Enterprise Resilience Management Blog

The Plight and Hope of East Africa

This is the third post in a weeklong look at East Africa. In yesterday's post, entitled Africa and America, I focused on an op-ed piece written by Paul Kagame, President of Rwanda. In that post, I mentioned that East Africa, of which Rwanda is a part, is currently facing a number of struggles, the gravest of which are drought and famine. I also noted that there is a possibility that an East African Federation could be formed that would include Kenya, Uganda, Tanzania, Burundi, and Rwanda. In this post, I'll look at some of the issues faced by those countries and discuss how difficult the path ahead is for most them. Let's start in Kenya with the drought and famine ["Lush Land Dries Up, Withering Kenya’s Hopes," by Jeffrey Gettleman, New York Times, 8 September 2009]. Gettleman writes:

"A devastating drought is sweeping across Kenya, killing livestock, crops and children. It is stirring up tensions in the ramshackle slums where the water taps have run dry, and spawning ethnic conflict in the hinterland as communities fight over the last remaining pieces of fertile grazing land. The twin hearts of Kenya’s economy, agriculture and tourism, are especially imperiled. The fabled game animals that safari-goers fly thousands of miles to see are keeling over from hunger and the picturesque savanna is now littered with an unusually large number of sun-bleached bones. Ethiopia. Sudan. Somalia. Maybe even Niger and Chad. These countries have become almost synonymous with drought and famine. But Kenya? This nation is one of the most developed in Africa, home to a typically robust economy, countless United Nations offices and thousands of aid workers."

The current crisis was created by "a combination of problems from failing crops and drought to civil war and rising food prices" ["East Africa faces a 'perfect storm' as humanitarian disasters combine," by Nick Amies, Deutsche Welle World, 23 September 2009]. According to Amies, the news is bad and could get worse.

"Climatic changes, war, financial hardship and infrastructural chaos seem to regularly take turns in plunging one region or another into desperation. The latest crisis is centered on East Africa, where countries such as Uganda, Ethiopia, Kenya and Somalia are currently experiencing a 'perfect storm' of suffering. These countries and others in the Horn of Africa are facing a combination of below-average rainfall, the prospect of serious crop failures, increased instability through regional and civil wars, and the overburdening of less severely hit areas through the displacement of populations. A report by the United Nations Food and Agriculture Organization (FAO) also warns that an already serious food insecurity situation in the region could worsen. The FAO report ominously predicts that if El Nino, the oscillation in ocean temperature which usually brings heavy rains towards the end of the year, delivers as expected, floods and mudslides could add to the misery by wiping out existing food stocks, killing livestock, damaging infrastructure and making thousands homeless."

At risk are "about 20 million people in Ethiopia, Eritrea, Kenya, Somalia, Sudan and Uganda" ["Hunger Crisis Worsens in East Africa as Boreholes, Funds Dry Up," by Jason Gale, Bloomberg.com, 23 September 2009].

"In parts of central Kenya, 50 percent of shallow wells, boreholes and other water sources have dried up. People walk as many as 30 kilometers (19 miles) in search of water in the country where 3.8 million are suffering the impact of drought, the WFP [World Food Program] said in [a] Sept. 16 report. ... Health officials are battling an outbreak of acute watery diarrhea in Ethiopia, where 1,354 new cases and three deaths were reported in one week this month, Save the Children said. The government estimates that 6.2 million people, half of them children, will need emergency food aid in the next few months."

The Economist declares that "governments are at their wits' end to keep their hungry people alive" ["A catastrophe is looming," 26 September 2009 print issue].

"This year’s drought is the worst in east Africa since 2000, and possibly since 1991. Famine stalks the land. The failure of rains in parts of Ethiopia may increase the number needing food handouts by 5m, in addition to the 8m already getting them, in a population of 80m. The production of Kenyan maize, the country’s staple, is likely to drop by one-third, hitting poor farmers’ families hardest. The International Committee of the Red Cross says famine in Somalia is going to be worse than ever. Handouts are urgently needed by roughly 3.6m Somalis, nearly half

the resident population (several million having already emigrated during years of strife). In fractious northern Uganda cereal output is likely to fall by half. Parts of South Sudan, Eritrea, the Central African Republic and Tanzania are suffering too. Rich countries are being less generous than usual. The UN’s World Food Programme says it has only $24m of the $300m it needs just to feed hungry Kenyans for the next six months. In Mwingi district, in Kenya’s Kamba region, the crops have totally failed. Villagers are surviving on monthly government handouts of maize-meal, rice and a little cooking oil. Worse than the hunger, say local leaders, is the thirst. People are digging wells by hand, but they hit rock. They plead for the means to go deeper but they cannot afford the dynamite or machinery. In the pastoral areas of northern Kenya, southern Ethiopia and south Somalia the death of livestock on a massive scale has sharpened conflict. Oromo rebels in south and east Ethiopia and Somali secessionists in the east of the country are likely to fight more fiercely. The drought may strengthen the hand of the Islamist Shabab movement, linked to al-Qaeda, in south Somalia; it uses food aid to control the people. Recent cattle raids in northern Kenya have left scores dead, with unprecedented numbers of women and children among the victims. Fighting may intensify until the land becomes greener again.

Despite the serious crises in Kenya and Uganda, there remains talk of an East Africa Federation (as mentioned above ["Big ambitions, big question-marks," The Economist, 5 September 2009 print edition]. On the surface, such a federation seems highly unlikely. The states involved are of very different sizes, backgrounds, and cultures. Each is facing unique challenges in its efforts to achieve sustainable development. So what is the driving force behind such a union? The Economist provides a little history lesson.

"In 1967 [Kenya, Tanzania, and Uganda] founded the East African Community (EAC) with a view to federation. Little progress was made; the EAC collapsed in 1977, to general rejoicing among Kenyans, who reckoned they were carrying the other two. In 1999, however, the project was revived. In 2007 it even expanded to include Burundi and Rwanda. Many still doubt whether a European Union-style federation can ever be achieved in the region, despite the EAC’s promise to create a single currency by 2015 and to make a customs union work. But recent developments have made further integration more likely."

The most important development is that the heads of East African nations are starting to warm up to the idea.

"Tanzania’s president, Jakaya Kikwete, now says his people should stop moaning and prepare for a common market. The head of Tanzania’s tiny stock exchange reckons there could be a single east African version in a few years. Work is already under way to create a common trading system. ... Uganda['s] ... president, Yoweri Museveni, has long nurtured a wish to end his career as the EAC’s first president. Paul Kagame, president of tiny, landlocked Rwanda, is also keen to press ahead. His recent rapprochement with Congo, Rwanda’s vast, ramshackle neighbour to the west, was made in the hope of increasing trade via the fledgling EAC’s market. He is now intent on adding value to Congolese raw materials and shipping them to the world market through the EAC, too. ... Kenya, for its part, wants to build a new deep-sea port near the island of Lamu, close to the border with Somalia. ... The hope is for roads and railways to Mogadishu, Addis Ababa and Kigali and a pipeline bringing in Ugandan and south Sudanese oil. Funds would flow in from Kuwait and other Arab investors. This would link up east Africa as never before, and a single currency and a customs union would then make much more sense."

There are, of course, lots of challenges remaining, but an integrated regional economy makes a lot of sense if the infrastructure can be put in place. In Paul Kagame's op-piece mentioned earlier, he pleads with the United States to "support regional initiatives in Africa." He rightly claims that "Africa's economic development does not stop at national boundaries. Our markets need to be connected by better roads, by canals and ports, and through new technologies." The Economist believes that if an East African federation could be achieved there is a good chance that it could expand to include other countries as well.

"Why should an East African federation stop with the club’s existing member countries? If defined by the area in which the lingua franca of the Swahili language is used, the range of lorries heading out of the Kenyan port of Mombasa, and the magnet of Nairobi as a hub, east Africa spreads into Ethiopia and includes a chunk of Somalia, a swathe of east Congo, a strip of northern Mozambique and all of southern Sudan, which could become an independent country in 2011, if its people vote in a promised referendum to secede. The EAC already has 126m people. If it expands, it could add as many as 120m more to that number, making it more than twice as populous as Africa’s 28 smallest countries combined—enough, its backers argue, to make a bigger EAC very attractive to foreign investors. The EAC says it would negotiate better deals with the rich world than individual African countries can."

The article concludes, however, on a more pessimistic note.

"Local businessmen are still sceptical. They argue that the EAC’s dream of federation could be botched by a trade row, tribal violence or strangled at birth with red tape by venal politicians and bureaucrats. So the mood is mixed. Could east Africa take off as a regional trading bloc? Or will the idea disappointingly fizzle once again? An early test of the EAC’s earnestness will be to see if it can get its member countries jointly to look after Lake Victoria, a common resource that scientists say has been overfished and poisoned by the sewage running off its overpopulated shores."

There are, however, some good things to report. Take the small country of Burundi, which I've yet to mention in the post ["A Death in Burundi," by Tracy Kidder, New York Times, 22 July 2009]. Burundi is at the bottom of the heap of current EAC members, but it is at least facing in the right direction.

"Burundi is a small, ancient, landlocked, mountainous nation that exports excellent tea and coffee and not much else, a country with a rich and, in modern times, a tragic history, tragic in large part because of European colonialism. It is a history intimately connected with the history of Rwanda, its neighbor to the north. In the post-colonial era, Rwanda and Burundi accentuated each other’s path toward mass violence. Most Americans surely remember hearing news of Rwanda’s infamous genocide, which began in 1994. But many know little or nothing of Burundi’s related catastrophe, an ethnic civil war that began in October 1993, lasted 13 long years and killed, it is estimated, about 300,000 Burundians. The country now has a democratically elected government, but it receives considerably less aid than Rwanda, and is in desperate shape. The war has turned a poor country into one of the very poorest in the world and also into one of the sickest. In almost every category, Burundi’s public health statistics rank among the world’s most abysmal. ... In 2006, a small group of Americans, led by a Burundian-American, created an organization called Village Health Works. They dreamed of helping Burundi find a new beginning. They started by trying to bring decent public health and medicine to a rural village named Kigutu. The system they created now provides, among many other services, food to the hungriest people in the area and clean water to all of them, and it is also a medical center that in its first year and a half has treated 28,000 patients, most of them without charge. ... Many volunteers and almost all the money behind Village Health Works come from the United States, but the inspiration behind it was both Burundian and American, and the entire enterprise, with its aim of making public health indigenous and lasting, has been built on a close alliance with Burundi’s health authorities. Committees of villagers — the most effective has been the women’s committee — have a real say in policy and operations. Moreover, all of the permanent staff — the lab technicians, community health workers, nurses and the chief doctor — are Burundian."

Uganda is a bigger success story. Oil continues to be found in that country ["Derricks in the darkness," The Economist, 8 August 2009].

"Tullow Oil, an Anglo-Irish exploration firm, announced on August 4th that it had struck oil while drilling in Uganda near the shores of Lake Albert. It was the tenth discovery in the area. Indeed, oil firms do not seem able to drill a well in Western Uganda without hitting the stuff. That part of Africa had long been seen as something of a wasteland by oilmen. But now an oil rush is under way. ... Within a few years Uganda could be producing 100,000-150,000 barrels a day (b/d). But where will it go? Some might be used to generate electricity, of which Uganda is desperately short. That could put an end to persistent blackouts and boost local manufacturing, which has withered on unreliable and exorbitantly priced electricity. The country’s president, Yoweri Museveni, has made it clear he wants a big refinery built. The oilmen politely disagree, arguing that east Africa’s economy can absorb only a fraction of the petrol and other products a full-sized refinery would turn out. They would prefer a much smaller facility, consuming perhaps 30,000 b/d, with the balance being pumped across neighbouring Kenya to the Indian Ocean."

An East Africa federation that developed the infrastructure mentioned earlier would help Uganda make the correct decision regarding the future of its oil. The country would be better off investing in alternative forms of reliable energy so that it could export its oil for the much-needed revenue. Kenya hasn't been so lucky, the article reports, and it keeps drilling dry holes. Exported oil from Uganda, however, would have to pass to through Kenya to get to market -- benefiting both countries. Undoubtedly, the news about oil has helped strengthen Uganda's currency ["East African currencies seen mostly gaining versus dlr," Reuters, 23 September 2009]. The discovery of oil should also increase the flow of FDI into the region -- investment it desperately needs ["Region Records Lowest FDI Inflow - UN," by Binyam Tamene, Daily Monitor, 20 September 2009].

"East Africa exhibits the lowest in-flow of Foreign Direct Investment (FDI) when compared to other African recipients, a new United Nations investment review revealed. While FDI inflows to Africa reached a record high of US$ 88 billion in 2008, the inflow into East Africa represents a mere 5% ($4 billion) of the total, almost the same as the previous year, the UNCTAD´s annual review of investment trends indicated. The report said FDI inflows increased in seven countries within the sub-region, namely Comoros, Djibouti, Madagascar, Mauritius, Seychelles, Uganda and Tanzania. Madagascar, Uganda and Tanzania received large inflows of FDI, particularly through cross-border Mergers and Acquisitions."

