Year: 2015

The left-wing Syriza party, led by Alexis Tsipras, has won Greece’s second general election of 2015. It was a narrow win with a historically low turnout, thereby indicating the current disheartened sentiment of the Greek people.

According to Reuters, with 99.5 percent of the votes counted, Syriza had secured 35.5 percent, followed by right-wingers New Democracy with 28.1 percent of the vote. While the breakaway Popular Unity party, formed by dissidents of Syriza, failed to break the three percent vote minimum needed to enter parliament.

Tsipras had a difficult challenge to convince the public that he should be re-elected given his turbulent time in office
this year

The 49 percent abstention rate, which is the highest since the fall of the military dictatorship in 1974, certainly helped to secure Syriza’s clear win, yet was not enough to secure a single-party regime. As such, a coalition government is being formed with Syriza’s former coalition partners, the Independent Greeks party.

In Tsipras’ victory speech, he spoke of having a clear mandate to rid the government of corruption and to protect those most vulnerable in Greece today. His first task as re-elected Prime Minister will be to assure European lenders that enough steps are being taken to comply with the €86bn bailout deal agreed in August so as to assure the next payment in received. The deal is due to be reviewed in October.

Tsipras had a difficult challenge to convince the public that he should be re-elected given his turbulent time in office this year. When Syriza first came to power in January, the prime minister pledged to remove austerity measures – yet around seven months later, the incumbent government accepted a new bailout with terms that were even harsher than before. After accepting the overhaul of the country’s pension scheme and raising taxes, Tsipras then resigned from his post.

It is expected that Syriza’s re-election will lead to more stability in the government, particularly as hard-left members are no longer in the party. There is also less likelihood of public protests on the streets. Tsipras’ victory despite his broken promises enables Syriza to swiftly proceed with the austerity measures needed for Greece to comply with bailout agreements and find its way back towards the path to recovery. It will be a complex process that will take some time, yet the people have again spoken of their understanding of the steps needed for long awaited economic and political stability in Greece.

Following a meeting in Beijing between UK chancellor George Osborne and Ma Kai, the Chinese vice-premier, it has been agreed that the People’s Bank of China will issue short-term debt in London. The short-term bonds would be denominated in the RMB, in London – the first time such debt has been issued outside China. As of yet there are no plans for longer-term bond issuance.

Osborne has previously stated his intention of making the UK the chief offshore base for Chinese finance

“The People’s Bank of China will issue short term central bank renminbi bonds in London. This is the first time these bonds will have been issued outside greater China. This is a major step in developing this market infrastructure,” said the UK Chancellor.

Osborne has previously stated his intention of making the UK the chief offshore base for Chinese finance, proclaiming that the short-term debt issuance agreement would be “China’s bridge into western financial markets”. “I want the UK to be the natural Western hub for renminbi trading,” he also noted, saying that he believes the deal “cements London as the pre-eminent location for renminbi trading and Chinese investment in the West.”

In October 2014, the UK became the first western country to issue a sovereign bond in China’s currency. Being the world’s first non-Chinese issuance of sovereign RMB debt and worth £300m, it was used to finance Britain’s reserves.

The agreement was part of the UK-China Economic and Financial Dialogue, hosted in Beijing. In total 53 agreements were made between the two economies, including the announcement of a feasibility study to look into creating a direct “stock connect” link between the London Stock Exchange and financial markets in Shanghai. China has also pledged £2bn to the UK to underwrite the financing of the UK’s Hinkley Point nuclear power station, opening up the way for other Chinese-UK nuclear deals, such as the potential majority Chinese ownership of a nuclear power plant in Bradwell, Essex.

Europe’s infrastructure was once the envy of the world. For centuries, it has pioneered the construction of roads, railways, water works and energy provision. It exported many of the greatest engineers throughout the world. However, as is the case with many countries that once laid claim to dazzlingly advanced societies, they have struggled to keep up with the times; in many cases resting on their laurels and failing to invest while other regions built the latest and greatest new pieces of infrastructure.

