Vol. I No. 3 / July – Sept. 2009

Boosting infrastructure in and the Caribbean OFID supports in Saudi Arabia celebrates inauguration of leading research university hosts South-South Summit OFID Quarterly is published four times a year by the OPEC Fund for International Development (OFID).

OFID is the development finance agency established in January 1976 by the Member States of OPEC (the Organization of the Petroleum Exporting Countries) to promote South-South cooperation by extending development assistance to other, non-OPEC developing countries.

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PUBLISHERS

THE OPEC FUND FOR INTERNATIONAL DEVELOPMENT (OFID) Parkring 8, P.O. Box 995, A-1010 Vienna, Austria Tel: (+43-1) 515 64-0; Fax: (+43-1) 513 92-38 Email: [email protected] www.ofid.org

EDITOR Farouk U. Muhammed DEPUTY EDITOR Audrey Haylins

CONTRIBUTORS Reem Aljarbou, Sam Ifeagwu, Anna Ilaria-Mayrhofer, Fatimah Zwanikken

PHOTOGRAPHS Rana Wintersteiner (Unless otherwise credited) PRODUCTION Susanne Dillinger

DISTRIBUTION Hala Elsayed DESIGN etage.cc/krystian.bieniek PRINTED IN AUSTRIA Stiepan Druck GmbH COMMENT

Vol. I, No. 3, Emerging out of the crisis: OFID part of the solution 2 July – September 2009 COVER STORY

Foundations for development Building infrastructure in Latin America and the Caribbean 4

OUTREACH

Nigeria’s First Lady visits Austria Attends General Conference of IAEA and calls on OFID DG 10 Marcel Khalife thrills Vienna audience at Concert for Peace and Humanity 12 OFID supports Armenia’s economic development 14 Reading, ‘Riting and ‘Rithmetic Having fun with the three R’s in Côte d’Ivoire 17 OFID assists flood-damaged African countries 20 4 Second OFID scholarship recipient graduates 22 OFID Diary 23 Meetings attended by OFID 23 12 Loan signature photo gallery 24

DEVELOPMENT COOPERATION

African Economic Outlook 2009 highlights regional integration 26 World food markets fail the hungry poor 30 Second Global Review of Aid for Trade concludes in Geneva 32 Private capital inflows to the South dwindle 34

MEMBER STATES FOCUS

KAUST opens its doors with inauguration celebration 36 Gulf countries expect recovery from global financial crisis Saudi Arabia speaks of minor impact on its economy 38 UAE to host new Energy Agency 41 Africa and hold South-South Summit 43

PARTNERSHIPS

Linking the past, present and future OPEC releases annual publications 46 36 Cheese-making business flourishes in rural Armenia 52

Cover photo: James Brunker/Alamy SPOTLIGHT

Researchers develop new rice varieties to meet hike in demand 54 COMMENT

Emerging out of the crisis: OFID part of the solution

he world has endured its most tax- ment – particularly among women. In the poor ing crisis in modern times. It is now countries without social safety nets, up to 90 well established that the crisis million people were marginalized and pushed T started with strong financial charac- into extreme poverty, and the number of teristics and soon developed into an all-encom- chronically undernourished is now close to one passing predicament involving all the facets of billion. All of these do not augur well for the the real economy. From OFID’s perspective, an- UN Millennium Development Goals. other result of the crisis was arguably the dam- The credit crunch and the fall in coun- aging loss of trust in institutions that had tra- tries’ and governments’ revenues led in- ditionally assumed a determining role in the evitably to an erosion of financial reserves and management of the world economy. a deterioration of fiscal balances. As a result, A year has passed since international fi- the financial crisis created an extraordinarily nancial markets ran the risk of a complete large and urgent demand for external financ- meltdown and one major bank that was con- ing. The need for concessional development sidered “too big to fail” did exactly that; this financing remains particularly urgent in low- was the apparent beginning of a traumatic de- income countries (LICs) – the traditional focus bacle which is still lingering despite hesitant of OFID’s assistance – which have little room signs of recovery. The trauma led to a credit for financial manoeuvre. For these countries, crunch which started somewhat undetected in two dramatic shocks in rapid succession – the the advanced economies in 2007 and has rap- 2008 world food crisis and the global financial idly engulfed developing countries through crisis – put insurmountable pressure on fragile various channels. To complete the picture of balances of payments and government fi- the developing countries, to the credit crunch nances. one must add a sharp reversal of private capi- These are the times when International Fi- tal flows, marked declines in commodity nance Institutions (IFIs) must live up to their prices, export revenues, tourism income and particular mandates; hence the call of the G20 workers remittances. for an enhancement of the resources of IFIs so With such an onslaught of financial set- as to enable them to support appropriately backs, real economies could not go unscathed. economies grappling with financial problems, The slowdown led to a steep rise in unemploy- particularly those of developing countries.

2 OFID QUARTERLY VOL. I, NO. 3 COMMENT

Driven by a strong sense of soli- One lesson is sharing which encourage globally darity with the South, OFID re- active commercial banks to main- sponded swiftly to the demand of already looming tain their activities despite a per- its Partner Countries as well as to above all others: ceived deterioration in the balance the calls of the international com- sheets of their local counterparts. munity which realized that the the need for a fair Meanwhile, the alleviation of magnitude and depth of the crisis global economic energy poverty remains a chief con- called for joint forces and harmo- cern of OFID, in line with the com- governance in nized approaches. mitment made by Heads of State Responding to the resolve of which the poor and Government of OPEC Member its Partner Countries to maintain Countries in the November 2007 have a voice. their investments and ensure fu- Riyadh Declaration. Issued at the ture growth, OFID front-loaded its conclusion of the Third OPEC Sum- programmed operations in support of public mit, the Declaration identified the eradication economic and social infrastructure, thus pro- of energy poverty as the first and overriding jecting to raise its commitments in 2009 by global priority. Further weight was lent to this some 30 percent above their average level of goal by the pronouncement in June 2008 by the previous two years and continuing the King Abdullah Bin Abdulaziz Al Saud of Saudi trend in 2010. Arabia of an Energy for the Poor Initiative. This Noting the newly developed aversion by Initiative, in which OFID was urged to play a the commercial banks for supporting the Pri- leading role, aims at enhancing access to af- vate Sector in low-income countries, OFID has fordable modern energy services, particularly accelerated the deployment of its Private Sec- in the world’s poorest countries, in collabora- tor Facility with commitments in 2009 tion with all relevant stakeholders in develop- planned to be some 45 percent higher than the ment. Both the Group of Eight (G8) and the average of the previous two years. In so doing, Group of Twenty (G20) have lauded and OFID has re-emphasized support for micro- pledged their support to the Initiative. credit, whose role in poverty alleviation is well OFID realises that dealing with the effects acknowledged. of the financial crisis should also involve The credit crunch also affected trade fi- preparing the after-crisis. For OFID’s Partner nancing and OFID found there another area for countries lessons are yet to be fully drawn, but supporting the economies of its Partner Coun- the crisis – borne elsewhere – has demonstrated, tries. The newly created Trade Finance Facility once more, their vulnerability to external came into its own through lines of credit, direct shocks. OFID is also to draw lessons from the financing of pre- and post-shipments of goods experience, but one lesson is already looming as well as providing working capital for such above all the others: the need for a fair eco- sectors as agriculture and agri-business. Equally nomic system and a global economic gover- relevant are OFID’s growing programs of risk- nance in which the poor have a voice.

OFID QUARTERLY VOL. I, NO. 3 3 COVER STORY

4 PHOTO: SHUTTERSTOCK COVER STORY

Foundations for development Building infrastructure in Latin America and the Caribbean

by Audrey Haylins

In countries of Latin America and the Caribbean (LAC), dwindling investment in strategic infrastructure has created in recent years a yawning gap between that region and the more dynamic Asian economies. Today, as governments wake up to the urgency of becoming more competitive, the private sector is emerging as an important ally. Leading the way in this process is one of OFID’s newest partners, the Corporacion Interamericana para el Financiamiento de Infraestructura (CIFI), a specialist financial institution with a unique focus on the small- and medium-sized infrastructure sector.

OFID QUARTERLY VOL. I, NO. 3 5 As an important revenue earner in many countries of the LAC region, the tourism sector is a key focus for infrastructure development.

PHOTO: IVAN CHOLAKOV GOSTOCK-DOT-NET/SHUTTERSTOCK:

A dequate economic infrastructure is is hardly a success story, with 58 million essential for productivity, growth Latin Americans still lacking access to and competitiveness. By definition, it is potable water and a massive 137 million also one of the pillars of poverty reduc- people without adequate sanitation. tion. According to a report*, however, spending on infrastructure in Greater investment crucial the LAC region dipped to less than 2 per- The dismal performance of the LAC re- cent of Gross Domestic Product (GDP) in gion is largely the result of traumatic 2005, compared with the 3.7 percent al- macro-economic crises over the past located on average in the 1980s. decade or so that forced drastic cuts in public spending. It is a performance that While the coverage and quality of stands in stark contrast to the achieve- infrastructure has undoubtedly im- ments of the so-called East Asian Tiger proved, says the report, progress has been countries and China, which have all too modest, especially with regard to transportation and energy. Even the * Infrastructure in Latin America and the Caribbean: Recent Developments and Key Challenges, August water supply and sanitation sector, 2005 - the most current and definitive study on which has fared better in relative terms, the topic.

6 OFID QUARTERLY VOL. I, NO. 3 COVER STORY

forged ahead in productive infrastructure gion, therefore, is the development of to lead LAC by a factor of three to two. more stable economies, together with

The result, according to the report, is an stronger legal, regulatory and institu- PHOTO: CIFI upper middle-income region whose in- tional frameworks.” frastructure coverage has fallen below the Up until just a few years ago, in- middle-income average. vestors could not get enough of the LAC The report concludes that the LAC region. Between 1990 and 2003, it was the region must increase investment in in- beneficiary of half of the US$786 billion frastructure development to 4 – 6 per- in infrastructure projects with private cent of GDP annually over the next 20 participation in the developing countries. years in order to match the level of cov- Despite some spectacular results, how- erage of countries like Korea and China ever, there was also a down side. On the and increase LAC’s competitiveness in one hand, the private flows were never world markets. Significantly, the report enough to offset the massive collapse in stresses the equal importance of the pri- public investment and, on the other vate sector as well as governments in hand, private interest was focused on moving forward. just a handful of countries. In addition, there were issues of immature gover- Roldan Trujillo, General Manager, CIFI An enabling environment nance and controls, together with a While desirable, however, the involve- growing public disenchantment with eral Manager, Roldan Trujillo, is no coin- ment of the private sector is not some- privatization. By 2003, the level of pri- cidence: “With most international banks thing that can be taken for granted, vate participation had plunged to just lending only for large-scale projects, we warns Juan Jose Juste, Chairman and US$16 billion from a peak of US$71 billion identified a niche in the region for a spe- Chief Executive Officer of CIFI: in 1998. cialist financial institution that could arrange funding for smaller and medium- “Potential investors need to be con- CIFI: clear-cut goals scale infrastructure projects,” he ex- vinced that LAC countries offer an envi- For CIFI, which was established in 2001, plains. “As well as direct lending, CIFI ronment they can rely on,” he says. “One the objectives have always been obvious: sees itself as playing the role of ‘arranger’ of the biggest challenges facing the re- “As an institution with local expertise - evaluating the bankability of potential and an intimate knowledge of the re- transactions and making them viable for gional macroeconomic, political and reg- foreign investors.” PHOTO: CIFI ulatory environment, we see our main task as providing a friendly hand to in- Diversification, perfect vestors both from within the region and track record from elsewhere like Europe,” says Juste. Since starting business eight years ago, With a shareholder group that includes CIFI has spread its operations to 17 differ- Caja Madrid, the fourth largest financial ent countries. It has also built up a widely institution in Spain, together with a diversified portfolio covering a large clutch of other top-tier commercial range of infrastructure sub-sectors, from banks and investment funds from Europe energy and transportation to telecom- and Latin America, as well as four impor- munications, mining, real estate, water tant multilateral institutions, CIFI is ide- and sanitation, to name just a few. ally positioned to broker deals between According to Trujillo, this spread is the two regions. primarily determined by market de- CIFI has chosen to focus exclusively mand, rather than by CIFI prioritizing on the modest end of the infrastructure certain types of projects. “A lot depends Juan Jose Juste, Chairman and CEO, CIFI spectrum. This, according to CIFI Gen- on the needs of any given country at

OFID QUARTERLY VOL. I, NO. 3 7 COVER STORY

Case study

Ferrovias Central Andina S.A. Ferrocarril Central Andino S.A. In 1999, Ferrovias was awarded the concession to rehabilitate, maintain and manage the Peruvian Central Railway, the second highest railway in the world. It connects the port of Callao, near the capital city of Lima, with Huancayo in the Central Highlands and Cerro de Pasco, an important mining center. The railway, which climbs to a height of over 4,781 meters, is predominantly a freight transporter but also offers limited passenger services. The main business of the Central Railway is the transport of mineral concentrates, metals and other mine products from the highlands to the port of Callao, as well as the transport of supplies and equipment to the mining companies. In 2004, CIFI was hired as financial advisor and arranger by Ferrovias to structure a US$14 million long-term debt financing to expand its rolling stock investment and refinance short-term and medium-term debt. CIFI successfully structured and syndicated the financing package with the participation of DEG (Deutsche Investitions- und Entwicklungs- gesellschaft). The project was one of the first public-private initiatives by the Peruvian Government and has proven to be a successful demonstration of the concession process in Peru. Source: CIFI

any given time,” he says. “For some- brings together the minds of the whole the beginning. “Ideally, we like to see the where like the Dominican Republic team. Our internal mechanisms for transaction through from start to finish,” where tourism is important, for example, launching the transactions, signing the says Juste. “This means taking a lead role the focus might be on hotels or the con- transactions and then controlling the in the structuring and the financing as struction of toll roads. In Guatemala and transactions are therefore completely well as in the distribution of the transac- Honduras, on the other hand, we have thorough.” tion to other banks.” seen a lot of demand for power supply Clients and partners In arranging deals, CIFI is highly schemes.” conscious of the need to partner with, CIFI’s clients are characteristically corpo- and tap into the expertise of, other organ- It is this diversified base that has led, rations that have either won a govern- izations. Explains Juste: “Latin America is at least in part, Trujillo believes, to CIFI’s ment concession as part of an industry quite remarkable record of zero defaults, privatization process, or secured a gov- much more than just a continent. Each something rarely seen in the world of fi- ernment contract for a joint public/pri- country has its own peculiarities, and just nance. “We have stringent guidelines in vate undertaking. This, according to Tru- because we are there and know how to do place to give us a good risk balance in our jillo, is typical for the region, where vir- the deals, does not mean that we are an portfolio,” he says. “This means we are tually all infrastructure transactions are institution that can do things on its own. never over-exposed, either in a particular built on some degree of public/private Collaboration and partnership are the country or a particular sector.” participation. keys to our success.” In addition, the company has put in Deals come to CIFI in a number of Alongside Caja Madrid, which is the place a meticulous and highly effective ways: directly from investors that the majority partner, multilateral financial credit approval process, which Trujillo is company has a standing relationship institutions feature strongly in CIFI’s convinced minimizes the possibility of with, through multilateral organizations, shareholder group. Among them are the failure. “We have the benefit of working or through CIFI’s marketing program. Central American Bank for Economic In- in a small team,” he says. “So the peer re- Whatever the source of the deal, how- tegration (CABEI), the Inter-American In- view process is very open and critical and ever, CIFI likes to be involved right from vestment Corporation, the Caribbean

8 OFID QUARTERLY VOL. I, NO. 3 COVER STORY

Development Bank, and the group’s most terms of assets and liabilities. “We want recent member, the International Fi- to expand the type of products we offer nance Corporation (IFC). customers and, at the same time, widen “We were delighted when IFC came the nature and source of our own fund- on board last year as our number two ing,” he says. “Our ultimate goal is to shareholder,” says Juste. “The Corpora- have a balance sheet that matches our tion has brought a lot of ideas and expert- enormous strategic value and to achieve ise to the table and, being a part of the an official credit rating.” World Bank Group, carries a lot of weight CIFI’s collaboration with OFID has in terms of prestige. Our shareholders commenced with a US$15 million line of now include four of the five multilaterals credit for on-lending to the private sector most active in the LAC region. This is in a group of prioritized, lower-income something we are very proud of.” LAC countries. Both Trujillo and Juste are Looking to the future, one of CIFI’s hopeful that this initial investment is the main objectives is to expand the struc- beginning of a more strategic partner- turing and advisory side of its opera- ship. Says Trujillo: “We would like OFID tions so that it is not purely a lender. to consider CIFI as more than simply a Juste reveals that CIFI has set a number borrower. We see both organizations as of strategic objectives to be reached by being quite complementary in the LAC the end of 2012, the most important environment and believe that the possi- being greater diversification, both in bilities for cooperation are very good.”