Much of the expected FDI will likely come from China, which is not only interested in Uganda's oil but in Congo’s timber, iron ore and other minerals. The flow of FDI should also improve because East Africa is on the verge of gaining broadband access to the Internet. As I wrote in my last post about Africa, Rwanda has struggled to connect Internet (see my posts Wiring Rwanda to the World and Update on Wiring Rwanda to the World, but it is apparently within weeks of getting that connection ["Bold Rwanda takes broadband leap," by Adam Blenford, BBC News, 21 September 2009].

"Landlocked Rwanda is weeks away from completing a link to a new fibre-optic network promising high-speed internet for East Africa, officials say. Engineers expect the capital, Kigali, to be connected to newly-arrived undersea cables in Kenya by November. A national fibre-optic ring is due to go online early in 2010. The new link is the key part of a plan to transform Rwanda from an impoverished, agricultural society into a hi-tech economic innovator."

Rwanda is not the only country that will be able to take advantage of the new connection ["Landlocked countries connect to Seacom cable," by Michael Malakata, Computer World, 22 September 2009].

"Landlocked countries in Southern and East African are now assured of high-speed bandwidth capacity following connection agreements between the undersea cable consortium Seacom and

ISPs. The Seacom consortium has signed agreements with Altech of South Africa and New Artel of Rwanda to provide connectivity to landlocked countries with high-speed bandwidth capacity. New Artel is a government-owned ISP providing Internet services to government ministries and departments. Through New Artel, Seacom will use Rwanda's national fiber-optic backbone to connect high-speed bandwidth to Burundi and the Democratic Republic of Congo. ... Mozambique and South Africa are the only two countries in Southern Africa that currently have connections to the Seacom cable as the cable has landing stations in the two countries."

The attached image (click to enlarge) shows the current broadband connections to Africa. Broadband connectivity between East African countries would be a huge step in making a federation a reality. Cellphone connectivity is another important connection and the outlook in that area is also improving ["Zain Expands Mobile Banking Service," Celluar News, 23 September 2009].

"Zain has announced an upgrade to its mobile banking service, Zap to enable customers to receive money from any bank account around the world and send money to any bank in Kenya, Tanzania and Uganda. ... Zain and its international and regional banking partners are confident that Zap will increase access to banking services in Kenya, Tanzania and Uganda, where formal banking services are largely restricted to urban populations. Eighty per cent of Kenya's and ninety-five per cent of Tanzania's and Uganda's populations do not have currently have access to banking services. Currently over US$10 million worth of airtime transfers take place in Kenya, Tanzania and Uganda each month."

Companies are also trying to introduce broadband services into the region ["Emerging Capital Partners Invests In East African Telecoms Co," By Robb M. Stewart, Wall Street Journal, 22 September 2009].

"Emerging Capital Partners has committed $25 million to Wananchi Group Holdings, a telecommunications company specializing in pay-television and Internet services in Kenya and Tanzania. ... ECP said its equity investment will be used to upgrade and expand Wananchi's network infrastructure, enabling the company to provide east Africa's first triple-play service of digital pay-TV, high-speed Internet and voice-over-Internet protocol services."

When viewed as whole, the above news stories clearly paint a picture of both plight and hope in East Africa. Visionary leaders like Paul Kagame continue to strategize about the future and see possibilities where others have seen none. As a funnel for resources from elsewhere in Africa, East Africa could become a major transshipment area and it could build on that to create an even broader economic base. The best hope for East Africa is to work together to bring these dreams to fruition. But first they must get through the current food crisis.

Africa and America

It's not often that the president of another country writes an op-ed piece for an American newspaper; but recently the President of Rwanda, Paul Kagame, did just that ["Why the U.S. Needs Africa," Washington Post, 21 September 2009]. Since I've posted several blogs about Rwanda, the article caught my eye. Unlike many African leaders, President Kagame wasn't pleading for aid but partnership. He wrote:

"Africa and the United States may be on the verge of a new partnership, not one of dependency and aid but one of shared ideas, vision and investments that increase our mutual prosperities. To begin this improved relationship, both must accept urgent and substantial changes in the nature of our bond."

Kagame points to President Obama's July speech to Ghana's parliament as a good place to start this new relationship.

"Africa needs to acknowledge a key tenet of President Obama's July address to Ghana's parliament: that a vibrant private sector is critical for capable, reliable and transparent societies. Without a dynamic private sector, no society can prosper. The African continent has been slow to foster conditions that build active private enterprise."

I certainly can't quarrel with those sentiments. I've been preaching for some time that developing countries will only find themselves on the path to prosperity when they foster conditions that attract foreign direct investment. That investment helps create jobs. Those jobs create a growing middle class. That middle class is the key to developing a sustainable national economy. Kagame admits that many African countries simply haven't done enough in that area. He continues:

"Africa must adopt policies that strengthen governance and promote economic growth to create conditions for a strong and innovative private sector. These are the most durable strategies for advancing socioeconomic transformation."

Kagame doesn't just point fingers. He accepts the fact that his nation has made mistakes but insists that it is striving to improve.

"Like all nations, my country is not perfect, but Rwanda continues to build strong foundations for stability and improve standards of living for all of our people. This has led to greater social integration and gender equity. Rwanda has leveraged the contribution of women for its productivity and prosperity; ours is the only country in the world with women as a majority in parliament. [To learn more about gender equality in Rwanda, read my posts entitled Rwanda's Women and Update on Rwanda's Women.] Rwanda has moved from instability to reconciliation and sustainable development largely through our Vision 2020 strategy. The primary principles of this strategy include macroeconomic stability; wealth creation to reduce dependence; and a shift from an agriculture-based economy toward a knowledge-based economy, with a vibrant service sector. We have enacted and consistently enforce a rule of law that counters corruption and supports our ambitious reform agenda."

President Kagame is rightfully proud of his country's latest ranking in the World Bank's Doing Business 2010 report. Rwanda was singled out as the top global reformer. For more on the latest Doing Business report, see my post entitled Good News in Tough Times. Not only is Rwanda on the right track with regulatory reform, but I believe, the country is also on the right track with its strategy. Most developing countries try to make the jump from agrarian economies to industrial economies. Rwanda is small and landlocked. Both of those factors indicate that Rwanda will never develop a great industrial base. But it does have human capital and natural beauty upon which a sustainable knowledge-based economy can be built. The country has struggled to connect Internet (see my posts Wiring Rwanda to the World and Update on Wiring Rwanda to the World, but it is moving in the right direction. Kagame's main point, however, is not how well Rwanda is doing, but why the United States should see economic opportunities throughout the continent. He writes:

"The link between the U.S. economy and African markets is critical, especially given global economic conditions and the potential Africa represents as a profitable new market. It is no longer enough for the United States to work for Africa based on pity; the United States must work with Africa to build both our economies and improve the lives of all of our people. The United States has long supported assistance to Africa. The United States must recognize that Africa is now in a position to be of assistance to the United States. It is time to acknowledge our mutual reliance with clear actions. Yes -- Africa must improve its governance institutions and embrace private-sector development. We appreciate the African Growth Opportunity Act and acknowledge that Africa has not fulfilled its potential; African countries should take responsibility for shortfalls in their efforts and take greater advantage of opportunities under this act. Meanwhile, the United States should increase financing to U.S. companies wishing to do business in Africa through key financial institutions such as Export-Import Bank of the United States and the Overseas Private Investment Corp. The United States has committed less to African markets than the emerging economies of Asia have; China guarantees nearly 30 times more in loans for investment in Africa than the United States does. Africa's needs are so great that there is ample room for both U.S. and Chinese investment. Increased U.S. investment in Africa would translate into more opportunities for U.S. companies, with high potential for profit flowing back to the U.S. economy."

Trust me, if the returns on investment in Africa were as good as President Kagame implies, U.S. companies would be rushing into Africa with or without government-backed financing. Most risk/benefit analyses right now conclude there are far more risks than benefits (see my post entitled Investing in Africa). Rwanda, for the time being, is the exception to the rule. It has done a lot to make conditions there more favorable to business. Kagame goes on to discuss regionalization.

"The United States should also support regional initiatives in Africa. Africa's economic development does not stop at national boundaries. Our markets need to be connected by better roads, by canals and ports, and through new technologies. Yet few U.S. companies are competing for large-scale and regional projects. The development of regional trading pacts similar to the North American Free Trade Agreement is among Africa's highest priorities. Regional development would better allow U.S. products and companies to reach beyond individual countries to greater markets without the burden of tariffs and legislative burdens."

For a number of reasons, I believe that regionalization is going to be a major characteristic in the next wave of globalization. Not everyone is happy with this development (for more on this subject, look for a future post entitled "The State of International Trade"). Kagame is right, however, stressing the importance of regional trade and especially the importance of regional infrastructure that connects countries with international markets. President Kagame concludes:

"As I meet with President Obama and other world leaders, ... I will remind them that development assistance to Africa is important but that the best type of aid leads to investment in national infrastructure and private-sector reinforcement. Without a vibrant private sector, there can be no economic growth or development. If the U.S. private sector played a greater role in Africa, mutual development would follow. To achieve this, the Obama administration must facilitate U.S. investment in Africa, and African leaders must attract greater U.S. investment by consolidating our institutions for effective governance."

Kagame's interest in "consolidating institutions" may refer to an idea being kicked around concerning an East African Federation that would include Kenya, Uganda, Tanzania, Burundi, and Rwanda ["Big ambitions, big question-marks," The Economist, 5 September 2009 print edition]. The magazine reports:

"Paul Kagame, president of tiny, landlocked Rwanda, is also keen to press ahead. His recent rapprochement with Congo, Rwanda’s vast, ramshackle neighbour to the west, was made in the hope of increasing trade via the fledgling EAC’s [East African Community] market. He is now intent on adding value to Congolese raw materials and shipping them to the world market through the EAC, too."

By some accounts, East Africa attracts much less investment than other portions of Africa (and Africa as whole doesn't attract nearly as much as other developing areas of the world). Parts of East Africa are also suffering from severe drought and famine. For more on the East African community, see tomorrow's post entitled "The Plight and Hope of East Africa." The Economist indicates that China is probably the largest investor in the region -- because China "plainly wants Congo’s timber, iron ore and other minerals shipped across the Indian Ocean via the EAC." President Kagame's claim that "China guarantees nearly 30 times more in loans for investment in Africa than the United States does," may be true; but it doesn't tell the whole story ["China Spreads Aid in Africa, With a Catch for Recipients," by Sharon LaFraniere and John Grobler, New York Times, 22 September 2009]. LaFraniere and Grobler begin their report in Namibia where, in 2007, China's President Hu Jintao made a state visit. They continue:

"China soon granted Namibia a big low-interest loan, which Namibia tapped to buy $55.3 million worth of Chinese-made cargo scanners to deter smugglers. It was a neat illustration, Chinese officials said, of how doing good in Namibia could do well for China, too. Or so it seemed until Namibia charged that the state-controlled company selected by China to provide the scanners — a company until recently run by President Hu’s son — had facilitated the deal with millions of dollars in illegal kickbacks. And until China threw up barriers when Namibian investigators asked for help looking into the matter. Now the scanners seem to illustrate something else: the aura of boosterism, secrecy and back-room deals that has clouded China’s use of billions of dollars in foreign aid to court the developing world. From Pakistan to Angola to Kyrgyzstan, China is using its enormous pool of foreign currency savings to cement diplomatic alliances, secure access to natural resources and drum up business for its flagship companies. Foreign aid — typically cut-rate loans, sometimes bundled with more commercial lines of credit — is central to this effort. Leaders of developing nations have embraced China’s sales pitch of easy credit, without Western-style demands for political or economic reform, for a host of unmet needs. The results can be clearly seen in new roads, power plants, and telecommunications networks across the African continent — more than 200 projects since 2001, many financed with preferential loans from the Chinese government’s Exim Bank. Increasingly, though, experts argue that China’s aid comes with a major catch: It must be used to buy goods or services from companies, many of them state-controlled, that Chinese officials select themselves. Competitive bidding by the borrowing nation is discouraged, and China pulls a veil over vital data like project costs, loan terms and repayment conditions. Even the dollar amount of loans offered as foreign aid is treated as a state secret."

Instead of helping Africa free itself from the corrosive effects of corruption, Chinese assistance exacerbates it. Some analysts call China's approach rogue aid (for more on the subject see my entitled Rogue Aid). China aside, President Kagame is correct that working together African countries and America can create opportunities that benefit both. The ball, however, is in Africa's court and it must make the first dramatic move towards a better future by improving its business environment.