With Europe’s economy crippled with debt and infrastructure across the region dating back decades, the ability to pay for a much-needed update has proven increasingly tricky for EU policymakers. Confidence in many European economies is at an all time low, with many investors reticent about putting their money into building major infrastructure projects while there remains a danger of default. At the same time, the EU’s labyrinthine regulatory framework means that getting big projects off the ground is even more difficult than elsewhere.

Falling figures
Infrastructure investment within the EU has fallen over the last few years, largely as a result of both the global financial crisis and the debt troubles experienced across the EU. In the eight years since its peak in 2007, infrastructure spending has reportedly fallen by €430bn, according to aviation industry group the Centre for Aviation (CAPA). In 2013, investment was 15 percent below the pre-crisis peak, while some EU member states were spending between 25 percent and 60 percent less than their previous levels.

Not to be outdone by other regions around the world, the EU has announced plans to set up its own infrastructure fund

However, the determination of the EU’s leaders to modernise the region’s infrastructure has resulted in a proposal that could help deliver the sort of investment it desperately needs. Not to be outdone by other regions around the world, the EU has announced plans to set up its own infrastructure fund that it hopes will attract vast swathes of investment from around the world.

Announcing the European Fund for Strategic Investments (EFSI), European Commission (EC) President Jean-Claude Junker set out plans for a fund worth €315bn over the course of the next three years that will help spur private sector investment in European infrastructure projects. Part of the so-called ‘Junker Plan’ to restore growth in the EU, the EFSI will be run by the European Investment Bank (EIB) and will hope to boost jobs and investment in the flagging European economy.

The fund will take a similar form to the newly formed Asian Infrastructure Investment Bank (AIIB), which the Chinese government has established as a rival to both the US dominated World Bank and the International Monetary Fund. By seeking investment from governments around the world, the idea is that global partners will have a stake in the development of Europe’s infrastructure.

Announcing the plan, Junker said the fund was necessary to help Europe’s economy to grow: “We need the plan right now because it is important to say that consolidating public finances is needed. But apart from that policy, we need structural funds to ensure that medium-term development of the European economy can rise.” EC Vice-President Werner Hoyer added, “We are having a paradigm change in the use of the EU budget because the EU shifts resources from grants to guarantees, from subsidies to loans and this is a great step.”

Leading development in infrastructure
China’s interest in Europe’s infrastructure comes at a time when its own AIIB has helped to spur development across Asia. The country is now set to play a leading role in the development of Europe’s infrastructure. In July it was reported that China’s Prime Minister, Li Keqiang, would pledge around €10bn to the fund at first, with potentially more coming if opportunities arose.

On a visit to Europe in June, Li Keqiang said that existing levels of trade flows between the EU and China had been not been “satisfactory”, and called for a treaty to be brought forward between the two regions. Such a treaty would help to make it easier for Chinese companies to buy into European industry. Speaking to the FT, Li Keqiang said, “The scale of two-way investment, a mere $20bn or less in 2014, is hardly satisfactory given the big size of the Chinese and EU economies and the huge volume of two-way trade. If a comprehensive, balanced and highly standard investment treaty could be reached early, it will bring opportunity for both sides to combine their respective strengths and form a new pattern of co-operation.”

Shortly after Li Keqiang’s trip to Europe, US think tank the Brookings Institution published a report explaining why China was looking towards Europe for investment opportunities. The authors of the report, Jonathan D Pollack and Philippe Le Corre, wrote that part of the reason for China’s interest in Europe was to remind other countries, and in particular the US, that it had other potential partners in global trade.

However, one of the primary reasons for China’s interest was the EFSI, which would complement its own infrastructure plans, namely the creation of a new ‘silk route’ that would restore China’s historically strong trading position. “China sees complementarity in its own grand infrastructure plan [‘One Belt, One Road’] to tie the future development of Central, South and Southeast Asia to increased Chinese trade and investment with Europe.”

They add that it makes sense for Europe’s individual member states to negotiate with China as a group, rather than alone, if they are to secure the best development for the entire region’s infrastructure.