Case study Belize

Belcogen Belcogen (Belize Co-generation Energy Limited) is a green- field project that involves the development, construction and operation of a 32.5 MW capacity, co-generation power plant located adjacent to the Belize Sugar Industries Limited (BSI) sugar factory in Tower Hill, Belize. The 27.5 MW biomass facility will burn sugar cane fibre (bagasse) as its primary fuel during the in-crop period (December – July), and will be supplemented with two diesel engines (5 MW) during the out-of-crop period (August – November). Belcogen will generate baseload electricity of 13.5 MW to supply the national grid (Belize Electricity Limited, the privately owned electrical utility in Belize) under a signed Power Purchase Agreement (PPA), and also to supply BSI with its electrical power (9MW) and steam requirements. Belcogen’s total investment cost is US$46.5 million, of which US$30.25 million is being financed with debt. CIFI acted as financial advisor and lead arranger for the long-term financing of the project, raising the required US$30.25 million from FMO of the Netherlands, the Inter-American Investment Corporation, the Caribbean Development Bank and CIFI. Source: CIFI

OFID QUARTERLY VOL. I, NO. 3 9 OUTREACH

Nigeria’s First Lady visits Austria Attends General Conference of IAEA and calls on OFID DG

by Sam Ifeagwu t was the Nigerian First Lady’s first I official visit to Austria where she Nigeria was, in September, represented at the also met with high-level Austrian Gov- 53rd General Conference of the International Atomic ernment officials and the heads of vari- ous international institutions based in Energy Agency (IAEA) by HE the First Lady, Austria, including OFID. At OFID, she held talks with Direc- Hajiya Turai Umaru Yar’Adua, wife of Nigerian tor-General Mr. Suleiman J. Al-Herbish and met, at her own request, with Nige- President Alhaji Umaru Musa Yar’Adua. rians working at OFID. The First Lady was The Conference adopted resolutions on several accompanied by a large high-level dele- gation which also included Nigeria’s Am- items including the Agency’s Program and bassador to Austria and the United Na- tions agencies in Austria. Budget for 2010-2011; measures to strengthen Exchanging views with Mr. Al-Her- bish, Hajiya Turai, as she is affectionately international cooperation in nuclear, radiation, known among Nigerians, explained her transportation and waste safety; nuclear security engagement with humanitarian causes, especially in the areas of [the battles measures to protect against nuclear terrorism; against] cancer and HIV/AIDS. Mr. Al- Herbish informed the First Lady about and strengthening of the Agency’s technical OFID’s continuing contributions to the global campaign against HIV/AIDS, cooperation activities. touching on the institution’s Special Grant Account for HIV/AIDS operations. Mr. Al-Herbish took the opportunity to explain to the Nigerian First Lady and her entourage the aims, record and continu- ing operations of OFID. He specifically mentioned OFID grants toward poverty alleviation and to poorer countries that are not OPEC Member States.

10 OFID QUARTERLY VOL. I, NO. 3 OUTREACH PHOTO: AGNES NEBEHAY

Nigeria’s First Lady, HE Hajiya Turai Umaru Yar’Adua, with OFID Director-General, Suleiman J. Al-Herbish

Hajiya Turai told Mr. Al-Herbish that can- to do the very best one could to uphold Secondary School, Kankiya, and subse- cer kills more Nigerians than HIV/AIDS the mandate of the institution and en- quently attended the Katsina College of and malaria. She blamed the situation on sure that the image of the country (Nige- Arts, Science and Technology. She a lack of necessary equipment and facili- ria) was held in high esteem by col- taught for a while and then went on to ties for diagnosis, physiotherapy and pal- leagues. She was welcomed by Mallam Nigeria’s prestigious Ahmadu Bello Uni- liative treatment of the disease in the Farouk U. Muhammed, on behalf of the versity, where she obtained a Bachelor country. She told the Director-General Nigerian staff at OFID. of Arts degree (Education and Lan- that, as a result of the growing number of Hajiya Turai is a philanthropist and guages) in 1983. cancer patients in Nigeria and other humanitarian; which partly explains her In her primary engagement at the African countries, her non-governmental interest in OFID and the work of OFID to IAEA, Hajiya Turai spoke of Nigeria’s organization, Women and Youth Empower- lift people out of poverty. The First Lady ability to deliver electricity to its citizens ment Foundation (WAYEF), decided to es- has worked tirelessly to be of genuine as- by exploring the country’s atomic en- tablish an International Cancer Centre in sistance to people in great need across ergy potential. She met with incumbent Abuja (ICCA), in collaboration with the Africa and elsewhere, often devoting her IAEA Director General, Dr. Muhammed MD Anderson Cancer Center of Houston, own personal resources to paying health el-Baradei; IAEA Director General-desig- Texas, USA. The First Lady disclosed that and education bills for people in need in nate, Mr. Yukiya Amano; the Director the Abuja centre, when fully operational, the whole of Africa. She is committed to General of the UN Office in Vienna would provide cancer treatment and serv- issues of peace, good governance and ex- (UNOV), Mr. Antonio da Costa; and the ices to Nigeria and 13 other West African emplary leadership as well as advance- Director General of the United Nations countries, before expanding its services to ment in the cause of the less privileged. Industrial Development Organisation the entire African continent. The center Hajiya Turai has received numerous (UNIDO), HE Dr. Kandeh Yumkella. would be the first of its kind and, indeed, honors and decorations for her humani- With senior IAEA staff, she discussed the the best in West Africa and would serve as tarian work. She has tried to ease the pain Agency’s Program of Action Against the flagship of healthcare delivery in of various children born with some forms Cancer Therapy (PACT) on behalf of her Nigeria and other countries. of deformity. The same applies to the Cancer Center in Abuja. She also inaugu- The cancer center project would cost clinical bills of many underprivileged pa- rated a new website of the Nigerian Em- 10 billion Naira (about US$100 million), tients. Similarly, she has provided schol- bassy in Vienna, before meeting with the with 50 percent of the funds already arships to students and given hundreds Austrian Chapter of the Nigerians in Di- raised. The project would require a of tricycles and other working materials aspora Organization (NIDO). Hajiya matching 50 percent funding to fully to the disabled. Turai equally held private meetings with take off. Born in Katsina, Nigeria, July, 1957, the First Ladies of Austria and Slovakia to At the meeting with OFID’s Nigerian Hajiya Turai was a gifted child. She grad- promote mutual relations between Nige- staff, the First Lady spoke about the need uated from Nigeria’s Government Girls ria and the two countries.

OFID QUARTERLY VOL. I, NO. 3 11 OUTREACH

Marcel Khalife thrills Vienna audience at In late June, Marcel Khalife, the world- Concert for Peace renowned Lebanese musician and com- and Humanity poser, accompanied by Agnes Nebehay by the Al-Mayadine he Concert for Peace and Humanity Another highlight of the memorable T was a fundraising event organized occasion was the announcement by Mr. Ensemble, gave a by the Society for Austro-Arab Relations Al-Herbish that OFID had approved a thrilling three-hour (SAAR). The venue was filled with over US$1.2 million grant in support of a new 900 people of all ages and cultures, who Scholarship Fund for Talented Palestini- concert at the Arcade were treated to a spectacular performance ans. The funds will provide higher edu- of traditional Arabic music spiced with cation opportunities to Palestinian stu- Court of Vienna’s City jazz and classical influences. At several dents from the West Bank and Gaza Strip points, many members of the audience as well as refugee camps in neighboring Hall. The Concert, of joyfully chorused some well-known Mar- countries. In her response, Ms. AbuZayd which OFID was the cel Khalife songs. thanked OFID for its “generous and un- The concert was held under the wavering support” to the Palestinian major sponsor, was joint patronage of Austrian Federal Pres- people. She noted that education is ident, Dr. Heinz Fischer and UN Secre- UNRWA’s main area of focus and em- part of several events tary-General, HE Ban Ki-moon, who ad- phasized that it is the most important dressed the audience through a video factor in the development of a stable fu- around the world to link, in which he spoke of the plight of ture for virtually any society. commemorate the the Palestinian refugees and UNRWA’s Meanwhile, at a separate signature role in assisting them. Mr. Ban Ki-moon ceremony July 1, 2009, Mr. Al-Herbish th 60 anniversary of the also paid tribute to Marcel Khalife for announced an additional US$3 million using his musical gifts to cross the pledge to the OFID Micro Enterprises for United Nations Relief boundaries of faith, race and social class. Palestine (PalFund), which is adminis- “They remind us of our shared human- tered by UNWRA on OFID’s behalf. Co- and Works Agency for ity as well as our shared responsibility to operation between OFID and UNRWA Palestine Refugees in build a better world,” the UN Secretary- extends back over many years and is set General said. The Concert was also sup- to be strengthened well into the future. the Near East (UNRWA). ported by a high-level honorary commit- OFID’s longstanding support to the tee consisting of Austrian Federal Chan- Palestinian people has intensified since cellor HE Werner Faymann; Foreign November 2002, when a dedicated win- Minister, HE Dr. Michael Spindelegger; dow was set up specifically to channel and Mayor of Vienna, HE Dr. Michael funds to the Occupied Territories as well Häupl. Others were EU Commissioner, as to Palestinian refugees in neighboring HE Dr. Benita Ferrero-Waldner; UNRWA countries. Initially endowed with US$10 Commissioner-General HE Karen Koning million, the Special Grant Account for Pales- AbuZayd; and OFID Director-General tine has been replenished several times Mr. Suleiman J. Al-Herbish. and now stands at US$90 million.

12 OFID QUARTERLY VOL. I, NO. 3 Lebanese musician and composer, Marcel Khalife, gave an enthralling performance in a special fundraising event for Palestinian refugees.

Mr. Fritz Edlinger, Secretary-General of the Society for Austro-Arab Relations (center) and HE Karen Koning AbuZayd, UNRWA Commissioner- General (right) applaud the announcement by OFID Director-General Mr. Al-Herbish (left) of a US$1.2 million contribution to the Scholarship Fund for Talented Palestinians. OUTREACH

OFID supports Armenia’s economic development

by Farouk U. Muhammed and Turki Al-Muaikil

In pursuing its mandate, OFID believes strongly in the importance of visiting and PHOTO: PRESS OFFICE OF THE PRESIDENT ARMENIA engaging in direct dialogue with its partner countries. Such missions are an opportu- nity to review sponsored In recognition of the cooperation between OFID and Armenia, projects on the ground and glean a better under- President Serzh Sargsyan presented Director-General standing of an individual country’s needs and Al-Herbish with the prestigious Anania Shirakatsi medal. priorities. In mid-July, OFID Director-General, Mr. Suleiman J. Al-Herbish, led a top-level delegation to Armenia, where successful discussions with the country’s leadership focused on ongoing OFID projects, future cooperation and the strengthening of existing ties between the country and the institution.

14 OFID QUARTERLY VOL. I, NO. 3 OUTREACH

ne of the highlights of the visit O was an audience with Armenian Armenia fact file President, Mr. Serzh Sargsyan, who ex- pressed profound appreciation to the

Director-General for OFID’s coopera- GEORGIA tion, flexible procedures and strong practical support. He was particularly LORI AZERBAIJAN SHAMLWUGH grateful for OFID’s co-financing of the AARMENIARMENIA Natural Gas Connectivity Networks YEREVAN TASHIRT

Project that will supply 32 rural commu- TURKEY Akori nities with natural gas. AZERBAIJAN ALAVERDI In recognition of OFID’s coopera- (NAKHC HIVAN) tion, President Sargstyan presented Mr. IRAN Al-Herbish with the prestigious Anania TUMANIAN Shirakatsi medal, which is awarded in STEPANAVANST LORI (planned) recognition of notable activities in the (planned) fields of economics, engineering, sci- Yeghegnut Saralanj ence and technology as well as signifi- Lusaghbyur Ghaltakhchi cant inventions and discoveries. The Shenavan Nor Khachakap President reiterated his country’s “satis- Geghasar Pambak faction with the projects that have been Arjahovit implemented by OFID in Armenia” over the years. Such projects, he added, had “contributed immensely to rural devel- opment and poverty reduction.” In his response, Mr. Al-Herbish said To w ns connected to gas pipeline that he was deeply honored to receive Planned connections the “splendid decoration” on behalf of the entire OFID family, noting that it symbolized “the strong and fruitful co- Armenia is a landlocked country, bordered on the north by Georgia, on operation between OFID and Armenia.” the east by Azerbaijan, on the South by Iran and on the west by Turkey. Mr. Al-Herbish stressed that OFID’s sup- Occupying an area of 29,743 km², the country has a population of three million port to financial and other institutions (UN 2008). The capital is Yerevan and the spoken languages are Armenian and in Armenia is in tune with the institu- Russian. The country has a GNI per capita of US$2,640 (World Bank, 2007); tion’s mandate and overall development and its main exports are: processed and unprocessed diamonds, machinery, strategy. In particular, he mentioned metal products and foodstuffs. In the northern Lori region, the OFID-spon- OFID’s support to Small and Medium sored gas distribution scheme has connected 23 towns to the natural gas Enterprises (SMEs) in the country, network. Two more towns will be added shortly. Source: FMAP “which is channelled through Byblos Bank Armenia and Inecobank.” The OFID delegation was also re- The Prime Minster expressed his pleas- the global financial crisis, and stressed ceived by Armenia’s Prime Minister Mr. ure at the OFID delegation’s visit and that in spite of such difficulties, Arme- Tigran Sargsyan; the Vice Prime Minis- called for closer cooperation in terms of nia was looking to “speed-up the process ter/Minister of Territorial Administra- the need to increase investment by way of reforms which could enhance the ef- tion, HE Mr. Armen Gevorgyan; as well of additional lending to SMEs for infra- fectiveness of joint action with interna- as the Minister of Agriculture, HE Mr. structure-related projects, including the tional partners” such as OFID. Gerasim Alaverdyan; among other rank- building of roads and power systems, ir- Responding, the Director-General ing officials. In attendance at discus- rigation modernization, and the instal- highlighted OFID’s ethos of always sions that followed was the Coordinator lation of gas facilities, particularly in the accommodating the expressed needs of of IFAD’s Armenia Program, Mr. Hen- rural areas of the country. He referred to the countries it works with. OFID, he ning Pedersen. the economic downturn triggered by stressed, never dictates areas of focus to

OFID QUARTERLY VOL. I, NO. 3 15 OUTREACH

its partners. Accordingly, Mr. Al-Herbish Addressing the local community and of- dent, Prime Minister, Vice Prime Minis- thanked the Prime Minister for the warm ficials, Mr. Al-Herbish expressed pleas- ter, Minister of Energy and others “for reception and said he had noted the gov- ure that he could help inaugurate “one having the foresight to enable the proj- ernment’s commendable plans for its of the most important programs for the ect to be realized,” and assured of people. He assured that OFID would con- people of Armenia.” He noted that the “OFID’s continuous support for the full tinue to “provide support to Armenia in project would convey piped natural gas development of essential socio-eco- areas accorded high priority by the gov- to individual households thus alleviat- nomic services to Armenia, particularly ernment.” Mr. Al-Herbish referred to ing difficulties encountered by the pop- its rural communities.” OFID’s earlier loans that had helped pro- ulation in accessing continuous and af- At the end of the three-day mis- mote rural development in the country. fordable energy for cooking and heating. sion, Mr. Al-Herbish and his delegation These, he said, reflected OFID’s cardinal He said the project would eliminate the left Armenia with pleasant memories of mandate to offer as much financial sup- use of less efficient and more costly types a country that remains focused on de- port – as possible within it means – to the of domestic fuels, thereby contributing veloping it economy as quickly as pos- poorest segments of society within a part- to the protection of forests in particular sible, with particular emphasis on em- ner country (see case study, page 52). and the environment in general. The Di- powering the rural population. Also during the mission, the OFID rector-General stressed that “the focus Other members of the OFID delega- delegation attended the inauguration of on energy is in line with the guidance tion were: Mr. Said Aissi, Assistant Direc- one of the gas distribution schemes that given by the Heads of State of OPEC tor-General, Operations; Mr. Imhemed forms part of the Gas Connectivity Net- Member Countries as stipulated in the Bukader, Director, Asia and Middle East works Project. Located in the rural Lori 2007 Riyadh Declaration, which priori- Region; Mr. Turki Al-Muaikil, Senior region, the scheme involves 80 km of tized the eradication of energy poverty Operations Officer; and Ms. Monique medium pressure pipeline and a 160 km- in developing countries.” In conclusion, Kouyoumdjian, Office of the Director- long gas distribution network. Mr. Al-Herbish commended the Presi- General.

