TCR Volume 3 Number 2 by The CenSEI Report

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Volume 3 - Number 2 • January 14-27, 2013

NATION

Strategic Analysis and Research by the

Center for Strategy, Enterprise & Intelligence The rise in the [stockmarket index] is the result of the unmitigated entry of ‘hot money’ … Government authorities should be more pro-active and effective in discouraging the entry of ‘hit-and-run money.’ This is to avoid the appreciation of the peso [that] leads to lower exports and higher unemployment ~ Former budget secretary Benjamin Diokno on fifth consecutive record index of 6,048 on January 9 Conservatively, we’re looking at 6,500 for the index in the near term ~ Stockbroker Freya Natividad after the stock market barometer topped 6,100 at noon on January 14

3 Reforming the Judiciary

When she took over last August, Chief Justice Maria Lourdes Sereno pledged judicial reform. Here are the Supreme Court’s ambitious programs, many already moving under her predecessors • Order in the courts: The four levels of the third co-equal branch of government, from the lowest sala to the High Court

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15 The Evolution of Chimerica

The Global Trends 2030 series of futures articles continues with a forward-looking assessment of the most important bilateral relationship in the world for the coming decades: China and America • Dollars and yuan: Beijing and Washington must resolve simmering currency and trade disputes — before the markets make the world pay • Enter the dragon: From trade and tech inroads to corporate and resource deals, China is building global clout far beyond cheap manufacturing

BUSINESS

23 Where the Money Will Go on the Road to 2030

As rich nations stall in the crisis-prone world economy, Asia returns to center stage. But the big challenge is still jobs, with nearly a billion people joining the global workforce

TECHNOLOGY

35 Romancing the Stone and Other Energy Magic

The U.S. National Intelligence Council 2030 forecast sees shale oil and gas technology turning America back into a global energy behemoth. And hopefully, heralding the shift to renewables

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43 As the World Turns Gray

Flipside to the emerging nations’ youth bulge is the rich world’s aging trend toward 2030 and beyond. Far from calming society, the demographic graying brings new strains and challenges • When will the next SARS hit? Medical advances have not stifled killer microbes passing from animal to human and infecting the world • Losing it: As people live longer, expect more to suffer from dementia

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POINT & CLICK You can access online research via the Internet by clicking phrases in blue

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Center for Strategy, Enterprise & Intelligence provides expertise in strategy and management, enterprise development, intelligence, Internet and media. For subscriptions, research, and advisory services, please e-mail report@censeisolutions.com or call/fax +63-2-5311182. Links to online material on public websites are current as of the week prior to the publication date, but might be removed without warning. Publishers of linked content should e-mail us or contact us by fax if they do not wish their websites to be linked to our material in the future.

The Kind of Problem We Love to Have It’s the kind of problem a strategic analyst likes to have — but it’s still a problem: too much information. Whenever The CenSEI Report researches online on pretty much any issue, the search engines never fail to unearth hundreds of thousands of reports, statistics, charts and maps, video and news, and other material. That one can write the proverbial book with the research compiled for every article, is no exaggeration. Of course, the job of analysts, editors and researchers of the Center for Strategy, Enterprise and Intelligence is to quickly sift through the voluminous information, and select for download and reference the studies, stories, statistics, sights and sounds most relevant, informative and insightful for the article being written. And the rule of thumb in choosing from the mountain of data: strategy, enterprise and intelligence. The information and expertise, first and foremost, must be strategically important, with knowledge and knowhow that could greatly advance or retard crucial aspects of the issue in question. For the Nation article on Philippine judicial reform, case disposition data was the portion of the Supreme Court annual report for 2011 to zero in, given one of the judiciary’s mega-problems: mammoth case backlog. For the “Chimerica” paper on the global relationship between China and America, the many possible directions of their evolving ties in the coming years and decades, are of immense strategic significance not only for the two superpowers, but also the world at large, whose economic, geopolitical and security cannot but be affected by the great game between Beijing and Washington. Along with strategy, enterprise and intelligence must guide in separating online wheat from chaff. CenSEI reports must provide not just reliable, useful and well-supported information, but also ideas and insights helpful in understanding and addressing issues. Our Technology report begins with the looming energy crunch, and ends with processes and resources both abundant and green. To deliver solid intelligence and enterprising but doable solutions, the material must be authoritative, adversarial, and audacious. Reputable sources include state bodies, multilateral agencies, world-renowned universities, and credibility-conscious financial institutions and other privatesector organizations. And the Health story on chronic and pandemic diseases must use only the most authoritative resources. Along with authority, however, there must also be an active search for adversarial and audacious data and analysis, to challenge seemingly impeccable views and findings, and explore a wide range of options in the search for what will work. Thus, even as globalization is the Business report theme, it is both insightful and reassuring to have strategy guru Pankaj Ghemawat debunking globalization hype. For every gem, even intellectual ones, must have many, many facets.

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Reforming the Philippine Judiciary Even with the impeachment and removal of then-Chief Justice Renato Corona in May, judicial reform led by the Supreme Court should continue By Atty. John Carlo Gil M. Sadian

By Atty. John Carlo Gil M. Sadian

Chief Justice Maria Lourdes P. A. Sereno takes her oath of office before President Benigno Simeon C. Aquino in Malacañang on August 25, 2012. Looking on are her husband (holding the Bible) and their children. (Supreme Court photo)

STRATEGY POINTS Reforming the judiciary is not just a matter of removing officials at the top, but also a matter of instituting changes at the level of the lower courts, where ordinary people file their cases seeking legal redress Can Chief Justice Lourdes Sereno lead the Supreme Court in promoting systemwide reforms that were initiated by her predecessors?

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August, when Malacañang picked Supreme Court Associate Justice Ma. Lourdes P. Aranal-Sereno to succeed impeached Chief Justice Renato C. Corona, many saw it as a bold move that would send a strong message about the Aquino administration’s commitment to implementing muchneeded judicial reform. The first few months of Chief Justice Sereno’s tenure might give us some hint of what is in store for the judiciary during her term.

Chief Justice under fire. In December, Sereno

came under fire from senior magistrates after she issued Administrative Order 175-2012. This order,

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which purported to designate a head for a “Judiciary Decentralized Office (JDO) in the Seventh Judicial Region,” actually reopened the Regional Court Administration Office Region 7 (RCAO-7), which had been pilot-tested and shut down in 2008. The order sought to devolve the powers of the Manila-based Court Administrator to the JDO, which would be stationed in Cebu. As reported on InterAksyon.com, Associate Justice Teresita Leonardo-De Castro issued a memorandum to Sereno expressing her dismay over the order, which, according to De Castro, “does not reflect the Court’s deliberation and the consensus of the Justices opposing the reopening of RCAO-7,” which they discussed during their en banc session on Nov. 27, 2012. As worded, the order stated that the court issued a resolution on November 27, wherein it was agreed by the magistrates to “RATIFY the action of Chief Justice Maria Lourdes P.A. Sereno to revive the Regional Court Administration Office in Region 7” and “APPOINT Judge Geraldine Faith A. Econg” as officer-in-charge of the said office. Justice De Castro, however, disagreed with the resolution, as it was her recollection that all of the justices present during the November 27 en banc session opposed Sereno’s proposal to revive the RCAO-7 because of constitutional issues and other reasons cited in De Castro’s memorandum.

Coming up against internal resistance?

This kind of controversy at the highest level of the judiciary reflects the situation that has hounded our judicial system for decades. Journalist Marites Dañguilan Vitug, who has written books criticizing the judicial system, connects the controversial Sereno AO to the larger picture of what she called “resistance” of old-timers to reforms.

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As observed by Vitug on Rappler.com, Sereno “understands the need to reform the organization and loosen the tightly centralized structure. But it’s going to be an uphill climb.” Vitug attributes this to the “resistance coming from those protective of their turfs and those with a stodgy bureaucratic mindset is the resistance to her leadership. It’s not a surprise that many of the justices do not welcome her appointment. After all, this is the first time in more than a century of the hierarchical Court that a junior member was named chief justice.” The internal politics among the magistrates is indeed a major issue when it comes to instituting judicial reforms. As they often say, change must come from within. In the decentralization issue involving RCAO-7, Vitug thinks that “politics and patronage got in the way of a larger good,” considering that a decentralized administration of local courts would mean lost clout for the powerful Office of the Court Administrator. According to Vitug, despite technological advancements, the judiciary still suffers the problems of decades past when it comes to simple matters such as sending of notices to parties-in-litigation for the ultimate reason that “the judiciary bucks the trend and continues to concentrate power in Manila.” This leads to “tedious administrative work for the chief justice who spends a lot of time signing voluminous papers, ending up as the decider of minutiae.” The Sereno administrative order might be seen as an honest effort on her part to decentralize the Manila-based administration of lower courts to attain a more efficient and effective judicial system, but decentralization of the power of the Supreme Court may not just involve political will on the part of the chief justices or the justices acting collectively. As pointed out by De Castro, constitutional issues might arise from the indication that the Constitution

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might have really intended for judicial power to be concentrated in Manila. While some may see this concentration of power as a hindrance to reform, it could also be a great tool for the High Court to effectively institute reforms without the usual obstacles brought about by the bureaucracy. In the past couple of years, it seems that the Court has tried its best to use its power to initiate reforms, if not complete change, in aspects of judicial administration.

Clogged dockets. It is beyond argument that the

primary problem hounding the judiciary is poor case disposition. The delays in the resolution of cases do not only reflect upon the performance of our courts, but also upon the overall administration of justice. Official data show that our lower courts receive more cases than they can dispose of, as can be seen in its 2011 case disposition, where out of the total case input of 995,178 cases, only 384,296 were disposed, for a resolution rate of only 39%. (See2011 CASE DISPOSALS BY FIRST- AND SECOND-LEVEL COURT DIVISION table) Among higher courts, the Court of Appeals disposed of 13,054 out of 33,320 cases in 2011, for a 37% accomplishment rate. The Court of Tax Appeals disposed of 358 out of 1,183 cases in 2011, a 30% accomplishment rate that also netted the government P12 billion in taxes and duties. The Sandiganbayan disposed of 430 out of 2,658 cases, for a mere 16% accomplishment rate, which still represented an improvement from the 247 cases it disposed of in 2010. (See 2011 CASE DISPOSALS BY THIRD-LEVEL COURT DIVISION table) At the level of the Supreme Court itself, the figures are no more encouraging. Of the 23,509 cases brought before the high tribunal, 11,020 were judicial cases while 4,393 were administrative cases. Of these, only 4,676 judicial cases and 2,028 administrative

cases were disposed, constituting a disposal rate of 42% for judicial cases and a 46% disposal rate for administrative cases. While some may think that the Supreme Court’s case disposal performance is encouraging, in that at least some cases were resolved, truth of the matter is that courts must post a 100% disposition rate to be able to clear their dockets. In a June 2011 Philippine Star column, Presidential Commission on Good Government chairman Andres Bautista wrote that even at an 80% disposition rate, our courts would still not be able to resolve the problem of clogged dockets due to what he refers to as the “backlog effect.” The logic is not difficult to understand. Based on the data presented above, if the lower courts resolved 39% of cases in 2011, this means that 61% would be carried on for the year 2012. And if such trend goes on, then the backlog for the successive years would just add up, until the courts reach what Bautista called the “legal Rubicon” of not being able to handle the total number of cases pending before them. The delay in the disposition of cases is due not just to the courts’ actual decision-making progress, but also to protracted trial procedures, which can drag on for years. While it is true that the Constitution itself mandates lower courts to decide cases in three months, appellate courts 12 months, and the Supreme Court 24 months, the fact remains that this time periods only start to run once the cases are “submitted for decision.” This means that the actual trial is excluded from the computation. Congress also tried to solve the problem of protracted trial by enacting the Speedy Trial Act of 1998, which set a maximum of 180 days for trials. Unfortunately, as observed by Bautista, “A comprehensive and holistic reading of the law, however, would reveal that the litany enumerated in the same law covers a Continued on page 7

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2011 CASE DISPOSALS BY FIRST- AND SECOND-LEVEL COURT DIVISION COURTS

CASE INPUT

CASE OUPUT

% OF CASE DISPOSAL

RCTs

582,206

190,187

33%

MeTCs

149,847

66,862

45%

MTCCs

151,045

76,539

53%

61,797

26,483

40%

9,244

23,564

32%

SDCs

113

15%

SCCs

926

628

68%

995,178

384,296

39%

MTCs MCTCs

Total RTCs = Regional Trial Courts MeTCs = Metropolitan Trial Courts MTCCs = Municipal Trial Courts in Cities MTCs = Municipal Trial Courts

MCTCs = Municipal Circuit Trial Courts SDCs = Shari’a District Courts SCCs = Shari’a Circuit Courts

2011 CASE DISPOSALS BY THIRD-LEVEL COURT DIVISION CASE INPUT Court of Appeals

CASE OUTPUT

% OF CASE DISPOSAL

33,320

13,054

37%

Sandiganbayan

2,658

430

16%

Court Tax Appeal

1,183

358

30%

39,161

13,842

35%

TOTAL

2011 SUPREME COURT CASE DISPOSALS BY DIVISION AND JUDICIAL-ADMINISTRATIVE BREAKDOWN JUDICIAL MATTERS CASE INPUT EN BANC

CASE OUTPUT

% OF CASE DISPOSAL

564

226

40%

First Division

3,638

1,455

40%

Second Division

3,382

1,674

50%

Third Division

3,446

1,321

38%

11,020

4,676

42%

TOTAL ADMINISTRATIVE MATTERS

CASE INPUT

CASE OUTPUT

% OF CASE DISPOSAL

EN BANC

615

446

73%

First Division

991

574

58%

Second Division

1,672

555

33%

Third Division

1,115

453

41%

TOTAL

4,393

2,028

46%

Table from “2011 Supreme Court Annual Report 2011,” Supreme Court of the Philippines

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wide range of instances representing periods of delay to be excluded in computing the time within which trial must commence.” Such “excusable delays” defeat the purpose of that law, which is to limit trials to a maximum of 180 days.

