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Author: Digital Editor

In the Shadow of Digital Authoritarianism, a Blueprint for Technological Liberty

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The world is on the precipice of a technological cold war. As authoritarian regimes develop new digital tools that endanger open societies and threaten democratic values, the West must decide whether to compete or concede. The battle for freedom is being fought in Ukraine today, but the frontline could one day be in Taiwan, a global technology hub producing the world’s most advanced microchips and a flourishing democracy less than 100 miles off the coast of China, which seems bent on annexing the island.

Winning the race for future technologies demands a united front. Just as the West came together to deter Soviet expansionism and stop the spread of communism in the postwar period, the United States and the European Union must revitalise the transatlantic alliance to win the competition for global tech leadership. That means developing a new joint strategy, pooling resources and capabilities, streamlining regulations, and leveraging their strengths – such as advanced tools for semiconductors and lasers, artificial intelligence, quantum computing, and genomics in Europe, and fusion energy, commercial space operations, and synthetic biology in the US.

Building resilient supply chains will also be necessary. With China dominating the supply of metals and rare-earth elements necessary for batteries, semiconductors, and other technologies, the US and the EU are sleepwalking into a critical minerals crisis. For example, China’s market share of high-powered permanent magnets for offshore wind turbines is nearly 90pc.

Lastly, the US and the EU must focus their efforts on achieving breakthroughs in vital sectors, including AI, biotech, advanced networks, clean energy, and the manufacturing technologies of tomorrow. The US CHIPS Act and the European Chips Act offer a blueprint – or at least the beginnings of one – for bolstering competitiveness in the next big technologies.

Cooperation on technology is not new. From the Council of Europe in Strasbourg to the International Telecommunication Union in Geneva, from the OECD to the European AI Act, the race to artificial intelligence seems sometimes to be a policymaking race, to control and coordinate it – and rightly so, in some cases. For example, the main risks identified by the interim report of the UN’s AIAdvisory Body include risks to the stability of financial systems and critical infrastructure, as well as strains on the environment, climate, and natural resources.

These issues are too important to be overlooked. In a recent report, the French AI Commission called for creating a World AI Organisation to “evaluate and oversee AI systems.” This could be a good idea, but it is not the only way forward. After all, the existence of the WHO is fundamental, but while it has played a vital role in eradicating some diseases, it did not prevent the COVID-19 pandemic.

Regulation should be a means to an end, not an end in itself. Despite the Brussels effect, the EU’s alleged ability to set global standards, the bloc’s landmark regulations on electric vehicles or the General Data Protection Regulation have hardly made the EU a superpower in electric mobility or data privacy. Hence, transatlantic cooperation should be broadened to include research and development programs and large “moonshot” projects.

Just as sanctions alone have not curbed Russia’s aggression against Ukraine, regulation will not be enough to prevent bad actors from misusing AI. Similarly, the West will have to go on the offensive against China’s techno-authoritarian model. Sharing intelligence can identify supply-chain vulnerabilities and facilitate “friend-shoring.” In addition to developing technological ecosystems with like-minded partners, it will be crucial for US and EU policymakers to expose short-sighted private ventures that play into the hands of those who see technology as a tool of oppression, not liberation.

The US and the EU cannot expect to win the technology race – which is also a war of ideas – when their citizens have been herded into social-media echo chambers, and when 44pc of children globally use TikTok. On this cognitive battlefield, the West must lead the charge to develop technologies that encourage critical thinking, protect privacy, and stop the destabilising fragmentation of the digital sphere and the spread of online hate and disinformation.

A revitalised transatlantic alliance must ensure emerging technologies reflect democratic principles and boost strategic autonomy. Forging partnerships with like-minded countries, including Australia, India, Japan, and South Korea, and enhancing cooperation among the G7 and the OECD could support these efforts. Together, they could develop an alternative model of technological empowerment – free of digital repression and authoritarianism – for developed and developing countries alike.

Western leaders should take inspiration from the COVID-19 vaccines, which, building on collaboration, massive experimentation, and decades of fundamental science, were developed in a record eight months. We must keep this spirit alive. Democracies risk being outmanoeuvred by the technologies that will shape the future, with dire economic and security consequences. A robust transatlantic tech partnership is imperative. The destiny of free and open societies depends on it.

 

Policymakers Rethink Energy, Aiming for Sustainability Amid Surging Demand

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Policymakers Rethink Energy, Aiming for Sustainability Amid Surging Demand

Ethiopia is on the verge of a major shift in its approach to energy management, signalling a much-needed adaptation to the evolving global and local energy environment.

