5 April 2011 | Vol. 2, № 12. From the Editor’s Desk Dear FDI supporters, Once again FDI’s Indian Ocean Research World Bank funding for water management in programme held a roundtable in Perth. It Indonesia while Jesse Pillay investigates considered “China’s Role in the Indian Ocean” Indonesia’s naval expansion. and was an important step in progressing the programmes research in to future scenarios in In the past week FDI welcomed the latest the Indian Ocean. In the next two weeks similar addition to our internship programme. University of WA student, Annika Aitken, is roundtables will be held in Sydney and assisting research manager Leighton Luke in Canberra. the Indian Ocean Research Programme. Roundtables form a fundamental part of the research that is carried out by FDI and we are Keep an eye out in the coming days for the Strategic Analysis Paper which provides a really thankful for the ongoing support we get from Associates in Australia and internationally summary of the recent FDI Global Land in making this a success. We believe that it Availability roundtable as well as a fascinating study on water surplus countries. Another provides FDI with a unique research edge. paper, due for release in the next few days will In this issue of the Strategic Weekly Analysis consider Pilbara Prospects. we get a first taste into what we can look forward to from our new strategic analyst Liam If you know of anyone that will benefit from McHugh. He considers a decision by Hancock our research or who should be considered as an FDI Associate, please give the FDI office a Prospecting to allow third party access to its rail network and what it will mean for smaller call on +61(08) 9486 1046 or email miners. [email protected] Readers will find two articles from the Food and Water Crises Research Programme. One, by Prue Campbell considers the terrible floods Major General John Hartley AO (Retd) that have hit Southern Africa while the other Institute Director and CEO article, by Nicole Bosveld, reports on new Future Directions International ***** Hancock Decision Solves Multi-User Rail Network Dilemma Summary Rio Tinto Iron Ore (RTIO), BHP Billiton (BHBP) and Fortescue Mentals Group (FMG) have developed and subsequently monopolised some of the largest private rail networks in the world. Hancock Prospecting’s announcement in late March to allow third party access to its future rail network has opened the Pilbara for junior players succeeding where the Federal Government, National Competition Council (NCC) and Pilbara Rail Infrastructure Advisory Committee has failed. Analysis The State and Commonwealth governments must develop a standardised rail policy to ensure a systematic and multidimensional approach to supply management of Pilbara exports. Current policy can be best described as ad hoc and monopolised by RTIO, BHBP and FMG creating a balkanised supply management chain scarring the Pilbara. A complementary review to the recent National Ports Policy1 is required to ensure sustained economic prosperity. Western Australian rail infrastructure has been a leitmotif of state development and growth and today includes more than 9,000 kilometres of lines linking suburbia to the city and industry to ports. State rail development has been led by private enterprise with the conduit of third party access under the State Development Act. However, in reality, existing legislation, NCC rulings, PRIAC recommendations and the Federal Treasurer have failed to ensure equitable access to Pilbara rail. The battle for third party access to the Pilbara rail infrastructure began in 2004 when FMG applied to the NCC for the right to use sections of the Mount Newman and Goldsworthy Railway. The Australian Competition Tribunal ruled that FMG should be granted access to RTIO’s Robe River line and BHPB’s Goldsworthy line. FMG augmented this decision with production of the Fortescue Railway, from its Cloud Break Mine to Port Hedland. Similarly, Hancock Prospecting has found similar barriers to entry materialising in duplication of rail infrastructure for their Roy Hill development due for completion in 2014. The company has decided to capitalise on their logistical advantage and provide access to emerging junior players and other iron ore companies’ ‘stranded projects’. The recent decision to allow third party access to railway lines will prove highly beneficial to the company and region alike. Equitable access to rail infrastructure amongst mining companies will promote efficiency by decreasing pressure on the Pilbara road systems and coordinating port access to avoid current bottlenecks. A legislatively mandated access regime would promote a Keynesian economic system in the region. The removal of barriers to entry for junior iron players would encourage competition in the Pilbara and promote continued government and industry investment. An efficient rail network system will also mitigate potential environmental challenges to the region’s unique ecology and character. 