Computerized case-management system.

How can this problem be solved? According to Senior Associate Justice Antonio Carpio, speaking in June as acting Chief Justice: “The solution to clogged dockets is a combination of measures to address case management, performance, procedural, case filtering, personnel, and judge-population issues.” For Carpio, the case-management issue can better be addressed by computerization. He cited the two-year computerized case management system of the Court of Appeals (CA), which has so far been a success. “Right now, a litigant with a pending case in the CA can go to the CA website, type his case number, and instantly he will know if a decision or resolution has been issued, and if one has been issued, he can download a copy. A litigant can also go to the CA compound in Manila where there is a computer kiosk. The litigant can find out the status of his case by simply typing on the touch-screen of the computer kiosk the case number or title of his case.” If the Supreme Court can introduce this system in lower courts, especially in faraway provinces, then Vitug’s concern about judicial power being “concentrated in Manila” can be addressed. The computerized case-management system is scheduled to be pilot-tested in Quezon City courts by the start of 2013, after having been pilot-tested in 21 courts in Lapu-Lapu City and Pasay City. Also significant is the 2010 implementation of the E-Payment System, which consolidates the payment of court fees in a single receipt, compared to the previous seven-receipt system that greatly affected the efficiency of court filings and unduly burdened litigants.

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Computerization of case management and the payment of court fees would be a big step towards genuine judicial reform. As Associate Justice Teresita Leonardo-De Castro opines, “The automation of key administrative process would also enable the Supreme Court to more effectively monitor and supervise the entire Judiciary. With computerization, we also hope to enhance the systems for ensuring transparency of court transactions and public accountability of court personnel.”

Improved rules of procedure. Of course, a

computerized case-management system would only resolve case management, which is just a clerical matter. The real game-changer would be reforming the procedure by which court trials actually proceed. As mentioned earlier, even if the courts comply with the constitutional deadlines for deciding cases, trials, which have to be held before any case is submitted for decision, drag on for years, despite the Speedy Trial Act’s requirement that they should take not more than 180 days. The Supreme Court has tried to address this issue by implementing special rules of procedure in specific type of cases. So far, simplified rules are being used in four types of cases: the 10-year Rules on Summary Procedure, the 10-year Rules on Intra-corporate Controversies, the two-year Rules on Environmental Cases, and the newly adopted Rules for Intellectual Property Rights Cases. Just last year, the Supreme Court pilot-tested a new set of Rules for civil and criminal cases which would, according to Carpio, “cut down trial time by at least one-half.” This innovation was introduced as the Judicial Affidavit Rule, which dispenses the taking of direct testimonies of witnesses during trial. Under this Rule, instead of orally testifying on the stand, the witness would just execute a judicial affidavit which would contain his entire testimony. The objectionable questions and answers would just

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be disregarded by the judge. The witness would only take the witness stand later on for cross-examination regarding the contents of his judicial affidavit. The Judicial Affidavit Rule had been implemented in Quezon City courts and was supposed to go national staring this month. Unfortunately, the Prosecutors’ League of the Philippines successfully petitioned the Supreme Court to defer, or at least modify, its implementation in criminal cases for one year. Thus, the Judicial Affidavit Rule would only cover civil cases until its full implementation in criminal cases in January 2014. The Prosecutors’ League cited as among the reasons for its request for postponement “the heavy workloads of the prosecutors affording them limited time to prepare judicial affidavits, as well as the deficiency in the number of prosecutors in many field offices.” They also asked for the creation of an ad hoc committee to revisit the Rule’s provisions. The reasons cited by the prosecutors are not difficult to understand. Justice Carpio agrees, saying that “Delays in the trial of criminal cases are largely due to the absence of prosecutors, the absence of public defenders, or the absence of prosecution witnesses. While these factors are beyond the control of the Judiciary, they contribute most to the congestion of court dockets.” Per the Supreme Court’s 2011 annual report, by yearend of 2011, the vacancy rate in lower courts stood at 27%, with 595 vacancies out of 2,198 positions. For Justice Carpio, “These vacancy rates are quite high, exacerbating the already clogged dockets. The vacancy rate in existing trial courts should ideally be less than 5%, to account only for the time needed to fill vacancies arising from normal retirements, promotions and resignations.” By way of comparison, Carpio stressed how “In the United States, the vacancy rate in existing federal district courts is currently at 10%, and they are already talking of a judicial crisis or emergency.”

Alternative dispute-resolution measures.

But even before trial commences, a lot of measures can be resorted to to be able to avoid contributing to the clogged dockets. Court-annexed mediation and judicial dispute resolution are two of the measures instituted by the Supreme Court to filter out cases from even reaching the trial stage. Data show that “out of 209,165 civil cases mediated as of May 2012, the success rate was 63.76%; and out of 23,979 civil cases placed under judicial dispute resolution as of May 2012, the success rate was 39.53%.” Judicial-dispute resolution comes as a second layer of filtering mechanism when mediation has failed. Considering that both mediation and judicial-dispute resolution are applicable in almost 80% of all firstand second-level courts, around 78% of all civil cases pending before first- and second-level courts can be filtered out before trial. According to Justice Carpio, these numbers show that “Mediation and judicial dispute resolution are huge successes in the battle to decongest the dockets of trial courts.”

The Small Claims Court Project. Another

innovation introduced by the Supreme Court is the Small Claims Court Project, which was jump-started in 44 selected first-level courts in 2008. Through A.M. No. 08-8-7-SC, the Court introduced the concept of small cases, which cover civil claims of up to P100,000. These cases are governed by a special set of rules designed to make the trials faster than in normal cases. This was intended to free our courts from wasting precious time on trivial claims between litigants. By 2011, almost 1,200 courts nationwide were hearing small-claims cases. In September 2011, the Supreme Court also launched a World Bank-USAID-funded Small Claims Monitoring System (SC2MS) that electronically processes small claims cases. According to the Supreme Court, this project has attained an 89.3% success rate, for which the World Bank has given the Supreme Court a rating of “excellent.” Continued on page 11

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A primer on the Philippine judicial system TCR presents a guide to the Philippine judicial system, as presented in the Supreme Court’s own annual report for 2011.

FIRST-LEVEL COURTS

A court bailiff calls a case during a trial in a Regional Trial Court during one of Chief Justice Corona’s court visits. (Supreme Court photo)

Occupying the first level of the hierarchy are the first-level courts comprised of the Metropolitan Trial Courts (MeTCs), which are established in Metropolitan Manila; the Municipal Trial Courts in Cities (MTCCs), in every city which does not form part of Metropolitan Manila; the Municipal Trial Courts (MTCs) established in each of the other cities or municipalities; and Municipal Circuit Trial Courts (MCTCs), created in each circuit comprising such cities and/or municipalities as grouped by law.

At the same level are the Shari’a Circuit Courts (SCC). Shari’a Courts have been established in Islamic regions and provinces to interpret and apply the Code of Muslim Personal Laws (PD 1083). Their decisions are appealable to the Shari’a Appellate Court, which, however, has yet to be organized.

SECOND-LEVEL COURTS The second tier consists of the Regional Trial Courts (RTCs) established in each of the 13 regions in the Philippines. Each RTC may be single-sala or composed of several branches. RTCs act as trial courts and may receive evidence from the parties of the case. They also exercise appellate jurisdiction over decisions of the MeTCs, MTCCs, MTCs, and MCTCs in their respective territorial jurisdictions. Also at the same level are the Shari’a District Courts (SDC). Their decisions are appealable to the Shari’a Appellate Court. Since the Shari’a Appellate Court has not yet been organized, decisions of SDCs may be brought to the Supreme Court through a special civil action of certiorari if the issue is one of jurisdiction or through a petition for review on certiorari as a mode of appeal under Rule 45. (GR No. 159210, Macaraig v. Balindong, September 20, 2006) THIRD-LEVEL COURTS

The Court of Appeals Building at Maria Orosa Street, Manila. (Supreme Court photo)

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The Court of Appeals. At the third level is the Court of Appeals (CA), which exercises its powers, functions, and duties through 23 Divisions of three members each. The CA’s 18th, 19th, and 20th Divisions comprise the CA Visayas, located in Cebu City; while the 21st, 22nd, and 23rd Divisions make up CA Mindanao, situated in Cagayan de Oro City. The CA is assigned to review cases elevated to it from the RTCs as well as from quasi-judicial agencies such as the Civil Service Commission, Securities and Exchange Commission, National Labor Relations Commission, and the Land Registration Authority.

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The CA also reviews cases where the sentence is reclusion perpetua or life imprisonment, as well as decisions of the Office of the Ombudsman in administrative disciplinary cases. The CA is a collegiate court and may sit en banc only for the purpose of exercising administrative, ceremonial, or other non-adjudicatory functions. Being essentially an appellate court, it generally resolves cases only on the basis of records, but in certain instances, it may also try cases, conduct hearings, and receive evidence. The Philippine Judicial System also includes two special courts: the Sandiganbayan and the Court of Tax Appeals.

The Sandiganbayan Centennial Building along Commonwealth Avenue, Quezon City. (Supreme

The Sandiganbayan. The Sandiganbayan is an anti-graft court that tries public officers with a salary grade of 27 and above – including their co-accused private persons – charged with criminal cases involving graft and corrupt practices as well as corresponding civil cases for the recovery of civil liability. The Sandiganbayan is composed of a Presiding Justice and 14 Associate Justices who sit in five divisions of three Justices each. Like the CA, its decisions are directly appealable to the Supreme Court.

Court photo)

The Court of Tax Appeals. Under RA 9503, the CTA is composed of a Presiding Justice and eight Associate Justices, and may sit en banc or in three divisions of three justices each. Republic Act 9282, which took effect on March 30, 2004, has elevated the status of the CTA to that of the CA. It has exclusive jurisdiction to review on appeal decisions in cases involving disputed assessments, refunds of internal revenue taxes, fees, or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or Tariff and Customs Code, It also exercises original jurisdiction over all criminal offenses arising from violations of the Tax or Tariff Codes and other laws administered by the Bureau of Internal Revenue or the Bureau of Customs.

FOURTH-LEVEL COURT

The Supreme Court Building along Padre Faura Street,

The Supreme Court. At the apex of the judicial hierarchy is the Supreme Court. It is composed of a Chief Justice and 14 Associate Justices who currently sit en banc or in three divisions of five members each. It has the power to settle actual controversies involving rights that are legally demandable and enforceable, and to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government.

Manila. (Supreme Court photo)

The Supreme Court is considered “the court of last resort,” since no more appeals can be made from a judgment or decision on the merits rendered by this court. A decision of a Supreme Court division is considered a decision of the entire Court. Decisions of the Supreme Court are considered part of the law of the land.

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Improving infrastructure. While some may say

that the majesty of the law is reflected in the pillars that stand tall at the halls of the Supreme Court, the situation for lower courts is disappointing. During his first year as chief magistrate, Chief Justice Renato Corona visited various courts across the country and saw how first- and secondlevel courts are cluttered with unnecessary court records, pleadings, and exhibits of terminated cases accumulated over the last half century. These documents have littered and obstructed hallways, corridors, stairwells and even fire exits of courtrooms and halls of justice. As observed by Corona, “They have become eyesores in the different courthouses and have posed a continuing danger, not only to the courts and their personnel, but to the public as well.” Administrative Order 103-2011 was thus issued by Corona, ordering the 138 regional trial courts, and 53 metropolitan trial courts and municipal trial courts in Manila, Makati, Quezon City, and Angeles City to conduct pilot-testing of court inventory to sort and segregate inactive case records and to identify records for immediate destruction through recycling and those for retention, scanning and digitization. Corona also pushed for the completion of the two model courthouses in Lapu-Lapu City and Angeles City, which would set the standard for the construction of future courthouses in the country. The Lapu-Lapu courthouse had been inaugurated by Chief Justice Reynato Puno in 2007, while the Angeles Hall of Justice was inaugurated in July last year. During the inauguration ceremonies in Angeles, Carpio announced that such model courthouses are “designed to be fully computerized, with built-in cables and wirings for power and telecommunications. Modern furnishings are installed in the judge’s chamber, courtroom and at

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the workstations of court personnel. There are also new facilities such as a holding area for detainees inside the courtroom to prevent the detainees from coming into direct contact with other litigants.”