Its leaders’ decision to revise the energy policy, a long-overdue move, is now seen as a critical step towards ensuring energy security and embracing sustainability. The strategic shift comes at a time when Ethiopia, like many countries around the globe, faces the daunting task of reconciling its growing energy demands with the imperative for environmental conservation and economic viability.

The evolution of domestic energy consumption patterns provides a compelling backdrop for the policy overhaul. In recent years, urban households have increasingly transitioned from kerosene to electricity for daily cooking needs, driven by the soaring costs of fossil fuels. While environmentally beneficial, the transition has placed an unprecedented strain on the country’s power infrastructure, revealing its unpreparedness for such a rapid increase in demand.

Nonetheless, rural and lower-income urban communities continue to rely on firewood, exacerbating deforestation issues and further stressing the energy system.

The federal government has introduced measures targeting energy consumption control. These include regulations on the energy efficiency of cooking appliances and a bold move to ban the import of fossil-fuel-powered vehicles in favour of electric ones. Such initiatives show the government’s commitment to reducing the country’s carbon footprint and transitioning to cleaner energy sources.

However, these measures also anticipate a notable surge in electricity demand, demanding robust upgrades to the existing power distribution networks, particularly in urban areas like Addis Abeba, to prevent frequent power outages.

The vision of energy efficiency should emerge as a central theme in the revised energy policy. The authorities should recognise that enhancing energy efficiency is not merely about responding to technical losses or curbing human-induced wastage; it is more about fundamentally rethinking how energy is consumed and managed across the board. From household appliances to large industrial boilers, the inefficiencies in energy use represent financial drains and a missed opportunity for conservation.

Addressing these inefficiencies requires a manifold approach. Establishing energy baselines and benchmarks should be a critical first step, allowing for a systematic assessment of energy consumption patterns across different sectors. The process should involve federal agencies as much as it does with industrial entities. Broad-based awareness and capacity building among facility managers and end-users would be no less critical. By understanding and monitoring their baseline energy consumption, policymakers can identify inefficiencies and implement corrective measures more effectively.

The policy should highlight the importance of energy baselining in facilitating future infrastructure design and guiding new investments in power generation. As policymakers encourage private sector participation in the energy sector, clarity on current and projected energy needs will be crucial for ensuring that new ventures contribute positively to the country’s energy landscape.

The policy should also acknowledge the critical role of energy efficiency in reinforcing other key pillars of the energy strategy, such as access, sustainability, and security. By prioritising efficiency, the country can better manage unexpected surges in demand, leveraging savings in one area to address shortfalls in another. There should also be a shift in perspective from cost control to a more holistic view of energy management, where every unit of saved energy enhances the system’s overall resilience and sustainability.

However, achieving this level of efficiency is not without its constraints.

The policy should point to the need for comprehensive assessments of energy use, particularly in sectors that may have been overlooked, such as small-scale industries. While individually, these businesses may consume low energy, collectively, they represent a considerable portion of the national energy footprint. The policy thus should call for these industries to adhere to international standards like ISO 50001, which emphasises continuous improvement in energy performance through systematic processes and documentation.

In addition to industrial efficiency, the revised energy policy should strongly emphasise developing and enforcing energy codes for residential and commercial buildings. These codes, must also be tailored to the local context and appliance usage patterns, ensure that new construction projects, whether public-led or private, incorporate energy-saving designs from the outset. Such proactive measures can lead to substantial savings in lighting, heating, and air conditioning costs, further contributing to the energy efficiency goals.

The revised energy policy must be a blueprint for transforming the energy sector. It should also recognise the intertwined challenges of meeting growing energy demands, ensuring environmental sustainability, and fostering economic development. By setting a clear path towards energy efficiency, the policy yet to be approved, must aspire to address the pressing issues of supply and demand. It can lay the groundwork for a more resilient and sustainable energy future.

However, the success of this endeavour will depend on the collective efforts of all stakeholders. Policymakers and industry leaders must share the commitment to energy efficiency and sustainability with individual consumers to achieve their vision of an energy-secure and environmentally responsible future.

Are Global Capital Rules Possible?

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The final proposals for bank capital rules were dubbed Basel 3.1, as if to suggest a minor tidying-up exercise – just a few grace notes added to a melody composed long ago. What’s in a name? But banks, concerned that the implications would be more severe, spoke of Basel 4, implying not grace notes, but a reworking of the entire composition, now in a primary key.

