijing for the first major summit dedicated to the project.

“Frankly, I don’t really know what the belt and the road are. The reason being that I think Beijing doesn’t know either,” said Tom Miller of Gavekal Dragonomics, who recently wrote a book on the New Silk Road.

Reality is complicated

In theory, incentives for cities, companies and countries to be involved are strong: hundreds of billions of dollars are expected to be spent on roads, railways, pipelines, ports and industrial zones stretching from Sri Lanka to Djibouti.

But as Hunchun shows, the reality of OBOR can be complicated and requires buy-in from other countries.

The city’s position at the apex of Russia, North Korea and China is a blessing and a curse. While Russia is gradually opening up to more trade, North Korea has stalled.

Tantalizingly close to the sea but without a sea port after Russia’s annexation in 1860, local businesses said they wanted to ship more goods via Rason, a nearby North Korean port earmarked as an export hub to China, Japan, South Korea and beyond.

That would open a shipping route to southern China, but with sanctions in place against Pyongyang, global tensions rising over its arms programme and Rason developing slowly, expectations of progress are low.

“We currently transport goods by rail to southern China. We’d like to ship from Rason, but at present that’s not happening,” said Wang Hai, general manager of Guanghai Import and Export Trading Company in Hunchun, a small firm with 12 staff, both Chinese and Russian. “Hunchun is a hub for northeast Asia, so in theory it should play a big role in ‘One Belt, One Road,’ but for now it hasn’t been able to get its act together.”

Russia more promising?

North Korea remains largely shut to the outside world, and China, while remaining its main economic and diplomatic backer, has signed up for tough U.N. sanctions against it.

But China said on Tuesday that North Korea would be sending a delegation to the upcoming OBOR summit.

Russian President Vladimir Putin will also attend, reflecting his country’s importance in China’s OBOR strategy; in Hunchun, some enterprises are already seeing benefits from mutual trade.

Xingyang Seafood, for example, imports 90 percent of its seafood from Russia and 10 percent from North Korea, said chairman Zhao Yang.

“The main advantage of being in Hunchun is that we are close to Russia,” Yang told Reuters. The company is headquartered in northern China’s Shandong province, but in 2015 it opened a branch in Hunchun to exploit its proximity to Russia.

“How does North Korea help us? It doesn’t help us at all, they have hardly any seafood left there.”

Trade with Russia

Hunchun’s spokesman Hao Qiang declined to comment about the city’s relationship with North Korea, because of the “current political situation,” and would not say how many North Koreans were working in the city. “But we can talk about Hunchun’s trade with Russia, the city’s clean air and successful tree-planting initiatives,” he said.

In addition to oil and gas export opportunities between Russia and China, Putin has spoken of roads and bridges being built to strengthen links.

Russia has struggled, however, to lure enough people to sparsely populated regions bordering China’s northeast, and there are concerns among Russians of creeping colonization if too much land is leased to the Chinese.

“They [Chinese] will live there, their relatives will come, they will deepen their roots there, they will take Russian women as wives,” firebrand opposition politician Vladimir Zhirinovsky said in 2015, when proposals to lease Russian land to Chinese farmers were put forward. “We will only have problems. I see no advantages.”

For Hunchun, OBOR is the latest in a series of development programs aimed at revitalizing Jilin province and China’s northeast.

Benefits of investments are clear

In the 1990s, the United Nations backed the Tumen River Area Development Project, which became the Greater Tumen Initiative linking China, Mongolia, South Korea and Russia.

The benefits of large-scale state investment are clear. From 25th place among smaller cities in Jilin in terms of economic growth, Hunchun now stands third. Foreign trade has doubled since 2011, according to city statistics.

Whether OBOR can add value over the longer term is uncertain, Peter Cai wrote in a report for the Lowy Institute, an Australian think-tank.

“If the Chinese government fails to connect its domestic projects with overseas components, OBOR will be little different from other domestic infrastructure programs, greatly diminishing its economic and strategic value.”
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Mexico is embarking on a strategy to combat illegal pipeline thefts that includes going after those who purchase and deal in stolen fuel as well as the thieves, the country’s treasury secretary said Tuesday.

Jose Antonio Meade said it’s a problem that costs Mexico somewhere between 15 billion and 20 billion pesos a year, or $780 million to $1 billion, and one that requires a holistic approach to solve.

Mexico’s government wants to reduce the siphoning of gasoline and diesel from illegal pipeline taps by attacking “not only the supply but also the demand,” Meade said, according to a transcript of remarks during a Q&A session released by the Treasury Department.

Besides quick-response actions against thieves, authorities must work to make the illicit business less profitable and make those who buy it face consequences, he said.