Cleansing the judiciary. Beyond the improvement of infrastructure and the system by which the wheels of justice turn, the most important aspect of judicial reform involves the very people who run the entire system. As the constitutional authority responsible for overseeing the entire judicial branch of government, the Supreme Court has made progress in its quest to ensure independence, integrity, and accountability in the judiciary. The year 2007 marked a milestone in the Court’s reform efforts, with the issuance of A.M. No. 07-3-02-CA in March 2007, which banned the long-standing practice of appointing spouses of magistrates into coterminous positions in the judiciary “to enforce the letter and the spirit of the New Code of Judicial Conduct for the Philippine Judiciary calling for an ethical judiciary that is above suspicion.” In that same year, a total of 80 trial court judges, 148 lower court personnel, and 21 Supreme Court personnel were subjected to disciplinary action. The year 2008 was historic, as the Supreme Court dismissed from service one of the magistrates of the Court of Appeals for grave misconduct, dishonesty, undue interest, and conduct prejudicial to the best interest of the service. Justice Vicente Roxas was not just removed from service, his retirement benefits were also forfeited. Together with Roxas, four other justices were either admonished or suspended for their improper actuations in a case involving the Manila Electric Company and the Government Service Insurance System. That same year, two Supreme Court employees were also removed from

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service, while 29 were disciplined. Eight Regional Trial Court judges were also admonished while 45 were penalized. At the municipal court level, three were admonished while 29 were penalized. The year 2009 saw the issuance of A.M. No. 093013-SC, which required the mandatory drug testing of all Supreme Court personnel. In the same year, the Supreme Court also disciplined 66 Regional Trial Court judges, 27 first-level judges, and 181 court personnel. The most significant of these disciplinary actions involved AM No. 09-2-19-SC, where the Supreme Court disbarred no less than retired Associate Justice Ruben Reyes for gross negligence involving a leaked copy of an unpromulgated ponencia (decision) he penned for the High Court. Meanwhile, in 2010, 51 Regional Trial Court judges, 19 first-level judges, and 181 court personnel were also disciplined. The following year, disciplinary action on 59 judges and 162 lower court personnel and 45 Supreme Court employees were also imposed. But the most historic disciplinary action imposed against a court official, albeit not adjudged by the Supreme Court, fell upon the highest of its magistrates. The impeachment and subsequent conviction of Chief Justice Renato Corona did not only bring to fore the need for reforms in the judicial system, it also set a new standard for public accountability. It might be a cliché to say that only history will judge the worth of any public official’s service to the nation. While it is true that Corona was indeed subjected to a political process that disregarded the technical niceties of a judicial trial, one thing is certain: that judicial reform peaked as he led a judiciary under pressure from a rapidly modernizing and still highly politicized society.

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News & Strategy Alerts Nation

Now, a higher price for ‘sins’ The sin tax reform bill was signed into law, raising local cigarette and alcohol retail prices starting Jan. 1 The sin tax reform law is expected to raise an additional P33.96 billion in revenue in its first year, the bulk of which will fund a universal health care program Tax hikes on cigarettes are expected to serve as a strong disincentive to smoke but it’s also feared they will spur massive unemployment in the tobacco industry and encourage smuggling

After almost 16 years of sitting in Congress, a bill restructuring excise taxes on “sin products”— tobacco and alcohol—was finally signed into law by President Benigno Aquino III on Dec. 19, as reported in BusinessWorld. Republic Act 10351, or The Sin Tax Reform Act of 2012, which took effect Jan. 1, is expected to raise additional revenues worth ₱33.96 billion during its first year of implementation. Of the projected revenue, ₱23.4 billion will come from tobacco products. The guidelines released by the Bureau of Internal Revenue impose higher taxes on sin products, while revising the old, three-tier tax rate on cigarettes to a two-rate system. Under Revenue Regulation No. 172012 dated Dec. 21, a uniform tax of P12 per pack will be imposed on machine-packed cigarettes retailing at ₱11.50 and below, and ₱25 for those retailing at over ₱11.50 in 2013. By 2017, the excise tax will be ₱30 per pack on all brands. The measure also removes the price classification freeze that has pegged tobacco products to 1996

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prices as the basis of tax classification. In its December 2010 report, “Paving the Road to Inclusive Growth and Development: A Proposed Legislative Agenda for the 15th Congress,” the Senate Economic Planning Office notes that weaknesses in the current sin-tax structure include non-indexation of specific tax to inflation and a complex multi-tiered tax system. Tobacco products enjoy low retail prices in the Philippines because of low tax rates. In fact, local cigarettes are among the cheapest compared to Southeast Asian Tobacco Control Alliance their counterparts in fellow Association of Southeast Asian Nations countries, per data from a Thailand-based, multi-sectoral coalition that helps ASEAN member states develop effective tobacco-control policies. A Dec. 25 Interaksyon report provides sample retail prices for cigarettes, beer and distilled spirits based

on the computations of the Department of Finance under the new sin tax law. (See table below) Tobacco giant Philip Morris Fortune Tobacco Corp Inc.-- the maker of Marlboro, Philip Morris, Hope, Fortune and Champion – raised cigarette prices on Jan. 8, a week after the Sin Tax Law took effect. The company said it received reports that some wholesalers started selling its cigarette brands at higher prices even during the holidays. In June, Philip Morris Fortune president Chris Nelson had expressed the concern that tax increases then being proposed by the government, which he described as “unprecedented,” would result in a drop in demand for tobacco for domestic consumption, which, in turn, would affect the livelihood of around 22,000 farmers nationwide.

Table from “How much booze, ‘yosi’ would cost under Sin Tax Reform law,” Interaksyon, Dec. 25

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In November, Malacanang Palace downplayed concerns that the sin tax reform measure would lead to massive unemployment in the tobacco industry and encourage smuggling, as reported in the BusinessMirror. That report quoted Secretary Ramon Carandang of the Presidential Communications Development and Strategic Planning Office saying, “That’s a common argument brought up in almost every country where sin taxes are about to be increased. But the evidence will show that after a period of adjustment, tobacco company incomes recover.” For its part, the Distilled Spirits Association of the Philippines (DSAP), an organization composed of some of the country’s top liquor makers, is seeking a temporary restraining order on the implementation of the sin tax reform law, ABS-CBN reported on Jan. 9. The DSAP claimed the implementing rules of the sin tax reform law constitutes “double taxation,” since “it effectively taxes distilled spirits twice – first as a raw material, and again, as a finished product.” New schedules of ad valorem tax and specific tax are provided for distilled spirits, wines, and fermented liquor in the BIR guidelines. According to the BIR guidelines on sin tax rates, fermented liquor (beer) tax is ₱15 per liter if the net retail price is ₱50.60 and below per liter, and ₱20 per liter for those with a higher price. For distilled spirits, the tax is 15% of net retail price plus ₱20 per proof liter. For wine, the tax is ₱200 per bottle of 750 ml if its net retail price is ₱500 or less, and ₱500 per if the wine costs higher. The DSAP also claimed the sin tax law “deprives local manufacturers of equal protection and violated the rule on uniformity of taxation under the Constitution.” Likewise, DSAP said the BIR’s guidelines on sin tax law were promulgated without public participation.

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According to the Sin Tax Reform Act, additional revenues will go to programs for tobacco farmers, and to the country’s universal health care program under the national health insurance program, and other health programs such as medical assistance, hospitals and health-enhancement facilities. Tax hikes on cigarettes are expected to serve as a strong disincentive to smoke. Findings from the 2009 Philippines’ Global Adult Tobacco Survey by the World Health Organization revealed there are an estimated 17 million smokers in the Philippines, and that an average of 10 Filipinos die from a tobaccorelated disease every hour. The BIR says reforming sin taxes would also convince credit-rating agencies to upgrade the country’s ranking to investment grade, thereby encouraging foreign direct investments into the country, according to a November Philippine Daily Inquirer report. All major credit firms — Moody’s Investors Service, Fitch Ratings and Standard & Poor’s — currently rate the Philippines a notch below investment grade.

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The Making of Chimerica: How Symbiosis Binds China and America Major adjustments in the China-U.S. relationship will be needed for the world economy to evolve By Victoria Fritz

STRATEGY POINTS The world economy has been dominated in the past decade by Chimerica, a symbiosis between Chinese export-led growth and U.S. over-consumption. The 2008 global financial crisis and subsequent sluggish economic recovery are putting pressure on this symbiotic relationship to develop beyond cheap Chinese exports for the American consumer The solution is not necessarily a complete decoupling, but significant adjustments leading to a renewed and healthier relationship

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ince China began transforming into a market economy, it has experienced unprecedented growth. In the last decade, this was fueled to a significant extent by exports to the United States. The savings China derived from this trade in turn financed American overspending and its growing budget deficit. Economic historians Niall Ferguson and Moritz Schularick recognized this symbiotic relationship, coining the term â&#x20AC;&#x153;Chimericaâ&#x20AC;? in a seminal 2007 paper, and citing it as the reason behind incredible wealth creation over the five preceding years. China enjoyed unprecedented, export-led growth, while the United States was able to consume more, save less, and still maintain low interest rates. This marriage of convenience dominated the world economy in the last decade, but hit a roadblock when the financial crisis struck in 2008. By the end of 2009, Ferguson and Schularick were calling for

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Chimerica: The symbiotic economies of China and America

an amicable decoupling in a study entitled “The End of Chimerica.” Although the U.S. government narrowly averted pushing the country over a “fiscal cliff,” substantial action on the country’s huge budget deficit has been deferred, while Chinese exports to the U.S. have decreased. Ferguson and Schularick recommend a revaluation of China’s renminbi (RMB), which would solve China’s problem of excessively large international reserves, and improve the American trade imbalance. As Chimerica dissolves, China is now looking for non-Western markets in which to invest, according to Mark Leonard, director and co-founder of the private think tank European Council on Foreign Relations and author of “What Does China Think?” In a commentary posted on the New Statesman site in August, Leonard sees no palatable version of this evolving Sino-U.S. relationship. War is out of the question, while strategic competition will hamper global governance. A “G2” format could bring out the worst in the two largest powers. He says the way to go is to encourage a multilateral order made up of more united regions, allowing China and America “to build a normal relationship.” According to the U.S. National Intelligence Council’s “Global Trends 2030: Alternative Worlds,” released in December, this will be a most likely trend in terms of diffusion of power. No longer will there be any dominating power, and a multipolar world will arise. (Overview, page ii) Having said that, the same paper emphasizes the importance of China-U.S. collaboration in fostering broader global cooperation (page ii, Potential Worlds-Fusion). Among the potential scenarios for 2030, the one of Fusion is seen as the most likely best case. In this case, all economies improve substantially. The emerging economies grow more

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Ongoing and emerging currency and trade disputes In a piece that appeared on the BBC website in November, business reporter Puneet Pal Singh details some of the current tensions plaguing U.S.-China relations. On the all-important currency valuation issue, the U.S. maintains that China is keeping its currency artificially low, resulting in cheaper Chinese goods. U.S. lawmakers see this as a key reason behind job losses in their country. China has declared an intention to let its currency float more freely, but counters that that a sudden rise in value will be damaging economically. After being pegged to the US dollar until 2005, the yuan has risen nearly 25%. Still, trading is under tight control, and some say it is still undervalued. Related to the currency issue, the U.S. says China sells certain goods at below fair market value. In a concrete example, the U.S. alleges that China grants state subsidies to solar panel manufacturers. The International Trade Administration has even ruled on this, finding the Chinese government liable for dumping and subsidization of crystalline silicon photovoltaic cells, the building blocks of solar panels. China has denied these accusations, and countered by accusing the U.S. of subsidizing some of its steel manufacturers. China then imposed tariffs on a certain type of steel, but the World Trade Organization said these tariffs were illegal. Rare-earth metals are a key element in many everyday devices today, such as MP3 players and hybrid cars, and China accounts for 90% of the world’s production. It has now imposed a quota on exports, and the U.S. says this will cause substantial price hikes. China’s defense is environmental protection. Although it produces 90% of what the world uses, China has only 23% of global reserves, and has urged other countries with reserves to boost production. Some analysts agree with this position.

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China’s growing influence around the world

rapidly than advanced ones, but the latter do not fall far behind. U.S. per capita income will rise by US$10,000 in 10 years, while Chinese per capita income also rises.

Since the start of this century,

have increased from less than

economy has grown tremendously.

now. With its current economic

China’s influence on the global

A slight ailment there can be felt

around the world. This is detailed

in a Oct. 17 Financial Times report. For example, China now produces seven times more steel than the

In terms of global conflicts, this scenario sees the U.S. and China mitigating the spreading conflict in Southeast Asia and drawing out a ceasefire and settlement.

U.K. and the U.S. combined,

accounting for nearly half the

As the U.S. and China come to greater cooperation, the idea of working together spreads. China’s regime undergoes greater democratization. Seeking reactions to the initial draft of this publication, the publishers met with experts in almost 20 countries. Most agreed with the point made by the paper that the U.S.-China relationship could be the most important bilateral tie shaping the future. In the same light, as the economic historians behind the term “Chimerica” call for a decoupling, other experts don’t necessarily agree.

A climate of ‘coop-petition.’

Terry Young, an economics professor at Pepperdine University, wrote in February 2012 that China and the U.S. should operate in a “climate of ‘coop-petition’… competing on some issues and cooperating for the benefit of both countries and the world economy.” Both countries are among the world’s largest economies, making

slowdown, Chinese demand has decreased, pushing prices down dramatically. This has affected the economies of Australia,

Brazil, Indonesia, and parts of Africa. Demand for cars and

equipment used in mining and

global output. Its global imports of iron ore, used in steelmaking,

10% in the 1990s to about 65%

construction have also weakened, affecting many producers in apan and Germany.

Global Outlook for Growth of GDP, 1996-2013 (as of Nov 2012) GDP

1996 - 2005 Contribution to World

Distribution of World Output 2012 18.2% 20.2% 13.8% 5.7% 7.2% 51.4%

Growth 3.3 2.5 2.2 1.0 4.0 2.8

GDP growth**** 0.7 0.6 0.1 0.3 1.7

China India Other developing Asia Latin America Middle East Africa Russia, Central Asia and Southeast Europe*** Emerging and Developing Economies

16.4% 6.3% 5.3% 7.7% 3.7% 3.3% 5.9%

8.1 6.5 3.9 2.8 4.6 4.6 5.0

0.6 0.3 0.2 0.2 0.1 0.1 0.2

48.6%

5.0

1.8

World Total

100.0%

3.6

United States Europe* of which: Euro Area Japan Other advanced** Advanced Economies

*Europe includes all 27 current members of the European Union, as well as Switzerland and Norway **Other advanced includes Canada, Israel, Iceland, Korea, Australia, Taiwan Province of China, Hong Kong, Singapore, and New Zealand

Continued on page 19

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Chimerica: The symbiotic economies of China and America

The report cited the IMF in claiming

10, Hongkong Shanghai Banking

Singapore, Australia, Chile,

second-largest trading partner of

Stephen King predicted that

have also increased their exports

that China is now the first- or

78 countries, who account for the equivalent to 55% of global gross

domestic product. This is a big jump from the year 2000, when it was the

first- or second-largest trading partner of 13 countries, who collectively

accounted for 15% of global GDP. As cited in a report by Lyubov

Pronina in Bloomberg last January

2006 - 2012 Projected GDP Contribution to World

Corporation’s chief economist

China would make its biggest-ever contribution to global growth in

Kazakhstan and Saudi Arabia to China.