Hope for Somalia? -- Not Much, I'm Afraid

This week I'm going to write about what's happening in East Africa beginning with Somalia. In October of last year, I wrote post claiming that Somalia is the epitome of a failed state [Somalia -- Poster Child of Failed States]. I reported that The Economist had declared Somalia "The world's most utterly failed state." I also noted that an entire generation of Somalis has now grown up within this failed state and asserted that "this lost generation is perhaps the greatest tragedy of the entire Somali saga." A few months later (January 2009), I wrote More on Somalia. In that post, I concluded by noting that "President-elect Obama certainly has plenty on his plate to keep him busy during the day and uneasy during the night. His ancestral ties to the [East African] area, however, provide him with an opportunity to make a difference where other western leaders could not. Aside from the issue of piracy, Somalia is not a strategically important country. The global economy can easily advance without it. But turning our backs on any part of the world is not the right thing to do. Finding a solution to the Somali problem will not be easy and it will not be quick; but ignoring it because it is difficult will only exacerbate the situation and will eventually lead to other unintended consequences like piracy and terrorism." To get an update on piracy in Somalia, see my post entitled Efforts to Confront Piracy Continue.

A few more months on, in March 2009, I wrote Somalia Remains Mired in Failure. In that post, I reported that Somalia had sworn in a new president, Sharif Ahmed and reported that he had reached out to the Muslim insurgents that control the southern portion of his country -- which I thought was unwise. I also noted that President Ahmed is a widely respected moderate Muslim. The insurgents to whom Ahmed reached out are known as the al-Shabab ("youth" in Arabic). Last December, The Economist reported on "The rise of the Shabab" [20 December 2009 print issue]. The article noted that Shabab fighters train near Somalia's border with Kenya. They receive funds and arms from Eritrea and recruits from several Arab countries.

"[These recruits] are expected to disavow music, videos, cigarettes and qat, the leaf Somali men chew most afternoons to get mildly high. Thus resolved, they wrap their faces in scarves and seek to fight the infidel. In return, they get $100 a month, are fed, and can expect medical treatment and payments if they are wounded, as well as burial costs and cash for their families if they are killed. The Shabab now controls much of south Somalia and chunks of Mogadishu. It took Kismayo a few months ago. The port of Marka, which takes in food aid, fell more recently. Many fighters are loosely grouped around two older jihadist commanders with strongholds near Kenya’s border, Mukhtar Robow and Hassan Turki. ... The Shabab has learnt from its mistakes in 2006, when it was overwhelmed in a few days by the Ethiopian army. It is now more pragmatic and more aggressive. This time round, it is apparently not picking fights with wealthy qat merchants. Men can chew what they like—but won’t be 'clean enough' to get a lucrative job in Kismayo’s port. Education is encouraged. Girls can go to school. Charcoal burning is forbidden for the sake of the environment. But the Shabab has also tightened its own security. Alleged spies for the transitional government or for Ethiopia are routinely beheaded with blunt knives. Mr Turki, the jihadist leader who lives mostly in the bush near the Kenyan border, sleeps in different houses when he is in a town. Public floggings and executions strike fear. So do masked faces. ... Most tellingly, the Shabab has learnt how to get hold of money faster. It concentrates its fighters in towns where there is money to be earned. The aim is to create an army that puts Islamist identity above divisive clan loyalties. Shabab commanders say a pious state will emerge once weaker militias have been disarmed. Some reckon that the Shabab shares some of the ransoms earned by pirates who operate out of the central Somali port of Haradheere. Those in Puntland, farther north, are apparently beyond the Shabab’s reach."

Between December 2008 and May 2009, the fighting grew worse and The Economist reported that Al-Qaeda was on the march in Somalia ["Al-Qaeda on the march," 23 May 2009 print issue]. The magazine was afraid that "Somalia’s new government [would] buckle under the latest wave of jihadist assaults." Somalia appeared to be a lightning rod attracting radical Islamists. The article reported:

"A fresh flow of foreign fighters is said to be heading for Mogadishu. Some of them—Americans, Britons and Italians of Somali origin, as well as Arabs, Chechens, Pakistanis and Uzbeks—are no longer being hidden by their commanders but are being eagerly shown off to display the insurgents’ global support. ... The jihadists are hitting Mr Ahmed’s government before it has had time to rebuild its own forces. Western governments have agreed to fork out $213m to set up a 6,000-strong army and a police force of 10,000. But the UN continues to reject pleas—from its own special envoy, Ahmedou Ould-Abdallah, among others—for it to send in a serious peacekeeping force, at least big enough to secure the capital and its immediate vicinity, including the airport and seaport. The 4,000 or so Ugandan and Burundian peacekeepers now propping up the shaky government under the aegis of the African Union (AU) are increasingly targeted by suicide-bombers."

By July, the Shabab controlled most of south and central Somalia, and much of Mogadishu. "Western security sources worry they could stage attacks outside the country, of the kind that destroyed the American embassies in Kenya and Tanzania in 1998" ["The next jihad," The Economist, 4 July 2009 print issue]. Despite his initial efforts to reach out to them, "the Shabab, for their part, have nothing but contempt for President Ahmed." The article also noted, however, that those fighting against Ahmed's government are al-Shabab supporters.

"Not all those who bear arms in the name of Islam support the Shabab. Several hundred kilometres north-east of Buale, in the town of Dusamareb, Sheikh Omar Sharif Muhammad, a Sufi religious leader, has mobilised fighters to “liberate” Mogadishu from the Shabab. ... Sheikh Omar’s men do not have the strength to march on Mogadishu any time soon, but in several recent battles they have halted the northward advance of the Shabab. They claim to have killed all manner of foreign fighters, and to have recently intercepted two Canadians of Somali extraction sent out as suicide-bombers."

As I noted earlier, the West's primary concern is that Somalia could be used as a training and staging base for terrorist organizations. Al Qaeda appears to be strengthening in Muslim Africa ["Qaeda Branch Steps Up Raids in North Africa," by Eric Schmitt and Souad Mekhennet, New York Times, 10 July 2009]. Schmitt and Mekhennet report that "Al Qaeda’s affiliate in North Africa has carried out a string of killings, bombings and other lethal attacks against Westerners and African security forces in recent weeks that have raised fears that the terrorist group may be taking a deadlier turn." They continue:

"American and European security and counterterrorism officials say the attacks may signal the return of foreign fighters from the Iraq war, where they honed their bomb-making skills. The attacks also reflect Al Qaeda’s growing tentacles in the northern tier of Africa, outside the group’s main sanctuary in Pakistan’s tribal areas, the officials say. In just the past six weeks, the group has claimed responsibility for killing a British hostage in Mali and an American aid worker in Mauritania, murdering a senior Malian Army officer in his home and ambushing a convoy of nearly two dozen Algerian paramilitary forces."

One of the African countries extremely concerned about Al Qaeda's and Shabab's presence in Somalia is the bordering country of Kenya ["Radical Islamists Slip Easily Into Kenya," by Jeffrey Gettleman, New York Times, 22 July 2009]. Gettleman reports:

"Kenya is widely seen as a frontline state against the Islamist extremism smoldering across the Horn of Africa. Few expect the Shabab to make good on its threats to march en masse across the border. But the creeping fear, the one that keeps the security staffs at Western embassies awake at night, is that the Shabab or its foreign jihadist allies will infiltrate Kenya and attack some of the tens of thousands of Westerners living in the country, possibly in a major strike like Al Qaeda did in 1998. [In June], Western counterterrorism experts in Kenya sent out text messages warning expatriates to stay away from malls in Nairobi, Kenya’s usually laid-back capital, because of possible suicide attacks by the Shabab. A few weeks later, the group threatened to destroy Nairobi’s 'tall, glass buildings.' The Shabab has already penetrated refugee camps inside Kenya, according to camp elders, luring away dozens of young men with promises of paradise — and $300 each. It has carried out cross-border attacks, kidnapping an outspoken cleric in May from a refugee camp 50 miles inside Kenya. [In July], in one of its boldest cross-border moves yet, a squad of uniformed, heavily armed Shabab fighters stormed into a Kenyan school in a remote town, rounding up all the children and telling them to quit their classes and join the jihad."

Al Qaeda affiliates in Somalia became the target of a special forces' raid conducted earlier this month ["U.S. careful of civilians in Somalia raid, official says," by Julian E. Barnes and Edmund Sanders, Los Angeles Times, 16 September 2009]. The raid targeted and killed Saleh Ali Saleh Nabhan, the reported leader of Al Qaeda forces in Somalia.

"President Sheik Sharif Sheik Ahmed, the leader of Somalia's transitional government, has urged the U.S. and African Union troops to use more precise tactics in dealing with insurgents, Somali government officials said. But Ahmed has also been calling upon the U.S. and other countries to assist him in defeating Shabab, an insurgent group in southern Somalia that has employed terrorist tactics against the transitional government. In May the U.S. provided more than 40 tons of weapons, enabling the government to launch an offensive against Shabab this summer that retook several cities along the Ethiopian border. Nabhan was believed to be an Al Qaeda cell leader as well as a leader of Shabab."

The militants are not going to fade away peacefully. Earlier this month they retaliated for Nabhan's death by detonating suicide car bombs in an African Union peacekeeping base ["Insurgents in Somalia retaliate with suicide blasts," by Mohamed Olad Hassan and Elizabeth A. Kennedy, Philadelphia Inquirer, 18 September 2009].

"Witnesses and officials said the bombings and a counterstrike from the AU base killed at least 16 people, including four bombers, and injured dozens, including one American. The sophisticated suicide attack underscored links between al-Qaeda's terror network and Somalia's homegrown insurgency. Many fear this impoverished and lawless nation is becoming a haven for al-Qaeda. ... The suicide bombings are a hallmark of al-Qaeda that can be traced to training from extremists like the operative killed this week by helicopter-borne U.S. special forces, said Ted Dagne, a Washington-based Africa specialist. Suicide attacks were virtually unknown in Somalia before 2007, even though the nation has been wracked by war for almost two decades.

Amid all of this bad news could there be any good news? Jeffrey Gettleman believes there is ["In Somalia, a Leader Is Raising Hopes for Stability," New York Times, 17 September 2009].

"President Sheik Sharif Sheik Ahmed ... is ringed by enemies and guarded around the clock by Ugandan soldiers who literally camp outside his door and, for the rare occasions he leaves [his] palace, drive him to the airport in an armored personnel carrier. The few glimpses he gets of Mogadishu’s deserted streets are through two-inch-thick bulletproof glass. ... The odds against Sheik Sharif are still long, but his moderate Islamist government is widely considered to be Somalia’s best chance for stability in years. For the first time in decades — including 21 years of dictatorship and the 18 years of chaos that followed — Somalia’s leader has both widespread grass-roots support inside the country and extensive help from outside nations, analysts and many Somalis say. ... Much of the world is counting on Sheik Sharif to tackle piracy and beat back the spread of militant Islam, two Somali problems that have flared into major geopolitical ones. Al Qaeda appears to be drawing closer to Somali insurgents in an effort to turn this country into a launching pad for global jihad. ... After years of ambivalence about Somalia, the United States is playing an increasingly active role here, and recently shipped 40 tons of weapons to Somalia to keep Sheik Sharif’s government alive."

In a country that has witnessed nothing but lawlessness over the past twenty years, people hedge their bets. "Many of [President Ahmed's] commanders still have ties to the Shabab, the Islamist insurgents working with Al Qaeda to overthrow Sheik Sharif’s government, and several government officers here conceded that a large share of the American weapons quickly slipped into Shabab hands." The single most important group holding the government afloat is "the 5,000 African Union troops guarding the port, airport and Villa Somalia," the presidential palace. Without the African Union troops, "many Somalis believe Sheik Sharif’s government would quickly fall." Still President Ahmed is hanging on.

"Sheik Sharif is a novel politician for Somalia. To start with, he is a politician. For decades, generals, warlords and warrior types have reduced this once languid coastal country to rubble. Sheik Sharif, 43, is used to carrying a compass, not a gun. Studious and reserved, he has triangulated his country’s clannish politics and found something that resembles Somalia’s political center, a blend of moderate and more strident Islamic beliefs, with the emphasis on religion, not clan. To help, he has assembled an impressive brain trust of Somali-Americans, Somali-Canadians and Somali-Europeans with Ph.D.’s who had been waiting on the sidelines for years to help rebuild their country. But the clock is ticking. Each day Sheik Sharif remains holed up in his hilltop palace, with millions of his people on the brink of starvation because of drought and grenades exploding just outside the palace gates, the euphoria that greeted his ascension slides into cynicism. Villa Somalia may be safe, but the rest of Mogadishu, the capital, is a death trap of assassinations, land mines and senseless violence. Errant mortar shells routinely sheer off the arms and legs of children."

Gettleman reports that Shabab fighters operate "just a few hundred yards beyond Villa Somalia’s chipped plaster walls" and await any opportunity they can find to kill him. He continues:

"The Shabab are as much of a political anomaly as the president. The president’s advisers contend that they have never seen a force as cohesive, well-trained and ideologically driven. The Shabab and their insurgent brethren now control most of Mogadishu and much of the country. They are often referred to as the Somali Taliban, sawing off thieves’ hands and recently yanking out people’s teeth, saying gold fillings were un-Islamic. But Somalis are not as religiously extreme as the Shabab’s presence might imply, and many say they are getting sick of the Shabab. That could spell a huge opportunity for Sheik Sharif, though critics say he must get out of Villa Somalia more and connect with the beleaguered population."