OFID in Armenia

To date, OFID has provided Armenia with millions of dollars in soft loans mostly for public sector projects in the areas PHOTO: MINISTRY OF AGRICULTURE of agriculture, agro-industry, transportation and energy, as well as projects of a multi- sectoral nature. OFID’s main co-financing partner in Armenia is IFAD (the International Fund for Agricultural Development). Following signature of an Agree- ment for the Encouragement and Protection of Investment (AEPI) in February 2005, OFID has also been channelling sup- port to Armenia’s private sector to help make more funding avail- able to small and medium-size enterprises (SMEs). In the Lori region, townspeople turned out in force to welcome the OFID delegation and celebrate the inauguration of the new gas pipeline. Pictured center are Imhemed Bukader, Director, Asia and Middle East Region and Monique Kouyoumdjian, Office of the Director-General.

16 OFID QUARTERLY VOL. I, NO. 3 OUTREACH

Reading, ’Riting and ’Rithmetic Having fun with the three R’s in Côte d’Ivoire

Twelve-year-old Atsin Ado Romain loves his new school almost as much as he loves playing football. He has his own desk and chair. The classroom is bright and airy. His teacher is fun. And, best of all, there is plenty of space outside for a kick-about with his friends during break.

PHOTOS: MONA ALESSA

A tsin is one of thousands of children At the heart of government policy is the Until the new premises opened, all of in West Africa’s Côte d’Ivoire, who need to build enough schools – especially Ebimpe’s children were crammed into a are today learning the three R’s in an at elementary level – for the country’s pre- very old, rundown building that lacked OFID-sponsored elementary school. dominantly younger population, and lo- even the most basic furniture and facili- Over the past few years, OFID has helped cate them so that all children have access ties. For the lucky 240 or so that have se- build dozens of these schools across the to a “local” school within a reasonable dis- cured a place in the OFID school, life country, most of them in underserved, tance of home. Other priorities include toi- couldn’t be more different. Although still rural areas. The new facilities are modern let facilities, on-site canteens and smaller quite basic, the six roomy classrooms – and spacious, and for the pupils and class sizes, together with more and better- for grades one through six – are designed teachers alike, a world away from the qualified teachers. Efforts are also ongoing to hold no more than 40 students at a cramped, dilapidated classrooms they’ve to encourage more girls to enter and re- time, instead of the usual 70. There are been used to. main in the education system. colorful posters on the walls, desks and For a country that still bears the scars Atsin’s school in the village of chairs for each child, and even a black- of a bitter civil war, Côte d’Ivoire has Ebimpe meets most, if not all, of these re- board in each classroom! much to be proud of when it comes to the quirements. Located some 35 km north “The children are clearly delighted education of its children. Since launching of the capital Abidjan, the village is home with their new school,” reports Mona a national plan for development of the ed- to around 1,500 people, most of whom Alessa, OFID Country Officer for Côte ucation system 12 years ago, the country earn a living from agriculture, growing d’Ivoire, who recently returned from a has steadily increased enrolments and re- mainly cassava, yams and coffee. Al- brief visit to Ebimpe. Despite it being the duced absenteeism and drop-out rates, all though they are not desperately poor, it summer break, the young students and of which has been achieved in spite of po- is nevertheless a hard life for the over- their teachers turned out in large num- litical and fiscal difficulties. whelming majority of families. bers, together with the village elders, to

OFID QUARTERLY VOL. I, NO. 3 17 Atsin and his classmates are enjoying lessons in their new school, which is just one of many built with OFID support.

18 OFID QUARTERLY VOL. I, NO. 3 OUTREACH

say thank you to OFID for its help. there is less noise, fewer distractions, and the pass mark of 85 set by the state. He is Mona came away with some lasting im- each student can enjoy more personal at- now keeping his fingers crossed that a pressions of the community and its chil- tention from the teacher. place can be found for him in the over- dren: “Like almost all Ivorian youngsters, And the impact is already being felt. subscribed grade 7 class of the nearby sec- the children of Ebimpe are thirsty for Teachers report that attendance and per- ondary school. knowledge. They understand that educa- formance levels are up and that the chil- Atsin’s favourite subject is history tion is a way out of poverty to a better fu- dren are better behaved and more atten- and he would dearly love to continue ture, and they are very motivated to at- tive. Word travels fast in a small village, through high school and maybe even go tend school,” she says. “This is true, even so places at the school have become on to college. His first love, however, will for those students who haven’t been able highly coveted and there is a long wait- always be football, and it is his greatest to get into the new school. You can see ing list to get in. wish when he grows up to become an in- that they are dedicated to learning at all Atsin Ado Romain is one of the ternational star like his idol and national costs, regardless of the hardships they lucky ones. More than that, he is a shin- hero, the Ivorian footballer Didier have to endure to do so.” ing example of the school’s success, hav- Drogba. The 12-year-old can but dream. For the children attending the OFID ing recently passed with flying colors his At least – and if fate favors him with a school, it is not just the novelty and com- primary school completion exam, the place in secondary school – he’ll always fort of the modern building that appeals Certificate of Elementary Studies. Atsin have his education to fall back on. to them. With smaller class numbers, scored 102 points, which is well above

Al-Herbish accepts distinguished Ivorian honor on behalf of OFID

In August, during a high-level visit to Côte d’Ivoire at the invitation of President Laurent Gbagbo, OFID Director- General, Mr. Suleiman J. Al-Herbish, was decorated with the prestigious Commandeur de l’Ordre National Ivoirien. The honor was conferred by the President in recognition of the significant contribution made by OFID, under the leadership of Al-Herbish, to Côte d’Ivoire’s development. The ceremony took place at the Presidential Palace during the 49th anniversary celebration of the country’s independ- ence. Mr. Al-Herbish, the only foreign recipient of the distinction, was decorated alongside the country’s former Minister of Agriculture, HE Abdoulaye Sawadogo.

In a later, private meeting with President Gbagbo at the Presidential Residence, Mr. Al-Herbish expressed his appre- ciation for the warm welcome the OFID delegation had received in Côte d’Ivoire, as well as for the decoration which he accepted on behalf of the OFID family. The President thanked the Director-General for his visit and for OFID’s ongoing support to the country, “especially during the hard times we have recently endured.” Mr. Al-Herbish with Ivorian President Laurent Gbagbo.

OFID QUARTERLY VOL. I, NO. 3 19 OFID assists flood-damaged African countries

S ince the onset of the rainy season Although OFID’s core activities focus on providing in June, 16 countries in West and Central Africa1 have been inundated by concessional financing in support of sustainable projects torrential rains that have caused massive across the developing world, the institution recognizes flooding. While the total number of fatal- ities is relatively low, at least 600,000 that emergency assistance is still instrumental in helping people have been affected since the spate mitigate the suffering of those affected by natural of floods began, and the long-term im- pact on already-vulnerable populations disasters. Therefore, when the International Federation has yet to be seen. To date, a vast amount of Red Cross and Red Crescent Societies (IFRC) launched of infrastructure and homes have been damaged or destroyed and crops and live- an appeal to the donor community in September to stock swept away, jeopardizing food se- mobilize funds to help victims of ongoing flooding in curity and livelihoods for thousands of agricultural communities. West and Central Africa, OFID swiftly responded by The incidence of flooding is not a approving a grant of US$1 million. The IFRC subsequently new phenomenon in the West and Cen- tral African region, which is inhabited divided proceeds equally among the National Red Cross by some 275 million people. With much Societies in five of the hardest-hit countries; namely, of the territory situated in low-lying areas that are, at most, 300 m above sea Burkina Faso, Chad, Mauritania, Niger and Senegal. level, and the majority of rainfall occur- ring from May/June until the end of

20 OFID QUARTERLY VOL. I, NO. 3 OUTREACH

September, the natural attributes of the region render it susceptible to severe

flooding. PHOTOS: IFRC Unfortunately, pervasive poverty, especially in rural areas, contributes to the severity of the problem. During peri- ods of heavy rainfall, outdated and di- lapidated water supply and sanitation infrastructure becomes easily blocked. Poorly-maintained and unpaved rural roads become rapidly submerged. Envi- ronmental degradation, owing to inten- sive farming practices, and deforestation deplete agricultural land of its natural protective mechanisms. Low-income cities also face a number of challenges in coping with inadequate infrastructure, a situation that has worsened with urban migration. Natural disasters are a challenge for any country, but it is clear that their socio-economic impact on fragile popu- lations in the developing world has far- Mothers and children are among the tens of thousands of people who have lost their reaching consequences, particularly in homes as a result of the severe flooding in Senegal. countries trying to recover from earlier catastrophes. Such is the case in West health risks, especially for young chil- promoting safe hygiene and sanitation and Central Africa, where nearly three- dren and the elderly. Stagnant water pro- practices. Relief workers are poised to as- quarters of the population live on less vides ample breeding grounds for mos- sist communities after the floodwaters than US$2 day. Just two years ago torren- quitoes and increases the potential for have receded to carry out works such as tial rains pelted the region, affecting malarial outbreaks in countries that are rehabilitating water supply sources and some 800,000 people and taking the already malaria-prone. Authorities are other damaged infrastructure, maintain- lives of 300. This year’s rainy season remaining vigilant in monitoring any re- ing emergency food supplies and provid- brought about unprecedented levels of ports of disease, and massive efforts have ing seeds and agricultural tools. rain in many areas. For example, in just been underway to distribute water pu- In addition to the latest grant, OFID one day the Burkinabe capital Oua- rification tablets, fresh drinking water, has, since its inception, released gadougou received 263 mm of rain – mosquito netting and anti-malarial US$60 million in emergency assistance. equating to one-quarter of the annual drugs. Meanwhile, health workers are As well as providing funding to victims rainfall for the entire country – levels not gearing up to handle any possible epi- of natural catastrophes, such grants have seen in almost a century. In the Bongor demics. also been extended to help address the region in Chad, some 240 km south of The IFRC has been working in close plight of populations displaced as a re- the capital N’djamena, violent rains cooperation with government entities, sult of civil conflict, and to close funding caused the Logone River to rise to dan- partnering national societies and a num- gaps in food distribution programs. In gerous levels that caused considerable ber of humanitarian organizations, in- 2002, OFID established a US$20 million damage to a nearby dam. Other coun- cluding NGOs and UN agencies UNICEF, Food Aid Special Grant Account to dis- tries report similar hardship. the World Food Program and the UN tribute some 43,000 metric tons of food Over and above the massive damage Office for the Coordination of Humani- rations to nine famine-struck African to infrastructure that the flooding has tarian Affairs. Widespread efforts of all countries. brought, the potential for disease out- actors have enabled the rapid deploy- breaks is high. Diarrheal and waterborne ment of staff and volunteers to dispense illnesses pose an ongoing threat, as seep- food rations, bedding, hygiene articles, 1 Benin, Central African Republic, Chad, Côte age from blocked sewage systems has tents and other urgently-needed items. d’Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Mauritania, Niger, contaminated drinking water, causing High priority is also being accorded to Nigeria, Senegal, Sierra Leone and Togo.

OFID QUARTERLY VOL. I, NO. 3 21 OUTREACH

Second OFID scholarship recipient graduates

In line with OFID’s continuous support to education which is one of the Millennium Development Goals, the Governing Board approved in 2007 the establishment of an Annual Scholarship

Award. Each year, the OFID Scholarship PHOTO: COMMENCEMENT PHOTOS INC. supports a qualified student from a to pursue higher education in a relevant field of develop- ment. The second recipient of this Award, Ms. Ismat Lotia, from Pakistan, recently graduated from John Hopkins Bloomberg School of Public Health with a Master’s Degree in Public Health Ms. Ismat Lotia with the Dean of the School Administration. of Public Health, Dr. Michael Klag.

he Scholarship Award aims at supporting a highly moti- middle-income urban community in Karachi. “I examined the T vated and academically driven individual from a devel- various socio-economic factors related to the decisions taken by oping country to overcome one of the biggest challenges: the household members to medicate their children at home instead cost of advanced academic graduate training. The winner of the of taking them to a health care provider. This question has im- OFID Award receives a full scholarship of up to US$100,000 to- plications for health care utilization and service delivery for ward the completion of a Master’s Degree in a development- similar communities in the region,” she explained.` related field. Ms. Lotia, graduated from the program in May 2009, and The first winner (2007) was Ms. Leah Manuzon from the has returned to work as an epidemiologist and program man- Philippines. She has since returned to her country after success- ager at the NGO “Interactive Research and Development” (IRD) fully completing her Masters Degree in the School of Policy, in Karachi. IRD is a non-profit institute that seeks to bring to- Planning and Development at the University of Southern Cal- gether scientists and entrepreneurs with a view to maximizing ifornia, USA. the impact of health interventions in poor communities. Ms. The second winner of the OFID Scholarship – for 2008/ Lotia is currently working on a Hepatitis B vaccination deliv- 2009 – was Ms. Ismat Lotia from Pakistan. She was offered ery project to 50,000 children and newborns in low-income admission into the Johns Hopkins University Bloomberg families living within the catchment population of Karachi’s School of Public Health to pursue a Masters Degree in Public Indus Hospital. She said “I hope to focus on further research Health (MPH). The MPH program is designed for individuals and development in the prevention of communicable diseases who have some experience within the field of development and among women and children in South Asia.” who wish to build on the experience, academically and profes- OFID strives to support human capacity building in devel- sionally, in an intensive capacity. Ms. Lotia aspired to attend oping countries in various forms. The Scholarship initiative this program due to its blend of academic and professional seeks to guide young men and women from developing coun- training which she said “truly fulfilled more than I had desired tries to make a difference within their communities through from my graduate education.” Her capstone project involved the acquisition of higher education. The OFID Scholarship is in a data analysis of health-seeking behaviour among a low- to its third year.