2014, pegged to a prediction of

China’s growing share of the world

growing importance of Chinese

below, from the Conference Board’s

8.6% growth this year and the

imports from various countries. As examples, he indicated that

economy can be seen in the table Global Economic Outlook 2013.

South Korea’s exports to China

China’s contribution to world GDP

from 3.5% in 2000, while Malaysia,

in 1996-2005, to 1.3 in 2006-2012.

account for 12% of their GDP, up

2012 Projected GDP Contribution to World

growth more than doubled, from .6%

Projected GDP

2013 Contribution to World

Growth 1.0 0.9 0.7 0.4 3.0 1.2

GDP growth**** 0.2 0.2 0.0 0.2 0.7

Growth 2.1 -0.2 -0.6 2.0 2.4 1.2

GDP growth**** 0.4 0.0 0.1 0.2 0.6

Growth 1.8 0.3 0.2 1.6 2.4 1.3

GDP growth**** 0.3 0.1 0.1 0.2 0.7

10.4 7.8 5.0 3.7 4.3 4.7 4.0

1.3 0.4 0.2 0.3 0.2 0.1 0.2

7.8 5.5 5.3 3.1 5.5 3.8 3.6

1.2 0.3 0.3 0.2 0.2 0.1 0.2

6.9 4.7 5.0 2.9 2.3 3.7 2.9

1.1 0.3 0.3 0.2 0.1 0.1 0.2

6.5

2.8

5.5

2.6

4.7

2.3

3.5

3.2

3.0

***Southeast Europe includes Albania, Bosnia & Herzegovina, Croatia, Macedonia, and Serbia & Montenegro, and Turkey ****The percentage contributions to global growth are computed as log differences and therefore do not exactly add up to the percentage growth rate for the world economy Table from Conference Board Global Outlook 2013

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them critical in achieving global stability and prosperity. Young advises China to gain sustainability by veering away from dependence on exports, and shifting to consumer growth. With increased domestic consumption, this means less saving, less money to finance America’s spending. With more balanced economies, the U.S. and China will achieve not only their own stability, but the global economy’s as well. This view is somewhat echoed by Michael Casey, managing editor for the Americas at DJ FX Trader of The Wall Street Journal. In a piece posted on the Wall Street Journal’s Market Watch page in November, Casey observed that Chimerica is on the rise again, with improving economic indicators both in China and the U.S. This revised version, however, features stricter financial controls in the U.S., and improving U.S. exports due to the slowly adjusting US dollar and RMB. Casey warns that unless the return of Chimerica isn’t characterized by a reorienting in the Chinese economy toward consumer-led growth and in the U.S. economy toward a more export and investment-driven expansion, this won’t last long.

Invite Chinese investments in U.S. Sebastian

Mallaby, the Director of the Center of Geoeconomic Studies at the U.S. based Council on Foreign Relations, also sees a continuation of close U.S.-Sino relations. In a video interview on February 12 last year. Mallaby says significant adjustments are needed in areas of dispute such as trade, and currency valuation. Less tension will come from a go-with-the-flow strategy. Instead of trying to arrest the flow of U.S. investments into China, invite Chinese investments in the U.S. Instead of resisting China’s plans to make the RMB the trading currency, embrace it. Though this move will relegate the U.S. dollar to the

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background, it will force the Chinese government to implement reforms, including the lifting of capital controls. (Click on the following screen cap for the full video)

Sebastian Mallaby of the Council on Foreign Relations discusses U.S.-China relations in the context of trade and currency valuation

YouTube /

See China as partner in economic ventures.

The president of the U.S. National Committee on United States-China Relations, Steve Orlins, shared a similar view in a Huffington Post piece last November 9. He cautioned against seeing China as threat, a position he says the U.S. has drifted into over the last three years. Seeing China as an enemy has resulted in innumerable lost opportunities to partner in economic undertakings. Shifting the point of view, a focus on partnership will bring improved economic relations. Orlins suggests undertaking a Bilateral Investment Treaty and a U.S.-China Free-Trade Agreement. Going into specifics, he recommends, in the wake of Hurricane Sandy, that China create a US$100-billion fund to invest in infrastructure and the rebuilding of the Eastern seaboard. To cover some of its energy requirements, China can invest in liquefied natural gas (LNG) production on the U.S. West Coast. LNG is available in the U.S. at a fraction of the cost in China.

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Chimerica: The symbiotic economies of China and America

To achieve smoother relations in the future, it is important to agree upon a set of rules. This is the advice of Nina Hachigan, a senior fellow at the Center for American Progress and formerly a staff member of the National Security Council. She shares her thoughts in her blog on Reuters, posted on November 19. According to her, there is some fear on both sides. The U.S. fears a stronger and more aggressive China that it might need to confront. At the same time, China fears a United States that may lash out to assert its waning power. When a rising star and a fading power meet, this calls for a “new type of great power relationship,” according to newly installed Communist Party chief Xi Jinping. Hachigan says the solution lies in both countries, along with other nations, embedding in a “web of common rules, norms and institutions that channel their competition and bound their rivalry.” An obvious question from China would be: Who makes the rules? China can have a hand in making the rules. It is already a member of the new Financial Stability Board, formed as a result of the 2008 financial crisis, and has helped make rules that limit banks’ risky behavior. In terms of trade, the tirades have been about who is not following the rules, and the disputes are contained within the World Trade Organization process. An underlying or otherwise overt rivalry marks the relationship between the U.S. and China today. To achieve cooperation that is healthy for the globe, the relationship needs major adjustments, and also finding a ground of common interest as a starting point for a renewed relationship. This can be in the energy sector, as suggested by Steve Orlins, the president of the National Committee on U.S.-China relations. The important point is to keep the dialogue open, with both sides agreeing on the rules of engagement.

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News & Strategy Alerts World

Humanity wastes up to half of the earth’s food About 30-50% or 1.2-2 billion tons of food is lost or wasted annually, one study reports One key way to prevent loss or wastage of food is to improve the infrastructure for food storage, roads, energy and markets

With possible food shortfall in the future due to rapid population growth, urbanization, increased incomes, and dietary changes, a recently released report says that due to poor practices in harvesting, storage and transportation in developing countries, and market and consumer wastage in developed countries, up to half of the world’s food is wasted or lost. The report of the British-based Institution of Mechanical Engineers, based on a study started in 2010, concluded that of the estimated 4 billion metric tons of food produced annually, anywhere from 1.2-2 billion tons are wasted. While the IME report is just one of several studies reporting the same serious problem regarding food security, its figures are much higher than those reported in earlier studies, primarily from the UN Food and Agriculture Organization. In the 2011 FAO study, “Global Food Losses and Food Waste,” authors Jenny Gustavsson et al reported that roughly one-third of the food produced for human consumption is lost or wasted globally, amounting to 1.3 billion tons per year. The IME and FAO reports share the finding that food is lost or wasted throughout the supply chain, from agricultural production down to household

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consumption. In the IME report, the authors said food wastage tends to occur primarily at the farmer-producer end of the supply chain in developing countries such as those of subSaharan Africa and Southeast Asia. “Inefficient harvesting, inadequate local transportation and poor infrastructure mean that produce is frequently handled inappropriately and stored under unsuitable farm site conditions,” the IME report said. According to the IME report, as the development level of a country increases, so the food loss problem generally moves further up the supply chain with deficiencies in regional and national infrastructure having the largest impact. For example, the report cited that in SouthEast Asian countries, losses of rice can range from 37% to 80% of total production depending on development stage, which amounts to total wastage in the region of about 180 million tons annually. In China, a country experiencing rapid development, the rice loss figure is about 45%, whereas in less-developed Vietnam, rice losses between the field and the table can amount to 80% of production. Meanwhile, the IME report said that even though in developed countries such as the UK, more efficient farming practices and better transport, storage and processing facilities ensure that a larger proportion of the food produced reaches markets and consumers, major supermarkets, in meeting consumer expectations, will often reject entire crops of perfectly edible fruit and vegetables at the farm because they do not meet exacting marketing standards for their physical characteristics, such as size and appearance.

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Activist Tristram Stuart delivers a TED Talk about global food waste

TED Talks

The FAO report said food gets lost in industrialized countries when production exceeds demand. It said in medium- and high-income countries, food is to a high extent wasted, meaning that it is thrown away, even if it is still suitable for human consumption. Apart from that, significant food loss and waste occur occur earlier in the food-supply chain. The IME report does not even take into account the inefficient use of land, energy, fertilizer, and water in the production of foodstuffs to begin with. Nevertheless, it warns, “This level of [food] wastage is a tragedy that cannot continue if we are to succeed in the challenge of sustainably meeting our future food demands.” A few recommendations have been made by IME and FAO to help prevent future food crises. Among them is investing in infrastructure and transportation, which is apt for the Philippines. The FAO report called for governments to improve the infrastructure for roads, energy and markets. In the following TED Talks video, activist Tristram Stuart warns the public about global food waste, calling for us to change the systems whereby large quantities of produce and other foods end up in trash heaps.

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The Diaoyutai-Senkaku tiff: Here they go again in Beijing and Tokyo Japan hopes to launch unmanned Global Hawk aircraft by 2015 in a bid to counter China’s growing assertiveness at sea Military tensions are going to lead to increasing military expenditures on both sides Tensions between Asia’s largest and second-largest economies over the disputed Senkaku (Diaoyu) islands escalated in the past week after Japanese and Chinese fighter aircrafts shadowed each other on Thursday, according to a Jan. 11 Financial Times report. China’s Ministry of Defense was reported as saying that a Chinese Y-8 military transport aircraft discovered that it was being closely followed by two Japanese F-15 fighters when it was on a “regular patrol” in air space east of Wenzhou on Thursday. The ministry was quoted as saying, “at the same time, a Japanese reconnaissance aircraft was also operating in that airspace. In response, China scrambled two J-10 [fighters] and conducted verification and monitoring.” The Chinese ministry accused the Japanese Air SelfDefense Force of continually stepping up reconnaissance activities against China and expanding the range of fighter aircraft operations. The Japanese government did not confirm the reports. This is not the first time that tension between the two countries heightened due to air surveillance. But with the election of new leaders in China and Japan, flexing military muscle is very likely to be part of their plans.

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The Japanese government appears to be building up its defenses to counter China. The Guardian on Jan. 9 reported that Japan has begun preparations to purchase an advanced model of drone from the U.S. – a close Japan ally – while China is reportedly rapidly expanding its nascent drone program. On Jan. 4, Agence France-Presse cited Kyodo News in reporting that Japan hopes to launch unmanned Global Hawk aircraft by 2015 “in a bid to counter China’s growing assertiveness at sea, especially when it comes to the Senkaku islands.” A Jan. 4 Business Insider article reported that, “The sales, which would be the first Global Hawk purchases by countries in the Asia-Pacific region, is part of the U.S. pivot toward Asia that will include increased arms sales to Pacific allies. The article cited the Pentagon’s Defense Security Cooperation Agency in reporting that sales agreements with countries in the U.S. Pacific Command’s area of activity rose 5.4% in fiscal 2012, to $13.7 billion. According to the Business Insider report, announcements of Global Hawk purchases come as the southern Chinese province of Hainan enacts a controversial policy of boarding ships that enter what China considers its territory in the South China Sea. The Global Hawk has a range of 8,700 nautical miles and a ceiling of 60,000 feet. The report also cites claims by the Chinese blog AirForceWorld that the Global Hawk can fly more than 3,400 miles away from its base and stay above its target area for 24 hours. “Both sides claim the drones will be used for surveillance, but experts warn the possibility of future drone skirmishes in the region’s airspace is “very high,” the Guardian report said. In the following video, James Corbett, editor of the Corbett Report news website, says China and Japan are preparing to commit more resources for military expenditures. Military tensions are going to lead to increasing military expenditures on both sides.

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Where the Money Will Go on the Road to 2030

As rich nations stall in the crisis-prone global economy, Asia returns to center stage. But the big challenge is still jobs By Ricardo Saludo

‘The recovery remains fragile and uncertain,’ cautions Jim Yong Kim, as his bank warns that U.S. fiscal paralysis, euro zone crisis or a China slump could slash growth

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World Bank

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Enterprise and investing on the road to 2030

“T

he recovery remains fragile and uncertain, clouding the prospects for rapid improvement and a return to more robust growth. And the outlook is weak in both highincome and developing-country economies.” That’s the less-than-sanguine prognosis for the global economy from one of its top caretakers, World Bank President Jong Yong Kim, in his video remarks on the mid-January launch of the institution’s twiceyearly situationer and forecast, Global Economic Prospects (GEP). The physician, anthropologist and rapper-turneddevelopment leader headed the Ivy League’s Dartmouth College before taking over the Bank last July. His main worries for 2013: failure in America and Europe to address their mammoth fiscal imbalances, a drastic downturn in growth-driving Chinese domestic investment, plus the threat of wheat and corn price hikes.

middle-class explosion in emerging markets, and the rise of mega-cities straining world resources are among the mega-trends expected to reshape the globe in the next two decades. That includes where and how money will be made — the subject of this portion of the two-issue series of articles on the NIC study published by The CenSEI Report. The overall trend, predicted by many studies in recent years, is that world economic growth, output and wealth will shift to emerging economies, led by Asian giants China and India, in decades to come. Indeed, assuming exchange rates adjust to reflect the future economic balance, emerging markets’ share of financial assets will likely hit 36% by 2020, six times the 2000 level (see Where the Wealth Will Be chart).