That name did not stick. Regulators insisted that it was not a new tune, and that anyone who could sing Basel 3 would have no trouble picking up Basel 3.1. But then, some anonymous practitioner in the American political dark arts came up with the term Basel Endgame, which seems to suggest that someone is about to die. On the eastern side of the Atlantic, the term recalls Samuel Beckett’s play, “Endgame”, about existential angst and the futility and meaninglessness of human life. Non-bankers might find that to be a good description of the debate over the proper size of big banks’ reserves, which has now been ongoing for many years.

Some countries, like Singapore and Australia, have stopped arguing and gotten on with it. The details are almost finalised in the European Union (EU) and the United Kingdom (UK). But, in the United States, the endgame is nowhere near the end – which may even be further away than ever, following US Federal Reserve Chair Jerome Powell’s recent intervention.

The short version of this tangled tale starts last summer when Fed Vice Chair for Supervision Michael Barr put forward some moderately tough proposals calling for sizeable increases in capital. US banks mounted a robust counteroffensive, and Powell said there must be “broad material changes” to proposals supported by most Federal Reserve Board members last year.

The politics have almost submerged the merits of the underlying argument.

Are some banks right to argue that the Fed’s proposals will put them at a competitive disadvantage internationally?

Comparing proposals across countries is very difficult. Barr’s plans, no doubt influenced by the spate of embarrassing US bank failures last year, did envisage a bigger increase in capital than was planned in the EU, but starting from a lower base. The UK, as ever, is somewhere in between.

Do all these different proposals comply with the original Basel agreement?

The Basel Committee will answer that question itself in due time, but it currently looks as though the UK will comply more or less, while the EU will not. Under Barr’s proposals, the US regime would probably have been compliant, and on the tougher side. Now, no one knows where it will land.

What we do know is that the constitutional arrangements that govern the setting of capital standards for banks are remarkably divergent in the three main Western jurisdictions. In the EU, the European Commission, a political body, holds the pen, because the stability of the single market requires that there not be significant divergences from place to place. If there were, all banks would be headquartered in the country with the weakest regime and would conduct all their European business there.

Thus, the EU Basel agreements are implemented through directives or regulations that carry the force of law throughout the bloc. Given the circumstances, it is not surprising that the outcome is a deal that may slightly undercut the original Basel agreement. Politicians, as usual, responded to special pleading. The Danish compromise, for example, includes a concession for banks that own insurance companies. It is an open secret that if the European Central Bank were fully in charge, the EU would comply with Basel, as the UK plans to be.

Since Brexit, the UK regulator has been alone in the driver’s seat. The government delegated the power to set capital rules to the Bank of England (BoE), and though it sometimes sounds as though ministers regret having done that, I doubt the regime will change at this point.

At first glance, the US regime might resemble the UK’s, since the Fed is in the driver’s seat. But, unlike the BoE’s board, the Fed’s board is politically balanced, with a majority reflecting the party in power. That is why Barr was able to propose his robust package of rules in the first place. But now, argues Peter Conti-Brown of the Brookings Institution, Powell is trying to protect the Fed, rather than the financial system, in the face of strong public criticism.

He “appears to prize Fed independence for monetary policy so dearly that he wants to avoid political fights about regulatory policy.”

That argument recalls Germany’s Bundesbank’s longstanding view that an independent central bank should not get into the dirty business of banking supervision. As Chancellor of the Exchequer, Gordon Brown acted on the same concern when he moved banking supervision to the Financial Services Authority (which I chaired) in 1997. However, George Osborne chose to reverse the move in 2013.

There are strongly held views on both sides of the debate about whether central banks should be responsible for banking supervision. But, the way the Basel Endgame plays out indicates that it will be difficult to deliver common global standards across different constitutional arrangements. In Beckett’s “Endgame”, the character, Clov, is pathetically desperate to create order out of chaos.

“I love order. It’s my dream,” he says. “I’m doing my best to create a little order.”

That could be the Basel Committee’s motto as it tries to sell its wares. But, like Clov, it may be facing insuperable odds..

 

This article is provided by Project Syndicate (PS).

Housing Control Law: Balancing Act or Quick Fix?

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Last week’s decision by lawmakers to regulate rental properties has sent shockwaves through the city. While many residents see it as a beacon of hope, others remain sceptical. Addis Abeba faces a severe housing crisis. The demand for affordable housing far exceeds the supply, forcing people into cramped, substandard dwellings or leaving them at the mercy of high rents for decent accommodation. This situation has widened the gap between rich and poor, exacerbating social inequalities.