22 OFID QUARTERLY VOL. I, NO. 3 July - September 2009

materials; marketing and testing JULY 1 AUGUST 10 of selected products; implemen- AUGUST 25 OFID Director-General tation of improved quality Private sector loan Grant agreement signed control measures; and capacity heads top-level mission agreement signed As a further demonstration of building among beneficiaries. OFID’s commitment to the wel- to Cote D’Ivoire Some 2,500 rural women are Latin America and the Caribbean. fare of the Palestinian people, a See story page 19. expected to benefit from the US$15 million. Loan to Corpo- US$3 million grant agreement was project. ración Interamericana para el Fi- nanciamiento de Infraestructura signed with the United Nations AUGUST 17 Relief and Works Agency for AUGUST 18 (CIFI). See story page 5. Palestine Refugees in the Near Research grants approved East (UNRWA). Arab Forum for Environment Research grants approved SEPTEMBER 9 and Development (AFED). Arab Thought Foundation Emergency assistance JULY 2 US$100,000. This grant will (ATF). US$100,000. The grant grant approved sponsor the 2nd Annual Confer- will co-sponsor the 8th ATF Gen- Loan agreement signed ence of AFED, to be held under eral Conference entitled FIKR 8 Central and West Africa. Madagascar. US$10 million. the theme, The Impact of Climate Kuwait 2009, which will hold De- US$1 million. This grant was Bekoratsaka–Boriziny (RN6) Road Change on Arab Countries. The cember 9–10, 2009, in the State divided equally among the Na- Rehabilitation project. event will take place in Beirut, of Kuwait. The Conference bears tional Red Cross Societies in five Lebanon on November 19-20, the theme Integrating the Arab African countries worst hit by a 2009, and is expected to bring to- Economy Partners for Prosperity, recent spate of severe flooding. JULY 10 gether over 500 top Arab and in- and will bring together over 500 See story page 20. Loan agreements signed ternational delegates, including Arab and foreign leaders, business 30 ministers of energy and envi- people, scientists and researchers. SEPTEMBER 10 . US$20 million. Buga- ronment. It will focus on climate The main objectives of the event Buenaventura Highway. change and will help develop a include the discussion of devel- Loan agreement signed opment challenges faced by the Dominican Republic. US$30 common Arab position for the . US$15 million. Caranavi Arab region and strategies to million. Electricity Distribution December 2009 International - Trinidad Electricity Transmis- overcome them; as well as Rehabilitation. Conference on Climate Change sion Project. (COP 15). strengthening inter-Arab cooper- ation and collaboration between Nyama e.V. US$100,000. The JULY 16 the Arab region and the rest of SEPTEMBER 15 grant will help finance a project the world. Al-Herbish concludes of the Nyma e.V., a non-profit Loan agreement signed NGO that aims at helping im- high-level mission to Mali. US$8 million. Taoussa Dam. Armenia prove the welfare of the Tibetan people. The scheme intends to Mr. Suleiman J. Al-Herbish, OFID strengthen Tibetan traditional Director-General, visited Armenia medicine (TTM), which uses local Meetings attended by OFID at the invitation of the Prime plants. Activities include bolster- Taoussa Dam Project. Minister HE Mr. Tigran Sargsyan. ing the use of TTM in healthcare See story page 14. settings, as well as the education July 23-24 September 15-16 and training of stakeholders in VIENNA, AUSTRIA VIENNA, AUSTRIA JULY 24 using these treatments. Further- Save the World Awards Scientific Forum at the IAEA more, income-generation activi- and the Sustainable World General Conference, during OFID sponsors Save ties will be promoted through the Congress which OFID presented the the World Awards construction of greenhouses for joint OFID/IIASA study cultivating medicinal plants and The Save the World Awards are “Biofuels and Food Security.” herbs. August 2-3 the first major global honors pre- September 24 sented to exceptional personali- Oxfam. US$100,000. The main OXFORD, UK ties and organizations working beneficiary of this grant is a 31st Oxford Energy Seminar BEIRUT, LEBANON toward a sustainable future for scheme that aims at enhancing Arab Energy Club Meeting our planet and its people, with living conditions and boosting September 7-10 September 28 the goal of fostering greater food security among women in VIENNA, AUSTRIA awareness of environmental and Senegal who are engaged in food VIENNA, AUSTRIA European International development issues. The 2009 processing/production. Envisaged First meeting of the Vienna- Association for Energy based International Energy awards were held in Zwenten- activities under the scheme in- Economics Conference 2009 Organizations dorf, Austria, as part of the Sus- clude expansion and diversifica- tainable World Congress. tion of packaging equipment/

OFID QUARTERLY VOL. I, NO. 3 23 OFID DIARY

LOAN SIGNATURE

July 2 HE Benja Joas Razafimahaleo, Minister of Finance and Budget of Madagascar, secured a US$10 million loan to help renovate a 95-km stretch of a major route that links northern Madagascar with the rest of the country.

July 10 HE Rosso Jose Serrano- Cadena, Ambassador of Colombia to Austria, with OFID Director-General Al- Herbish. The Ambassador signed a US$20 million loan agreement in support of a project to upgrade a section of a strategic transport corridor between Bogotá and Buenaventura.

24 OFID QUARTERLY VOL. I, NO. 3 OFID DIARY

September10 Mr. Ricardo Javier Martinez Covarrubias, Chargé d’affaires at the Bolivian Embassy in Vienna, signing the loan agreement. The US$15 million credit will help finance an electricity transmission project. PHOTO: AGNES NEBEHAY

September 16 HE Sidiki Lamine Sow, Ambassador and Permanent Representative of Mali to the United Nations in Geneva, secured a US$8 million loan for a dam construction project that will improve the availability of irrigation water.

The full list of loan signatures can be found on page 23.

OFID QUARTERLY VOL. I, NO. 3 25 DEVELOPMENT COOPERATION

African Economic Outlook 2009 highlights regional integration

African countries should redouble their efforts towards regional integration in order to consolidate and accelerate their economic and social develop- ment and reduce poverty on the continent. These are the views contained in the African Economic Outlook (AEO) 2009, a joint publication of the African Development Bank, the United Nations Economic Commission for Africa (UN-ECA), and the Organization for Economic Cooperation and Development (OECD).

he AEO aims at keying into the Millennium Development Goals (MDGs). 2009, less than half the 5.2 percent T New Partnership for Africa’s Devel- To this effect, the AEO 2009 provides an achieved in 2008. To compound the opment (NEPAD1) by serving as a tool for assessment of socio-political conditions, problem, rising world prices for food policy analysis and dialogue for the key structural developments, and the products combined with the global eco- African Peer Review Mechanism. Other short-term macro-economic outlook in nomic slowdown are undermining the objectives include the raising of aware- selected African countries, placing the conditions for sustainable socio-economic ness about conditions in the region, and evolution of African economies in a development and poverty reduction in helping to monitor progress towards the world economic context. the region. Also, none of the sub-Saharan In view of the tough challenges that African countries is currently on track to 1 The New Partnership for Africa’s Development Africa faces, the AEO 2009 notes that the attain the eight MDGs by 2015. (NEPAD) was launched in October 2001 as an African-inspired initiative aimed at helping outlook for the continent has been ad- Therefore, the global economic African countries overcome poverty and un- versely affected by the global economic downturn is an opportunity for a re- derdevelopment by accelerating equitable crisis. The global downturn is expected to examination of current approaches to in- and sustainable growth and development in the region. slash Africa’s growth rate to 1.8 percent in ternational development. In particular,

26 OFID QUARTERLY VOL. I, NO. 3 DEVELOPMENT COOPERATION

Algiers Constantine Tunis Oran TUNISIA Rabat MEDITERRANEAN SEA Casablanca Fès Tripoli

Alexandria MOROCCO Cairo

ALGERIA LIBYA EGYPT

WESTERN SAHARA

MAURITANIA MALI

Nouakchott CAPE VERDE NIGER SUDAN CHAD ERITREA Praia SENEGAL Khartoum Dakar Asmara GAMBIA Niamey Banjul Bamako BURKINA FASO DJIBOUTI Bissau Ougadougou GUINEA BISSAU Ndjamena Djibouti Conakry BENIN GUINEA NIGERIA SOMALIA COTE GHANA Addis Ababa Freetown Porto Abuja SIERRA LEONE D‘VOIRE TOGO Novo CENTRAL ETHIOPIA AFRICAN Monrovia Lagos REPUBLIC Lome CAMEROON Accra LIBERIA Abidjan Malabo Yaounde Bangui EQUAT. GUINEA UGANDA Mogadishu SAO TOME AND PRINCIPE CONGO Kampala Libreville Sao Tome GABON D.R. OF THE KENYA RWANDA Nairobi CONGO Kigali Brazzaville Bujumbura BURUNDI Victoria Kinshasa Dodoma SOUTH ATLANTIC TANZANIA Dar Es Salaam

OCEAN Luanda SEYCHELLES

Moroni MALAWI ANGOLA ZAMBIA Lilongwe COMOROS Lusaka

Harare

MAURITIUS Much of Africa’s socio-economic ZIMBABWE Antananarivo MOZAMBIQUE Port Louis integration hinges on the continent’s NAMIBIA BOTSWANA road network, which is sparse given Windhoek Gaborone Pretoria the sheer size of the land area. Maputo SWAZILAND MADAGASCAR Johannesburg Mbabane Many countries are landlocked and SOUTH AFRICA Maseru lack any major transport corridor, LESOTHO Durban Marshes a constraint that makes the cross-border Salt Lakes Cape Town trade of goods difficult and expensive. Main Road Even within countries, inadequate road National Capital infrastructure leaves remote provinces marginalized and the population INDIAN OCEAN with only limited access to markets and social services.

OFID QUARTERLY VOL. I, NO. 3 27 DEVELOPMENT COOPERATION

OFID in Africa

OFID stands ready to continue to assist African coun- In addition, OFID has actively encouraged the develop- tries in strengthening regional integration and achieving ment of the private sector in Africa by providing lines the broader goals of NEPAD, which are consistent of credit to regional development banks for on-lending with the principles of South-South collaboration and to small-, medium- and micro-enterprises (SMEs). solidarity that lie at the heart of OFID’s mandate. The institution has also provided loans and equity In keeping with its mission to focus its attentions on the investment directly to private initiatives under its sepa- poorest nations, OFID has dedicated half of its rate Private Sector Facility. Furthermore, OFID has given cumulative public sector lending to assist Africa substantial grant aid to finance capacity building and the climb the development ladder. This support has been transfer of adequate technologies and know-how; to provided in the form of concessional and untied public help African countries face food crises and to provide sector loans to help address the deficiencies that prevail care and support to individuals and families affected by in several important areas. These include transport, HIV/AIDS. This direct support to African nations has communications, energy, agriculture and agro-industry. been supplemented by indirect assistance via financial Others are education, water supply and sewerage, resource transfers to organizations such as the Interna- as well as health. The Africa region has also been tional Fund for Agricultural Development (IFAD), and the assisted by OFID through balance of payments Common Fund for Commodities (CFC). It is noteworthy support and debt relief under the Heavily Indebted that OFID played a significant role in the establishment Poor Countries (HIPC) Initiative. of IFAD and the CFC.

OFID public sector project lending - geographical distribution of cumulative approvals as of September 30, 2009 (in millions of dollars)

Latin America Europe AFRICA Water Supply and the Caribbean and Sewerage Agriculture Transportation 130 240.8 588.8 923 Education

1,006.6 373.8 3,288 Telecommunications 2,557 Energy 4.5 492.2 101.7 212.9 Health 209.1 57.7

National Industry development Multi- Asia banks sectoral

28 OFID QUARTERLY VOL. I, NO. 3 DEVELOPMENT COOPERATION

Distribution of African Countries Status by MDGs Source: African Development Bank

Above average Around average Below average

G1. Eradicate Extreme Poverty and Hunger 16 10 24

G2. Achieve Universal Primary Education 23 13 16

G3. Promote Gender Equality and Empower Women 22 20 11

G4. Reduce Child Mortality 14 19 19

G5. Improve Maternal Health 1917 16

G6. Combat HIV/AIDS, Malaria, and Other Diseases 35 7 9

G7. Ensure Environmental Sustainability 28 11 14

The global recession and its attendant forces have severely impeded Africa's attainment of the Millennium Development Goals. As many as 24 countries have made below-average progress towards the main goal of eradicating extreme poverty and hunger, and 19 countries have fallen behind with efforts to reduce child mortality.

the crisis underscores the need for communities (RECs). These include the African countries to develop their inter- Community of Sahel-Saharan States (CEN- Did you know? nal markets by strengthening regional in- SAD); the Common Market for Eastern and Southern Africa (COMESA East tegration and South-South cooperation. ); the • Between 2005 and 2007, more Regional integration – together with eco- African Community (EAC); the Economic than three-quarters of Africa’s nomic diversification – could help de- Community of Central African States exports went to Asia. velop internal markets, enhance produc- (ECCAS/CEEAC); the Economic Commu- • In more than half of African tive capacities, generate income, and nity of West African States (ECOWAS); the countries, tax revenue represents strengthen the long-term growth per- Intergovernmental Authority on Develop- less than 20 per cent of GDP formance of most countries on the ment (IGAD); the Southern African Devel- as compared to 36 per cent in African continent. It could also help real- opment Community (SADC), and the Arab OECD countries. ize economies of scale, improve national Maghreb Union (AMU). Full market inte- • The rate of return on foreign and regional competitiveness, and serve gration, however, remains to be achieved direct investment is higher in as a launching pad for African economies in African sub-regions, as intra-commu- Africa than anywhere else in to integrate smoothly and participate nity trade continues to be impeded by the developing world. more effectively in the global economy. inadequate production of goods and • Africa was the first region in African countries have increasingly deficient capacities in transport, commu- the world to offer free, mobile realised the advantages of regional co- nications and energy. roaming services across several operation and integration as a strategy to As these issues are seriously addressed countries. Today, four out of 10 collectively accelerate economic growth by the respective governments and the Africans have a mobile phone line. and enhance their role in the world econ- problems successfully tackled, African omy. To this end, African countries are countries would be better able to integrate pursuing a strategy of regional trade inte- more smoothly with positive spinoffs for gration through eight regional economic their economies and people.

OFID QUARTERLY VOL. I, NO. 3 29 DEVELOPMENT COOPERATION

World food markets fail the hungry poor

World Hunger Series For the one billion people in developing countries who Hunger and Markets subsist on less than US$1 a day, life is a constant struggle for survival. Among the greatest challenges they face is Markets can help alleviate hunger, although for many households that of getting adequate nourishment, a task made all the opportunities created by markets remain elusive. harder by, among other things, fluctuating – and in recent

Several market-based innovations years – spiraling food prices. With no end in sight to the provide opportunities to break the hunger-poverty trap. current crisis, the burning question is – how can world food markets be better managed so that they facilitate – rather than hinder – access to food and, at the same time, give fair compensation to producers?

lobal food prices have increased an important role in both reinforcing often sell low and buy high because of G dramatically in recent years, and and mitigating the risk of hunger and market failures. They cannot get credit most forecasts expect them to remain malnutrition. Food markets perform two and generally have to sell low to cover high and volatile in the near future. Some inherently opposing functions. On the their cash needs at harvest time, when 50 developing countries – mostly in one hand, they must help keep food af- supply is abundant, and buy high during Africa – remain at risk as a result of the fordable, particularly for the hungry the lean period. food price hikes, which are particularly poor, who depend on food markets for To break the hunger-poverty trap, devastating for the poorest of the poor, adequate access to food. On the other governments, international groups and who spend two-thirds or more of their in- hand, markets must promote efficiency private actors are encouraged to work come on food. Additional millions have in resource allocation, especially for food together to devise strategies that build been forced to reduce both the quality producers, who favor high prices. on the strengths of food market dynam- and quantity of the food they consume – Whether markets limit or facilitate ics as potential instruments in the fight endangering their health, education, and access to affordable and nutritious food is against hunger. The risk of market fail- productivity – and the number of hungry a function of market institutions, infra- ure or inefficiency can be reduced is expected to pass the one billion mark structure and policies. Ironically, many through several measures. These include before the end of this year. of the hungry poor are farmers – particu- better monitoring of food prices and The food crisis can be ascribed to larly women – with few assets, such as trade flows, promoting market re- several factors. These include rising land. Their agricultural production is low silience, and improving disaster risk global demand, slow productivity growth and partly serves as household subsis- management. Trade and food security and changing weather patterns, as well as tence. They buy food, sell their crops or policies should be made more consis- market failure. According to the WFP’s livestock and also sell their labor to earn tent, and the hungry poor should get latest World Hunger Series, markets play income. Unfortunately, poor farmers better access to agricultural inputs and

30 OFID PHOTO:QUARTERLY SHUTTERSTOCK/MURIEL VOL. I, NO. LASURE 3 PHOTO: CHARLES TAYLOR/SHUTTERSTOCK

The pricing of food is a delicate balancing act that needs to be fair to both producers and consumers. value chain innovations. Furthermore, The WFP report stresses the importance geted investments are urgently required price incentives should be provided to of Official Development Assistance to enhance world food production capac- create rural purchasing power, which (ODA) in supporting market innova- ity. Commitments to increase ODA must in turn can stimulate rural and broader tions, post-crisis recovery and emergency be fulfilled.” economic growth. These measures should food aid. The historic neglect of invest- Undoubtedly, the challenges are be complemented by cost-effective ment in agriculture and rural develop- daunting and the poor continue to reel investments in nutrition, such as the ment, and the decline in ODA to the sec- under the crushing weight of rising food development of affordable and nutri- tor to less than 4 percent of total aid in prices. However, OFID and other devel- tious food products. In addition, food 2007, has been an additional factor con- opment institutions are doing their best markets should be supported by en- tributing to stagnating food production to increase their funding to the vital hanced research and access to educa- and hunger. To reverse this trend, the agriculture sector in which the majority tion, financial services and well func- Group of Eight (G-8) most industrialized of the poor in most developing coun- tioning labour markets. Investment nations meeting in L’Aquila, Italy, July 8- tries are involved. The overall goal is to should also be boosted in social protec- 10, 2009, committed to disbursing US$20 help these countries to develop their tion, infrastructure and institutions, in- billion for tackling the food crisis over economies, and as much as possible, cluding the strengthening of legal and the coming three years. The G-8 ex- within the shortest period of time, sig- regulatory frameworks, and establish- pressed concern about the longstanding nificantly enhance the standard of liv- ment of a robust system for setting and under-investment in agriculture and the ing of their people. enforcing quality standards. Another impact of high food prices on developing strategy is the implementation of poli- countries. According to the L’Aquila Joint cies that support fair competition Statement on Food Security: “Sustained and among new market entrants. predictable funding and increased tar-

OFID QUARTERLY VOL. I, NO. 3 31 PHOTO: PICT

Second Global Review of Aid for Trade concludes in Geneva

Trade can be an important engine for socio-economic growth, sustainable development, and global peace and stability. However, many developing nations – particularly the Least Developed Countries (LDCs) – lack the infrastructure and human and institutional capacities required for trade to make a tangible contribution to growth and poverty reduction. In such countries, improved market access needs to be matched by Aid for Trade.