WHERE THE WEALTH WILL GO By 2020, China and other emerging markets are forecast to almost double their share of world financial assets

“The risks from this situation are substantial, especially for developing countries,” says Brown- and Harvard-educated Kim, founder of Boston-based Partners in Health and initiator of the World Health Organization’s “3 by 5” HIV/AIDS treatment program. “We cannot wait for the return of growth in the highincome countries. We really need developing countries ... to set the stage for medium- and long-term growth.” The World Bank chief’s prescription: continued funding and support for infrastructure, health and education investments in the developing world. The planet’s top development official would find much agreement about his comments on the world economy’s future among experts at the U.S. National Intelligence Council. The NIC’s “Global Trends 2030: Alternative Worlds” report, published last month, sketches out similar contours for the world in the coming decades. Chronic crises and Asia’s return to center stage as the West stagnates, an unprecedented

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U.S. Western Europe Japan

Other developed China Other emerging

Chart from “The Emerging Equity Gap,” report by McKinsey Global Institute, 2011; cited in Global Trends 2030, by U.S. National Intelligence Council, 2012; page 44

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Crisis — the new normal. But first, the bad

news. The Global Trends report forecasts: “The 2008 crisis and its long ‘tail’ raise the prospect of an extended crisis that would undermine the social and political fabric in many Western

countries and create longterm destabilizing effects. Most of the leading Western countries could therefore suffer the consequences of low economic growth that lasts longer than a decade.”

GROWTH AND CONFIDENCE IMF Economic Forecasts and IBR Business Optimism for 2013 Lower than global average GDP growth predicted Higher optimism than global average

Higher than global average GDP growth predicted Higher optimism than global average

Lower than global average GDP growth predicted Lower optimism than global average

Higher than global average GDP growth predicted Lower optimism than global average

**Balance percentage nets those indicating optimism against those indicating pessimism Graphics from “International Business Report 2013 - Ireland," by Grant Thornton, pages 5 & 8

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Enterprise and investing on the road to 2030

What U.N. Secretary General Ban Ki Moon said about world weather at the Doha climate change conference in November — “The abnormal is now the new normal” — could very well apply to the global economy today. “Crisis-prone” is how the Global Trends report describes it, with disparate economic growth rates among different regions “exacerbating global imbalances — one of the contributing causes of the 2008 [global financial] crisis — and straining governments and the international system.” In fact, disparities in growth and mounting trade and payments imbalances have been around for decades, so more of the same wouldn’t normally spur chronic crises. The big difference now, however, is that businesses and investors everywhere have seen the most advanced economies and financial systems nearly collapse and drag the world into the abyss. And they remain in that precarious state, with mountains of debts still threatening to landslide four years after Almost Armageddon in America and Europe.

The fragility of business confidence. In the

International Business Report 2013, London-based global accounting and consulting giant Grant Thornton’s annual survey of corporate confidence, the industrial world’s outlook is subpar overall, and so is business optimism in most major economies — the U.S., Japan, Britain, France, and Italy and nearly all the European Union (see Growth and Confidence top chart). Among top EU economies, only Germany showed better sentiment than the world average, and not by much. On key outlook indicators like growth, export, pricing and earnings, businesses with rosy expectations are markedly down for this year and last, compared with 2011 (see bottom table). That overall decline in optimism applies to the world, America and Europe, with the drop in scores for growth, profitability and revenue prospects down by double digits, as much as 39% percentage points for European economic expansion.

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“The uncertainty in the global economy has dampened business growth prospects not only in mature economies, but across the world,” summed up Grant Thornton Brazil executive Madeleine Blankenstein. The consultancy firm’s Emerging Markets Opportunities Index report, also completed late last year looking 12 months ahead, the top developing world economies still saw a significant drop in optimism. China, India, Russia, Brazil and Mexico turned in a seven-percentage-point decline in business optimism surveys in the second and third quarters of 2012 (page 6 in Emerging Markets report). But the top five mature economies — U.S., Japan, Germany, Britain and France — fell more than double. Indeed, as seen in charts on pages 7 and 9 in the Emerging Markets study, a greater proportion of firms in emerging economies than those in mature ones expect gains in revenues (79% emerging vs. 35% mature), profits (68% vs. 19%), new buildings (23% vs. 16%), plant and machinery (40% vs. 28%), research and development (41% vs. 13%), selling prices (42% vs 16%), and salaries rising faster than inflation (15% vs. 9%). With greater expansion in developing economies, more of their firms see financing as a constraint, both its cost (30% emerging vs. 13% mature) and the lack of working capital (35% vs. 16%) as well as long-term funding (29% vs. 15%). This high credit demand in the developing world should attract increasing funds and financial institutions from the West and Japan, while emerging market enterprises with good corporate governance can tap industrial-world capital and capital markets even more than before.

Rich and in debt. The No. 1 economic worry and

burden constraining business across the planet and most especially in advanced economies, is debt. Widespread fears persist that another financial crisis could rock the planet as the West’s debacle did in 2008 with

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dampening economic effects continuing until today. The mammoth debt overhang itself constrains both spending and lending as borrowers scrimp to pay off debt, and lenders exercise much greater care to avoid increasing their bad-loan piles. What’s worse, the deleveraging needed to clear the IOUs and reinvigorate credit, investment and growth will likely take the better part of a decade from the start of the crisis, according to McKinsey Global Institute’s 2012 report, “Debt and Deleveraging: Uneven Progress on the Path to Growth” (see Escaping the Debt Trap graphic). If the West follows the projected timetable, the loans overhang would be around beyond 2016, with banks, enterprises and households clearing debt ahead of governments. Then lending, spending and

growth would pick up, enabling the public sector to raise revenues and also pay down liabilities. But McKinsey reported a year ago that total debt had risen since the 2008-09 crisis, with only the U.S., Australia and South Korea having cut borrowings as a percentage of gross domestic product. And the toughest challenge on both sides of the Atlantic is paring state debt without triggering another deep regional or global recession. Recovery watchers should look for six “critical markers of progress” cited by McKinsey: “the financial sector is stabilized and lending is rising; structural reforms unleash private-sector growth; credible medium-term public deficit reduction plans are in place; exports are growing; private investment has resumed; and the housing market is stabilized and residential construction revives.” The report

ESCAPING THE DEBT TRAP Deleveraging Timetable Based on Sweden and Finland Crises

Graphic from McKinsey Global Institute report, “Debt and Deleveraging,” 2012; citing analysis from International Monetary Fund, Haver Analytics, and McKinsey

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added: “No single country has all the conditions to revive growth.” With the threat of euro zone breakup and America’s own fiscal woes, the fear remains that the West would fall into the same politically safe, but economically ineffective policies which mired Japan in deflation limbo for two decades and counting. An even bigger worry: more mega-crises adding to the red ink and squelching the global growth needed to wash it away, like another debacle in China’s overborrowed real estate sector and “shadow banking” system, or a military conflict with Iran jacking up world oil prices and plunging the world into a new recession.

employment beyond the current retirement age. Plus job creation in the developing world to absorb its growing workforce. Continued on page 29

BUILDERS AND MAKERS WANTED Growth in Construction and in Engineering/ Mechanical Goods Production, 2010-2030

Emerging markets take the lead. With advanced countries stuck in neutral, if not slipping into reverse, the developing world is racing ahead even faster than before the West’s crisis. Global Trends 2030 cites an Oxford Economics study that forecasts “another one billion workers from developing countries are likely to be added to the global labor pool in the next several decades.”

“Creating Jobs in a Global Economy, 2011-2030,” published in 2011 by the Oxford research and analysis think tank and recruiting firm Hays, projects 24% increase in the workforce of developing nations by 2030. That’s an additional 931 million working-age men and women. “This will increase the relative economic importance of developing countries,” the study said, with more jobs being created in industry and services, rather than agriculture. And what’s needed to absorb a billion workers? Infrastructure for industry and services, and the right expertise and skills for future jobs, said the Hays-Oxford Economics report. Migration too. Hence, Hays urges investment in training and education, open national borders and international accords “to facilitate employee migration,” and

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Data from Oxford Economics, cited in “Creating Jobs in a Global Economy, 2011-2030,” by Hays and Oxford Economics, 2011, pages 24-25

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With the rise in employment, incomes and population in developing countries, the jobs forecast expects their consumer markets to expand greatly too. Global Trends 2030 agrees: “Up to now less than one billion people have accounted for three-quarters of global consumption; during the next two decades, new and expanded middle classes in the developing world could create as many as two billion additional consumers. Such an explosion will mean a scramble for raw materials and manufactured goods.” Just the projected urban infrastructure projected, said the NIC report, “could roughly equal the entire volume of such construction to date in world history” (page 24). The U.S. intelligence paper adds: “The health of the global economy will be increasingly linked to how well the developing world does — more so than the traditional West.” No wonder the World Bank boss wants developing nations to drive growth, rather than leaning on the rich to do it.

HSBC sees exactly that happening. The Londonbased global bank’s 2012 study, “The World in 2050: From the Top 30 to the Top 100,” which updated its seminal 2011 report, forecasts that emerging markets would generate between two-thirds and threequarters of the planet’s economic expansion till midcentury (see Driving Global Growth chart below).

The new Silk Road. With future world demand

coming from emerging markets, HSBC sees the rise of new trade routes in its mid-2011 report, “The Southern Silk Road: Turbocharging ‘SouthSouth’ economic growth.” The bank expounded: “We are witnessing the creation of a Southern Silk Road, a network of new “South-South” trading routes connecting Asia, the Middle East, Africa and Latin America [as] trade and capital flows between emerging areas of the world could increase tenfold in the next forty years.” A graphic of Chinese and Indian export growth shows thick lines going to those very regions (see Where Asia’s Giants Will Sell map next page). Continued on page 31

DRIVING GLOBAL GROWTH Contributions to World Economic Expansion  percentage points per year

Developed Markets

EmergingMarkets

Global

Chart from “The World in 2050: From the Top 30 to the Top 100,” HSBC, 2012, page 2

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WHERE ASIA’S GIANTS WILL SELL Projected Growth of Chinese and Indian Exports, 2010-2050  Arrow thickness indicates higher growth

Graphic from “The Southern Silk Road,” published by HSBC, 2011, page 61

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STRATEGY POINTS Withe fragile business confidence, crisis is the world economy’s middle name In coming decades, get set for 1 billion more workers in the developing world To tap future trade and growth, invest in new or better infrastructure and skills

To service the burgeoning commerce, HSBC sees both financial and infrastructure facilities also expanding exponentially: “The revolution in trade will be matched in capital markets. Asian financial centres are growing rapidly and, in time, the renminbi may become the world’s most important reserve currency.” The report added: “To facilitate South-South connections, the emerging nations will have to invest heavily in infrastructure. Already, China has five of the ten biggest ports in the world. Other emerging nations are not quite so advanced. But, with the help of Chinese investment, the process of infrastructure “catchup” is slowly being established.” Those who think there isn’t much trade expansion left after over a century of globalization since the British Empire exported the Industrial Revolution, will be pleased to know that they

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haven’t missed the boat by any measure. “The scale of the opportunity is huge in part because the ‘economic borders‘ — tariffs, restrictions on migration, hostility — between emerging nations today are still high,” said the trade forecast. “Removing these ‘borders’ won’t be easy but work is already underway.” China is now the largest trading partner of 124 countries, the Associated Press reported last month, with the U.S. tops in 76, reversing the totals just six years ago. But even that sign of South-South trade resurgence only points to mammoth potential ahead. How much? Pay attention to globalization guru and former Harvard professor Pankaj Ghemawat, now teaching global strategy at Spain’s IESE Business School of the University of Navarre. In his Edinburgh talk last year available on a TED.com video, the author of World 3.0: Global Prosperity and How to Achieve It and Redefining Global Strategy debunks globalization hype with some eye-opening facts. Only 2% of phone calls are international (6%-7% if online calls are included), not the 30% average guess by Harvard Business Review readers. On immigration, just 3% of people in the world were not born in the countries they live (HBR survey estimate: 20%). While official data may show that exports contributed 30% of global gross domestic product, the figure includes much double- and triple-counting of intermediate goods. Stripping that out, World Trade Organization DirectorGeneral Pascal Lamy estimates the actual exports-to-GDP ratio at around 20%. Foreign direct investment made up below 10% of total world capital flows in 2010 (HBR survey: 30%). Lastly, Ghemawat notes, even as a U.S. survey put 25% as the median estimate of how much of the

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News & Strategy Alerts Business

Trends to watch in 2013 Enterprises are under pressure to evolve according to upcoming trends Upcoming trends include changing employee preferences, rising consumer expectations, digital health care, and personal-care products with supposed skin-enhancing ingredients The New Year brings a renewed sense of hope and optimism. Jumping the gun on which firms will be successful this year isn’t our style at TCR, but we will offer a few trends that could be fortuitous for your business in 2013.

Flexible workplace. According to a report prepared for Strategy guru Pankaj Ghemawat highlights globalization’s untapped potential TED Video

federal budget goes to foreign aid, in fact the real amount is 1%. Bottom line: globalization has barely begun. And with the developing world yet to come into its own as the leading driver of global economic growth in the decades to come, the potential for businesses catering to that incipient behemoth is unprecedented. In future studies, The CenSEI Report will assess the magnitude, contours and business impact of this continental shift in the global economy, and offer recommendations on how enterprises and nations can gain from it and avoid its pitfalls. Meantime, let’s brace ourselves for an exciting global ride to the emerging business world of 2030.