Many residents pay exorbitant rents for one-room galvanised steel houses that lack basic amenities. Despite the excitement surrounding the new regulations, there is a sense of cautious optimism. Tenants fear landlords accustomed to exorbitant rents may find ways to circumvent the system. They point to past experiences where citing previous rent control laws offered no protection from eviction or rent hikes.

Even those living in high-end rentals remain apprehensive. They believe landlords will find ways to maintain their income, either through informal payments or circumventing the regulations entirely.

While rent control seems like a quick fix, it may indeed benefit tenants in the short term by offering stability, but it could also have unintended consequences. Landlords might resort to demanding informal “top-up” payments to compensate for reduced rental income. Meanwhile, desperate renters could be forced to pay above the regulated rate to secure a place to live.

The risk of reduced housing availability is another concern. Faced with lower returns, landlords might withdraw properties from the market, further constricting the already limited supply. I believe a more comprehensive approach is needed; a combination of policies, including increased investment in social housing projects.

Some view rent control as a temporary crisis response, while others argue it could be a long-term measure to prevent market excesses. However, potential economic drawbacks loom in the absence of addressing the root cause of the crisis. Examples like India illustrate the potential pitfalls of rent control. In some cases, it led to a decline in property quality as landlords opted to exit the market, leaving tenants in even worse conditions.

There is a consensus among housing scholars: rent control alone cannot solve the problem. It must be implemented alongside increased social housing initiatives and additional measures to address affordability. Economists with strong opposing views believe rent control deters investment in the rental market. Reduced returns could discourage new entrants and incentivise existing landlords to exit, ultimately decreasing the available housing stock.

Furthermore, limited rental income could discourage landlords from properly maintaining their properties. This could lead to a deterioration of existing housing, impacting the quality of life for tenants.

Looking beyond traditional methods, exploring affordable construction technologies could offer promising alternatives. Incentivising the private sector through tax breaks, subsidies, and land grants could encourage increased development of affordable housing projects. Public-private partnerships could also play a vital role in addressing the housing shortage.

Tax exemptions have proven successful in encouraging the development of affordable housing. This approach not only increased the supply of affordable units in countries like India but also benefited developers.

Residents’ concerns highlight the need to address potential loopholes in the rent control scheme. The government must consider inflation in property costs and explore additional solutions to ensure a balance between affordability for tenants and a fair return for landlords.

Ultimately, a sustainable and fair housing market requires a delicate balance. Rental prices need to cover landlords’ expenses while remaining accessible for tenants. Only then can Addis Abeba address its housing crisis and ensure a decent standard of living for its residents.

The Silent Money Drain

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Offering help without expecting something in return is a genuine act. However, while well-meaning, these kind souls can unintentionally lead the recipient down a path of financial trouble. My friend experienced this firsthand.

She relied on a trusted Bajaj driver for everything, from errands to picking up her niece from school. He went above and beyond, lending her money in a pinch, like the time he gave her 1,000 Br. Because of his generosity, my friend used his services regularly, planning to repay him at month’s end. The driver never pressured her, despite his financial limitations.

However, as days turned into weeks, my friend grew increasingly anxious. Finally, the bill arrived. The total amount was a staggering blow. It was mind-boggling that the combined cost of rides and groceries could balloon to several thousands of Birr – equivalent to her entire salary! Disbelief forced her to double-check, meticulously reviewing each expense with the driver. Yet, the sum remained a near-unbelievable 20,000 Br. Settling the debt took a significant amount of time, but more importantly, it taught her a valuable lesson.

She realised the importance of tracking all expenses, no matter how small. They can silently accumulate and become overwhelming. This revelation struck a chord with me too. I can be careless with spending, neglecting minor expenses that snowball into significant amounts. As the saying goes, a small pebble can tip a barrel.

In the fast-paced world, it is easy to lose track of spending. We tap our phones, and see receipts dwindle, but lack a clear picture of where the money goes. This lack of awareness blocks financial goals. That is where the humble expense journal comes in – a superhero for finances.

Diligently recording daily expenses reveals valuable insights into spending habits. This paves the way for a stable and secure financial future. It is astonishing how easily individuals overlook seemingly insignificant expenses that quietly drain their bank accounts. Whether it is daily coffees or impulsive purchases, they all add up. Holding oneself accountable and uncovering hidden money leaks is essential. Imagine the shock of realising that a seemingly harmless coffee indulgence amounts to a substantial sum over time. Keeping an expense journal cultivates mindfulness when it comes to budgeting.