32 OFID QUARTERLY VOL. I, NO. 3 DEVELOPMENT COOPERATION

t was in light of the above tenets budgets for development cooperation. As to US$50 billion in developing country I that representatives of the 153 a result, the implementation of several trade finance over three years, US$15 member countries of the World Trade Or- aid for trade projects in the South has billion of which will be earmarked for ganization (WTO) and heads of interna- been delayed. Africa. tional organizations gathered at WTO To reverse these worrisome trends, Meanwhile, the need remains for a headquarters in Geneva, Switzerland, development financing institutions balanced and comprehensive conclusion July 6–7 2009. The occasion was the (DFIs) and donors gathering in Geneva of the Doha Development Agenda (DDA) or Second Global Review of Aid for Trade. in July formally committed more than Doha Round of multilateral trade negoti- Some four years earlier, trade minis- US$6 billion to the Global Trade Liq- ations, which started in Doha, Qatar, in ters attending the WTO Ministerial Con- uidity Program (GTLP). The GTLP was November 2001. After almost seven years ference in Hong Kong, China, in Decem- established as a temporary initiative in of negotiations, the Doha Round reached ber 2005 had endorsed the need for Offi- response to mounting concerns ex- yet another deadlock on July 29, 2008, re- cial Development Assistance (ODA) Ac- pressed by the (G-24) Fi- flecting deep rifts between North and cordingly, ministers directed the WTO nance Ministers about protectionist South, particularly about the need to re- Secretariat and member governments to threats during the ongoing economic duce agricultural subsidies in the North. develop an Aid for Trade package. Under and financial crisis, especially the in- Successful conclusion of the Doha Round the package, donors would provide loans creased recourse to subsidies in trade, on the basis of its development mandate and grants to help, the low-income coun- investment, finance and labor services. could provide a major stimulus to the tries (LICs) in particular, to negotiate bet- Working through a network of more restoration of world growth and confi- ter in multilateral trade talks and imple- than 500 banks in over 70 developing dence in world markets, and reduce ment the results more effectively. Such countries, the GTLP aims at pooling up looming protectionist threats. financing would also help the LICs to benefit from export opportunities and build the necessary infrastructure- pro-

duction- and trade-related capacities to PHOTOS: PICT integrate into the world trading system. Following a First Global Review of Aid for Trade, which was held in Novem- ber 2007, the aim of the Second Review was to evaluate progress towards imple- mentation of the Aid for Trade Initiative and to assess how trade could be better integrated into national and regional de- velopment strategies. The Review also studied the impact of the global eco- nomic downturn on aid for trade OFID support to trade flows, and the expanding role of emerg- ing South-South donors (i.e., , , and China) in regional inte- Working in tandem with its partners in development, OFID plays its part in assisting gration initiatives. local banks and micro- small- and medium-sized enterprises (SMEs) in the South to Participants noted that important build their own trade finance portfolio through a dedicated Trade Finance Facility (TFF). progress has been made toward imple- Launched in 2006, the TFF aims at enhancing developing countries’ share in interna- mentation of the Aid for Trade initiative tional trade and promoting inter-regional trade by helping meet their growing demand to date. Since 2005, aid for trade has for trade finance credits. By the end of September 2009, US$339 million in lines of grown by more than 10 percent annu- credit and US$589 million in risk-sharing guarantees had been approved under the TFF. ally, with new commitments reaching The TFF is part of OFID’s broader response to the current crisis. In 2008, the insti- US$25.4 billion in 2007. However, the tution also redoubled efforts to encourage growth and employment creation in the global economic downturn has affected private sector with the provision of US$216 million in support of SMEs under OFID’s the trade outlook, with the volume of Private Sector Facility (PSF) – a 66 percent increase over 2007. This support has been global trade declining by 10 percent in provided in conjunction with public sector lending to trade-related infrastructure de- 2009 – its largest drop in 80 years – and velopment, including energy, transportation, industry and telecommunications. some developed nations cutting their

OFID QUARTERLY VOL. I, NO. 3 33 DEVELOPMENT COOPERATION

Private capital inflows to the South dwindle

by Fatimah Zwanikken

The global economic and financial crisis has drastically reduced the supply of private credit to developing countries, thereby reversing the strong upward trend that began in 2003. According to Global Development Finance 2009, a publication by the World Bank, net private capital inflows to the South dropped sharply to US$707 billion in 2008, from about US$1.2 trillion recorded in 2007. Highlights from the report are examined below.

t is a known fact that whenever left a large gap in financing for develop- Net private debt flows to the developing I there is financial crunch, especially ment. The sharpest contraction in the countries also dropped noticeably to of global proportions, recession sets in supply of private capital has been from US$108 billion in 2008, from US$499 bil- and the flow of private capital tends to commercial banks, with net portfolio eq- lion in 2007. The reduction was driven dry up. Thus, with relatively less capital uity inflows to the South falling by al- mainly by the sharp fall in short-term to spare, investors – particularly the com- most 90 percent to just US$15.7 billion in debt inflows, which shifted from a posi- mercial ones – prioritize where to put 2008, from US$138.6 billion in 2007. The tive US$202 billion in 2007 into a nega- their money. However, it would seem dramatic drawback of private capital was tive US$16.3 billion in 2008, and in bond that those countries that ordinarily need a reflection of the virtual disappearance financing, which fell to just US$11 billion investments most are shunted to the bot- and changing role of many institutions. in 2008, from US$85 billion in the previ- tom of the list. These institutions had provided financial ous year. Furthermore, net medium- and Indeed, many developing countries intermediation to developing countries, long-term bank flows declined by 40 per- and emerging markets are facing deterio- a worldwide reduction in financial lever- cent from US$214.5 billion in 2007 to rating financing conditions as a result of age, and increased risk-aversion as part of US$123 billion in 2008. the exodus of private capital, which has a broader financial and confidence crisis.

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With the exception of the Middle East ment in resource-rich developing nations Although the overall decline in world- and North Africa, where private capital such as Angola, Brazil, Chile, Kazakhstan, wide worker’s remittance flows as a result inflows rose by 11 percent in 2008, the and the Russian Federation. of the crisis is more modest, the situation downturn has affected countries and re- However, one area that showed pos- may prove more serious for some small gions worldwide to various degrees. itive signs was worker’s remittances poor countries where remittances are rel- Emerging Europe and Central Asia were which remained resilient in 2008. This atively important. the hardest hit, accounting for almost was mainly because many migrants did With a more pronounced global half (47 percent) of the decline in private not leave their adopted countries and downturn, a fall in import demand, and capital inflows in 2008, followed by Latin continued to send money home. Also, re- scarcer private capital inflows, economic America and the Caribbean and South mittance flows increased slightly to growth in developing nations is forecast Asia (41 percent each), sub-Saharan US$305 billion during the year, from to drastically cool off to 1.2 percent in Africa (35.5 percent), and East Asia and US$265 in 2007. The world’s top five re- 2009, from 5.9 percent in 2008. This will the Pacific (28 percent). cipients were India, China, Mexico, the push additional millions of people below Across regions, the decline was con- Philippines and Poland. the poverty line, reversing hard-won centrated in short-term debt flows (48 per- Net private capital inflows to devel- gains towards the poverty reduction and cent), portfolio equity (26 percent), and oping countries are foreseen to decline related United Nations Millennium De- bonds (20 percent). Notably, almost all re- further in 2009, shrinking to US$363 bil- velopment Goals (MDGs). gions experienced significant setbacks in lion before staging a weak rebound in These negative results and projec- short-term debt flows, which accounted 2010, in tandem with a projected gradual tions should serve as a clarion call for De- for a major share of the decline in East Asia recovery of world economic growth. velopment Finance Institutions like and the Pacific (67 percent), South Asia However, FDI inflows to the South are OFID to work more closely with the poor- (56 percent), and Europe and Central Asia likely to drop by 30 percent to US$385 bil- est countries in particular, so as to further (45 percent). In sub-Saharan Africa, on the lion in 2009, reflecting weaker growth assist them along their respective paths other hand, two-thirds of the US$15 bil- and corporate earnings, and significantly of economic growth. However, while the lion decline came in portfolio equity, with lower mergers and acquisitions (M&A) DFIs try and fill the gaps created by the the remainder in bond financing. transactions. Similarly, worker’s remit- drastic scarcity of private capital inflows, In contrast, net foreign direct invest- tances are expected to retreat to US$290 the needy developing countries must ment (FDI) inflows to developing coun- billion in 2009. This would be a reflec- work harder to create more conducive tries – the largest component of interna- tion of both the impact of the economic economic environments that would en- tional capital flows to the South – rose recession in high-income countries, from courage international investments when from US$520 billion in 2007 to US$583 which remittances originate, and lower the global financial crises is over in the billion in 2008, driven by the strong mo- growth in the developing countries. next couple of years. mentum of the first half of the year. Un- like portfolio equity and bond invest- ments, FDI reflects a long-term engage- Net private capital inflows to developing regions, 2007-08 ment to invest in the host country, which makes such investments less likely to be reversed and liquidated in times of crisis. $ billions 500 2007 2008 estimate Because the unfolding crisis had an even more profound effect on FDI in- ECA Europe and Central Asia flows to the North, the South increased 400 LAC Latin America and the Caribbean (-47 %) its relative share in global FDI to a record EAP East Asia and Pacific SAR South Asia Region 40 percent in 2008, from 25 percent in 300 SSA Sub-Saharan Africa 2007. The East Asia and Pacific and (-28 %) -221 MENA Middle East and North Africa South Asia regions received most of the 200 (-41 %) -78 US$63 billion increase in FDI inflows. In- flows to India doubled in 2008, reflecting 100 -88 (-41 %) significant progress towards economic re- (-35.3 %) (+11 %) -46 +2.5 forms and opening up additional sectors -19.5 0 to FDI in recent years. The high commod- ECA LAC EAP SAR SSA MENA ity prices that persisted throughout most Source: World Bank Debtor Reporting System and staff estimates. of 2008 also continued to support invest-

OFID QUARTERLY VOL. I, NO. 3 35 MEMBER STATES FOCUS

PHOTO: SCOTT NELSON/KAUST King Abdullah University of Science and Technology (KAUST) opens its doors with inauguration celebration

by Reem Aljarbou

Saudi Arabia’s King Abdullah University of Science and Technology (KAUST) opened its doors at a ceremony attended by several world leaders and other dignitaries on September 23, 2009. At the heart of the university’s mission is an unwavering commitment to sustainable development. Located on the Red Sea near Jeddah, KAUST aims to nurture innovation in science and technology, giving strong support to world-class research in the key areas of energy and the environment. The inauguration of KAUST coincided with Saudi Arabia’s 79th National Day.

36 OFID QUARTERLY VOL. I, NO.3 MEMBER STATES FOCUS

T he King Abdullah University of Sci- rial and waste management KAUST aims at MacBook Pros. The system’s ence and Technology was initiated and preservation of the envi- becoming the hub for storage peaks at a massive with a US$10 billion endowment. The ronment. A unique signature 1.9 Petabytes. According to main objective is to make KAUST an in- of the KAUST campus is the strategic research in the global ranking of the ternational, graduate-level research uni- coral reef situated off its shores, strategic areas most powerful supercom- versity dedicated to inspiring a new age which drives the university’s puters, TOP500, Shaheen of science and tech- of scientific achievement. It endeavours ambition to become the stew- occupies the 14th position. to create an international community of ard of a marine sanctuary for nology that are This ranking makes Sha- scholars and academic leaders, commit- ongoing research on the coral crucial to the future heen the fastest supercom- ted to the advancement of science and reef ecosystem. The KAUST puter in Asia, and the sec- technology. Moreover, KAUST plans on campus covers an area of of Saudi Arabia, ond fastest outside Europe. becoming the hub for strategic research 36 million square meters. the Gulf region and As such, Shaheen is one of with emphasis on four strategic areas of In addition to the various the most powerful super- the world. science and technology that are crucial to facilities, KAUST is home to computers in an academic the future of Saudi Arabia, the Gulf re- an Advanced Visualization environment and positions gion and the world. The university’s Laboratory called “CORNEA,” a fully im- KAUST as a key player in the field of com- thrusts are: Resources, Energy and Envi- mersive, six-sided virtual reality facility putational science. ronment; Biosciences and Bioengineer- that allows students and researchers to The Academic partners that KAUST ing; Materials Science and Engineering; turn data into 3D, interactive structures. has drawn on for groundbreaking re- Applied Mathematics and Computa- CORNEA was built with the University search and collaboration include, among tional Science. of California at San Diego. It is a mech- others: California Institute of Technol- At the inauguration, The Custodian dyne-built VL6 with the world’s highest ogy; Cornell University; Georgia Institute of the Two Holy Mosques, King Abdul- resolution (100 million pixels) and the of Technology; Imperial College Lon- lah bin Abdulaziz Al Saud, stated: “It is brightest (10,000 lumens) visualization don; King Abdulaziz City for Science and my desire that this new university be- environments. It has 24 Quad HD pro- Technology; King Fahd University of Pe- comes one of the world’s great institu- jectors, the highest native resolution troleum and Minerals; MIT; National tions of research; that it educates and projectors available and has the only ad- Taiwan University; National University trains future generations of scientists, vanced spatial/surround sound system of Singapore; University of Rome – La engineers and technologists; and that it of this type. Sapienza; Stanford University; Technische fosters, on the basis of merit and excel- Another example of the Univer- Universität München; The Hong Kong lence, collaboration and cooperation sity’s desire to become one of the leading University of Science and Technology; with other great research universities R&D centers in the world is “Shaheen,” University of California, Berkeley; and the private sector.” one of the world’s most powerful, high- University of Cambridge; University of Sustainable development is not just performance computing (HPC) systems. Oxford; University of Tokyo; University a strong influence on KAUST’s agenda. It Named after the Arabian Peregrine fal- of Toronto; and Utrecht University. has also inspired campus planning, prac- con known for its speed, Shaheen is the The University opened with 72 fac- tices, research and operations. In an at- product of a joint research project be- ulty members from different regions of tempt to demonstrate and promote re- tween KAUST and IBM (International the world. At maturity, the faculty is ex- sponsibility towards resources, KAUST Business Machines). Until its transfer to pected to number approximately 225. has integrated several sustainable meas- Saudi Arabia to coincide with the uni- The top countries of origin are the ures into various elements in its design. versity’s inauguration, Shaheen was op- United States (14), Germany (7), Canada The desert climate of Saudi Arabia created erating out of IBM’s T.J. Watson Re- (6), and China (6). KAUST’s inaugural specific challenges, and innovative meth- search Laboratory in Yorktown Heights, faculty includes prolific researchers, in- ods in construction were implemented. New York. novators and authors who claim at least The development of alternative energy Shaheen is a 16-rack IBM Blue Gene/P 108 patents, 100 software products/in- sources is an example of the ethics of sus- system that has 65,600 independent pro- vention disclosures, and 64 books or tainable development upon which the cessing cores. The supercomputer is capa- chapters. Including students, faculty, university is founded. The campus oper- ble of performing at a processing power staff and their families, the campus ates efficient use of water, electricity and of 220 TFLOPS (trillion floating points community is expected to number ap- other resources, as well as efficient mate- per second), equivalent to about 24,000 proximately 20,000.