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Telus by info-tech research group Indaba Division, firms are under increasing pressure to evolve their businesses in line with certain trends in business. Changing employee preferences, for instance, are pushing businesses to adopt a more flexible work set-up where employees can work with their technology-of-choice to accomplish business goals whether they work in the office or elsewhere. “A workforce with the flexibility to use its own technology tools on the job, wherever they may be, can be more productive and loyal,” the report notes. It also reveals that “an essential component in changing work styles, especially within knowledge-intensive organizations is collaboration, and the technologies that make it more efficient.”

Rising consumer expectations. The Telus report also

emphasizes that consumers are expecting more from the businesses they deal with, particularly in understanding who they are. The report says: “Successful businesses moving forward will be those that meet these rising expectations and offer customers exactly what they want, even before the customer knows they want it.” Here, social media plays a major role, especially since it is becoming a “legitimate customer service medium.”

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Robert Passikoff, Ph.D., founder and president of research consultancy firm Brand Keys, regards the expectation economy as a critical trend in 2013—along with online retail pop-up stores and physical kiosks, voice assistance (as in Apple’s Siri), and going green, per his Dec. 18 post on the Forbes site. There is an awfully big gap, he says, between what brands offer and what consumers desire. “Accurate measures of real, often hidden, expectations provide significant advantages to brands that understand their value and point to how to delight customers,” he reveals.

personal-care products with supposed skin-enhancing ingredients, as a key trend. Higher-performance products with active and natural ingredients are becoming increasingly popular among both the older and the under-21 set. The article cites data from market research firm IBIS World that shows cosmeceuticals accounted for 13.4% of the $54.9-billion wholesale cosmetics and beauty-products market in 2012. Meanwhile, the Freedonia Group, according to the article, predicts the demand for cosmetic chemicals will jump to $9.4 billion by 2016.

Digital health care. According to trendwatching.com,

one of world’s leading trend firms, digital technologies are the new medicine. Health-care apps (or applications that run on mobile devices) are being used and prescribed by doctors and physicians to improve health outcomes. For health providers, these apps will reduce costs by making consumers more conscious of their health, improve compliance, and allow remote monitoring that can pick up early warning signs. In 2013, the market can expect consumers to turn to medical institutions to certify and curate these digital products.

Cosmeceuticals. Entrepreneur magazine, in its

Palace backs BIR plan to tax online sellers Amid objections posed by those that will be affected by the move, Malacanang supports the BIR in its bid to tax online traders Government must review the nature of online trade and set clear rules and standards to ensure compliance

“Trends 2013,” names “cosmeceuticals,” i.e., advanced Malacanang supports the Bureau of Internal Revenue (BIR) in its plan to collect value-added tax (VAT) on online sales, according to a Dec. 29 report from The Philippine Star. Deputy presidential spokesperson Abigail Valte says in the report that online stores were no different than physical ones and clarifies that the BIR is targeting online sites that do selling as their primary business.

An iPhone screenshot of the Antibiotics Reminder app by NPS MedicineWise shows how patients can remember to take their medicine on time

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In the report, BIR Commissioner Kim Jacinto-Henares also says majority of online traders do not issue sales invoices for transactions, which prevents the BIR from collecting added revenue from taxable transactions. However, officials of online shopping sites have

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asked the government to rethink its plan to tax online sellers, according to an August 2012 report in ABS-CBN News, mainly because the move will require an approach different from that of traditional merchants. In the report, senior manager for business development, sales, and marketing at Sulit.com.ph Me-Anne Bundalian reiterates that the BIR must first come up with ways to make the registration of the business and the issuance of receipts convenient for entrepreneurs. In its efforts to boost revenues and meet its collection target, the BIR has previously been going after certain sectors, such as professionals and gold sellers. Collections in January-November 2012 reached ₱969.34 billion, ₱119.83 billion or 14.11% more than collections made for the period January to November of 2011, according to a Department of Finance press release. In the United States, three bills are being considered in Congress that would grant the states the right to collect taxes from online sellers, according to a December article in The Washington Post. These bills are: the Marketplace Fairness Act, the Marketplace Equity Act, and the Main Street Fairness Act. Steven Aldrich, chief executive of online tax and accounting services firm Outright.com, says in his article that an ideal bill would be one that grants an exemption to small businesses under $1 million in annual revenues. While efforts to focus on particular sectors for revenue collection are well and good, government must first set clear standards in order for the initiative to be accepted and effective. The BIR must review how online businesses operate, as well as the intricacies of online transactions, and devise a simple mechanism for taxing these firms. A 2006 paper by the Philippine Institute for Development Studies (PIDS) says e-commerce can

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In a PTV News report, deputy presidential spokesperson Abigail Valte says that online merchants are no different from ordinary sellers

“theoretically be both a threat and a boon to taxation.” Electronic transactions may be more difficult to track, the paper says, partly because of the potentially large volume of transactions. It adds that e-commerce is less constrained by physical boundaries, and individuals can even transact with parties based in other countries, thus posing jurisdictional questions. While taxation is less complex with physical goods, electronic or digitized goods, such as software, could easily be bought and sold over the Internet, which makes tracking them all the more difficult. In addition, e-commerce also serves as an avenue for budding local businesses to reach their clients at a minimal cost. Thus, the move to impose taxes on online sellers may discourage start-ups, which goes against other initiatives—from government or private groups— to promote entrepreneurship. These small businesses may eventually grow big enough to set up physical shops even with their success in online selling, as in the case of some clothing, accessories, and beauty enterprises in the Philippines. As such, the government may also set revenue brackets that allow for exemptions depending on annual sales.

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Promising Technologies for Meeting Energy Demand The key to meeting future global energy demand will be in enhancing existing technologies By Jerome Balinton

STRATEGY POINTS Technologies including enhanced oil and natural gas extraction via horizontal drilling and hydraulic fracturing, bio-based energy, and renewable energy will play indispensable roles in meeting the demand for energy, the U.S. National Intelligence Council says Demand for energy will rise by about 50% over the next 15-20 years Rapid increases in renewable energy production will be underpinned by falling technology costs, rising fossil-fuel prices, and carbon pricing, but mainly by continued subsidies

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ital resources are at potential risk of dwindling as the world faces a future with growing populations, increased incomes, dietary changes, and economic growth in developing countries, according to the United States National Intelligence Council’s “Global Trends 2030: Alternative Worlds” report. The previous issue of The CenSEI Report discussed how food and water supply might come up short to meet growing global demand unless policymakers and their private counterparts take necessary action. A promising approach for addressing this looming scenario is in maximizing technological advances that could increase food and water supply. Apart from the threats of food and water shortfalls, another dwindling vital resource discussed in the report is energy. Aside from surges in demand for food and water, the report says demand for energy “will rise dramatically about 50% over the next 1520 years largely in response to economic growth in the developing world.” Production, however, will grow as well, with technologies such as enhanced oil and natural gas extraction via horizontal drilling, hydraulic fracturing (fracking), bio-based energy, and renewable energy playing important roles in meeting growing energy demand.

Fracturing and horizontal drilling. The combined power of fracking and horizontal drilling has allowed oil and gas companies to recover oil and natural gas from rocks, in deposits previously thought to be“useless” and “unrecoverable.” According to the NIC Global Trends report, fracking is a relatively new technology used to extract gas and oil from rock formations, having been first developed and commercialized in the late 1940s. Fracking consists of pumping fluid (usually water) mixed with propping agent (usually sand) and a dozen or so chemical additives to control physical characteristics

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such as viscosity, pH, surface tension, and scale prevention, at high pressure into a well bore. This high pressure creates fractures that propagate through the rock formation; the propping holds the fractures open to allow the gas to flow through the opened porous formation once the well has been completed. Fracking has evolved from using 750 gallons of fluid and 400 pounds of sand in a well to using a million gallons of fluid and 5 million pounds of sand. The latest fracturing operations use computer simulations, modeling, and micro-seismic fracture mapping as well as tilt sensors, which monitor rock deformations. Modernization of these technologies made way for oil and gas companies to explore and extract more potential deposits of shale. For fracking to be more efficient, the technology is coupled with horizontal drilling, a technique that became standard practice in the 1980s in oil and gas wells, according to the report. The infograph from The Wall Street Journal on page 37 shows the process of shale extraction using technologies fracturing and horizontal drilling.

Rocks beneath us hold gas. The NIC report

says “producers have long known shale as “source rock” – a rock from which oil and natural gas slowly migrated into traditional reservoirs over millions of years.” And data in the “World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States” by the U.S. Energy Information Administration (EIA) shows that of 32 countries assessed, China, the U.S., and Argentina are the countries with highest “technically recoverable shale gas resources.” The EIA report says China has recoverable deposits of 1,275 trillion cubic feet; the US has 862 trillion

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any significant attempts to apply hydraulic fracturing to shale. The shale gas revolution appears to have happened rapidly in a period of a decade, the Chatham House report says. According to the report, from 1% in 2000, shale gas share in U.S. domestic gas production grew to 20% in 2011, reflecting the massive investments of the U.S. government and its private partners in drawing oil and gas from shale.

Shale is redrawing emerging market investment map. According

Infographic from “Shale Gas Will Rock the World,” May 10, 2010, Wall Street Journal

to a June brief on natural gas reserves in The Economist, the International Energy Agency (IEA) predicts global gas demand will increase by more than half between 2010 and 2035, and unconventional gas – comprised mainly of shale gas – will make up 32% of the total supply, up from 14% today.

cubic feet; while and Argentina has 774 trillion cubic feet. The combined shale gas reserves in the 32 countries plus the U.S.’ own reserves come up to a total of 6,622 trillion cubic feet. (See the complete list of 32 countries and the technically recoverable shale gas resources in their basins here.)

As per an analysis posted on the Reuters site in December, shale gas is redrawing the investment map for emerging markets like Poland, Romania in Central Europe; through Mexico and Argentina in South America, India and Pakistan in Asia and South Africa.

However, according to “Resources Futures,” a Chatham House report by Bernice Lee et. al., the only success story of shale-gas production is the U.S. “shale gas revolution.” According to Alex Trembath et al in “Where the Shale Gas Revolution Came From: Government’s Role in the Development of Hydraulic Fracturing in Shale,” it was in the 1970s and 1980s, with the American gas industry suffering from declining production rates, that there were

Meanwhile, China, having the largest potential deposits of shale gas, shows serious interest in exploring that potential per its 12th five-year plan (2011-15). According to “Breaking New Ground: A Special Report on Global Shale Gas Developments,” by The Economist’s Economist Intelligence Unit, China’s current five-year plan lists exploration and development of shale gas as a key component, and China started to exploit its massive

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shale reserves in July 2011, mostly in the southwest of the country.

Advanced bio-fuels. Other sources of energy that

have the potential role of securing energy supply in the next 15-20 years are the wood, crops, and garbage that generate biomass. According to a 2009 report, “Global Potential of Sustainable Biomass for Energy” by Svetlana Ladanai and Johan Vinterback of the Swedish University of Agricultural Sciences, biomass is the largest and most important renewable energy option at present and can be used to produce different forms of energy.

The NIC Global Trends report lists a few sources of biomass, such as agricultural and forest residues from which cellulosic ethanol can be derived, municipal solid wastes or garbage, and energydedicated crops such as perennial grasses and trees. According to the NIC report, other bio-fuels that could enter the market include drop-in fuels, which are easily integrated with existing transportation-fuel infrastructures. An example of drop-in fuel is the biobutanol produced by fermentation and renewable hydrocarbons produced by algae and genetically engineered organisms.

GLOBAL POTENTIAL OF BIOMASS FOR ENERGY Biomass

Main assumptions and remarks

Category

Energy potential in biomass up to 2050

Energy farming on current agricultural land

Potential land surplus: 0-4 Gha (average: 1-2 Gha). A large surplus requires structural adaptation towards more efficient agricultural production systmes. When this is not feasible, the bioenergy potential could be reduced to zero. On average higher yields are likely because of better soil quality: 8-12 dry tonne/ ha/yr is assumed.

0 - 700 EJ (more average development: 100 - 300 EJ)

Biomass production on marginal lands

On a global scale a maximum land surface of 1.7 Gha could be involved. Low productivity of 2-5 dry tonne/ha/yr. The net supplies could be low due to poor economics or competition with food production.

< 60 - 110 EJ

Residues from agriculture

Potential depends on yield/product ratios and the total agricultural land area 15 - 70 EJ as well as type of production system. Extensive production systems require reuse of residues for maintaining soil fertility. Intensive systems allow for higher utilisation rates of residues.

Forest residues

The sustainable energy potential of the world’s forests is unclear - some natural forests are protected. Low value: includes limitations with respect to logistics and strict standards for removal of forest material. High value: Technical potential. Figures include processing residues

30 - 150 EJ

Dung

Use of dried dung. Low estimate based on global current use. High estimate: technical potential. Utilisation (collection) in the longer term is uncertain

5 - 55 EJ

Organic wastes

Estimate on basis of literature values. Strongly dependent on economic development, consumption and the use of bio-materials. Figures include the organic fraction of MSW and waste wood. Higher values possible by more intensive use of bio-materials.

5 - 50 EJ

Combined potential

Most pessimistic scenario: no land available for energy farming; only utilisation 40 - 1100 EJ of residues. Most optimistic scenario: intensive agriculture concentrated on the (200 - 400 EJ) better quality of soils. In parenthesis: average potential in a world aiming for large-scale deployment of bioenergy.

Table from “Potential Contribution of Bioenergy to the World’s Future Energy Demand,” IEA Bioenergy, 2007

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A downloadable podcast available on the Scientific American site briefly discusses how a fuel station in California uses algae for its biodiesel product. In the podcast, David Biello says algae was turned into a fuel without having to die, being buried in sediment and cooked by eons of geologic processes into petroleum. According to him, the company Solazyme simply grows its algae in the dark, on a sugar diet. Starved of light, the algae digest sugar and produce oil, which the company harvests.