Gettleman reports that "the Shabab have their own defectors and may be losing critical support. Two young men who recently quit said the Shabab’s pipeline of money, which used to flow from rich Somalis outside the country, was drying up as more Somalis backed Sheik Sharif. Aid workers said the Shabab were taxing food in their territory, a very unpopular move when food prices are already high because of the drought." People are probably also getting tired of being afraid and watching atrocities committed in the name of Allah.

"The Shabab used to be seen as genuine freedom fighters, those leading the battle against the thousands of Ethiopian troops in Somalia propping up the previous transitional government. But now that the Ethiopians have left, the Shabab seem to be going through an ideological drift. Their focus is no longer on liberating Somalia, the defectors said, but on something bigger. 'Our commanders were trying to tell us that there’s no Somali national flag and no national borders,' said one recent defector, Mohamed, who feared identifying himself further. 'They told us the jihad will never end. Once we finish in Somalia, we go to Kenya and then elsewhere.' While that global agenda may be alienating Somalis, it seems to be a magnet for wayward jihadists looking for the next holy war. Former insurgent commanders paint a much more alarming picture than American officials, who contend that there are only several hundred foreign fighters inside Somalia."

The fact that Somalia represents the "next holy war" and sits beside the world's most dangerous seas is why Somalia has once again grabbed the world's attention. Every crisis has a moment, however, when conditions are ripe for bold action and decisive moves. Many people believe that time is now for Somalia.

"Many Western diplomats say now is the time for Sheik Sharif to sow divisions within the Shabab and entice relatively moderate insurgent leaders, like Sheik Hassan Dahir Aweys and Sheik Muktar Robow, also known as Abu Monsoor, into the government. That was what Secretary of State Hillary Rodham Clinton stressed when she met last month with Sheik Sharif in Nairobi, Kenya, a meeting that Sheik Sharif called his 'golden chance.'"

In order to take advantage of this golden moment, the Somali government will require resources from outside and integrity from within (so that those resources aren't passed along to the rebels).

"At a donor conference in Brussels in April, [President Ahmed] got pledges of more than $200 million, though much of it has not materialized. 'The problem with international aid is that it often comes late and is limited,' Sheik Sharif sighed. More help may be on the way. According to United Nations and Somali officials, the Ugandan military plans to invade Kismayo, a port town in southern Somalia controlled by a Shabab-allied group, as soon as more peacekeeping funds arrive. And Somali officials say the C.I.A. will open a base in the old officer quarters near Mogadishu’s airport. They said three C.I.A. officers visited Villa Somalia in late August to discuss training Sheik Sharif’s struggling intelligence services. American officials acknowledged that the United States was helping in unconventional ways, but would not specify further."

For a country that has suffered so much for so long, it's surprising to find any hope alive in Somalia. Yet the people of Somalia have demonstrated time and again a remarkable resiliency in the face of the worst conditions on earth. Let's hope President Ahmed's government, with support from the international community, can take advantage of this moment in history to make a difference in the lives of people who deserve better than they have received.

Update on Turkey and the Kurds

Because my company does a significant amount of business in the Kurdish region of Iraq, I have a particular interest in the ongoing struggle between Turks and Kurds in neighboring Turkey. According to The Economist, things may be taking a turn for the better ["Peace time?," 24 August 2009 print issue]. The article begins with a brief history between the two ethnic groups over the past 80 years.

"For most of the past 80 years those of Turkey’s 14m-odd Kurds who dared publicly to identify themselves as such have been brutally repressed, kicked out of their villages, tortured, jailed or killed. The Kurds have fought back in rebellion after rebellion. None so violent or so long as that launched in 1984 by the outlawed Kurdistan Workers Party (PKK). Over 40,000 people, many of them PKK fighters, have died in a terrorist campaign that has cost the state billions of dollars, blotted its international image, and stymied Turkey’s efforts to become a full-fledged democracy. Successive governments have mumbled about dealing with the Kurdish problem, only to be stopped by Turkey’s hawkish generals."

In every conflict, however, a moment comes when it is ripe for decisive action on both sides. Most often this moment arrives when one side militarily routs the other. With so much national treasure and precious blood already spilt, military victory no longer looks possible or desirable in the conflict between Turks and Kurds.

"A confluence of circumstances is raising hopes of a more lasting solution under the leadership of Turkey’s prime minister, Recep Tayyip Erdogan, who has staked his political future on this issue. In a ground-breaking speech in parliament earlier this month, Mr Erdogan provoked tears when he spoke of the common pain of Turkish and Kurdish mothers who had lost sons in the conflict. His interior minister, Besir Atalay, has been making the rounds of assorted politicians and civic leaders to build consensus for an as yet unarticulated plan. Mr Erdogan, who has long shunned the largest Kurdish party, the Democratic Society (DTP), for being the PKK’s political front, met its leader, Ahmet Turk, in early August."

Foreign Policy declares, "Chances of Turkey and the Kurds reaching a rapprochement are at their highest in 25 years" ["Is Turkey Renaming Istanbul Constantinople?," by Nick Danforth, 4 September 2009]. Although Prime Minister Erdogan has offered previous olive branches to the Kurds, there appears to be a positive difference this time around. Many analysts believe that the future of the global economy rests with the success of emerging market countries and Turkey wants to be a part of that success -- so do its Kurdish citizens. The Economist continues:

"The government’s plan is said to include easing remaining bans on Kurdish broadcasting, allowing Turkified villages to regain their Kurdish names, setting up Kurdish language and literature departments in universities and scrapping laws under which thousands of young Kurds are jailed for allegedly acting for the PKK (usually for no more than chanting PKK slogans or throwing stones at police). 'This time the government means real business,' concludes Henri Barkey, an American academic who has studied the Kurds."

The signs of change are everywhere, earlier this month the Turkish government announced that it would stage a play at a national theater in Kurdish ["Turkey to stage play in Kurdish for first time," by Ibon Villelabeitia, Reuters, 21 September 2009]. Following Erdogan's speech promising to seek peace with the Kurds, there was a massive demonstration held by Kurds supporting an honorable settlement ["Kurds rally for peace in Turkey," The Kurdish Globe, 5 September 2009].

"More than 100,000 Kurdish people rallied ... in Diyarbakir, the largest city in Turkey's mainly Kurdish southeast, urging the Turkish government to grant them greater rights and reach a peace deal with Kurdish rebels of the Kurdistan Workers Party (PKK). The demonstration was organized by the Democratic Society Party (DTP), a pro-Kurdish party in Turkey, under the slogan 'Yes to an Honorable Peace.' In a speech, DTP leader Ahmet Turk said the government must negotiate with the PKK to end the 25-year violence."

Negotiating with the PKK is not a simple matter. The group has been labeled terrorists by the Turkish government and its founder, Abdullah Öcalan, who captured and imprisoned in 1999, is considered a terrorist and murderer. He remains imprisoned on a life sentence on İmrali Island in the Marmara Sea. The Economist continues:

"The trickiest part of Mr Erdogan’s 'Kurdish overture' is how to get the PKK to stop fighting without negotiating with their imprisoned leader, Abdullah Ocalan, who continues to hold sway over both his men and millions of ordinary Kurds. The main opposition parties have already blasted Mr Erdogan for alleged treason. The obvious way out would be to use the DTP as a proxy, rather as Britain used Sinn Fein to deal with the IRA. The trouble is that the notoriously egocentric Mr Ocalan cannot bear to remain out of the limelight. He now says he will unveil his own road map for peace. Although recent opinion polls show 45% of Turks supporting Mr Erdogan’s Kurdish overture, a deal that followed overt bargaining with the PKK would be tricky to sell at home."

Ahmet Turk's public insistence that "the government must negotiate with the PKK," doesn't appear to leave an opening for the DTP to act as a proxy. For their part, PKK fighters and the expatriates that support them say they want to come back to Turkey and live openly and free ["Kurdish rebel supporters seek a way back to Turkey," by Tim Cocks and Shamal Aqrawi, Reuters, 9 September 2009].

"Supporters of the rebel Kurdistan Workers Party (PKK) exiled in Iraq say all they want is to go home and have their rights as minority Kurds respected. ... [Kurdish expatriates] represent [a] festering problem Turkey and Iraq must solve if they are to bring lasting stability to a region that is among the world's richest in energy potential, but is plagued by sectarian war, political feuds and cross-border tensions. ... Despite Turkey's steps to relax Kurdish policies, the PKK's continuing struggle for an ethnic homeland gives refugees ... little reason to hope they can soon go home."

The Turks are calling for the PKK rebels to lay down their arms so that negotiations can begin in earnest ["Turkey tells PKK to lay down its arms," United Press International, 23 September 2009].

"Turkish military leaders called on Kurdish guerrillas to lay down their arms in an effort to find a settlement to the so-called Kurdish question. Gen. Ilker Basbug, the top Turkish military commander, called on the Kurdistan Workers' Party, PKK, to lay down its weapons for peace. ... 'We cannot reach a solution with guns and blood,' he said. 'The only solution is that the terrorist organization lays down its weapons.' He cautioned, however, that his forces would continue their fight against the separatist rebels as long as the PKK continues to fight."

The PKK see that offer as hollow and one-sided. In an interview with The Kurdish Globe and reported in the article cited above, a "PKK spokesperson Ahmed Daniz said until now the call for solving the Kurdish issue in Turkey has been just words and media statements, nothing very serious. 'We won't put down our arms until we see Turkey is serious about solving the Kurdish issue, and the solution must be vital,' said Daniz." The fact that General Basbug is involved in the peace overture, however, is generally considered a good sign. The Economist continues:

"At least this time the army is behind the government. The chief of the general staff, Ilker Basbug, has grumbled about undermining the 'unitary state' and injecting ethnicity into the constitution. But a string of leaks about attempted coups and botched operations against the PKK have dented the generals’ image. Many of those most likely to torpedo a Kurdish deal are being prosecuted in the Ergenekon case against an alleged network of anti-government plotters. General Basbug has long conceded that military means alone cannot solve the Kurdish problem."

The Kurds are probably going to have to concede the fact that the PKK is never going to be legitimized as a political power and that its founder is going to remain imprisoned. The DTP must become the focus of negotiations if PKK rebels have any chance of returning home and living as free citizens. The time is ripe for bold action. The Economist concludes:

"More than Mr Erdogan’s career is at stake. So is Turkey’s future. A new generation of dissatisfied and radical Kurds could easily unleash a cycle of violence that even the PKK might be unable to control. What is most heartening is that the Kurdish initiative is not merely about responding to European Union pressure: it is a home-grown affair. And the onus is as much on the PKK and its allies as on the government to ensure that it succeeds. It will not be easy, but Mr Erdogan seems determined to plough on. If he succeeds, says Sezgin Tanrikulu, a human-rights lawyer in Diyarbakir, the Kurds will flock to back him."

As the world begins to emerge from this latest recession, a season of hope is dawning in emerging market countries. For Turkey to enjoy fully the benefits of that future, it needs to honorably settle the conflict that has raged for far too long with the Kurds. Getting the PKK out of the hills of northern Iraq would certainly make life easier for both the Iraqi central government and the Kurdistan Regional Government. It would be one step further down the path to prosperity for both Iraq and Turkey.

Good News in Tough Times

I have written a number of posts in which I've mentioned the World Bank's Doing Business Report and the positive impact it has had on the global business environment. It may well prove to be one of the most important things that the World Bank has ever done. The World Bank just released it latest report and, according to The Economist, it provides some good news in these tough times ["Reforming through the tough times," 12 September 2009 print issue]. Writing about governments' responses to the recession, The Economist writes:

"The World Bank’s annual Doing Business report, which tracks changes to the regulations that affect business, suggests that governments have handled the storm well. In the year since June 2008, 131 countries introduced 287 pro-business reforms—20% more than in the previous 12 months and more than in any year since the World Bank started the survey in 2004."

Not surprisingly, most of those reforms have been enacted in developing countries, where corruption has been a lot more prevalent than sensible regulation. In fact, many regulations have been set up to guarantee that unethical leaders and their cronies get their slice of national treasure before it can be used to help the rest of the country. The article reports that developing countries are beginning to make real strides toward reform.

"Low and lower-middle income economies accounted for two-thirds of the action, with Rwanda turning out to be the world’s champion reformer—the first time a sub-Saharan country has claimed the prize. Eastern European and Central Asian countries were the most energetic reformers by region for the sixth year in a row (26 out of 27 governments there introduced reforms). Middle Eastern and North African countries were not far behind (17 out of 19 countries), and 17 high-income countries also spruced up their business regulations."

Anyone who regularly reads financial news sources, like the Wall Street Journal, Financial Times, or The Economist, knows that some Eastern European and Central Asian countries have mounted significant ad campaigns to attract businesses. Reform has been a large part of those campaigns. Rwanda's improving climate is not a big surprise either. For more on Rwanda, see my post Moving Forward in Rwanda], which was written in June 2008 just as Rwanda was making its big jump up the Doing Business Index. As I've noted in previous posts that mentioned the Index, its primary contribution has been to spur competition among nations to see their scores rise. As the article puts it, "reform seems to be contagious."