1 Briggs, G., Australia Receives its First National Ports Strategy, Strategic Weekly Analysis, Future Directions International, 18 January 2011 Page 2 of 6 The State and Commonwealth government must recognise the unique challenges and opportunities of developing the Pilbara’s logistic infrastructure network and with industry input, develop a coherent and considered access regime. Liam McHugh Strategic Analyst FDI Northern Australia and Energy Security Research Programmes [email protected] ***** Flooding in Southern Africa: a New Challenge to Food Security Background Recent flooding and storm damage in the southern African nations of Namibia, Angola, Malawi and Mozambique pose a challenge to these nations already threatened by food security. While heavy seasonal rainfall is usually anticipated at this time of year, the severity of the current situation represents both an immediate humanitarian concern, and a longer-term setback in establishing food security in the impoverished regions Comment Namibia’s President Hifikepunye Pohamba declared a state of emergency on 29 March 2011 for northern parts of the country after heavy flooding displaced nearly 10 000 people and washed away roads and infrastructure. The President described the current flood disaster as potentially one of the worst in the country’s recorded history and has allocated 30 million Namibian dollars ($4.3 million) to the recovery effort. Flood levels have already risen eight centimetres higher than 2009 levels, setting a new record for the area where approximately one million people - half of Namibia’s population live. Food security in the immediate future remains an ongoing concern with relocation camps established to assist the displaced population already reporting a lack of food and fuel. The floods have also taken a heavy toll on the country’s infrastructure, with reports that whole tracts of road have been washed away, further compounding food distribution issues. Flood damage has affected maize crops in particular, one of the region’s staples. There are reports that the flooding is preventing agricultural work with crops standing in water and millet fields owned by subsistence farmers being severely affected. In addition to heavy crop losses, livestock losses are also anticipated with grazing lands being either flooded or in too poor a condition to sustain livestock. Furthermore, the flooding situation is only expected to worsen as more flood waves come from Angola and continued heavy rains are expected in northern regions. Many of the villages in Angola’s affected provinces are inaccessible and can only be reached by air, isolating many communities. Fields have been washed away and there are dire projections for the next harvest. The UN Office for the Coordination of Humanitarian Affairs reports that over 6,500 households have been affected, nearly 5,000 homes destroyed and over 34,000 people displaced or evacuated as a result of the flooding. The government of Angola, however, has yet to request assistance from the international community in addressing the disaster. Access problems pose critical issues for Angola’s Page 3 of 6 future food security which was already precarious following 20 years of civil war. Even after three years of peace, many Angolan farmers had yet to return to their lands and the Food and Agricultural Organization of the United Nations reports that a considerable amount of food aid is required to meet the deficit in Angola’s current production levels. In Malawi, rainfall over the past few weeks has resulted in new cases of flooding and storm damage. It is estimated that nearly 3,000 households are currently affected, with the Malawi Red Cross having only been able to respond to shelter needs in some areas. The immediate needs of the population are food aid and shelter. The floods are compounding existing food insecurity in Malawi where small landholdings have resulted in encroachment on marginal land and increased soil erosion. In March, 2,609 hectares of crop land have been lost as a result of the floods, with 414.5 hectares of crops destroyed in the Dezda district alone. Prior to the floods, Malawi was already a recipient of some of the highest levels of food aid in Southern Africa, a trend unlikely to change in the wake of the recent crop devastation. An estimated 22,000 people left their homes to escape flood waters in Mozambique. While it was feared by authorities that the flooding may exceed the levels seen in 2000, the impact was less severe than anticipated. Government flood alerts were recently downgraded for all basins in the country from orange to green, indicating a normalisation of rainfall conditions. Central and southern Mozambique households affected by the floods along the Limpopo and the Zambezi rivers are experiencing temporary food insecurity. It is estimated that 33,841 hectares of planted land have been affected, and 22,200 hectares lost entirely. Flooding is anticipated to continue in the region throughout the rainy season, further exacerbating what is already a critical challenge for the impoverished southern African nations.