Global biomass estimate. According to the 2004

paper, “Global Biomass Fuel Resources” by Matti Parikka, biomass currently represents approximately 14% of the world’s final energy consumption. For IEA, biomass provides 10% of the world’s primary energy supply, but most of this is in the form of inefficient traditional biomass used for cooking and heating in developing countries. In her paper published in Elsevier, Parikka writes that about 25% of the usage is in industrialized countries, where a significant level of investment in environmental protection has been made to meet emission standards, especially air emissions, in light of Kyoto greenhouse gas reduction targets. And over the past decades, the use of biomass has increased rapidly in many parts of the world. Surging oil prices have also increased the interest of countries in biomass. Meanwhile, Parikka says the other 75% of primary energy use of biomass is in heat production for developing-country household energy needs, and in process-heat production for biomass-based industries through the use of their generated residues. Today, the most widely used forms of bio-energy are firewood, bio-ethanol, biodiesel, and biogas, according to the “Research and Development on Renewable Energies: Preliminary Global Report on

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Biomass from the International Science Panel on Renewable Energies (ISPRE). That report says in 2007, 50 billion liters of ethanol and 11 billion liters of biodiesel were produced worldwide. Per a primer on biomass from Canada’s Centre for Energy, the U.S. currently leads the world in ethanol production and use, followed by Brazil — together they account for 89% of the world’s production. In 2010, the U.S. produced 49.3 billion liters of ethanol. In Brazil, all vehicle fuels sold contain ethanol, and more than 4 million cars run on 100% fuel ethanol produced from sugar cane. The rest of the country’s vehicle fleet uses ethanolblended gasoline. The ISPRE report says the use of modern biomass is set to increase in the future as a result of national or regional legislation mandating an increased share of renewable energy. The report predicts that installed capacity in the next decades of biomass will increase from the current estimate of 550 ethanol and 250 biodiesel plants (2007) to over 1,000. According to IEA’s “Technology Roadmap: Bioenergy for Heat and Power,” by 2050, bioenergy could provide 3,000 terawatt-hours of electricity, i.e. 7.5% of world electricity generation. In addition, heat from bioenergy could provide 22 EJ (15% of total) of final energy consumption in industry and 24 EJ (20% of total) in the buildings sector in 2050. The following chart shows the technologies used for converting biomass to energy, per the ISPRE report. Among the many conversion processes, the most important are: low temperature processes, including the anaerobic digestion of wastes, fermentation of carbohydrates to obtain alcohols and chemical reaction to produce biodiesel; and high temperature processes, including combustion, pyrolysis and gasification.

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PROCESS CHART FOR BIOMASS TECHNOLOGIES

Biomass High Temperature

Combustion

Low Temperature

Thermochemical conversion

Chemical

Biotechnological

reaction

conversion

Carbonization

Gasification

Pyrolisis

Transesterification

Fermentation

Degredation

Charcoal

Producer gas,

Bio-oil

Syngas

Biodiesel

Ethanol

Biogas

Uses

Power

Heating

Transportation

Biorefineries

Chart from “Research and Development on Renewable Energies: Preliminary Global Report on Biomass (2009), International Science Panel on Renewable Energies

Sustainability of production. According to “Potential Contribution of Bioenergy to the World’s Future Energy Demand,” by IEA Bioenergy, targets and expectations for bioenergy in many national policies are ambitious, reaching 20-30% of total energy demand in various countries depending on long-term energy scenarios. The IEA paper says the sufficient biomass resources

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and a well-functioning biomass market that can assure reliable, sustainable, and lasting biomass supplies are crucial preconditions to realize such ambitions. “The potential for energy crops depends largely on land availability considering that worldwide, a growing demand for food has to be met, combined

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with environmental protection, sustainable management of soils and water reserves, and a variety of other sustainability requirements,” the IEA Bioenergy report says. For its part, the NIC report says one key way to achieve sustainability is to make the cost of bio-based energy sources competitive at the commercial level.

Renewable energy. According to “2012

The Outlook for Energy: A View to 2040,” by ExxonMobil, by 2040, global electricity demand will be about 80% higher than today. The ExxonMobil paper says that the growth in energy demand will come from industrial (45%), residential (30%) and commercial (20%). The use of electricity for transportation, while growing, will remain limited. Meanwhile, the fuels used to generate electricity will continue to shift away from coal and toward lowercarbon sources such as natural gas, nuclear, and renewable-energy sources.

FUEL FOR ELECTRICITY GENERATION BY 2040 Quadrillion BTUs 300

250

200

150

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0 1990

The following chart presents the predicted distribution of different fuels in electricity generation by 2040. According to the IEA’s “World Energy Outlook 2012,” a steady increase in hydropower and the rapid expansion of wind and solar power has cemented the position of renewables as an indispensable part of the global energy mix; by 2035, renewables will account for almost onethird of total electricity output. For example, solar grows more rapidly than any other renewable technology. As the NIC report says, solar energy has substantial growth potential, and this could disrupt the global

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energy environment if it achieves a competitive cost with electricity produced from other sources of energy. The IEA world energy outlook report says renewables will become the world’s second-largest source of power generation by 2015 (roughly half that of coal) and, by 2035, they approach coal as the primary source of global electricity. The IEA 2012 energy outlook and the NIC Global Trends report share the same perspective that rapid

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Promising technologies for meeting energy demand

News & Strategy Alerts Technology

A call to bridge the online gender gap Doubling the number of online girls and women in developing countries, to 1.2 billion in three years, could potentially contribute up to US$18 billion to annual GDP across 144 developing countries

Wind Other renewables

To close the online gender gap, policymakers should make plans to increase broadband penetration, address market constraints that impact the affordability of Internet platforms and roll out digital inclusion programs aimed specifically at women

Nuclear

Coal

Gas

Oil 2015

2040

Graph from “2012 The Outlook for Energy: A View to 2040,” (2012), ExxonMobil

increase in renewable energy is underpinned by falling technology costs, rising fossil-fuel prices and carbon pricing, but mainly by continued subsidies. While subsidies might still be necessary to support new renewable energy projects, they can and should be adjusted over time as capacities increase and as costs fall, in order to avoid excessive burdens on governments and consumers. When adjusted properly, they can be small costs for governments and consumers to pay for cleaner and more sustainable energy in the long run.

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Doubling the number of online girls and women in the developing world from 600 million today to 1.2 billion in three years could possibly add from US$13 billion to $18 billion to annual GDP across 144 developing countries, based on the latest report released by tech-giant Intel Corp on Jan.10. The study, “Women and the Web,” is the first compilation of global data on how women in developing countries access and use the Internet, and the first attempt to quantify the Internet gender gap. The online gender gap is real. The report studied 2,200 women and girls in four countries--Egypt, India, Mexico and Uganda—and found that across the developing world, nearly 25% fewer women than men have access to the Internet, and the gender gap soars to almost 45% in regions such as sub-Saharan Africa. Further, the study found that one in five women in India and Egypt believes the Internet is not appropriate for them. What’s keeping away women from being online? Among the challenges are: affordability of access, illiteracy, lack of awareness of the Internet’s potential benefits, lack of familiarity or comfort with technology, and disapproval of families.

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A University of Michigan 2002 paper, “Users Divided? Exploring the Gender Gap in Internet Use,” reported that some studies have found that males report more experience using the Internet. Men likewise score higher on measures of comfort, innovativeness, and Internet selfefficacy. “The apparent lack of confidence among female Internet users has not translated into a disproportionately male Internet-user population,” it added. According to the World Wide Web Foundation’s first major publication, “Accelerating Development Using the Web: Empowering Poor and Marginalized Populations,” access to the Internet can bring significant opportunities, growth, employment and social relationships. However, the book, which was released in May, notes that “there was virtually no attention paid to the reality that the Internet, along with other technologies, might not be gender neutral.” Research shows that rates of women’s use of the Internet do not necessarily go in tandem with an increase in national rates of Internet penetration because a wide range of socioeconomic and political factors affect and frame the gender divide. Moreover, the book says countries with a high level of information-technology development do not necessarily have higher female participation rates. To illustrate, it notes that France, Germany, Luxembourg, the Netherlands, Norway, and the U.K. have the same rates of female Internet use with those of countries with much lower Internet penetration such as Brazil, Mexico, Tunisia, and Zimbabwe. Moreover, it adds, “Italy’s digital gender gap is similar to that of Kyrgyzstan, which has 10 percent of Italy’s Internet penetration rate. Greece and Portugal, with relatively high rates of Internet use, are close to the bottom on the percentage of female Internet users, but Mongolia and the Philippines, with relatively low levels of Internet penetration, are near the top.”

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THE WIDENING ONLINE GENDER GAP

Chart from Jan. 2013 Intel study

To bridge the online gender gap, the aforementioned Intel report suggests that policymakers should: • Develop comprehensive national plans for increasing broadband penetration that address gender specific barriers to access • Address market constraints that impact the affordability of Internet platforms, such as ensuring healthy competition, while also supporting women directly through programs such as targeted subsidies.

Future technology trends The IBM 5 in 5 shows the future of computing devices where all five senses can be shared by your hardware in order to aid in decision-making In 2013, expect the emergence of ultrahigh-definition TVs, touch-screen PCs, and non-traditional gaming devices, among others, based on the Consumer Electronics Show 2013 IBM’s 5 in 5 for 2012 focuses on computer innovations that will usher in a new era of

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cognitive computing, i.e., machines that help us think. The tech giant’s forecast of inventions for the next five years focuses on how computers will mimic and augment the senses by, for instance, enabling users to feel physical textures through mobile devices. In the era of cognitive computing, IBM’s Chief Innovation Officer Bernard Meyerson explains in his Dec. 17 blog post, humans and machines will collaborate to produce better results with “each bringing their own superior skills to the partnership.” He notes: “[T]oday, a convergence of new technologies is making it possible for people to comprehend things much more deeply than ever before, and, as a result, to make better decisions.” IBM’s 5 in 5: • Touch - Through infrared and haptic technologies, a smartphone’s touchscreen technology and vibration capabilities will enable users to experience the physical sensation of touching something • Sight - Computer vision in future could help save lives by analyzing patterns in order to make sense of visuals in the context of big data, such as detecting anomalies specific to the areas of agriculture and health care • Hearing - Sensors can pick up and analyze sound patterns and frequency changes, which may be useful in predicting the weakness of infrastructure or determining the meaning of a baby’s cry • Taste - In the works is a way to compute “perfect” meals through the use of an algorithmic recipe of favorite flavors and nutrition

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The IBM 5 in 5 video shows predictions that will change the world in five years

• Smell - In the future, sensors will be able to distinguish odors—a chemical, a biomarker, molecules in the breath—that can help detect problems in a person’s health or a crop’s soil conditions. If gears and gadgets at the Consumer Electronics Show 2013 are any indication, the eight biggest trends this year according to PC Mag are: ultrahigh-definition (4k) TVs, touch-screen personal computers, next-generation mobile chipsets for faster performance and longer battery life, incar smartphone integration, digital health, nontraditional gaming devices, wireless audio and video, and wireless cameras. In 2012, the four trends that characterizing consumer electronics purchase were: consumers purchasing fewer, multiple-function devices; consumers not being locked into any single operating system; cloud-based services and apps showing substantial increase in use, and; continued “consumerization” of information technology in the workplace as consumers use mobile devices for work purposes. The trends were discussed in a 2013 Accenture report on a quantitative online survey on purchase patterns and the use of consumer technology.

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Brave Old World

Predicting the state of the worldâ&#x20AC;&#x2122;s health as its population ages By Pia Rufino

STRATEGY POINTS Expect progress against communicable diseases and a growing burden chronic diseases in the coming years A novel respiratory illness will strike in the future, which is seen to be one of the most disruptive events possible The aging trend and advances in quality of health care will present challenges to government budgets

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Brave old world

eople are living longer than ever before. With continuous declines in death rates among older people, the share of population aged 80 years and over is rising quickly, and more people are living past 100, according to “Global Health and Aging,” a 2012 joint report from the World Health Organization (WHO) and the U.S. National Institute of Aging (NIA). According to the report, dramatic progress in life expectancy over the past century “is part of a shift in the leading causes of disease and death.” The global burden disease pattern has shifted from infectious and parasitic diseases that often kill the young to noncommunicable diseases (NCDs) that more commonly affect adults.

Chronic diseases: top killer. Over the next 10

to 15 years, WHO predicts that people will suffer more death and disability from such NCDs -- chronic diseases such as heart disease, cancer, and diabetes -than from infectious and parasitic diseases. “In 2008, NCDs accounted for an estimated 86 percent of the burden of diseases in high-income countries, 65 percent in middle-income countries and 37 percent in low-income countries. By 2030, NCDs are projected to account for more than one-half of the disease burden in low-income countries and more than three-fourths in middle-income countries. Among the 60-and-over population, NCDs already account for more than 87 percent of the burden.” In the report, burden is measured by estimating the loss of healthy years of life.

CHRONIC NONCOMMUNICABLE DISEASE IS WORLD’S TOP KILLER 2008

High-income Countries

Middle-income Countries

Low-income Countries

2030

Communicable, maternal, perinatal, and nutritional conditions Noncommunicable diseases Injuries Charts from the National Institute on Aging and the World Health Organization (WHO) 2011 report “Global Health and Aging” (p. 9) based on “Projections of Mortality and Burden of Disease, 2004-2030” by WHO

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Likewise, by 2030, NCDs will exceed communicable, maternal, perinatal, and nutritional diseases as the as the most common cause of death worldwide, according to Europe’s own Global Trends 2030 report, subtitled “Citizens in an Interconnected and Polycentric World.” The report, produced last year by the European Union Institute for Strategic Studies (EUISS), notes that NCDs, comprising mainly cardiovascular diseases, diabetes, some cancers and chronic lung diseases, are the biggest global killers and a leading cause of preventable morbidity and disability. It notes that about a quarter of global NCDrelated deaths occur before the age of 60.