“European leaders understand that dealing individually with a stronger China weakens the EU’s hand. By linking its new ‘silk road’ to Europe’s own plans for infrastructural development, China seeks to play an enhanced role in the global economy and increase its stake in the EU.”

Targeted projects
Many of the projects targeted by the EFSI will focus on infrastructure, education, research and development, and various forms of clean energy. Each of the projects that the scheme will target will receive 20 percent of funding from the fund. There will also be considerable investment in transport infrastructure, with roads and rail networks receiving funding for much needed upgrades. Europe’s many shipping ports are also likely to be clamouring for investment from the fund to ensure they can cope with the increasing demands of global trade.

A number of projects have already been given the green light by the EIB, which will now use the funds from the newly formed EFSI to realise them. These include a number of offshore wind, biomass and transmission energy projects in Denmark, various renewable energy projects and water treatment schemes in Spain, energy efficiency investments in French residential buildings, and the construction and refurbishment of three hospitals in Austria.

There is also going to be a concerted push to deliver high-speed and extensive broadband throughout member states, so that the EU is not left behind by the technological advancements being seen by the internet.

Europe’s digital infrastructure is seen as a vital cog in the future of the EU’s economy, and so a large part of investment will be targeted at expanding things like 4G networks, developing 5G networks, and building fibre optic broadband.

With the EFSI fully operational before the end of 2015, European leaders hope that a wave of investment will soon help get a number of infrastructure projects off the drawing board and built, creating thousands of jobs in the process. However, for the likes of China, the opportunity to buy into lucrative new industries across Europe, and connecting them to their own grand infrastructure schemes could be one not to be missed.

The US Federal Reserve has announced its much-anticipated decision to maintain interest rates at the current level of around zero percent. Fed Chair Janet Yellen retreated on the impending rise due to concerns regarding the global economy and China’s slowdown.

“We’ve long expected to see some slowing in Chinese growth over time as they rebalance their economy. There are no surprises there. The question is whether or not there will be a risk of a more abrupt slowdown than most analysts expect,” Yellen said at a press conference, according to the BBC.

Following the announcement, Yellen spoke of the possibility of increasing the interest rate in October instead

Although the US unemployment rate fell to 5 percent in August, the lowest level since 2008, the Fed is keen to see a further improvement to the labour market before raising interest rates. In addition, the target inflation rate of around 2 percent has not been achieved either – which places more pressure on the Fed to hold off on the increase.

Further domestic concerns include falling stock prices and the appreciation of the dollar – factors which could lead to slowing economic growth in the country, despite its positive performance over the past year.

Following the announcement, Yellen spoke of the possibility of increasing the interest rate in October instead. Despite general consensus in the Fed that the rise will take place before the end of the 2015, Reuters reported that four policymakers believe it will not happen until next year or beyond.

Both the World Bank and the IMF have called for the Fed to continue holding off due to the impact that the increase may have on emerging markets, particularly given this year’s global economic slowdown.

Despite covering just two percent of the globe’s surface, more than half of the world’s population now lives in cities, consuming approximately 75 percent of mankind’s resources. Given the rapid rate of urbanisation, economies must contend with a multitude of complex challenges as pressure mounts for cities to become sustainable, in all aspects related to the term. Those that don’t will bear increasingly harmful repercussions – economically, socially and politically. It’s not just a matter of greener practices; all factions of society stand to lose unless practical solutions to rapidly expanding populations are implemented.

As the world adjusts to the urban phenomenon of the 21st century – albeit it at a frustratingly slow pace – there are some cities that stand out in terms of their efforts to become sustainable. Singapore has made commendable strides to reduce congestion in urban dwellings; Munich is a pioneer in green energy, while Rio de Janeiro is taking steps to tackle its infamous favela crisis.

Yet, no city has got it completely right yet. There is no utopic centre that resolves the various, interlinked obstacles they face, from housing to quality of life and water scarcity – the list goes on. “Cities that are not sustainable begin to breed other problems – not just environmental ones”, said Gilberto Arias, Senior Advisor, participating at the UNFCCC in climate change and sustainable development.