"Countries try to emulate leaders in their regions. Many African governments, for example, have taken note of the success of Mauritius’s deregulated economy. They also respond to competition. Germany introduced laws to make it easier to establish joint-stock companies, scrapping ancient regulations, because so many German companies were taking advantage of the single European market and incorporating in Britain. Amazingly, given the fiscal pressure on governments, only one country increased its corporate income-tax rate: Lithuania, from 15% to 20%."

Old habits of corruption and ways of doing business are hard to break. So the real question is whether reported reforms are taking place only on paper or are they having a real effect on the way business is conducted. According to the article, reforms seem to be taking hold.

"[Reforms appear to be having real impact], according to a growing body of academic literature (so far there are 405 articles in academic journals and 1,143 working papers devoted to studying the impact of the Doing Business reforms). Lower barriers to entry are associated with a smaller informal sector. Informal businesses have lower wages, lower growth rates, poorer safety records, tend not to pay taxes and are prey to corruption. Reducing the cost of doing business leads to higher rates of growth and entrepreneurship. One study shows that, in poor countries, a ten-day reduction in the time it takes to start a business can lead to an increase of 0.4 percentage points in GDP growth. Another shows that people who have a formal title to their property invest as much as 47% more in their businesses."

The key for me is that reforms are increasing entrepreneurship. It's entrepreneurs who start new businesses, create jobs, and know how to succeed in local economies. While economies need to be anchored with large companies, it is generally small businesses that provide most of the jobs. The article notes that reform doesn't always come easy.

"It often takes a shock to set the reform machine in motion. Several countries that have been racked by civil wars, including Rwanda, Afghanistan and Sierra Leone, have brought in new company laws. The best reformers have several things in common. Their reforms are part of a broad agenda of boosting competitiveness. Over the past five years such pace–setters as Rwanda, Egypt, Colombia and Malaysia have each implemented at least 19 reforms. And they never stop. Those paragons Hong Kong and Singapore introduce substantial reforms each year. The willingness of governments to keep reforming in such tough times strengthens the prospects for recovery. Sensible regulations not only make it easier for new firms to get started, but also help established firms change direction and clapped-out firms declare bankruptcy."

In discussions with government leaders about Development-in-a-Box™, I stress the importance of having a strategic plan to guide them as they move forward. The article calls this having "a broad agenda," but developing countries need more focus than that to make the hard choices leading to a better future. Although the news is good, the article insists that now is not the time to rest on past laurels.

"There is no cause for complacency. Businesses in low-income countries struggle with twice the burden of regulation as those in high-income countries. Developed countries have an average of ten times as many newly registered businesses for every adult as countries in Africa and the Middle East. Almost two-thirds of the world’s workers are still employed in the informal sector. The World Bank’s latest progress report, optimistic though it is, is a reminder of how far there is still to go in getting business regulations right."

The development community now widely recognizes the fact that impoverished countries will remain poor unless they can attract more foreign direct investment (FDI) than foreign aid. As long as corruption, over-regulation, instability, disease, illiteracy, and lack of infrastructure plague poor nations, they will have a difficult time attracting investors. The purpose of aid should be to help establish the conditions that can attract FDI. Countries develop only as fast as a sustainable middle class arises. Middle classes only emerge when relatively good-paying jobs are created by investors. That is the reason that the World Bank's Doing Business Report has become such an important tool in helping developing countries steer towards a brighter future.

More on Nuclear Power

The Financial Times reports that "in the fight to secure fuel supplies and cut carbon emissions, nuclear power looks increasingly attractive -- but is also generating concern over proliferation" ["Split on the atom," by Ed Crooks and James Blitz, 9 September 2009]. The authors report:

"Nuclear energy provides about 15 per cent of the world’s electricity. Some 30 nations generate nuclear power; 10 to 20 are expected to join them in the next 10 years. At present there are 370 reactors in operation. The International Atomic Energy Agency, the UN watchdog, reckons that 1,400 new reactors may be built between now and 2050."

There are two main concerns about the increasingly large number of reactors in use, being built, or planned: proliferation, as mentioned above, and nuclear waste. Proliferation is a concern because "India, Israel and Pakistan have all used the materials and technologies offered in 'atoms for peace' programmes to make bombs. Today the fear is that Iran is doing the same." Grappling simultaneously with issues of reducing greenhouse emissions, controlling nuclear proliferation, and meeting energy needs will be no easy matter. Crooks and Blitz report that there are "three key factors inspiring the nuclear renaissance."

"First, there is security of supply. Driven by the development of emerging economies such as China and India, global energy demand could rise by as much as 45 per cent by 2030, according to the International Energy Agency, which represents rich energy-consuming countries. As concerns have grown about the future availability of fossil fuels, which will be increasingly provided by a small number of large suppliers, energy consumers have come to see the virtue in diversifying their sources of supply.

"Second, there is economics. The economics of nuclear power are fiercely contested, and highly sensitive to changes in variables such as construction costs. What is unarguable, however, is that it provides an energy source not linked to the oil price.

"Finally, there is the growing pressure to meet climate change goals. The US and its allies accept that the global struggle to cap greenhouse gas emissions means nuclear energy options must be available. Nuclear energy is almost free of emissions and, if growing energy consumption is not to lead to soaring concentrations of carbon dioxide in the atmosphere, it is likely to play an increasingly important role."

The authors point out that the growing global trend of taxing greenhouse emissions will also spur countries toward nuclear power. Some critics believe that a resurgence in nuclear power comes too late, offers too little and is both dangerous and expensive. Crooks' and Blitz' main concern, however, is proliferation.

"The most serious concern of all over the nuclear renaissance remains the link to proliferation. Power stations are not, in themselves, much of a risk – the problems lie in the uranium enrichment process, which can be employed to develop both civil and military versions of nuclear power. 'The world will be a much more dangerous place if more countries acquire enrichment and reprocessing facilities, because then we will have more potential nuclear weapons states,' says Leonor Tomero, of the Center for Arms Control and Non-Proliferation in Washington."

As I discussed in a recent post entitled The Future of Thorium, thorium-fueled reactors could help address proliferation concerns because they do not generate weapons-usable plutonium in the reaction; they consume any weapons-usable uranium isotopes produced in the process; and they leave comparatively little waste and even that waste is less radioactive. Aside from those benefits, thorium-fueled reactors could help destroy excess plutonium from countries that built the stockpiles in the first place, actually reducing the world's nuclear threat. With the possibility of over 1,000 reactors being built over the next 40 years, alternatives to current reactor designs needs to be seriously considered. Countries interested in developing nuclear weapons, however, will continue to insist on developing nuclear fuel capabilities as well (meaning the ability to enrich uranium). The argument they will use is that they don't want to be dependent on a supplier of nuclear fuel any more than they want to be dependent on a supplier of coal, natural gas, or oil. Countries like the UAE, however, have indicated that are open to buying nuclear fuel from an outside supplier. The attached image depicts the typical nuclear fuel cycle (click to enlarge).

One may ask why oil-rich nations are interested in nuclear power anyway. The answer is simple -- economics.

"Even for oil- and gas-rich countries, such as Iran and the UAE, another Middle Eastern country keen to build civil reactors, nuclear generation makes sense because it frees up more of their hydrocarbon resources for export. The earnings from those exports 'would easily pay for investment in nuclear energy', says Hans-Holger Rogner of the IAEA. Given likely long-term oil and gas prices, 'It makes economic sense.'"

The bottom line for Crooks and Blitz is that nuclear proliferation is likely to remain a concern in the decades ahead. Such concerns, however, are not likely to staunch the desire of many countries to build nuclear reactors. Jim Rogers, chairman, president and chief executive officer of Duke Energy Corporation which operates nuclear power plants in the U.S., is, of course, a strong believer in the future of nuclear energy "Why Nuclear Power Is Part of Our Future," Wall Street Journal, 4 August 2009]. He writes:

"According to industry estimates, building a new nuclear plant can result in the creation of 1,400 to 1,800 jobs during construction, with peak employment as high as 2,400 jobs. Operating a new plant can generate 400 to 700 permanent jobs that can pay almost 40% more than average local salaries. These are good, long-term jobs—the kind you can raise a family on. Additionally, each year the average nuclear plant generates approximately $430 million in sales of goods and services in the local community and nearly $40 million in total labor income, including both direct and secondary economic impacts. Imagine the economic stimulus if the 26 or so new nuclear plants currently planned for the U.S. were fully developed. ... When it comes to creating thousands of 21st century jobs—energy jobs on which we can rebuild the middle class—nuclear power clearly has the edge."

Roger's is, not surprisingly, a cheerleader for an industry that has taken its lumps. As a result, nuclear power has basically been on hold in America for decades. Even though the U.S. currently has the largest number of nuclear reactors in operation, France has long been seen as nuclear power's strongest proponent. The Economist openly asks, "Will France continue to lead the global revival of nuclear power?" ["Power struggle," 6 December 2008 print issue]. It continues:

"With 'no oil, no gas, no coal and no choice', France decided to go nuclear in 1974, and today about 80% of its electricity is generated by 59 nuclear plants across the country. But even France became pessimistic about nuclear power: it stopped building new reactors at the end of the 1980s and in 2002 a government report called the industry a 'monster without a future'. How things have changed. Nuclear power is back in favour, thanks to fears about oil supplies, energy security and global warming. France is poised to develop its expertise into a significant export. Its president, Nicolas Sarkozy, considers the sale of nuclear power to be central to his diplomacy: it is a badge of France’s technical prowess and a reaffirmation of its status as a global industrial power."

Areva, a government-owned French company, is currently building three nuclear power plants around the world and The Economist believes that the company's "'third generation' reactor design, called the EPR, [has] an edge over blueprints from its two big rivals: Westinghouse, now a unit of Toshiba of Japan, and GE Hitachi, a recently formed joint venture." Rebecca Smith writes about third and fourth generation reactor designs ["The New Nukes," Wall Street Journal, 8 September 2009]. She begins with Westinghouse's third-generation design.

"The Westinghouse AP1000 boasts half as many safety-related valves, one-third fewer pumps and only one-fifth as much safety-related piping as earlier plants from Westinghouse, majority owned by Toshiba Corp. In an emergency, the reactor ... is designed to shut down automatically and stay within a safe temperature range. The reactor's passive designs take advantage of laws of nature, such as the pull of gravity. So, for example, emergency coolant is kept at a higher elevation than the reactor pressure vessel. If sensors detect a dangerously low level of coolant in the reactor core, valves open and coolant floods the reactor core. In older reactors, emergency flooding comes from a network of pumps—which require redundant systems and backup sources of power—and may also require operator action. Another big concern is how well a plant can handle a terrorist attack, especially the nightmare scenario of someone flying a jetliner into the reactor area. The Evolutionary Power Reactor from France's Areva SA, another Generation III design, guards against such an accident by putting the reactor inside a double containment building, which would shield the reactor vessel even if the outer shell were penetrated. The design also boasts four active and passive safety systems—twice the number in many reactors today—that could shut it down and keep the core cool in case of a mishap. ... The Union of Concerned Scientists, a group critical of nuclear expansion, considers this the only design that is less vulnerable to a serious accident than today's operating reactors. Further out, Gen IV reactors, which use different fuels and coolants than Generation II and Generation III reactors, are designed to absorb excess heat better through greater coolant volume, better circulation and bigger containment structures. Advanced research into metal alloys that are resistant to cracking and corrosion should result in more suitable materials being used in plants, too, and giving them longer useful lives. Still, Generation III reactors are incredibly complex systems, requiring the highest-quality materials, monitoring and training of personnel. Critics say it's unrealistic to think they can operate flawlessly. Corrosion of vital equipment remains a potential problem, especially if it goes undetected deep within parts of the reactor that are difficult or impossible to directly inspect. What's more, none of the Generation III designs have been cleared for construction by the Nuclear Regulatory Commission. Some Generation IV concepts haven't even been presented to the NRC for review, and they still are years away from crossing that threshold."

Smith then discusses pebble bed reactors, which I first talked about in 2006 in a post entitled The Future of Nuclear Power. She writes:

"Some researchers see the answer to the safety problem in revolutionary reactor designs that promise to be more 'inherently safe'—physically incapable of suffering a catastrophic meltdown. One such design, at least in theory, is the Pebble Bed Modular Reactor, being developed in China and South Africa. It's powered with balls of uranium-filled graphite rather than the typical fuel rods. If the cooling system were to fail, the reactor temperature stays well below the balls' melting point and then automatically cools down."

The Economist admits that "the high cost of building new plants, and the uncertainty over the cost of nuclear energy relative to other sources, could delay the nuclear renaissance, especially in the midst of a credit crunch. Luckily for vendors, governments are bent on tackling climate change and securing energy supplies, and are likely to offer big subsidies." Smith agrees that high costs have crippled the nuclear industry in the past which is why some companies are looking at building smaller reactors that cost less. She reports:

"Some see nuclear power's future in small reactors that could be manufactured in factories instead of on site—and cost only $3,500 to $5,000 per kilowatt of capacity [as opposed to $4,000 to $6,700 per kilowatt of capacity for larger reactors], or millions of dollars instead of billions. Babcock & Wilcox, a unit of McDermott International, has designed a small 125-megawatt reactor that would be built at its U.S. factories and then delivered to power-plant sites by rail or barge. This would eliminate a bottleneck—and the associated higher costs—for ultra-heavy forgings that are required for large reactors. ... Another plus of small reactors: They're designed to be refueled less frequently, reducing the number of refueling outages. Instead of every 18 months to two years, they could go four or five years, reaping a saving from having less down time. Another feature of some reactors is the ability to do more maintenance while plants are running, again reducing idle time."