NCDs incur huge economic cost. The EUISS report cites a 2007 study published in The Lancet (login required for full-text access) that looks into the burden of chronic diseases and their economic impact in 23 countries that account for around 80% of the total burden of deaths from chronic diseases in developing countries. The 2007 study expects an increasing burden of chronic diseases through 2030. It notes that chronic diseases claimed 61% of all deaths in 2005, and are projected to account for 66% and 71% of total mortality in 2015 and 2030,

THE GROWING BURDEN OF CHRONIC DISEASES CVD and

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Other Chronic

Projected Deaths (all ages)

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46%

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61%

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71%

2015

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Cancers

Projected DALYs

DALYS - Disability-affected life years

Chart from “Global Trends 2030: Citizens in an Interconnected and Polycentric World,” European Union Institute for Security Studies, October 2011, p. 74, citing “The Burden and Costs of Chronic Diseases in LowIncome and Middle-Income Countries,” The Lancet, December 2007.

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Brave old world

The pandemic threat In the future, people will not be spared from pandemics, most of which will come from animals. The emergence of an easily transmittable new respiratory pathogen – a virus that will kill or harm more than 1% of the victims -- is what the National Intelligence Council’s Global Trends 2030 report foresees to be one of the future’s “most disruptive global events.” Furthermore, advances in biological sciences may not be enough to keep up with the threat. The report also speculates that a still unrecognized, slow-moving pathogen may have already hopped on to humans somewhere. It warns, “Unlike other disruptive global events, such an outbreak would result in a global pandemic that directly causes suffering and death in every corner of the world, probably in less than six months.” Examples of deadliest pathogens are the Black death, which claimed from 30%-45% of lives on the British Isles in the 14th century; measles and smallpox in the Americas that may have killed 90 percent of the native population; and the 1918 influenza pandemic that affected more than 15 percent of German forces, as cited in the NIC report. According to the U.K.’s own Global Trends 2040 report, global pandemics will remain a serious threat due to “dependence of international trade, relatively unrestricted movement of people, and high levels of migration.”

respectively. The study warns that if no action is taken, approximately US$84 billion of economic production will be lost due to heart disease, strokes, and diabetes alone between 2006 and 2015. A 2011 study by the World Economic Forum (WEF) and Harvard School of Public Health presents more compelling estimates. According to their report, “The Global Economic Burden of Non-communicable Diseases,” over the next two decades, “NCDs will cost more than US$30 trillion, representing 48% of global GDP in 2010, and pushing millions of people below the poverty line.” To prevent and manage NCDs, the World Economic Forum-Harvard study recommends the following: • Dietary changes (e.g., reduced consumption of salt and increased consumption of fruit and vegetables)

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• Increased physical activity • Cessation of smoking and harmful use of alcohol (perhaps by increased tobacco and alcohol taxes, and through information, education and communication campaigns) • Transforming medical training to address the changing nature of disease burdens are all options to prevent and manage NCDs, including mental illness.

Progress in communicable diseases.

Meanwhile, the U.S. National Intelligence Council, in its “Global Trends 2030: Alternative Worlds” report, released in December, foresees good news on the fight against communicable diseases. Without an infectious pandemic, the NIC expects a 30% decline in global deaths from all communicable diseases—including AIDS, diarrhea, malaria, and respiratory infections--by 2030.

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Moreover, the dramatic reduction in infant and child deaths, and the sustained progress against communicable, maternal and perinatal diseases will result in longer life expectancy for the developing world, it adds.

“extending the quality of life for those aging,” based on the abovementioned NIC report. One of the major demographic trends cited in the study is aging both for the West and increasingly most developing states.

According to the report, “drug-resistant forms of diseases previously considered conquered such as tuberculosis, gonorrhea, and staphylococcus aureus could become widespread, markedly increasing health-care costs.”

Britain’s Defense Ministry’s futuristic report also expects continued advances in quality of health care in the year ahead. It notes that the aging societies of the developed world especially Europe as well as Japan, Korea, and China, will spend significantly on health care. Further, those with expanding middle classes -- India, China and Latin America -- will increasingly demand higher-quality health care.

For its part, the U.K. Ministry of Defense, in its 165page “Global Strategic Trends - Out to 2040” report published in 2010, predicts that diseases such as cholera, malaria, water-borne infectious diseases, tuberculosis and hepatitis will remain significant. It also says that, “The geographic extent of certain diseases will be modified by variations in climate, with regions not previously susceptible to diseases, such as Dengue fever and Lyme disease, becoming progressively affected.”

Recognizing the importance of healthy lifestyles. Moreover, the British Defense Ministry

report says there will be increased recognition of the importance of healthy lifestyles. “Diagnosis and treatment of genetic diseases will improve, and lifestyle choice is likely to become the main driver of poor health in the developed world. The treatment of chronic lifestyle diseases will grow in importance, placing increased emphasis on primary care,” it adds. The report also predicts that people from the developing world will likely be exposed to the “mass consumer dietary options” and lifestyle vices of the West, placing them at risk to develop similar lifestyle illnesses.

Costly health care ahead. The world will see

continued progress on health in the future, including

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The pressure to improve health-care standards, plus the need to meet the needs of older populations, will exert pressure on government budgets. The aging trend will have huge influence on health care in the future, including higher expenditure on pharmaceuticals and support for the elderly. “Geriatric (for illness of elderly) and palliative medicine (for relieving and preventing the suffering of patients) will become increasingly important with a significant proportion of the global healthcare industry existing to prolong life. This will create an increased burden on states in addressing long-term health requirements and also increasing pension commitments and welfare support.” Per the Asian Development Bank report “Asia 2050,” by 2050, more than 40% of Japanese and Koreans will be over 65 years old. Currently, it notes that 20% of Japanese are over 60, as are some 12% to 15% of China and Korea’s populations. “Ageing societies will have to adjust economic structures, institutions and policies to take account of the increasing number of elderly. Health care (including long-term care) and related regulations will have to be adjusted to the special needs of the elderly.”

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Rise of dementia patients The aforementioned joint WHO-U.S. NIA report predicts that worldwide improvement in life expectancy will translate into significant increases in the numbers of people with dementia, especially Alzheimer’s disease. “Most dementia patients eventually need constant care and help with basic activities of daily living, creating a heavy economic and social burden.” According to the report, prevalence of dementia rises sharply with age. It notes that about 25% to 30% of people aged 85 or older have dementia. Older people are also particularly susceptible to infectious diseases.

In its report “The Future of Pensions and Healthcare in a Rapidly Ageing World - Scenarios to 2030,” the WEF indicates that rapid population aging will significantly challenge the affordability of pension and health care systems. One of the key challenges for pensions and health care: “significant pressure on pay-as-you-go public pensions and healthcare systems due to rapid population ageing, cost-increasing medical technologies and higher incidences of chronic diseases.” The report posits that new forms of collaboration among key stakeholders – individuals, financial institutions, health-care providers, employers, and governments – are important to overcome challenges related to pension and health care delivery and to sustainably fund a world that’s getting older fast.

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News & Strategy Alerts Health & Lifestyle

Being overweight linked to lower risk of mortality New study suggests being overweight might lead to a longer life Longer life for overweight people is possible because they get better medical care, either because they show symptoms of disease earlier or because they’re screened more regularly for chronic diseases stemming from their weight Surprising as it might seem, a new study by scientists at the U.S.-based Centers for Disease Control and Prevention suggests that being overweight may be connected to longer life. The new research released on Jan. 2 in the Journal of the American Medical Association (JAMA) made its conclusion from a detailed review of over 100 previously published research papers connecting body weight and mortality risk among 2.88 million study participants living around the world, the Time report said. Apart from the surprising finding about being overweight, the new research did confirm that people who are obese, particularly those who are extremely obese, tend to die earlier than those of normal weight. Per the World Health Organization’s factsheet, since 1980, obesity among adults has more than doubled worldwide, with faster growth in emerging markets such as Brazil, South Africa, and Mexico, per The Economist videographic (link is to the page where the videographic can be accessed and viewed). Also, the WHO factsheet released on May 2012 indicates that in 2008 more than 1.4 billion adults (20 and older) were overweight. Of these, over 200 million men and nearly 300 million women were obese. According to the Time report, the JAMA study’s findings also suggest that people who are overweight (but not

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Screen capture of The Economist videographic The Economist

obese) may live longer than people with clinically normal body weight. On the other hand, the WHO said 65% of the world’s population live in countries where overweight and obesity kills more people than underweight. The WHO factsheet says overweight and obesity together comprise the fifth-leading risk for global deaths. At least 2.8 million adults die each year as a result of being overweight or obese. In addition, 44% of the diabetes burden, 23% of the ischemic heart disease burden, and between 7% and 41% of certain cancer burdens are attributable to overweight and obesity. The common health consequence of overweight and obesity, according to WHO, are the following: • Cardiovascular diseases (mainly heart disease and stroke), which were the leading cause of death in 2008 • Diabetes • Musculoskeletal disorders (especially osteoarthritis - a highly disabling degenerative disease of the joints) • Some cancers (endometrial, breast, and colon) The WHO said the risks for these non-communicable diseases increase with the increase in body mass index (BMI). The Time report said for the JAMA study, lead author Katherine Flegal and her colleagues analyzed every study

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they could find that broke down death risk by the standard BMI categories set by the World Health Organization in the late 1990s: underweight defined as BMI less than 18.5, normal weight being BMI between 18.5 and 24.9, overweight being BMI between 25 and 29.9, and obese as BMI of over 30. People who are 5’4″ would be considered of “normal” weight if they weigh between 108 and 145 pounds, for example, and overweight if they weigh from 146 to 174 pounds, and obese if they weigh more than that. Overall, people who were overweight but not obese were 6% less likely to die during the average study period than normal-weight people, the Time report said. That advantage held among both men and women, and did not appear to vary by age, smoking status, or region of the world, according to the Time report. The study looked only at how long people lived, however, and not how healthy they were when the died, or how they rated their quality of life. According to the Time report, Flegal and her coauthors suggest that it’s possible that overweight and obese people get better medical care, either because they show symptoms of disease earlier or because they’re screened more regularly for chronic diseases stemming from their weight, such as diabetes or heart problems. There is also some evidence that heavier people may have better survival during medical emergencies such as infections or surgery; if you get pneumonia and lose 15 lbs, it helps to have 15 lbs to spare, for example. Another possible explanation may involve “reverse causation”: maybe being thin doesn’t make you sick, as some experts argue, but instead being sick can make you thin. Being overweight may be associated with longer lives if people who lose weight because of diseases such as cancer, for example, contribute to earlier death among individuals who weigh less, the Time report said.

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New study could lead to needle-free insulin A discovery about how insulin is taken up by cells could lead to new diabetes treatments and needle-less injections for diabetes sufferers Globally, 371 million people live with diabetes, a leading cause of blindness, amputation, and kidney failure The World Health Organization projects total deaths from diabetes will rise by more than 50% in the next decade Scientists from the U.S and Australia have discovered how insulin is taken up by cells, promising new diabetes treatments and needle-free shots for people who suffer from the disease, based on a Jan. 10 Agence France-Presse (AFP) report posted on the Yahoo! site. Findings of X-ray research appearing in the journal Nature identified for the first time “how the hormone insulin binds to the surface of the cells, triggering the passage of glucose from the bloodstream so that it is stored as energy.” Lead researcher Mike Lawrence said scientists “have been trying to work out how this binding mechanism works for more than 20 years and the discovery should unlock new and more effective drugs to treat diabetes” such as “new types of insulin that could be given in ways other than injection, or an insulin that has improved properties or longer activity so that it doesn’t need to be taken as often.” Further, Laurence says the discovery could help treatment of diabetes in developing nations, leading to the development of more stable insulin that does not need refrigeration. The Massachusetts Institute of Technology has developed a jet-injection device that is needle-free, using a high-

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pressure jet to deliver medicine through the skin, according to a June Fox News article. Although the skin is still punctured, the diameter of the stream of the jet-injection device is only about the quarter of the size of a needle, or about the diameter of human hair, which makes injection less painful than a mosquito bite. Additionally, the needle-less system would eliminate the need for needle disposal and the risk of accidental needle sticks, according to the Fox News article. It notes that every year, an estimated 385,000 needle sticks and other related injuries occur in health-care workers. Based on the World Health Organization’s Nov. 2012 fact file on diabetes, there is an emerging global epidemic of disease that can be traced back to rapid increases in overweight, obesity, and physical inactivity. The WHO expects diabetes to become the seventh-leading cause of death in the world by 2030. Moreover, total deaths from diabetes are projected to rise by more than 50% in the next 10 years. According to WHO, diabetes is a leading cause of blindness, amputation and kidney failure. Figures from the International Diabetes Federation Diabetes Atlas 2012, shows there are over 371 million people living with diabetes globally, with China, India, and the U.S. having the most number of diabetics. Data from IDF shows 4.8 million people died last year. Surprisingly, half of people with diabetes don’t know they have it. Moreover, one in four deaths due to the disease occurred in the region. Currently, there is no cure for diabetes, but effective treatments exist, IDF says on its website. In terms of managing diabetes, blood sugar levels can be kept as close to normal as possible by a combination of these activities: thirty minutes of moderate physical activity per day on most days of the week, maintaining a healthy weight, avoiding foods high in sugars and saturated fats, and limiting alcohol consumption, avoiding tobacco, and monitoring complications.

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