OFID QUARTERLY VOL. I, NO. 3 37 MEMBER STATES FOCUS

PHOTO: SHUTTERSTOCK: MEMBER STATES FOCUS

Gulf countries expect recovery from global financial crisis Saudi Arabia speaks of minor impact on its economy

Several regions of the world are reporting slow and measured recovery from the global financial crisis which has laid economies dormant and resulted in negative economic growth, company closures and job losses. Among the regions and sub-regions reporting cautious improvement are the Gulf States and a few other OPEC Members.

he Paris, France-based Organisa- Elsewhere in Europe, there was also opti- covery is imminent,” said Hetal Mehta, T tion for Economic Cooperation mism suggesting that the worst of the of Ernst & Young. and Development (OECD) declared in rapid decline in world economic output Germany is equally showing signs early July that the global recession was may be over. The President of the Euro- of optimism, with the country’s business “easing,” and the pace of decline of the pean Central Bank, Jean-Claude Trichet, confidence moving above its low point world’s major economies “slowing.” Ac- said there was a “slowing down in the de- thus far. Germany’s economy was hit by cording to the OECD, the composite crease in Gross Domestic Product a dramatic fall in exports. In the United leading indicators index for its 30 mem- (GDP),” while certain countries were al- States, consumer confidence recovered ber countries rose 0.5 points in April ready reporting a pick-up. Said Trichet: from its absolute-low in the last few 2009, but was still 8.3 points lower than “We are, as far as growth is concerned, months. in April 2008. around the inflection point in the cycle.” Officials in the developed economies It was still too early to assess whether Among the European countries are, thus, declaring that the scale of inter- this was a temporary or more durable showing signs of a tentative recovery is vention by governments, both in imple- turning point, the OECD says. The data the United Kingdom (UK) with retail menting economic stimulus packages point to a “reduced pace of deterioration sales up and manufacturing output and in supporting the banking sector, is in most of the OECD economies.” World down by a smaller margin. The National only now beginning to affect the econ- stock markets, however, have recovered Institute for Economic and Social Re- omy, and is certainly having a moderat- from their lows of March, 2009, giving search in the UK said the rate of decline ing effect. What is less certain, however, some hope that the perceived global im- of GDP had slowed in April. There were is whether contraction will continue into provement would hold. The expectation also indications that housing market ac- 2010, or whether additional government is based mainly on survey data of con- tivity in the UK is picking up slightly. intervention will be required to trigger sumer and business confidence. “The patient has been stabilised and a re- real recovery.

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In the Gulf, Saudi Arabia, for its part, Since the construction business began to Corporation, and reviewed the period had made it known that the financial cri- feel the impact of the crisis in late 2008, between June 2008 and May 2009. sis had had only a minor impact on the developers have put on hold or cancelled Also, the report noted that the Mid- Saudi economy. But the Kingdom’s Min- a total of 566 projects. The figure repre- dle East and North Africa picked up the ister of Finance, HE Dr. Ibrahim Al Assaf sented 29 percent of all those planned in pace of business regulatory reform faster told the international media in the Red the UAE to build offices, hotels, resi- than any other region, in a year of global Sea port city of Jeddah, that it was still too dence and retail homes. With total proj- financial uncertainty. Seventeen of 19 soon for countries to scale back stimulus ects worth US$900 billion, including economies in the region passed regula- packages aimed at supporting recovery. those put on hold or cancelled, the tions to create opportunities for domes- Saudi Arabia, like some other key na- UAE accounts for 60 percent of the tic entrepreneurs. tions, had boosted spending on infra- US$1.5 trillion of total projects in all With no major reform recorded dur- th structure, education and healthcare this member countries of the GCC. ing the period, Qatar was ranked 39 . st year, seeking to support growth. Dr. Al The impact of the economic down- Kuwait, at 61 , established a law enabling turn elsewhere in the Arabian Gulf has the restructuring of companies facing fi- Assaf opined that the world “has seen the been less severe. This conclusion was nancial difficulty or insolvency; while worst of the crisis,” but added that “we based on a survey of thousands of proj- Bahrain, ranking 20th, consolidated pre- are still not out of the woods.” The min- ects across the region each worth at least liminary approvals for building permits ister cautioned about celebrating too US$10 million. Of projects worth more in a one-step mechanism and reduced the soon and urged developed and develop- than US$387 billion in Saudi Arabia, time needed to obtain building permits. ing countries to continue with their 19 percent of the total number has been In Vienna, Austria, OPEC, the Or- measures and stimulus packages. cancelled or suspended. Kuwait has total ganization of the Petroleum Exporting With Saudi Arabia per se, the minis- projects worth more than US$114 bil- Countries added its voice to the discus- ter explained that the impact of the lion, with 17 percent cancelled or on sion regarding recovery of members’ global crisis was mainly on those sectors hold. Oman’s total projects are worth economies. OPEC said in early September that depended on outside demand, par- more than US$38 billion, of which 8 per- that the evidence of an impending up- ticularly oil and petrochemicals. When cent cent are on hold and none can- turn in the global economy appears to be true recovery starts in the rest of the celled; while Bahrain has US$36 billion gathering, but true recovery “will be slow world, “which we are seeing signs of,” worth of projects, with 27 percent can- and gradual.” However, OPEC left its demand as well as the price of oil will re- celled or on hold. world oil demand forecast for fiscal 2010 cover. Dr. Al Assaf said “we have seen Indeed, several of the Gulf coun- unchanged. The Organization said in its those signs reflected on the current price tries, particularly the UAE, were pro- monthly report for September, that of oil.” nounced active economic reformers this world oil demand was expected to fall by In the United Arab Emirates, much financial year by the World Bank Group. 1.56 million barrels per day (b/d) in 2009 of the attention, apart from oil exports, In a global survey of the ease of doing before rising by 500,000 b/d in 2010. had been on the construction industry, business, the UAE, for the first time, Regarding non-OPEC countries, which was described as worst hit in all of ranked among the world’s 10 most ac- OPEC projected supplies to rise by the Gulf Cooperation Council (GCC) tive economic reformers. The Bank said 420,000 b/d in 2010, supported by countries. According to the Khaleej the Emirates rose from 47th to 33rd higher output from the United States, Times, the UAE’s once-booming con- among 183 economies worldwide in Russia, Norway and Azerbaijan and revi- struction industry, had, as a result of the terms of the overall ease of doing busi- sions to historical data. This is 100,000 global economic crisis, slowed more dra- ness. This is the result of having b/d less than previously forecast. De- matically than any other construction scrapped the minimum capital require- mand for OPEC crude will average 28.06 market in the GCC region. Even so, the ment for business start-ups and simpli- million b/d in 2010, down by 460,000 Emirates is still seeing “an extraordinary fied registration procedures. The Bank b/d from 2009, the September report level” of activity, with 1,372 projects ei- report was issued jointly with its invest- said. This is a smaller decline than its ther being built or in the bidding process. ment arm, the International Financial 480,000 b/d previous assessment.

40 OFID QUARTERLY VOL. I, NO. 3 MEMBER STATES FOCUS

UAE to host new Energy Agency “Renewables” to play increasing role in global energy mix

ember States of the newly estab- hagen, Denmark, was a fourth city nom- OFID, is offering US$50 million in annual M lished International Renewable En- inated to host the agency, but the Dan- loans to finance renewable energy proj- ergy Agency (IRENA) have decided to lo- ish government withdrew from the com- ects in developing countries. UAE Foreign cate its headquarters in Abu Dhabi, the petition (prior to Sharm el-Sheikh) in Minister HH Sheikh Abdullah bin Zayed United Arab Emirates. It was also agreed favour of Bonn. Also, Bonn and Vienna Al Nahyan was quoted as saying that the to divide IRENA competence and compo- withdrew their candidature at the Sharm UAE, in view of the location of the agency nent parts among three interested cities: el-Sheikh summit. in Abu Dhabi, was extending its hands to the new headquarters in Abu Dhabi; a The interim headquarters will be all countries of the world, and that the centre of technology and innovation in sited in Abu Dhabi’s Masdar City, a agency was not exclusively for the Emi- Bonn; and an inter-organizational liaison planned new city that seeks to produce rates. “It is an international asset,” he office in Vienna. IRENA officials said this zero net carbon emissions and zero net said. “All countries of the world,” he told would reflect the spirit of cooperation waste. The government of the UAE is the Emirates News Agency, “have a right that the agency needed to grow into a committing US$22 million of annual sup- to the agency.” strong and effective organization. port to IRENA through financial year Several Arab and African states The announcement came following 2015. Furthermore, the Abu Dhabi Fund lauded the location of the agency in the agreement to appoint French diplomat for Development, a sister institution of UAE, arguing that the selection was a and Minister of State, Hélène Pelosse as the agency’s first Director-General. Pelosse has a long record of involvement in renewable energy research and devel- opment. She also has what the new agency calls strong communication and representation skills. Pelosse led last year’s European Union negotiations to

form binding targets of 20 percent re- PHOTO: MANFREDXY/SHUTTERSTOCK newables in Europe’s energy mix by 2020. Also, she helped draft French re- newable energy policy as well as the Mediterranean Solar Plan. This involves efforts to develop 20 gigawatt capacity of renewable energy resources in the Mediterranean region by 2020. At a summit at Sharm el-Sheikh, Egypt, representatives from 136 coun- tries took the decision on the agency’s headquarters and leadership. Compet- ing cities against Abu Dhabi were Bonn, Solar energy offers an efficient alternative to electricity, especially in isolated areas of Germany, and Vienna, Austria. Copen- developing countries that are difficult to connect to the national grid.

OFID QUARTERLY VOL. I, NO. 3 41 MEMBER STATES FOCUS

success for the developing world. tions charged with renewable energy de- of renewable energy on a global scale. Energy experts said the UAE had the ap- velopment. Among them are a number of The agency will act as the global voice for propriate climate and topography for the organs of the United Nations System and renewable energy, providing practical production and use of renewable energy, the International Energy Agency (IEA). advice and support for both industrial- particularly wind and solar. The UAE also Nevertheless, Dr. Hermann Scheer, a ized and developing countries, thereby has, for a while, argued in defence of non- member of the German Bundestag who helping to improve frameworks and polluting alternative energy sources. Al- first called for IRENA’s creation in 1990, build capacity. ready, extensive research is going on in argued that neither of those organiza- Renewable energy is generated from the country against a backdrop of a world- tions provided sufficient focus on renew- natural resources such as wind, sunlight wide race for renewable energy resources able energy. According to Scheer, who and geothermal sources. Such energy and technologies. Dr Mohammad chairs the World Council for Renewable could be used to produce electricity for Yaqoub, an expert at the UAE University Energy, the fact that 136 states have domestic and industrial use. The experts told the Worldwatch Institute that global signed IRENA’s statute should reassure assert that renewable energy has a num- growth in solar and wind energy is on the the sceptics. No other inter-governmen- ber of benefits including the fact that it is rise and that the UAE has immense oppor- tal organization came into being with so free – apart from the initial investment tunities for these two sources. Abu many members at its formation, Scheer and scheduled maintenance – as com- Dhabi’s western region and the moun- declared. He called on governments to pared to crude oil and other conven- tainous areas such as Jebel Hafeet and the endow IRENA with the necessary re- tional energy resources. Plans to develop Fujaira mountains are a backdrop for sources to support member states in Masdar City as the world’s first carbon- much wind and solar energy. drafting policies to introduce renewable free metropolis has had a huge impact on There had been initial reluctance energies nationally. research and development efforts for re- among some developed countries to ap- IRENA aspires to become the main newable energy in the Emirates. prove of the new agency because of the driving force for a rapid transition to- existence of other international organiza- ward the widespread and sustainable use

The physical potential of renewable energies

Current global primary energy consumption (GPEC)

Solar radiation (continents) (1800 x GPEC)

Wind energy (200 x GPEC)

Biomass (20 x GPEC)

Geothermal energy (10 x GPEC)

Ocean and wave energy (2 x GPEC)

Hydro energy (1 x GPEC)

Source: Nitsch, F. (2007): Technologische und energiewirtschaftliche Perspektiven erneuerbarer Energien. Deutsches Zentrum für Luft- und Raumfahrt.

42 OFID QUARTERLY VOL. I, NO. 3 MEMBER STATES FOCUS

PHOTO: 2009 MICHU

Africa and South America hold South-South Summit Margarita Declaration speaks of closer cooperation

record 61 African and South Amer- sylvania, USA. The earlier ASA summit Venezuela is eminently popular in many A ican (ASA) states met in summit, was in Abuja, Nigeria, in 2006. African countries. He called for a unified September 24-25, on the Venezuelan is- A key objective of OFID, as spelled mining company; an oil company and a land of Margarita in the Caribbean. The out in its mandate, is the promotion of bank, as his colleagues highlighted their leaders discussed global power structures South-South solidarity. countries resources which they could in- and, among other issues, cooperation in Some 28 of the 61 states at Margarita dividually contribute. The leaders also energy, finance, trade, regional security, (eight South American and 20 African) supported a Special Fund to help agriculture, mining and development were represented at the highest level – by strengthen the capacity of developing prospects. It was the second such summit heads of state and government. Others countries to confront climate-related in three years aimed at helping foster were vice-presidents, prime ministers, hardships. closer collaboration between the two re- foreign ministers and other ranking offi- Apart from President Chávez, other gions. The two-day summit came right cials. They called for new links between prominent leaders at the summit in- after the 64th United Nations General As- the continents, including joint military, cluded President Luiz Inácio Lula da Silva sembly Session in New York and the banking and mining efforts. Host of the of Brazil; President Cristina Fernández meeting of the G20 in Pittsburgh, Penn- summit, President Hugo Chávez Frias of of Argentina; Ecuadorean President

OFID QUARTERLY VOL. I, NO. 32 43 MEMBER STATES FOCUS

The Margarita Declaration ; Chilean President endowed with a total US$20 billion as Michele Bachelet; Abdelaziz Bouteflika of start-up capital. Brasilia, Buenos Aires proposes wider cooperation Algeria; Robert Mugabe of Zimbabwe; and will each provide US$4 bil- of Bolivia; and Muammar lion dollars. President Chávez suggested in education, technology, El-Gaddafi of the Socialist Peoples Libyan that the bank, to primarily fund anti- mining, agriculture and Arab Jamahiriya, who currently chairs poverty and development projects, will the . This was Gaddafi’s hold foreign reserves of countries of energy, and reasserts the first visit to the in his 40 years South America. He stressed that “keep- as leader of Libya. ing them in banks of the North so that commitment of African A Declaration produced at the Mar- they make loans using our own money, and South American garita summit touched on a wide range will be silly.” Chávez also said the Bank of global issues. It urged a reform of the of the South should forge an alliance leaders to the eradication UN Security Council; it proposed wider with a similar institution in Africa, pos- cooperation in education, technology, sibly the African Development Bank, to of poverty and hunger. mining, agriculture and energy; and create a “South-South” bank financially condemned piracy, nuclear weapons strong enough to finance larger scale de- and illegal arms trade. A chapter ex- velopment projects and programs. The pressed renewed commitment to collab- Venezuelan leader suggested a name for oration in the fight against poverty and the new South-South Bank – “Bancasa” asserted ASA’s desire for genuine devel- (for ASA – Africa-South America – as the opment. present summits are known). The 95-point, 30-page Declaration Along with the Margarita Declara- also touched on the need to solve, in a tion, a number of countries also signed bi- peaceful way, any problem or dispute lateral agreements to boost or establish that could endanger regional or global trade and finance. Venezuela signed a security. Furthermore, the Declaration Memorandum of Understanding with said the two regions are committed to Sierra Leone to create a joint mining championing anti-drug initiatives, pro- company. Venezuela will sign similar posals and actions. The document nev- agreements with Mali, Mauritania, Niger ertheless recognized the traditional use and Namibia in the near future. Several of coca leaves by the indigenous peoples other leaders spoke in favor of regional of Bolivia as a cultural tradition that cooperation in the areas of food and agri- should be respected by the international culture. They also expressed interest in community. taking part in the next FAO food security The Declaration, furthermore, re- summit scheduled for November 2009, asserted the commitment of African and in Rome. South American leaders to intensify ef- forts to eradicate poverty and hunger in Some key statements by the leaders at the the context of the Millennium Develop- summit were widely disseminated by the ment Goals (MDGs). The Director-General global media: of the Food and Agriculture Organisation • Argentine President Fernández was of the United Nations (FAO) Jacques quoted as saying that the emerging co- Diouf, who attended the summit, re- operation between Africa and South marked that for the first time in history, America could give rise to a new model more than one billion people in the of cooperation that would include the world faced hunger. transfer of technology and generate On the sidelines of the summit, the jobs. She declared that Argentina presidents of seven South American coun- could offer technology, expertise and tries – Argentina, Bolivia, Brazil, , machinery, “so that Africa would not , and Venezuela – have to depend on charity from inter- signed a “foundation document” for national organizations, but would a Bank of the South or Banco del Sur, to be produce its own food itself.”