Categorising expenses into groceries, rent, and clothes provides a crystal-clear understanding of where income goes. This breakdown allows us to compare spending against the budget, highlighting areas for adjustment.

Expense journals also develop financial responsibility. Recording every expense forces taking ownership of finances and compels us to confront spending head-on. It shifts the person from a passive spender to an active decision-maker. This newfound awareness empowers making conscious choices about allocating hard-earned money, leading to better financial outcomes.

These journals are not only about tracking money; they are allies in achieving financial goals. Monitoring monthly savings can be incredibly motivating. Seeing the numbers climb fuels a sense of accomplishment. Even in the face of setbacks, flipping through the journal serves as a powerful reminder of past successes which reignites commitment and propels forward.

OMNI OUTDOORS

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Various sports are played late afternoon at the Stadium near Mesqel Square. In a country where soccer reigns as the epicentre of most athletic energy, finding sporting avenues for team activities is often daunting. Urbanites  share small playgrounds scattered about the capital for a panoply of games. The wave of recreational parks built over the past years have become go-to hotspots for most looking for accommodating spaces. With nearly 70pc of the Ethiopian population aged below 29 years old and close to 27pc unemployed youth population, sport provides a constructive channel for outbursts of creative energy.

 

MINOR NUISANCES

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Urbanites patiently queue up for taxis around the Casanchis area drenched in heavy rainfall. Addis Abeba’s acute transportation ails have created a resolute populace capable of enduring the harshest of weather conditions and the most crowded accommodations for daily commutes. Hunted by double-digit food inflation rates and cornered by stagnant wages, the rainy days add to the residents’ woes with limited transportation. While taxi-hailing services have proliferated over the past few years, they are out of reach for city residents with a 26pc poverty rate. Mass exodus from regional states as the country hosts above three million internally displaced people has created a population boom desperately needing a census after 16 years.

CONCRETE CHIAROSCURO

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Arat Kilo area is poised for an aesthetic makeover as a massive corridor construction pulverises through what some consider urban landmarks, and others regard as antiquated vestiges of a bygone era. An interesting optical horizon emerges as the socialist Dergue regime’s former base of operations is razed, with the ruling party’s headquarters peeking from the backdrop. The area, which has served as a cultural epicentre and grounds for the palaces of successive rulers, will be adorned with amphitheatres, vast pedestrian sidewalks and bike lanes if the project goes according to the City Administration’s plan.

Deloitte Receives First Capital Market License

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Deloitte, the global consulting firm, receives the inaugural capital market service provider license. The commencement of license issuance was announced last month, making Deloitte’s entry into Ethiopia’s budding capital market a notable milestone, given its nearly two-century-old legacy

The event was held at the Ethiopian Capital Markets Authority’s headquarters on Africa Avenue (Bole Road). Brook Taye (PhD), director general of the Authority, looks forward to seeing the first investment bank, indicating that the licensing of Deloitte as an investment advisor will allow to expedite the development.

Ethiopia’s venture into capital markets has been in the making for nearly five years, initially established within the central bank before forming an independent regulatory authority. The recent approval of the capital market service providers directive marks a significant development in the sector.

The London-based consulting firm boasts revenues of 64 billion dollars last year. Tewodros Sisay, Deloitte Africa’s economic advisory leader, said the pioneering move demonstrates dedication to supporting clients in the region.

Authorties Pledge for Change as Climate Risks Surge

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A key theme for climate-informed investments in crucial sectors like construction, energy, water, transportation, and agriculture was discussed last week, at the Hyatt Regency. It brought together stakeholders from the Ethiopian Association for Civil Engineers (EACE) and the United Nations Office for Project Services (UNOPS) to address an issue centred on building a climate-resilient infrastructure.

The discussions revolved around how Ethiopia can adapt to and recover from climate-induced disruptions.

Seid Nuru, advisor to the Ethiopian Construction Works Corporation, said the previously overlooked economic impact of climate change, including frequent droughts and reduced rainfall, poses a threat to development. Private sector involvement in building and financing low-carbon infrastructure projects that can withstand climate challenges were raised while promoting renewable energy sources.

A recent World Bank report estimates that climate change could reduce Ethiopia’s GDP by 1-1.5pc annually. The report also suggests that Ethiopia requires over 27 billion dollars by 2050 to meet its climate resilience goals.

Anne-Claire Howard, procurement group director at UNOPS, toughed on green procurement policies that promote the efficient use of energy, materials, and natural resources, focusing on recyclable materials.