Multifaceted challenges
Traffic jams are the mainstay of any metropolis – as all city dwellers know too well. Not only is road congestion detrimental to the environment, (according to the International Road Transport Union, traffic increases CO2 emissions by around 300 percent), it also holds significant economic and social implications. The inefficiency of a city’s road network can stunt both private and public sectors, wasting valuable time and money. Yet air pollution is not limited to vehicles – businesses, homes and public structures alike are guilty of harmful carbon emissions.

The consequences of climate change are already being witnessed globally, identifiable as unpredictable weather conditions that severely disrupt cities and their communities. City mayors and businesses are charged with the feat of promoting efficiency and implementing more effective monitoring systems, but these kind of changes do not happen overnight – they require governmental support for training, funding and most importantly, motivation.

As resources become more scarce and expensive, the issue of efficiency becomes increasingly vital in all aspects of city living and sustainable practices. At present, multiple cities around the world suffer from water shortages – from developing cities such as Sao Paolo, to wealthier counterparts, including Las Vegas and Tokyo. In June, San Diego’s Water Authority banned several activities and placed limits on irrigation with portable water – but a long-term solution requires far more than just temporary cutbacks.

Efforts to reduce consumption, such as partnerships with local businesses and campaigns to advise citizens, can effectively change social habits and perception. Educating a city’s populace holds the key to success as sustainability necessitates support and participation from all layers and sectors of society.

The European Commission’s SWITCH report argues that by introducing green areas and clean rivers to a city, a foundation is laid for the health and character of urban communities. This in turn further motivates initiatives and a desire for a city to become more sustainable. Green architecture, including construction with biomaterials, green rooftops and urban farming not only bring a natural element to the built environment that is aesthetically pleasing, they also penetrate the social consciousness of a city.

Finding some answers
The struggle of transportation within confined urban spaces has forced some city administrators to create innovative solutions. After a warning that congestion would cost Singapore over $2bn, the country’s Land Transport Authority (LTA) introduced the e-Symphony payment card in 2008, enabling citizens to pay for buses, the metro, road tolls and even consumer goods with a simple touch. The huge advantage of the system is that it enables Singapore’s Ministry of Transport to collect extensive data on a daily basis that can alter public transportation routes in order to ensure efficiency.

Improvements are made on a regular basis, such as a distance based fare structure that was introduced in 2010. “LTA is currently working on contactless payment modes that will allow devices with Near-Field Communication technology such as wristbands and mobile phones to be used at the fare card readers in the near-term”, an LTA spokesperson told World Finance. “We are also working towards an account-based payment system where commuters are identified upfront and the transaction will be processed and charged back-end, similar to post-paid mobile phone subscription schemes. By leveraging on innovative technologies, we hope to bring greater convenience to commuters through innovative fare payment systems.”

Yet the system is not without its flaws. There are many cities that would struggle to implement a payment card that so accurately tracks movements and payments, particularly as the threat of cyber security looms more so than ever. “The Singapore proposal is very good, but you have to be careful with what you’re asking people to do, because you’ll have a backlash in different areas. In other parts of the world, people are very nervous about the information they give out to people and the government, but Singapore has a much stronger government”, Arias argued.

Understanding the cultural and social nuances between cities is crucial in order to create unique, bespoke strategies that are effective to the area in question. This again highlights why careful planning is key to the process, so that all caveats of an initiative are examined and incorporated to achieve long-term success.

On the other hand, Bolivia has taken to the skies to solve the crippling traffic jams in La Paz. Over the last two years, the incumbent government has ploughed $234m into the construction of the world’s largest cable car system, and plans to invest a further $450m into a six-line expansion. As well as being the most cost-effective solution presented by the authorities, it has fewer maintenance costs than other systems – but naturally, it also has its own risks. “I think the example illustrates that not all solutions are appropriate to all cities and that the palette is wide open for city administrators to approach intelligent and resilient urban growth.