Armed gangs add to problem

The topic is front-and-center in Mexico these days after gun battles between the army and suspected thieves killed four soldiers and six gunmen last week in the central state of Puebla. Armed gangs have gotten involved in the business of fuel thefts, and gunmen were said to have used civilians as human shields in one of the clashes.

Fuel thieves are also suspected of being behind a shocking crime in Puebla on May 2, when eight assailants raped a woman and her 14-year-old daughter, killed her toddler son, beat her husband, stole the family’s pickup truck and left on them on a highway at night. In March, three state detectives were abducted and killed by a fuel theft gang allegedly with the help of the local mayor and police officers.

Meade said those who “tear at the social fabric, who in a very cowardly fashion hide behind … women and children,” cause problems for communities and are “terribly dangerous.”

Corrupt workers a concern

Meade acknowledged it’s “very likely” that corrupt workers at state oil company Petroleos Mexicanos, or Pemex, are involved in facilitating pipeline thefts. He said officials are working with the company to identify them.

Officials are also looking at gas stations that may be selling stolen fuel, as well as the mass transportation sector. To that end, authorities raided 13 gas stations last month after detecting irregular fuel-buying patterns, Meade said.

“There was even a gas station that had been shut down (by authorities) for a year but was continuing to sell gasoline, which of course was stolen,” he said.

Looking for help from Senate

The secretary said authorities are looking into technology that would allow them to better track illegal pipeline taps and “mark” gasoline to help identify fuel that has been stolen.

Meade also noted legislation passed in the Chamber of Deputies and pending in the Senate would make it easier to prosecute fuel theft.

“The theft is illegal, but possession of stolen gasoline … since we don’t catch them physically and flagrantly stealing, we often find it impossible to take legal action,” he said.

Stolen fuel part of local economy

The Puebla state Public Security Department reported Tuesday that in a series of raids it seized over 21,000 liters (5,600 gallons) of fuel and 12 vehicles apparently involved in thefts.

Some communities in Puebla and elsewhere have come to base much of their economies on selling fuel stolen from the thousands of taps that are drilled into state-owned pipelines each year. It can also be dangerous — on Sunday one such illegal tap exploded into flames.

Meade said Puebla is the state with the highest incidence of fuel theft, followed by Guanajuato and Veracruz.
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Four U.S. states filed a lawsuit Tuesday over President Donald Trump’s decision to restart the sale of coal leases on federal lands, saying the Obama-era block of the leasing program was reversed without studying what’s best for the environment and for taxpayers.

The attorneys general of California, New Mexico, New York and Washington, all Democrats, said bringing back the federal coal lease program without an environmental review risks worsening the effects of climate change on those states while shortchanging them for the coal taken from public lands.

“Climate change has to be considered when we are talking about compensating states and New Mexico citizens for their resources,” said Cholla Khoury, New Mexico Attorney General Hector Balderas’ director of consumer and environmental protection.

The U.S. Interior Department’s Bureau of Land Management administers 306 coal leases in 10 states, producing more than 4 billion tons of coal over the past decade. Most of that coal — 85 percent — comes from the Powder River Basin in Wyoming and Montana.

Production and combustion of coal from federal lands accounted for about 11 percent of U.S. greenhouse gas emissions in 2014.

The Obama administration blocked the sale of new leases in 2016 to conduct an environmental study and a review of the royalties that mining companies pay the U.S. government for coal that’s extracted. Federal officials and members of Congress said the current royalty rates were shortchanging taxpayers.

In January, Interior officials said they were considering raising those royalty rates to offset the effects of climate change from burning the coal.

In March, President Donald Trump signed an executive order directing Interior Secretary Ryan Zinke to amend or withdraw the coal leasing program moratorium.

The next day, Zinke did so, saying the Obama administration’s environmental review would cost “many millions of dollars” and that improvements to the program can be made without a full-scale environmental review.

The lawsuit by the four attorneys general, which was filed in Great Falls, Montana, says the reversal was made “with no justification other than an objection to the time and cost of complying with the law.”

Lifting the moratorium without properly considering the environmental effects or ensuring that the program is providing fair market value for the publicly owned coal violates federal laws, they allege.

“They didn’t follow the law,” Khoury said. “You can’t make piecemeal changes without doing this assessment to fully understand all parts of this program.”

Interior Department officials did not return telephone and email messages seeking comment.
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The U.S. economy won’t achieve the Trump administration’s 3 percent growth goal this year and not until all of its tax, regulatory, trade and energy policies are fully in place, Commerce Secretary Wilbur Ross said on Tuesday.

Ross also said trade enforcement actions would be a major tool to cut U.S. trade deficits, adding that he has problems with World Trade Organization rules which allow widely divergent tariffs and are slow to punish violators.

The 3 percent growth target “is certainly not achievable this year,” Ross told Reuters in an interview. “The Congress has been slow-walking everything. We don’t even have half the people in place.”