All of the proposed designs have their critics, Smith reports. And all of them produce radioactive waste -- the prime concern of environmentalists. As Smith writes, "one of the most contentious issues surrounding nuclear power: Where do you put the spent fuel?" She continues:

"Tens of thousands of metric tons of nuclear waste—mainly spent fuel rods—are sitting at power-plant sites while the federal government struggles to come up with a site to store it all. No nation has yet built a permanent waste site, although the current situation can continue for some time: Even critics say storage methods in place now should allow fuel to be stored safety for 50 to 100 years, while permanent plans are worked out. The big problem with controlling waste: Today's reactors capture only about 5% of the useful energy contained in uranium—which means lots of radioactive leftovers once the fuel is used. Some Generation III reactors promise to address this problem by squeezing more electricity out of their fuel, reducing the total amount of waste produced, but it's only by a relatively small amount. In short, it does nothing to solve the looming waste issue, though it does produce more megawatts of electricity in the short run. Some Generation IV reactors, known as fast reactors, may offer a breakthrough in the future—because they're designed to burn previously used fuel. GE-Hitachi, for example, is developing a fast reactor called Prism that would take spent fuel or weapons waste, sitting in storage today, and use nearly all of it as fuel, leaving little waste. What's left would also be less radioactive than current waste, and would need to be stored for hundreds of years instead of thousands of years, scientists say. Fast reactors are able to unlock energy in waste because they can burn plutonium, neptunium and other materials that Generation II and Generation III reactors leave behind. GE-Hitachi estimates there's enough energy sitting in nuclear storage sites in the U.S. to completely meet the nation's energy needs for 70 years, if fast reactors were used to convert waste into electricity."

Even fast reactors have their critics and skeptics. The Economist reports, however, that "plastic beads may provide a way to mop up radiation in nuclear power-stations and reduce the amount of radioactive waste" ["Trappings of waste," 5 September 2009 print issue]. After discussing the challenge of nuclear waste water, the article reports:

"A team of researchers led by Börje Sellergren of the University of Dortmund in Germany, and Sevilimedu Narasimhan of the Bhabha Atomic Research Centre in Kalpakkam, India, think they have found a new way to deal with it. Their solution is to mop up the radioactivity in the water with plastic. In a pressurised-water reactor, hot water circulates at high pressure through steel piping, dissolving metal ions from the walls of the pipes. When the water is pumped through the reactor’s core, these ions are bombarded by neutrons and some of them become radioactive. The ions then either settle back into the walls of the pipes, making the pipes themselves radioactive, or continue to circulate, making the water radioactive. Either way, a waste-disposal problem is created. Because the pipes are steel, most of the ions are iron. When the commonest isotope of iron (⁵⁶Fe) absorbs a neutron, the result is not radioactive. The steel used in the pipes, however, is usually alloyed with cobalt to make it stronger. When common cobalt (⁵⁹Co) absorbs a neutron the result is ⁶⁰Co, which is radioactive and has a half-life of more than five years. At present, nuclear engineers clean cobalt from the system by trapping it in what are known as ion-exchange resins. These swap bits of themselves for ions in the water flowing over them. Unfortunately, the ion-exchange technique traps many more non-radioactive iron ions than radioactive cobalt ones. To overcome that problem Drs Sellergren and Narasimhan have developed a polymer that binds to cobalt while ignoring iron. They made the material using a technique called molecular imprinting, which involves making the polymer in the presence of cobalt ions, and then extracting those ions by dissolving them in hydrochloric acid. The resulting cobalt-sized holes tend to trap any cobalt ions that blunder into them, with the result that a small amount of the polymer can mop up a lot of radioactive cobalt."

The Holy Grail of nuclear power is fusion reactors that leave no radioactive waste, but no such reactors are on the horizon. There is, of course, the matter of "table top" or "cold" fusion that The Economist calls "the beast that will not die." ["The beast that will not die," 28 March 2009]. They report:

"On March 23rd, 20 years to the day since Martin Fleischmann and Stanley Pons announced that they had accomplished nuclear fusion at room temperature in apparatus built on a laboratory bench (they hadn’t), experimental results purporting to demonstrate such cold fusion were presented to a meeting of the American Chemical Society in Salt Lake City, Utah. Cold fusion is so called to distinguish it from the sort that goes on in stars and hydrogen bombs. That needs a temperature of several million degrees. If cold fusion worked, it could provide an inexhaustible supply of clean energy. But it has been cold-shouldered by most scientists. Funding has dried up. What research there is, is conducted outside mainstream laboratories. In fact, its advocates have renamed their endeavours “low-energy nuclear reactions” because cold fusion has received such a drubbing. That is because most scientists think it impossible. ... To try to persuade their fellow researchers of the reality of cold fusion, Pamela Boss and her colleagues decided to search for evidence of the presence of high-energy neutrons, which should be produced when two nuclei fuse. Dr Boss works for the Space and Naval Warfare Systems Centre in San Diego, California, an organisation that develops communication systems for the American navy. The experiment that she thinks results in cold fusion uses an electrochemical technique in which two electrodes are plunged into an electrolyte made from a recipe that includes heavy water. Heavy water gets its name because it contains deuterium, a form of hydrogen that has a neutron in its nucleus as well as the usual proton and thus weighs twice as much as the ordinary sort. Deuterium is easier to fuse than simple hydrogen, and so is favoured in these sorts of experiments. Dr Boss and her colleagues reported that one of the electrodes in their experiment got hot, an effect they attribute to fusion. Most researchers in the field, though, do not accept that heat is sufficient evidence of fusion (if only because it was the basis of the Pons/Fleischmann claim). So to strengthen her case, Dr Boss placed a special plastic called CR-39 next to the hot electrode. If fusion was taking place, then neutrons flying through the plastic would cause protons within the material to recoil, leaving telltale tracks. Studying CR-39 under a microscope and counting the number of tracks is a standard way to assess how many neutrons bowled past. Dr Boss and her colleagues reckon they have seen enough tracks to provide evidence for the emergence of high-energy neutrons from their experiment. They published the results earlier this year in Naturwissenschaften. Dr Boss told the meeting, 'taking all the data together, we have compelling evidence that nuclear reactions are stimulated by electrochemical processes.' Certainly there would appear to be something strange going on. But even if Dr Boss’s results really are evidence of high-energy neutrons, many physicists will continue to deny that cold fusion could be real. That is because there is no theoretical explanation for electrochemical cold fusion within the existing laws of physics."

All I can say is stayed tuned but don't hold your breath. The real point is that there are no silver bullets when it comes to nuclear energy. It continues to offer a promising way to reduce greenhouse gas emissions but raises environmental challenges associated with its waste. And, of course, there are the proliferations issues discussed earlier by Crooks and Blitz. I believe nuclear power does play an important role in the world's global energy future, but it's only a piece of the energy puzzle.

Changing Demographics in Africa

According to New York Times' columnist Nicholas Kristof, one of "the grimmest risks to human life" in Africa is not living in a war zone but having children ["This Mom Didn’t Have to Die," 17 May 2009]. He writes:

"One of the most dangerous things an African woman can do is become pregnant. ... According to the World Health Organization, Sierra Leone has the highest maternal mortality in the world, and in several African countries, 1 woman in 10 ends up dying in childbirth. It’s pretty clear that if men were dying at these rates, the United Nations Security Council would be holding urgent consultations, and a country such as[Sierra Leone] would appoint a minister of paternal mortality. Yet half-a-million women die annually from complications related to pregnancy or childbirth without attracting much interest because the victims are typically among the most voiceless people in the world: impoverished, rural, uneducated and female."

Unfortunately, females are often undervalued in societies struggling to survive. The Economist claims that the poorer the circumstances the greater the chances are that families will have girls rather than boys. If true, it only exacerbates the situation by making girls even less valuable than boys ["Sons and mothers," 11 July 2009 print issue]. The article reports:

"That mother knows best is no secret. That her reproductive organs also know best may come as more of a surprise. But that is what two evolutionary biologists, Robert Trivers and Dan Willard, hypothesised nearly four decades ago. Boys, they reasoned, will thrive reproductively when they have grown big and strong in resource-rich environments. Otherwise, they will do badly. Girls, by contrast, will do reasonably well across the board and thus have a comparative advantage over their brothers in poorer situations. Parents, meanwhile, have a genetic incentive to see their progeny do well. Give a mother abundant resources, then, and her body should favour sons. Place her in difficult conditions and she should have more daughters. The Trivers-Willard theory has been tested with success in several species of wild animal. Showing it to be true in people, however, has proved difficult. But a paper just published in Biology Letters by Thomas Pollet of the University of Groningen, in the Netherlands, and his colleagues makes a brave attempt to do so."

To test the theory, Dr. Pollet studied polygamist families in Rwanda. He reasoned that if the theory holds true that, all other things being equal, women from monogamous marriages should have more sons than women from polygamous marriages and that earlier wives should have more sons than later wives.

"As the researchers suspected, when all other things were equal mothers in monogamous marriages had [the] most sons: 101 for every 100 daughters. Those who were the first wives of polygamists scored similarly. Wives who were 'third or lower order', though, had only 94 sons for every 100 daughters. Of course, all other things are rarely equal. The team also found and corrected for the facts that a mother’s age and which province she lived in affected the sex ratio of her children. Her level of education, whether she lived in a town or the countryside, and whether she owned the house she lived in did not, however, seem to make any difference (not that a lower-order wife is ever likely to own a house). What the researchers did not correct for was the father’s age. And previous studies have shown that older fathers are relatively more likely to beget daughters. So part of the effect Dr Pollet has discovered might be caused by the fact that, obviously, a man is older when he takes a second or subsequent wife than when he marries for the first time. This age effect, too, could be ascribed to the Trivers-Willard hypothesis if, say, sperm quality falls with age. But it would be a separate phenomenon from what is going on in the mother."

Having more women in the world is not a bad thing and "evolution has led to women, but not men, getting progressively beautiful, according to scientists" ["Women getting more beautiful, say scientists," The Telegraph, 26 July 2009]. And, according to the article, "researchers found that attractive women have more children than their less attractive counterparts and that a higher proportion of those children are female." Since attractive couples are more likely to have girls than boys, researchers argue, girls are getting prettier while men "remain as aesthetically unappealing as their caveman ancestors." Sorry men! One would think, however, that increasing attractiveness would make women more appreciated by the shallower gender; but that doesn't seem to be happening. In many traditional cultures around the world, women continue to struggle for their rightful place in society. Africa is one of the regions in which women are still fighting for rights.

The Economist reports, however, that "Africa is undergoing a 'demographic transition'. ... African women are now following their sisters in Asia and the rich world by bearing steadily fewer children" ["The lesson from Sodom and Gomorrah," 29 August 2009 print issue]. The article continues:

"Admittedly, Africa is lagging behind Asia by about 20 years, and the continent’s fertility rates are still high, but the trend is clear. In Mozambique in 1950 a woman had, on average, 6.5 children over her lifetime; now she has five. In Ethiopia the figure has dropped from seven to five; in Côte d’Ivoire it has almost halved from its peak; in Botswana it has more than halved. The only exceptions are war-torn places such as Congo."

The article admits that one of the factors affecting the decreasing birthrate is HIV/AIDS, which is killing off both fathers and mothers during childbearing years. It also reports, however, that, when people leave rural areas for the city, birthrates also decline dramatically. And, according to the article, Africa is "is part of the fastest urbanisation in history. Africa’s rush to the cities is not just changing the location of Africa’s populations, it is changing their structure, too." People are hoping that Africa will be able to take advantage of what is known as the "demographic dividend."

"In Latin America and Asia this transition yielded a huge economic gain, called the 'demographic dividend'. As birth rates decline, the proportion of children shrinks and the working-age population bulges, as is happening now in Africa. That can kick-start industrialisation. Factories employ low-skilled farmers fresh from the country, which increases productivity and prosperity, which creates demand, and so it goes on. Some studies reckon that demography explains as much as a third of Asia’s economic growth. It is this opportunity that Africa must prepare for. The 'dividend' is not automatic. It has to be earned. A productive, healthy workforce could lift large parts of Africa out of poverty, but an expanding cohort of jobless, idle and frustrated young men will create political and social instability. Just think of the riots and deaths sparked by rampaging hordes of youths in Nigeria, Zimbabwe and Kenya."