“The cable car concept was pioneered in Medellín, Colombia and has been a huge success, not only for urban transport, but also as a tourist attraction. These are now, I believe in existence or in planning in Lagos, Nigeria, Rio de Janeiro and other cities. The cost is less than an underground system – though there will be safety issues to consider, of course”, Arias told World Finance.

Survival of the fittest
Sustainability also extends to planning for potential catastrophes and natural disasters. As demonstrated by the typhoon paths that hit Vanuatu earlier this year, which Arias explains were equivalent to the size of the Gulf of Mexico, “It really doesn’t matter where you are – you don’t have to be at the eye of a storm to have a problem. And because we have cities that are more densely populated, more people get displaced, which means that resilience for cities is important not just for places that get hit by the storm, but because people at the storm area may come to your city for shelter.” The increasing incidence and size of natural disasters also highlights the danger of maintaining a centralised power generator system, and the need to implement a robust energy strategy.

Flooding is also affecting more areas than ever before and poses grave danger to densely populated areas. “Cities at risk of flooding as a result of climate change or due to their geographic location can learn from the strategies that the private sectors has helped deliver in places like Rotterdam, where severe floods in the middle of the 20th century were the catalyst for actions taken that have kept the city safe up until the present day”, said John Batten, Global Cities Director at Arcadis, a firm specialising in global natural and built asset design and consultancy.

Curitiba in Brazil is another well-documented example of a city that has successfully mitigated against the risk through an innovative approach to flood management that began in 1995 following floods that caused $40m in damages. The Integrated Urban Drainage Master Plan involved a strategic network of parks in urban areas to not only absorb precipitation runoff, but also to provide corridors for transport through the parks and add aesthetic value to the city. An early-earning system is also in place, which has been supported by a high level of public awareness and involvement.

A tactical approach
“Effective planning can help cities create a framework to become more sustainable by helping to set a clear long-term vision for what it wants to be done and setting a roadmap of how it can get there”, said Batten. “To do this, cities need to take a balanced view of their sustainability vision.” This entails a thorough understanding of various principles and cooperation among all stakeholders in order to provide lasting solutions that meet a city’s needs, while also making it a desirable place to live and work.

More involved growth management practices and a strategic approach is vital for cities to accommodate for their expanding communities, before costs and issues spiral out of control. “We need to figure out better ways to do management of these things because without organisation, planning will become very resource intensive. If you allow cities to sprawl without any real planning or logic to it, transportation from the edges to the centre will be very difficult and expensive – not only in terms of infrastructure, but also in terms of time and services, things like fire services, hospitals, policing, all becomes very difficult”, Arias told World Finance.

A deeply collaborative and strategic effort is therefore crucial in order to make cities smart. We are in the midst of the age of urbanisation – a first in history. As such, governments face issues that they have never before encountered, issues that could be their downfall unless addressed quickly and effectively. But being sustainable involves a complex web of policies, projects and stakeholders.

It is far more than just creating green urban spaces and cleaning rivers – it entails an integrated system that works harmoniously to maximise the potential of a city. And the approach itself is not as simple as a one size fits all proven method – herein lies the difficulty. “Each city has its own challenges, which means that the priorities differ from city to city. While Los Angeles has a need to improve its water supplies, New York is investing in better protection from future storms. Where London needs to replace its ageing infrastructure, Jeddah is building completely new. The challenge for any city is to balance the needs of its people, the planet and profit, so while all are important, some need more immediate attention based on the individual circumstance”, Batten explained.

Creating sustainable centres is not just the moral obligation of city administrators, it is absolutely necessary for survival – with a responsibility to all parties. Involving the private sector can fill the gap in terms of funding, for doing so is to their benefit as much as the populace.

And as technology improves and innovative solutions appear across the globe, more and more cities will be inspired to follow suit. The world is changing – socially, economically and environmentally – cities are therefore responsible for accommodating this new era, and there is certainly no more time or energy left to waste.