44 OFID QUARTERLY VOL. I, NO. 3 MEMBER STATES FOCUS PHOTO: REPÚBLICA BOLIVARIANA DE VENEZUELA, MINISTERIO DEL PODER POPULAR PARA LA COMUNICACIÓN Y INFORMACIÓN

Venezuelan President Hugo Chávez Frias pointed out that South America and Africa together hold one-quarter of the planet’s oil reserves.

• Brazil’s Lula da Silva said “we have to Libyan leader also reiterated criticism or uni-polar world.” Instead, “it will be construct a new alliance, discover op- of the UN system which he made a few multi-polar…Africa will be an impor- portunities and help ourselves mutu- days earlier in New York. tant geographic, economic and social ally.” He summed up the general tenor • President Chávez further underscored pole…And South America will be too,” of views among the 28 leaders at the the potential of the two regions he declared. summit. which, together, hold one-quarter of • Ecuador’s Correa, who holds the rotat- the planet’s oil reserves. Prior to the At the close of the summit, Venezuela ing presidency of the Union of South summit, Venezuela and Equatorial offered facilities to house an ASA Sum- American Nations (UNASUR) added Guinea, which produces nearly mit Secretariat on Margarita Island. The that for the first time ever, there were 400,000 barrels per day of oil but has leaders agreed to a follow-up mecha- sufficient resources in the world to no refinery of its own, signed agree- nism, to be based on sector-related solve the problem of hunger. He said: ments with Mauritius and Niger to working groups. These high-level offi- “We have the biggest permanent reser- study the construction of a sub-re- cials will meet in the next few months voir of clean water in the world and gional refinery in West Africa. It is pro- to work out proposals to be presented to yet they call us the poor.” posed that the refinery would eventu- an assembly of foreign ministers within • Gaddafi told his colleagues that, “for ally serve even OPEC country Nigeria. the next several months. The third African countries, it is closer to visit President Chavez told the summit that Africa-South America summit will be in our brothers in South America.” The the 21st Century “will not be a bi-polar Libya in 2011.

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Linking the past, present and future OPEC releases annual publications

In a world where energy interdependence among nations seems to advance year-on-year, it is essential to have a handle on just what is happening, as well as where, when and why. It is without doubt a challenge, given the increasing scope and intricacies of the global energy system, but one that needs to be undertaken. For OPEC, meeting this challenge is clearly evidenced in two of its annual publications — the Annual Statistical Bulletin and the World Oil Outlook. James Griffin and Alvino Mario Fantini report on the press conference that marked the release of the latest issues of these two publications.

T he Annual Statistical Bulletin (ASB), tary General, Abdalla Salem El-Badri, in and analysts at the OPEC Secretariat in now in its 44th year, and the World the forewords of both publications. In Vienna, as well as a global online audi- Oil Outlook (WOO), first published in the ASB, El-Badri says the publication “is ence. The event was presided over by El- 2007, are part of OPEC’s efforts to ad- meant to further enhance transparency Badri, who was joined by Dr Hasan M vance awareness and provide a better un- through data-sharing amongst all stake- Qabazard, Director of the OPEC Research derstanding of the major issues that are of holders in the oil industry.” As for the Division, Fuad Al-Zayer, Head of the Data concern to the Organization and the oil WOO, he stresses that the publication’s Services Department, Mohamed Hamel, market in general. The ASB ties in the past “goal is to provide a useful reference Senior Adviser, and Dr Fuad Siala, Alter- and the present, bringing together time- guide for the coming year: it is an impor- native Sources of Energy Analyst, and series data for a wide variety of oil market tant tool that helps further the common currently Officer-in-Charge of the Energy and energy indicators. The WOO links the interest among all stakeholders for en- Studies Department. present and the future, with state-of-the- ergy market stability as we look to bring Following introductions by Dr art economic modelling and forecasting more clarity to the oil market and de- Omar Farouk Ibrahim, Head of OPEC’s used to present information, projections velop solutions and ways forward in the PR & Information Department, and brief and concepts for the medium- and long- years ahead.” preambles from El-Badri and Qabazard, term outlooks. This year, the release of the two pub- the floor was given to Al-Zayer, to pres- The Organization’s efforts are visible lications took place at a press conference ent the key findings and main messages in comments expressed by OPEC Secre- in early July, in front of assembled press of the ASB.

46 OFID QUARTERLY VOL. I, NO. 3 PARTNERSHIPS

PHOTOS: OPEC At the launch of the ASB/WOO were HE Abdalla Salem El Badri, OPEC Secretary General (centre); Dr. Hasan M. Qabazard, Director, Research Division (2nd left); Dr. Fuad M. Siala, Officer-in-Charge, Energy Studies Department (1st left); Mr. Fuad Al-Zayer, head, Data Services Department (2nd right); and Mr. Mohammed Hamel, Senior Adviser, (1st right).

Rising levels of reserves said. Non-OPEC reserves, on the other In fact, lower oil consumption in the 3 In presenting the publication’s findings, hand, were 89 trillion m , or 49 percent. OECD economies last year led to the first decline – by 350,000 b/d – in world oil Al-Zayer began by highlighting that the Continued production data indicates that proven oil reserves in consumption since 1993. The price of OPEC Member Countries have risen by In addition, as Al-Zayer explained, OPEC crude was also significantly volatile in 75 billion barrels (bn b) in 2008. This oc- continues to be a reliable supplier of 2008, he added, making it an especially curred despite an overall increase in pro- crude oil to the world, with Member difficult environment in which to make duction, he noted. Specifically, OPEC’s Country crude oil production in 2008 in- investment decisions. proven reserves reached 1,027bn b at the creasing “on average” by more than one end of 2008, compared with 952bn b at million barrels/day (b/d), while non- Upstream and the end of 2007. This is more than dou- OPEC production fell by more than downstream activities ble OPEC’s cumulative oil production 500,000 b/d. This demonstrates the Or- The 2008 ASB data also show that OPEC since the beginning of productive activ- ganization’s commitment to ensuring Member Countries continued to increase ities in Member Countries (448bn b), he that the market is always well-supplied. their investments in exploration and pro- added. In fact, in a slide showing produc- duction, despite noticeably rising costs. With OPEC’s current proven reserves tion levels going back to 1962, Al-Zayer One measure of the growth in produc- in Member Countries representing 79 per- explained that OPEC Member Countries tion activities in the ASB is the data re- cent of the global total, the 2008 data ap- accounted for nearly half of all world pro- garding the number of active drilling rigs pears to underscore the ongoing impor- duction, with their share accounting for in both OPEC and non-OPEC countries. tance of the Organization’s activities for more than half in the mid-1970s. Cur- The number of rigs reached its highest meeting world energy needs. The balance rently, OPEC’s share of world crude pro- level in 2008 with 400 active rigs in of 21 percent represents non-OPEC re- duction stands at 45.9 percent, he said. Member Countries, Al-Zayer said. How- serves (about 268bn b), said Al-Zayer. Consumption levels, too, are re- ever, he added that “the picture has Data for proven natural gas reserves is flected in the ASB data. For example, in changed during the latter part of 2008,” also included in the ASB, noted Al-Zayer. 2008, decreasing oil consumption in with figures showing a sharp decline, due At the end of 2008, OPEC Member Coun- North America and Europe was offset by to the global economic downturn. tries held 93 trillion cubic metres of gas, or growth in developing countries in the The figures also showed that OPEC 51 percent of total world gas reserves, he Middle East and China, noted Al-Zayer. Member Countries have continued to

OFID QUARTERLY VOL. I, NO. 3 47 PARTNERSHIPS

invest in downstream refineries, both at home and in major consuming coun- tries. The data in the ASB show that the growth of refinery capacity over the past 20 years has taken place primarily in OPEC Member Countries and in Asia. Other areas, like Europe and the United Sates, “have remained relatively stag- nant”, Al-Zayer said. OPEC’s investments in downstream activities are also reflected in the in- creased amount of OPEC exports of re- fined products – with 4.4 million b/d ex- ported in 2008, compared with 4.3 mil- lion b/d in 2007. The majority of the ex- port growth, said Al-Zayer, has been wit- nessed in Asia. HE Abdalla Salem El Badri fielding questions from a reporter after the Press Conference Oil revenues and development Another of the ASB’s important features US$757 billion in 2008. “It is worth men- by the end of 2008,” with the central el- is the inclusion of summary data for all tioning that 75 percent of petroleum rev- ement linked to this freefall, “the global of OPEC’s Member Countries. GDP per enues — and 56 percent of all exports — financial crisis, which was triggered by capita levels, for example, show that the were required for importing goods from the sub-prime mortgage crisis in the US, average income in each Member Country other countries,” said Al-Zayer. And the before rapidly spilling across the world.” is US$4,700 per capita – compared with ongoing price volatility has made it a the OECD average of US$36,400. This sim- Additionally, Hamel noted that it challenge for Member Countries to plan ple fact may remind people that OPEC’s was now recognized that the extreme their national budgets, he added. Members are developing countries. volatility witnessed by oil markets had been exacerbated by speculation and In fact, as Al-Zayer noted, OPEC A turbulent year was not helpful for market stability. This Member Countries continue to be highly Following the conclusion of the ASB was taken further in El-Badri’s foreword dependent on oil exports. Oil exports re- presentation, the baton was passed to in which he stated: “OPEC has repeat- main the primary means for OPEC Mem- the WOO. In its third year, the WOO is edly called for better regulation and in- ber Countries to generate revenue for the now widely recognized as one of the in- creased transparency in these (commod- development of their people and dustry’s premier publications; one that ity) markets, for the benefit of both pro- economies. In fact, for seven of the 12 receives widespread media coverage and ducers and consumers alike. This call Member Countries, oil export earnings one drawn upon by a wide variety of in- had a prominent place in the foreword represent more than 90 percent of total dustry stakeholders. And given, as the of last year’s WOO. There is evidently a exports, noted Al-Zayer. The OPEC aver- WOO 2009 describes, that “the year need for this to be repeated here.” age is 74.3 percent. that has passed between the publication Due to significant price increases in of the 2008 edition and the finalization The downturn has impacted both 2008, the value of all OPEC exports in- of this year’s has been one of unprece- economic activity and international creased by US$304 billion over 2007, dented turbulence,” there was much for trade, leading to a choking of demand reaching US$1,356 billion (versus the new publication to analyze and for oil. “World oil demand fell in 2008 US$1,052 billion in 2007). The value of comment on. and our expectation is that we will see a OPEC’s petroleum exports alone in- This was clearly evident in the pres- further significant decline this year. It is creased by about US$261 billion in 2008, entation delivered by Mohamed Hamel. the first time since the early 1980s that reaching more than US$1,000 billion, He underscored the extreme volatility oil demand has declined in two succes- noted Al-Zayer. in the oil market “with OPEC’s Refer- sive years,” Hamel said. The increasing value of oil exports, ence Basket price reaching more than Nevertheless, he was quick to point however, was partly offset by higher lev- US$140 per barrel last summer, before out that a recovery will follow, although els of imports, with their value reaching falling by 75 percent to close to US$30/b its timing and strength remain some-

48 OFID QUARTERLY VOL. I, NO. 3 Fuad AL-Zayer, Coordinator, ASB 2008 and Mohammed Hamel, Coordinator, WOO what uncertain. In this year’s WOO Ref- Hamel said that “medium-term prospects Supply is sufficient erence Case it is assumed that the end of (to 2013) for oil demand are adversely im- On the supply side, Hamel stressed that 2009 represents the bottom of the cycle pacted by the economic recession and the resource base is sufficient and there with global output declining by 1.3 per- the expected slow recovery.” OECD de- would be a wide range of conventional cent. In 2010 and 2011, recovery is un- mand falls in this period, with the main and non-conventional sources of oil to derway, but far from complete. And it is source of incremental demand coming satisfy demand. He said: “The key issues only by 2012 that economic growth is from developing countries. Overall, there are not related to availability, but more back to trend values. Once the recovery is a major reassessment from last year, to deliverability and sustainability, as is complete, economic growth averages with oil demand by 2013 projected to be well as to uncertainties surrounding the 3.4 percent per annum (pa) for the next 5.7 million b/d lower. extent to which increases in the demand decade, with the average rate falling in Looking long-term, oil demand, for crude will actually materialize.” the following decade in line with demo- with the transportation sector remaining In the medium-term, total non- graphics and productivity gains. the main source of the increment, is ex- OPEC supply, mainly from non-conven- This will obviously have implica- pected to grow from 85.6 million b/d in tional oil, is expected to continue to see a tions for future energy and oil use and 2008 to close to 106 million b/d by 2030, modest rise, increasing by just over 1 mil- Hamel also added that policies, such as although this 2030 figure is around 8 mil- lion b/d from 2008–13. From OPEC’s the US Energy Independence and Secu- lion b/d lower than last year. Once again, viewpoint, the Reference Case points to rity Act, and the European Union cli- developing countries are set to account OPEC’s crude oil supply having fallen dra- mate and energy legislative package, for most of this rise. matically in 2009 in the face of the global constitute key drivers in this regard. In recession, then rising slowly over the Hamel said that “OECD countries’ 2009, both policies are incorporated medium-term and returning to 2008 lev- into the WOO. demand actually peaked in 2005 and sees els by around 2013. And in the long-term, a steady future decline, by around 4 mil- With this base in mind, there are a non-OPEC supply rises to 2030, due to lion b/d in 2030, compared with 2008.” number of key findings. non-crude sources, OPEC natural gas liq- Nevertheless, Hamel underlined that, uids also increase, which means that de- A demand viewpoint even by 2030, oil use per capita in devel- mand for OPEC crude will increase from From a demand perspective, energy de- oping countries will remain far below 31.2 million b/d in 2008 to 41 million b/d mand in the Reference Case increases by that of the developed world. in 2030. This is 2.5 million b/d lower than 42 percent by 2030, or 1.5 percent pa on In fact, Hamel stated, despite the in- the projection in last year’s WOO. average, with fossil fuels continuing to crease in energy use, a large share of the This year’s WOO also emphasizes satisfy most of the world’s energy needs. world population will continue to lack that large investments are currently un- Looking at oil demand specifically, access to modern energy services. derway in OPEC Member Countries to

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Who gets what from oil?

Fuad Al-Zayer, Head of OPEC’s Data Services Depart- with the US$3,346 billion ment, concluded his presentation of the ASB with a in crude oil sale revenues quick look at the updated version of the OPEC docu- received by OPEC producers. ment, Who Gets What from Oil? Offering a breakdown In the United Kingdom, of the actual price of a liter of oil, the publication graph- in particular, the tax on a ically illustrates the tax burden imposed on the final litre of oil represents nearly consumer of oil in G7 countries. 57 percent of the cost of a Al-Zayer explained that the cost to produce and litre, with only 34 percent sell a liter of oil consists of the actual price of crude, the going to the actual price of industry margin (including refinery, transportation and the crude and nearly nine distribution costs) and the taxes imposed by the national percent to cover industry governments of consuming countries. He noted that with margins. In other words, the the exception of Japan, Canada and the US, all G7 coun- UK government makes nearly 1.7 times tries make more money from taxes on oil than oil more off a litre of oil than the producers of that oil. producers make from the sale of crude. In summary, Al-Zayer said that what the informa- In aggregate, Al-Zayer highlighted that for the five-year tion in the brochure indicates is that, in general, the real period 2004–08, the total revenue from taxes received by price burden on consumers comes from taxation in G-7 country governments was US$3,418 billion, compared consuming countries.

Who gets what from a litre of oil in 2008?

Crude fob price Industry margin Tax

UK

Germany

Italy

France

Japan

Canada

USA $ / litre

0 0.25 0.50 0.75 1 1.25 1.50 1.75

Notes: Figures are estimated prices in US dollars per litre for the year 2008. Industry margin includes transport, insurance and other costs. Crude fob oil price includes cost of production and other related expenses. Source: Research Division, OPEC, Vienna, Austria, 2009.