In order to take advantage of the demographic dividend, African countries will need new leaders that fight corruption, become wise stewards of national resources, and invest in their country's human capital. Africa is the final stop for the industrialization train; but no one knows exactly when it will arrive. The article concludes:

"There are plenty of reasons to fear the worst. Poor farming and environmental degradation could lead to hunger, poverty and strife. Instability, corruption and family breakdown could break the cycle of industrialisation and growing productivity. Hence the need to get African policy right: a green revolution to keep rural hunger and poverty at bay; peace and contraception to keep the demographic transition on track; education and better governance to create a workforce able to exploit the chances on offer; and services to help people in slums like Sodom and Gomorrah [near Accra, Ghana]join the formal economy. Such desires are hardly new—indeed each stands on its own merits. What is new is the sense of urgency. The demographic dividend comes around only once. Eventually the bulge of energetic, working-age people becomes a bulge of dependent, elderly ones. The transition will pass in a couple of generations—the blink of a demographic eye. Africa must not fumble its best chance at prosperity."

In a companion article ["The baby bonanza," 29 August 2009 print issue], The Economist provides more details about Africa's declining birthrates:

"In 1990 the continent’s total fertility rate was over six, compared with two in East Asia. By 2030, according to United Nations projections, the total fertility rate in sub-Saharan Africa could fall to three. By 2050 it could be below 2.5. It is surely no coincidence that the past 15 years have seen Africa’s fastest-ever period of economic growth. Africa, exceptional in so many ways, does not seem to be an exception to the rule that, as countries get richer, they experience a demographic transition. ... A fast-growing, economically active population provides the initial impetus to industrial production; then a supply of new workers coming from villages can, if handled properly, enable a country to become more productive. China and East Asia are the models. On some calculations, demography accounted for about a third of East Asia’s phenomenal growth over the past 30 years."

Many people in the development field still look to Africa's future with some hope. Companies are sitting on the sidelines waiting to rush in to help Africa develop, but they are waiting for less violence, less corruption, and a more viable workforce. The article rightly asserts that even in a resource rich continent like Africa, "Africa’s people are its biggest asset." There is not much time to get things right, the article argues. There are too many young people ("one African in two is a child") who need to be educated, trained, and cared for in African countries right now.

"Millions of children already live rough in towns and cities. Prostitution and death await the poorest girls. The boys take to glue and crime. Africa has the highest rate of child disablement in the world. Some think 10-20% may be disabled, a staggering number, but since they are rarely seen in clinics and schools that is hard to verify. Paediatricians suspect some are killed in infancy—not Darwin’s natural selection but the dispensing of an extra mouth to feed. Physical stunting is probably rising."

Whether Africa's huge youth bulge establishes a foundation for industrialization and a brighter future or sets the continent ablaze with conflict rests entirely with the leaders and people of Africa. The rest of the world has patiently demonstrated a willingness to help, but corrupt and short-sighted leaders have undermined efforts at every turn. The article concludes:

"Demography needs to be put in perspective. It is not destiny. Africa needs a green revolution; more efficient cities; more female education; honest governments; better economic policies. Without those things, Africa will not reap its demographic dividend. But without the transition that Africa has started upon, the continent’s chances of achieving those good things would be even lower than they are. Demography is a start."

It looks like the world is about to claw its way out of the current recession. That means the rest of the world is about to charge forward once again and Africa could be left in the dust of progress if it doesn't quickly change course. Some nations undoubtedly will, but many others have shown few signs of even trying. I've noted before that, thanks to unnatural boundaries established by colonial states, not all African nations are equally endowed with resources. Some states are likely to be permanent wards of the international community because they are simply incapable of establishing a sustainable economy. Other states, however, have no such excuse. Companies like mine stand ready to help create sustainable economies when conditions permit.

Optimism and Pessimism

Since the current recession began, I have been touting the importance of entrepreneurs in getting the economy back on its feet. One of the characteristics possessed by most entrepreneurs -- one that makes them well-suited to doing business in bad times (or good) -- is optimism. Having an optimistic boss is one thing, but an article in BusinessWeek claims that businesses with optimistic employees have an even larger competitive edge ["Is Optimism a Competitive Advantage," by Michelle Conlin, 24 August 2009 print issue]. The article equates an employee's optimism with his or her level of engagement in the company and concludes that "the link between a company's employee engagement and its bottom line is real: the more engaged the workers, the higher the sales and profits." Conlin writes:

"Most human resources managers base their motivational policies on a simple psychological premise: that optimistic, engaged employees are more productive and hence can help their employers grow and make more money. Put simply, workplace optimism, if nurtured properly, can be a competitive advantage."

The reason that Conlin equates engagement with optimism is that optimism is hard to gauge. There are, however, a number of ways of judging a person's level of engagement in a company and studies have shown that as engagement rises so do sales. Conlin continues:

"Companies don't directly measure the optimism of their employees. Instead they rely on engagement scores, typically gathered by outside consultants who exhaustively survey the staff. As in: Does your boss support you in getting your job done? Do you have a best friend at work? Then the number crunchers analyze the results. Many companies see a link between employee engagement and the bottom line. Best Buy, for example, says a 2% increase in employee engagement at one of its electronics stores corresponds, on average, to a $100,000 annual rise in sales at that location."

There are other benefits of having optimistic employees besides a better bottom line. We've all be around negative people in the workplace and the experience isn't enjoyable. People like working with optimistic people. They are willing to go the extra mile to help them because optimistic people are generally the first ones to offer help when they see a need. Conlin points out that in times of grave uncertainty, like the current recession, instilling a sense of optimism and hope in employees is crucial to making it through the difficult time.

"'The more optimistic [people] have better coping mechanisms and can help their organizations recover more quickly,' says Binna Kandola, whose British firm, Pearn Kandola, has conducted 'happiness audits' for PricewaterhouseCoopers, among others."

Kandola clearly equates optimism with happiness. That shouldn't be too surprising since most optimistic people are happy because, as the old song goes, they "always look on the bright side of life." If you don't believe that optimism and happiness can make a difference, Conlin tries to persuade you otherwise by providing a case study.

"HR managers often point to Campbell Soup as the most compelling example of how an all-out assault on pessimism can alter a company's fortunes. When Douglas R. Conant became chief executive in 2001, Campbell had a reputation as an exceedingly pessimistic workplace. Management's engagement scores were the lowest of any big company Gallup had surveyed. Its stock was in the pits. Takeover rumors were rampant. And a leading securities analyst of the food industry likened the company to a 'buggy whip' maker. Conant decided that winning in the marketplace meant first winning in the workplace. He gave every employee the equivalent of a user's manual that explained how he himself operated. He replaced nearly all of the company's top 350 leaders, a signal, in part, that he was serious about heeding employee complaints that the place was broken. Then he set about transforming Campbell into a more employee-centric company. Conant created Campbell University, upgraded the recognition program that showers gifts and other awards on high performers, and penned up to 10 handwritten thank-you notes to employees a day. Today, according to Gallup, Campbell's engagement scores are among the highest of any company it measures, and its earnings growth has handily beaten that of its peers."

At a time when high unemployment is rampant, employers can forget how important it is to invest in their company's human capital. Training is often one of the first things to be discarded during an economic downturn. The problem with that strategy is that it undermines the optimism and hope of employees at a time when those characteristics are critical for getting through tough times. Conlin asserts that "there's no better way to stoke pessimism than by firing a lot of people." She concludes her article by discussing what J.C. Penny and a medical technology company called Stryker have done to avoid layoffs.

Although I am a big believer in optimism, I'm also a realist. I understand that there is also a place for people who are willing to question company actions when they see a problem that optimists don't. That is why I found it interesting that BusinessWeek published a companion article to Conlin's that praised a bit of pessimism ["The Case for Pessimism," by Patricia Pearson, 24 August 2009 print issue]. She writes:

"What American businesses can use at this juncture is the advice of professional nervous wrecks like me. Don't scoff. It pays to pay attention to the Nervous Nellie in the house—the person who will tell you that now is a good time to back away from bravado and consider how an anxious, pessimistic temperament is linked to creativity, conscientiousness, and perfectionism."

I must admit that I have never equated a pessimistic temperament with creativity, conscientiousness or perfection. I've always thought that creative people were having too much fun being creative to be pessimists. Pearson, however, lays out a convincing argument that worriers and perfectionists can make good employees because they pay attention to detail.

"One study that confirmed these correlations, 'Can Worriers be Winners?' by Adam Perkins and Philip Corr of the University of Wales, found that people of high intelligence who fret, who double-check obsessively, and generally go around in a state of high alarm expecting the worst, produce better results."

Every company needs employees who worry about the details. There's a reason for the old saw, "the devil is in the details." Pearson, however, believes that there is a link between pessimism and problem-solving. She continues:

"There appears be a genetic tie between mood disorders and problem-solving creativity. When Sir Isaac Newton invented calculus, a new field of mathematics that revolutionized science, he didn't mention his invention to anyone for 10 years. Why? Because he was beset by anxiety and neurosis. And he didn't have a team leader who was paid to be upbeat. (Well, of course he didn't—he lived in the 17th century, a time free of phrases such as 'team leader.' But you see my point.) And Sir Isaac wasn't the only angst-ridden scientist. Psychologist Dean Simonton at the University of California's Davis campus found that a third of eminent scientists are dogged by anxiety, depression, or both. In his view, whatever wiring they possess that makes them vulnerable to those feelings also makes them think outside the box. That goes for business, too. We tend to see pessimism as the bane of robust capitalism. Managers are frequently urged to screen for depression when hiring and to offer their afflicted employees counseling. But within a company's psychological capital there exists a currency to be tapped: something known as 'depressive realism,' the ability bestowed by melancholy to view reality more accurately. Abraham Lincoln and Sir Winston Churchill, both intimately acquainted with melancholy, brought a sober, gimlet-eyed view to their respective missions, refusing to be carried away by irrational optimism as they searched the shadows for signs of their nations' true states. Would Lincoln and Churchill have been persuasive at today's relentlessly upbeat sales conferences? Probably not. Who wants to hear the ifs and buts?"

Pearson claims that every business needs people who are looking to the skies for gathering clouds as well as people scanning the horizon for new opportunities. Does that mean that a company is better off filling its empty seats with pessimists? I don't think so. Even by her own admission, Pearson admits that two out of every three eminent scientists are not pessimists nor do they suffer from anxiety and depression. Her real argument is: don't under-appreciate the value of naysayers just because they might not be pleasant people to work around. I believe the larger lesson is that individuals should not immediately submerge pessimistic thoughts when they arise. All of us -- even the most optimistic of us -- see problems when others see clear sailing or get depressed occasionally.

"'Depression,' writes [Dr. Paul Keedwell at the Institute of Psychiatry in London], helps to remove any misunderstandings, misguided goals, and 'false optimism that have fueled goal frustration.'"

There is a balance between optimism and pessimism that must be found and I believe that optimism must outweigh pessimism most of the time for businesses to succeed. Business leaders must be optimistic as well as realistic. That means they must have trusted advisors who are willing to offer bad news or have the courage to tell the boss that his idea stinks. Although it may be ego satisfying to be surrounded sycophants, such people rarely provide value to a company. Most organizational gurus will tell you that there are a number of crucial roles that must be filled in order to make a good corporate team. Each of those roles may require a different temperament from its occupant. A good leader understands the value of each of these roles and selects a proper candidate to fill it. While it might create a pleasant working environment if people walked around humming Bobby McFerrin's "Don't Worry, Be Happy," your business will do better if you embrace a philosophy that says, "Be happy, but worry some."

Efforts to Confront Piracy Continue

I first wrote about piracy last December in a post entitled The Return of the Pirates. In that post, I discussed the fact that Somalia has become the primary focus of those attempting to rid the seas of the scourge of piracy. The capital of piracy in Somalia is Eyl. And the kings of Eyl are the pirates. There is a lot of money to be made through piracy and there are plenty of people anxious to get their cut ["Life in Somalia's pirate town," by Mary Harper, BBC News, 18 September 2008]. Harper describes what happens in Eyl "whenever word comes out that pirates have taken yet another ship."

"There is a great rush to the port of Eyl, where most of the hijacked vessels are kept by the well-armed pirate gangs. People put on ties and smart clothes. They arrive in land cruisers with their laptops, one saying he is the pirates' accountant, another that he is their chief negotiator. ... In Eyl, there is a lot of money to be made, and everybody is anxious for a cut."

Harper reports that the number of Eyl residents who are actual pirates is relatively small. The supporting cast for piracy operations, however, is much larger. As a result, piracy " has become a mainstay of the Puntland economy. Eyl has become a town tailor-made for pirates - and their hostages. Special restaurants have even been set up to prepare food for the crews of the hijacked ships." According to Harper, the entire area is bustling.

"The town is a safe-haven where very little is done to stop the pirates - leading to the suggestion that some, at least, in the Puntland administration and beyond have links with them. Many of them come from the same clan - the Majarteen clan of the president of Somalia's transitional federal government, Abdullahi Yusuf. The coastal region of Puntland is booming. Fancy houses are being built, expensive cars are being bought - all of this in a country that has not had a functioning central government for nearly 20 years. Observers say pirates made about $30m from ransom payments last year - far more than the annual budget of Puntland, which is about $20m. ... Now that they are making so much money, these 21st Century pirates can afford increasingly sophisticated weapons and speedboats. This means that unless more is done to stop them, they will continue to plunder the busy shipping lanes through the Gulf of Aden. They even target ships carrying aid to feed their compatriots - up to a third of the population."