But Ross said the growth target ultimately could be achieved in the year after all of President Donald Trump’s business-friendly policies are implemented. He noted that delays were possible if the push for tax cuts was slowed down in Congress.

“I think between the change in regulatory attitudes which will make it easier to make big projects, and the new taxes, which will make the rates of return much better, the reduced regulatory environment, I think over time you will see increases in capex – and that in turn has a big multiplier effect through the economy,” Ross said.
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Now onto his third job since finishing high school a decade ago, Festus Chege is hoping his latest venture as a water vendor in Githurai, a growing suburb to the south of Kenya’s capital Nairobi, will pay off.

Like many young people from poor families, the 30-year-old passed his high-school exams but lacked the funds to pursue his studies, confining him to work in the city’s fast-expanding informal sector.

Kenya’s current drought, which is affecting some 3 million people across the East African country, has led to a drop in water volumes in reservoirs serving Nairobi residents.

The city authorities have been forced to ration water services, giving priority to critical facilities like hospitals, as well as manufacturers. Taps in poor households are now empty of piped water most of the time, and they have little choice but to buy their water from vendors like Chege.

“The water business is good,” said Chege, who has been selling water for the past four months. “People call me to supply them with water as early as 4 a.m.”

Chege, who uses a rickshaw to transport the water, sells 20-liter drums of water for 50 shillings ($0.49) each. In a day, he can supply as many as 40 drums, earning him 2,000 shillings — more than double a government clerk’s wage.

It’s five times more than what he was making last year hawking secondhand clothes.

“There were days when I would find myself idle because of a lack of customers,” said Chege. That’s when he would join his friends to smoke bhang, a form of cannabis — a common pastime among young slum-dwellers who take the drug in secret dens.

Now, Chege says he no longer has time to mess around with drugs because he is busy from dawn to dusk selling water.

In January this year, he joined a youth group called Ni Sisi Sasa (“It is our time”), which helps jobless young people in the neighborhood improve their lives. One activity it offers is water vending.

The group has a water depot in Githurai, which purchases its supply from the Kiambu County Council water unit.

Group members like Chege buy water from the depot at low rates and resell it to local residents at a profit.

“By the end of the year, I want to make enough money so that I can enroll in a teacher training college,” said Chege. He plans to continue supporting the group even if he realizes his ambition of becoming a teacher.

Growing population

According to the Nairobi City Water and Sewerage Company (NCWSC), the capital’s residents need 740,000 cubic meters of water daily to meet demand.

Currently only 462,000 cubic meters of water are being supplied due to declining water levels in the Ndakaini reservoir, said Philip Gichuki, NCWSC’s managing director.

The reservoir, which supplies 85 percent of the city’s water, has a capacity of 70 million cubic meters, but due to poor rains this season, it is only around 40 percent full.

For instance, the Aberdares water tower in central Kenya — the source of rivers feeding the reservoir — has received just 250 mm of rain since December, way below the 1,000 mm it would normally receive in the rainy season, said Gichuki.

“The shortage has forced us to ration water,” said Nairobi County’s executive for water, Peter Kimori. “Estates have been forced to look for alternative sources due to the rationing.”

The county government plans to sink 140 boreholes in Nairobi’s fringe estates to ward off future water shortages.

But experts like Gichuki say more will be needed to meet demand in the capital due to its growing population, as rural migrants flock to areas like Githurai where many find work as manual laborers.

According to the World Bank, there are over 4 million people — around a tenth of Kenya’s population — living in Nairobi and its suburbs. In 1963, when Kenya attained independence, the city was home to only a third of a million people.

Creaking infrastructure

Gichuki said the solution was to upgrade the city’s water infrastructure.

“[It] has not been developed since post-independence days,” said Gichuki. “This is leading to the increasing water pressure and shortage in Nairobi.”

Fred Kihara, water fund manager at The Nature Conservancy, an international NGO, said the worsening water problem in Nairobi is linked to climate change, as rainfall volumes in central Kenya have declined.

On top of this, the government is not doing enough to conserve water towers like the Aberdares, he added, by preventing forests being cut down for farming, for instance.

“Clearing of trees reduces the soil’s ability to retain water which seeps into rivers feeding reservoirs like Ndakaini dam,” said Kihara, explaining that without trees, the water evaporates faster.

Meanwhile, Kenya’s Central Organization of Trade Unions says 4 million jobs are needed for the country to cut poverty to zero by 2020.

Youth unemployment has shrunk to 15 percent from 25 percent in 2006, as the economy’s informal sector has expanded.

“I am able to do this [water] business because the government has removed harsh regulation on the informal sector,” said Chege. “There is less harassment from tax officials.” But he called for better access to government support such as the youth enterprise development fund, which is hard to tap for young people without political connections.
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