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expand upstream capacity. Hamel said: as 2020, demand could be as low as 29 Kyoto Protocol track, to agree on further “This should be sufficient to not only sat- million b/d, or as high as 37 million b/d, commitments for Annex-I countries. The isfy demand for OPEC oil, but also to pro- which “translates into an uncertainty importance of these is evident in the vide a comfortable cushion of spare ca- gap for upstream development invest- WOO, which explores the implications pacity, of around 6 million b/d by 2013.” ment requirements in OPEC Member for future CO2 emissions. However, he also stressed that this is in- Countries of over US$250 billion.” Hamel said this edition “stresses extricably connected to the assumption These are significant numbers, un- again the historical responsibility of de- that oil prices in the Reference Case are as- derlining the importance of security of veloped countries in the current state of sumed to be sufficient to ensure that in- demand. Hamel asserted that there was a the Earth’s atmosphere. Cumulative vestments are undertaken in a timely “real prospect of wasting resources on un- greenhouse gas emissions even by 2030 manner. needed capacity.” are still largely from developed coun- Alternative scenarios explored tries.” Moreover, he added that devel- Downstream challenges oped countries, having the financial and The concept of a deeper and longer reces- The WOO also explores the downstream, technological capabilities, should take sion than currently envisaged, coupled with the economic downturn and the lead in mitigation and adaptation ef- with a medium-term low oil price envi- shrinking product demand having dam- forts, including through the provision of ronment in the medium-term, is ex- aging impacts on the sector, with falling adequate financial resources and the plored in a ‘Protracted Recession’ sce- utilization rates and weakened refining transfer of technology to developing nario. Although Hamel stated that the margins. This is occurring alongside an countries. “This is enshrined in the UN likelihood of an extended recession had increase in refineries’ potential to run Framework Convention on climate recently subsided, the scenario depicts a crude, because of investments decided change and its Kyoto Protocol,” he said. future where businesses face tight and ex- during the previous high margin cycle. It pensive credit conditions, world output results in a projected distillation capacity Linking the past, present is reduced by an additional six percent by surplus in the Reference Case of around and future 2013, world demand is lower by around 5 million b/d by 2012, pointing “to the The ASB and the WOO provide linkages 2.4 million b/d, albeit demand for OPEC increasing likelihood of refinery closures across the past, present and future. They crude is slightly higher, and crude oil over the coming years, particularly in the are valuable resources that detail how the prices are significantly softer than in the Atlantic basin, in order to restore mar- oil industry got to where it is today and Reference Case. gins and reach satisfactory utilization what challenges remain for the develop- The upshot is that this has all had an rates,” stressed Hamel. ment of a sustainable energy future in an adverse impact upon companies’ cash In the longer term, however, the increasingly interdependent world. They flows and financing conditions and thus global refining system will require sub- are also important elements in the fur- upon oil supply prospects, in both OPEC thering of pragmatic dialogue and coop- stantial capacity additions. Current pro- and non-OPEC countries. And in turn, jections indicate the need for around 18 eration among all stakeholders. Hamel highlighted, “spare capacity could million b/d of new distillation capacity, fall to around two percent of world de- 10m b/d of conversion capacity and more mand, compared with around four per- than 20 million b/d of desulphurization cent last year and almost eight percent capacity. Hamel said investments this year.” He added that the message in conversion capacity should be from this scenario is that, “as history has mainly geared to hydro-cracking shown in the past, too low oil prices are and more than 70 percent of new not sustainable. They would lead to tight- desulphurization capacity will be ori- ness and thus much higher prices when ented to diesel sulphur reduction.” the global economy recovers.” In the long-term, the WOO also ex- Approaching Copenhagen plores the huge uncertainties over de- This year is also an important one for cli- mand for OPEC oil and how much in- mate change with negotiations set for vestment is required. This is delved into Copenhagen in December. This is both in two further alternative scenarios: one within the United Nations Framework Both the ASB and the WOO are depicts higher economic growth and the Convention on Climate Change (UN- available for free download at the other lower, compared with the Refer- FCCC) track to enhance the implementa- OPEC website: www.opec.org. ence Case. Hamel stated that by as early tion of the Convention and inside the

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Cheese-making business flourishes in rural Armenia

In Armenia, a precarious enterprise run by a widowed mother of three in a remote, post-conflict village has been transformed into a booming business, thanks to a microcredit loan provided through the Farmer Market Access Program. Spearheaded PHOTOS: PROVIDED BY FMAP by the International Fund for Agricultural Development (IFAD) and cofinanced by OFID, the initiative aims at stimulating and diversifying commercial activity among struggling rural communities.

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the early stages. With few assets, no equipment or production site, and no ac- cess to markets, Ghasryan found the start-up to be particularly difficult. But undaunted by the risks and responsibili- ties involved, Ghasryan sold her farm to invest more money in the business, and began buying milk from her neighbours. Eventually her hard work paid off. When she secured the US$20,000 loan from the IFAD-funded project in 2004, it made a crucial difference to her business. She bought new processing equipment, re- paired and expanded the production site, and founded Daliha Ltd, named after her three children, David, Lilit and Hakob. Daliha Ltd specializes in making a Roque- fort-type cheese. “This is an especially risky type of cheese,” says Ghasryan. “It takes three months to ripen, and even ida Ghasryan lives in Syunik dis- from home on a very small scale. Today, then you have no guarantee of getting A trict, one of the most remote and thanks to her dogged determination and the right quality. I also make fresh cheese least developed regions of Armenia. The a loan through the IFAD-funded Agricul- to cover operational costs.” region’s economy, already fragile after the tural Services Project, Ghasryan’s com- collapse of the Soviet Union, was badly pany is a prosperous family business, pro- Market links stimulate economy damaged during the conflict with Azer- ducing almost 20 tons of cheese a year. Another major obstacle Ghasryan has baijan over the Nagorno-Karabakh region The project, implemented in Armenia had to overcome is the difficulty of gain- from 1991 to 1994. Its distance from the from 2001 to 2006, provided microcredit ing market access. Syunik is remote and capital and lack of transport connections services for small business development there is little demand for her cheeses in has impeded economic recovery. When as part of a broader drive to support rural the district. But she has managed to her husband died, Ghasryan was left and economic development in disadvan- solve the problem of product distribu- alone without a job and with three small taged and remote areas of Armenia. tion by establishing links with three children to support. “I couldn’t give up,” dealers who sell her products in Yerevan, she says. “Three lives depended on me.” Loan helps overcome hurdles the capital. Ghasryan’s business is help- Ghasryan had a small dairy farm and Ghasryan faced a number of challenges ing stimulate the local economy. By pur- some experience in cheese processing, getting her small business off the ground. chasing 650 litres of milk per day from having worked as a qualified cheese- For one thing, cheese-making in itself is 15 families, she generates income for her maker in the local factory during the So- a risky venture. It is a slow and labor-in- fellow villagers. In the future Ghasryan viet period. She began to produce cheeses tensive process that requires a great deal and her children intend to take out a sec- of supervision, as well as lab- ond loan to expand production. They oratory analysis and tests. The plan to buy a farm, equipment and a lab- smallest instance of careless- oratory and open up a second produc- ness can spoil the product, tion site. “I’m so happy that I have over- and many risks are involved come so many obstacles and been able to in the different stages of pro- secure this prosperous future for my chil- duction, from milk storage, dren,” she says. Since 2002, IFAD has pasteurization and curd-mak- helped strengthen the economic and so- ing to pressing of the cheese, cial position of women through the pro- salting, ripening and storage. grammes and projects it supports in east- On top of that, she had to ern European and former Soviet coun- deal with other overwhelm- tries, by helping women’s businesses ing difficulties, particularly in take root and thrive. Source: IFAD

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he continuing high cost of rice is a T worrying trend, not least for the

PHOTO: IRRI poor families in developing countries who spend up to 40 percent of their in- come on rice. And for whom even a seem- ingly small increase in price means that they can no longer afford to pay for schools fees, health care and other basic amenities. So what are the reasons for demand outpacing supply and keeping prices up? For one, the world population continues to rise, while cultivable land is shrinking, partly due to desertification and erosion. Secondly, soaring fuel prices have esca- lated transportation costs, which trans- lates into more expensive seeds and fertil- izer. During the years when rice was abun- dant and inexpensive, many developed countries became complacent about in- Research is helping to develop hardier varieties of rice that can grow in difficult conditions. vesting in agricultural research and devel- opment. And despite the climb in rice prices, ample investments have not been forthcoming, thus slowing the progress of Researchers develop research organizations that strive to de- velop sustainable solutions for farmers. It has become the general consensus new rice varieties to among stakeholders, agricultural re- search institutions and others that while rice production must be maximized, al- meet hike in demand lotting more land for agriculture is not a viable solution. Rather, technologies by Anna Ilaria-Mayrhofer must be devised and disseminated that will help optimize rice yields while utiliz- Although what was deemed the “rice price crisis” ing less land. Fortunately, organizations such as in early 2008 has abated somewhat, its effects the International Rice Research Institute cannot be ignored, nor the underlying causes. (IRRI), have made enormous strides in doing just that. Based in Manila, the And while the average consumer in the industri- Philippines, IRRI has devoted nearly half a century to helping the developing alized world may not be seriously affected by world stave off poverty and famine. As well as teaching small farmers how to in- paying more for their favourite breakfast cereal or tegrate inexpensive technologies and packet of rice, higher food prices have disastrous boost rice yields, the Institute has also tested tens of thousands of cultivars and consequences for families in the developing bred hardier varieties of rice plants that can withstand severe weather conditions countries, where rice is the staple food for around such as flood, drought and saline soils, With offices scattered across 14 nations, three billion people. IRRI is known as the “Home of the Green Revolution in Asia.”

54 OFID QUARTERLY VOL. I, NO. 3 SPOTLIGHT

Rice is a labor-intensive crop, not only during the maturation process in the paddy, but also after harvest. Farmers PHOTO: IRRI must face a number of daunting chal- lenges to ensure that losses are kept to a minimum, while the paddy rice under- goes a lengthy, multi-step preparation process. Although methods vary from re- gion to region, traditional methods are the most widely practiced in developing countries. Some of them, however, re- sult in higher losses and hang in delicate balance with weather conditions. Over- all post-harvest losses in Asia, the top rice-producing region in the world, are estimated at approximately 10-15 per- cent. And when one examines the painstaking process it takes to get from the paddy to the table, it becomes easier to understand how easily losses can occur, particularly among low-income farmers who often lack up-to-date equip- ment and technical support. From paddy to storage Post-harvest processing begins with threshing, to remove the grain from the plant, clean it and then store it temporar- ily before milling. The rice must be dried as quickly as possible after harvest to pre- vent mold and contamination from pests. Sun drying is one of the most com- mon methods used in Asia, and to a lesser extent, drying machines. This is a vital step, as the moisture level must be low Poor families in developing countries spend up to 40 percent of their income on rice, which before it is suitable for storage; the longer is the staple food of billions. the rice is stored, the lower the initial moisture content must be. Once milled, the rice must be stored. The proven to be invaluable. Such services are For rice destined for consumption, most favored method by Asian farmers especially useful for farmers who may not the paddy grains must be milled to re- entails storing grains in 40-50 kg jute be able to afford modern machinery, but move the inedible outer hull of the sacks in open granaries, although some- can nonetheless benefit from incorporat- grains. A one-step milling method leaves times other types of containers are used. ing new methods and learning how to the second bran layer, thus resulting in Such methods, however, are susceptible avoid many of the problems that result in brown rice. To produce the more widely- to spoilage from moisture as well as insect losses. eaten polished white rice, an additional or rodent pests. To test the most effective storage milling step is required. Although larger methods, IRRI scientists conducted an commercial operations use machines Simple technologies, small cost analysis of live insect counts found in that that yield high “head rice recovery” IRRI has striven, therefore, to provide rice. Grains stored in bags in open ware- (the amount of unbroken grains pro- farmers with simple, low-cost technolo- houses had the highest levels; the lowest duced), typical village mills tend to re- gies that can help resolve some of these were found when airtight, or hermeti- cover only around 30 percent of the orig- problems. The Institute also offers vil- cally-sealed, containers were used. IRRI inal paddy rice. lage-level extension services, which have thus developed the IRRI Super Bag,

OFID QUARTERLY VOL. I, NO. 3 55 SPOTLIGHT PHOTO: IRRI a 50 kg-capacity plastic liner that is im- pervious to moisture and reduces oxygen levels from 21 percent to 5 percent (thus producing an environment not con- ducive to insect life). The reusable bags cost only around US$1 each – an expense farmers can swiftly recover as a result of less spoilage. IRRI has also demonstrated to farm- ers that traditional storage containers, such as clay pots, can be made more in- sect and water-resistant simply by paint- ing their inner and outer surfaces with acrylic paint and sealing the openings with grease, silicon or other water-resist- ant substances. Recycled plastic contain- ers have also proven to be efficient, inex- The use of proper rice storage techniques can dramatically reduce losses due to spoiling through damp and pests. pensive solutions. Another tool that has been devel- that is attended by local extension work- are very promising. While yields during oped by IRRI, along with the Interna- ers and neighboring farmers. FPR has normal rainfall for drought-resistance tional Maize and Wheat Improvement been welcomed by farmers as they are in- types were roughly the same as those of Center (CIMMYT), is a web-based Cereal volved in the entire process, and the suc- the regular varieties; during times of Knowledge Bank that was launched in cessful results have been swiftly dissemi- drought, yields reached approximately 2008 as “the world’s leading repository of nated to other communities. 1.5 – 2 tons/ha, instead of the 0.5 ha extension and training materials related a farmer might expect from planting to cereal and cereal production.” Users At the forefront of research the regular variety. In the Philippines, can tap into a plethora of information, IRRI is also at the forefront of developing drought-tolerant strains brought another such as fact sheets, e-learning courses and new strains of rice that can withstand ad- bonus – a two-week earlier maturation, a “Rice Doctor.” The latter helps farmers verse conditions and has the potential to which enables farmers to get their pro- to identify problems and glean potential help millions of impoverished farmers. duce to marketplaces earlier and avoid solutions, often using existing technolo- Farming families in developing countries late harvests under unfavorable climatic gies – such as how to prevent grain break- have been forced to accept famine as a conditions. Another benefit of the age during milling by making small mod- regular occurrence. This is often the case drought-tolerant strain is that unlike its ifications to the machine and maintain- when food supplies from the previous counterparts, it doesn’t need to be ing optimal levels of moisture. year’s harvest become depleted and the planted in flooded paddies, a tremendous To help famer reduce losses in the new crop is not yet ready to be harvested. boon in water-scarce regions. field, IRRI developed the Farmer Partici- Households must then resort to depleting IRRI has also developed a flood- patory Research (FPR) approach, where their savings or, more often than not, resistant rice that has been tested in scientists, together with farmers, imple- trading their livestock for food supplies, Bangladesh, a low-lying country that ment different cultivation technologies. leaving them with even fewer income- experiences major annual flooding. First, in each village, group meetings are generating opportunities. Swarna Sub-1 came about when, five years carried out with a facilitator (generally a There are a number of reasons for a ago, IRRI scientists inserted a submer- researcher), the village head and a small late harvest, although the most prevalent gence-resistant gene into the conven- group of farmers. Here, the farmers dis- obstacle put in the farmers’ path is ad- tional strain of Indian rice. What they cuss their specific problems, agree upon verse weather conditions. Inclement ended up with was this: a cultivar that a potential strategy with the researcher, weather – such as drought or excessive could withstand more than two weeks of and then seek volunteers to test the solu- rain – during a plants’ reproductive stage being underwater. The local branch of tion on their own fields – doing so in ac- can wipe out an entire crop. IRRI, with donor support, embarked cordance with their normal practice. After many years of dedicated re- on a distribution program of seeds and While the relevant experiments are car- search, IRRI, in collaboration with a host seedlings of Swarna Sub-1 across nine dis- ried out, extension workers make follow- of scientists and partner institutions, has tricts in the country. With test plots ex- up visits. Afterwards, participating farm- developed strains of drought-tolerant panding and enthusiastic support from ers prepare a report about the experi- rice that have been successfully tested in farmers, it is hoped that the use of this ment, which is discussed at a workshop India and the Philippines. The findings variety will be adopted country-wide.

56 OFID QUARTERLY VOL. I, NO. 3 www.ofid.org

Securing a better future for the world’s poor

Sustainable development is all about results that last. Results that continue making a difference from one generation to the next. It’s about healthy, well-educated populations, clean water and food security, and an end to isolation.

For over 30 years, OFID has been at the forefront of the fight against poverty. Working hand-in-hand with needy communities, we’ve helped build schools, health centers and roads. We’ve provided energy and water supplies. And we’ve helped our partner countries develop vibrant private enterprise sectors.

Their future is our inspiration.

OFID A Dynamic Partner Parkring 8, A-1010 Vienna, Austria P.O. Box 995, A-1011 Vienna, Austria Telephone: (+43-1) 515 64-0 Fax: (+43-1) 513 92 38 www.ofid.org