Based on Harper's description of a booming pirate town, one would expect to Eyl to be a bustling metropolis with rising buildings, paved roads, and fancy stores. As the attached video demonstrates, however, most of the wealth is bypassing average citizens who are still trying to make a living off of stony ground and scarce resources. Wherever the money is being spent and the fancy houses are being built, it's certainly not in downtown Eyl.

Although the waters near Somalia are the primary focus of the international community, piracy is not just a problem in that region of the world. Piracy has hotspots in a number of places and has more than doubled this year. The video shows where piracy is a problem around the world.

According to The Economist, some countries are treating pirates too leniently and such behavior is sending the wrong signals to pirates ["Wrong signals," 9 May 2009 print issue].

"The requirement to fight piracy is one of the oldest bits of international law. The idea that any country may take action against pirates is the precursor to the idea of 'universal jurisdiction' used to prosecute heinous crimes such as genocide. In Latin legalese, pirates are termed hostis humani generis (an 'enemy of mankind'). Moreover, the UN’s Convention on the Law of the Sea stretches the definition to include crewing a pirate ship and inciting or 'intentionally facilitating' attacks. Surely sailing with RPGs, long ladders and grappling hooks should fall within this definition? But many countries have not fully incorporated all this into their national legislation. Some make arrests only if their own nationals or ships are attacked."

The article concludes that although beefed up enforcement at sea is probably required, "the real answer is to sort out Somalia. And navies can’t do that." Part of the problem, Rear Admiral Scott Sanders, USN, insists is that the public needs to stop romanticizing piracy ["Admiral: Navy must ‘de-romanticize’ piracy," by Andrew Scutro, Navy Times, 20 August 2009]. Sanders heads a task force specifically established to deal with piracy.

"'Part of our message is to de-romanticize piracy,' said Rear Adm. Scott Sanders, commander of counter-piracy Task Force 151. 'Pirates are bad people. They are holding over 100 people against their will.' ... Although in recent years the U.S. Navy and other forces have been tangling with ship hijackers in the Somali Basin and the Gulf of Aden, Task Force 151 was stood up in January for specific and coordinated counter-piracy operations."

In the article, Sanders explained that one of the advantages enjoyed by pirates is that they operate in a vast area and locating them is difficult. In an effort to improve surveillance, the U.S. military indicated last month that "it would be deploying unmanned reconnaissance aircraft in the skies above the Seychelles archipelago to bolster anti-piracy patrols" ["U.S. planes to join anti-piracy push," Washington Times, 20 August 2009]. Other forces are also being tapped to bolster the task force as the monsoon season comes to an end ["Anti-piracy forces boosted to forestall surge," by Robert Wright, Financial Times, 15 September 2009]. In an interesting development, for-hire services have developed to help shipping companies cope with piracy. These services include ransom negotiation and protection ["Splashing, and clashing, in murky waters," The Economist, 22 August 2009 print issue].

"Parleying with pirates, and then paying the ransom (often by airdrops), are jobs that shipowners regularly contract out to private firms or 'risk consultancies'. Other maritime security services are less controversial: fitting ships with kit, such as barbed or electric wires, to make it hard for pirates to clamber aboard. Increasingly, security firms also put armed guards on ships, or offer their own craft as escorts. Business protecting ships off east Africa has tripled in the past year, says Eos Risk Management, a London firm."

In the end, however, The Economist was right. The piracy challenge begins on land not at sea. Until conditions ashore make it dangerous and unprofitable for pirates to operate, piracy will remain a problem. In places like Eyl, where pirates are a major source of income, local economies need to be stimulated simultaneously with a crackdown on criminals. Taking away once source of livelihood without replacing it with another doesn't solve the problem it exacerbates it. Finding alternative sources of income for a place like Eyl is probably the most serious challenge to stopping piracy that the international community faces.

Inventors as Heroes

Luke Johnson, who runs a private equity firm called Risk Capital Partners, recently published an op-ed piece in the Financial Times in which he claims "Inventors are our greatest heroes" [2 September 2009]. He explicitly makes the claim because he believes that society under-appreciates the people who spend their time inventing the things that make our lives better. He writes:

"Society has a curious attitude towards inventors. Their brilliance over the centuries touches all of our lives in countless ways, yet we mostly take their efforts for granted. Indeed, more often than not in Britain we caricature them as eccentric boffins, like Caractacus Potts in Chitty Chitty Bang Bang. This ambivalence is a mistake; to me, they are perhaps the greatest heroes of all."

Johnson also regrets that most "inventions" now seem to come from corporate teams rather than individual giants of invention like Nikola Tesla and Thomas Edison. He looks back wistfully on the days when progress had personalities with which it could be associated. "There are too few such inspirational figures around today to dazzle and excite," he writes. "Perhaps the solitary ideas of one man (or woman) are not enough to produce real technological progress in the 21st century." I don't agree that we don't have personalities today that can excite us. I think of men like Dean Kamen (inventor of the Segway and numerous medical devices) and Ray Kurzweil (who has invented things in fields as diverse as optical character recognition, text-to-speech synthesis, speech recognition technology, and electronic keyboard instruments). Anyone who has ever heard these gentlemen speak knows they can stir the soul. Where I do agree with Johnson is that inventors don't achieve the recognition and celebrity they probably deserve. The chipmaker Intel is running a commercial in which a scientist is shown receiving the kind of attention generally reserved for Hollywood celebrities. The tagline of the commercial is something like, "Our heroes are different than your heroes." The government seems to do public service announcements on every other subject; perhaps it should run a series on inventors as heroes.

Johnson writes about some of the challenges that inventors face from corporate giants that appear ready, willing, and able to engage in patent infringement. "Knowledge of patent law and persistence bordering on the obsessive," he writes, "seem useful attributes if you want to be a successful inventor." He continues:

"The subject of intellectual property and its protection is a contentious one. Industries like the pharmaceutical trade exist thanks to laws that allow them to enjoy temporary monopolies for original drugs. Vast, long-term research and development expenditure can only be recouped because of this complex system. But some would argue that charging high prices (which often bear no relation to the cost of production) for life-saving treatments is immoral. Certainly, the juicy profits enjoyed by big pharma in the US are part of the reason that healthcare costs there are so high. Yet we are all beneficiaries of their discoveries and formulations. I believe in freedom for enterprise, but I also think entrepreneurs must be allowed to reap the just rewards for their efforts."

Although he admits that innovators seek to be rewarded for their efforts, they are also motivated by a desire to see an idea actualized. He writes:

"Inventors I have met are fundamentally motivated by a desire to see their creations become appreciated and recognised, rather than an urge to accumulate wealth. Tim Berners-Lee, the man responsible more than any other for the initiation of the world wide web, is a classic example of this attitude. He is a modest academic who has, I am sure, resisted countless overtures to make huge fortunes from the web, in order to carry on his role as one of its custodians."

Johnson notes that "inventors must have a deeply practical streak: they need to think of ways to fabricate new things. They should be a combination of artist and engineer: with the vision to imagine a new device and the ability to make it come to life." It's the ability to make something "come to life" that differentiates an inventor from dreamer. He concludes:

"We need inventors more than ever if we are to improve the world. From a cure to Alzheimer’s to better car batteries, there are thousands of urgent problems that need solving. History suggests the magical combination of technology, capitalism and brains is capable of meeting every challenge – despite the doubts of the pessimists."

Individual inventors are heroic because the great ones are rare. Perhaps the world has become too specialized to create another Thomas Edison. Nevertheless, people come up with good ideas all of the time. Unfortunately, many of those ideas are never acted upon. Although I don't believe that pedestrian thinkers can change into innovative thinkers, even the most pedestrian thinker comes up with an occasional insight. The challenge for businesses is how to capture that insight and build upon it. Kathy Gurchiek, an associate editor for HR News, believes that companies can help stimulate eureka moments in their employees ["Motivating Innovation, HR Magazine, September 2009 -- membership required to view]. This is not as simple as putting up a suggestion box next to the boss' office. Most suggestion boxes collect more cobwebs than ideas. Gurchiek says that an organization needs to foster curiosity in their employees. Innovators are naturally curious people and want to know why things work -- or just as importantly, why they don't. If employees aren't free to ask questions, they won't be free to offer suggestions.

She also restates what every book, article, and speech about innovative organizations states -- you must be willing to take risks. If an organization isn't experiencing failures, it's not an innovative company. To substantiate her case, she reports the observations of someone who has studied innovation: "Failure is '100 percent intrinsic to successful innovation,' notes Tom Kuczmarski, author of Innovation: Leadership Strategies for the Competitive Edge (McGraw-Hill, 1996), who suggests throwing failure parties so people learn from their mistakes." She also points out good advice from Mike Taylor, president of Innovative-e Inc., a technology consulting and services company in Atlanta, who notes it would be "foolhardy to blindly allow change without considering the possible scope of failure."

She applauds what Johnson laments, that "teams are considered the engines of innovation and creativity that lead to future products and services." When teams are creative it's generally because they have been assembled to deal with a specific challenge and the team contains members from divergent backgrounds. The divergent backgrounds create what Frans Johansson calls "the Medici Effect." Gurchiek agrees that "diversity helps." Here's what she writes on the subject of diversity:

"Cross-functional innovation teams ease buy-in from various departments, which is vital when it’s time to create a prototype, says Tom Kuczmarski, author of Innovation: Leadership Strategies for the Competitive Edge (McGraw-Hill, 1996). Sharon Flank, who holds six patents and has another six pending, assembles unlikely teams to stimulate innovation. Flank is CEO of InfraTrac, a Silver Spring, Md., company that tracks and detects counterfeit drugs. 'Here’s what has worked with my teams,' she says:

• Select people with different perspectives, backgrounds and expertise.
• Make sure the team does not solely consist of people who work together regularly.
• Bring teams up-to-date on the challenge, the state of the art
  and the options to date. E-mail is good for this purpose.
• Give team members the time and an informal atmosphere to incubate ideas.

'Once they’re prepared, put them together for a while. After an hour or two, feed them,' she says. 'The conversation will continue informally, and you may get better results. Creativity will continue after this session, so don’t despair if you don’t get anything right away.'"

Gurchiek believes this last point is important -- "don't despair if you don't get anything right away." Patience and tenacity, she notes, are key characteristics of innovative organizations. Tenacity is important because a it helps overcome the "shiny penny syndrome." She explains:

"To truly value innovation, leaders must empower workers. They must be explicit in what they mean by innovation and why it’s important to survival—and they should share examples of ideas. It’s important, too, to question the company’s basic operating assumptions, he adds. There is more to innovation, though, than identifying possible ideas, says Mitchell Gooze, who spent 20 years in the high-technology industry and managed four companies for Teledyne. One of the biggest problems companies have, he says, is deciding from among many ideas which ones to implement—and sticking with those ideas. Often there is a disconnect between what the CEO thinks can be done and what is possible with the resources available, says Gooze. Alternatively, leaders of some companies keep changing their minds about what they want to do. 'They have the "shiny penny" syndrome where they keep chasing after the next shiny penny,' Gooze notes."

Of course, organizations can face exactly the opposite problem as well. They stick too tenaciously to an idea whose time is past. Isabelle Royer, discussed this problem in an article entitled, "Why Bad Projects Are So Hard to Kill" [Harvard Business Review, February 2003]. She wrote:

"The failures I’ve examined resulted, ironically, from a fervent and widespread belief among managers in the inevitably of their projects’ ultimate success. ... The result is what I call collective belief, and it can lead an otherwise rational organization into some very irrational behavior."

She recommends assigning an "exit champion" who has the right temperament and enough credibility to pull the plug on failing pet projects. An organization requires a culture that breeds trust in its employees in order to foster an environment in which both innovators and exit champions can work. Gruchiek concludes her article on that topic. She writes, "An environment where employees feel safe broaching ideas, trying new things, taking risks and failing is imperative to fostering a culture of innovation, and trust is key for such a culture to take root." Fostering an innovative environment is not easy. Creating an environment that stifles innovation unfortunately is. In a sidebar, she lists some "Innovation Busters":

"'Not everyone will adore and support you' for trying to be innovative, observes Joni Daniels of Daniels & Associates, a Baltimore-based organizational development and management training company. Be prepared to address the following factors that Daniels says inhibit innovation:

• A hectic environment where there is no time for reflection.
• A sterile environment where creativity is not stimulated.
• Rigid rules and barriers that prevent people from connecting.
• Stress that saps creative energy.
• Routines that limit responses.
• Egos that keep organizations stuck.
• Fear of self-expression.
• Negative self-thinking.

I've written before about most of the things discussed in this post about innovation. It's always good to remind ourselves, however, about some of the do's and don'ts of innovation. My advice is to give truly innovative thinkers a free rein to explore ideas and provide an institutionalized way to capture good ideas generated by more pedestrian thinkers. Good ideas need to appreciated and explored before the naysayers get a chance to knock them down.